Madeira legal and accounting and tax considerations in 2023
Since 2003, Healy Consultants Group assists our multinational Clients to timely accurately and completely discharge their Madeiran legal, accounting, audit and tax obligations. Madeira is part of the European Union (EU) and a Madeiran LLC enjoys i) a corporation tax rate of 5%, ii) 0% withholding tax, iii) 0% capital gains tax and iv) accesss to 52 double tax treaties!
Corporate Income Tax
- Until 2027, the annual net profits of a Madeiran LLC enjoys a corporation tax of 5%. To enjoy this low tax rate, the company must maintain economic substance on the island including i) at least one local employee and ii) the company makes an investment of at least €75,000 in a Madeira property or other tangible/intangible assets such as software, patents, machinery, cars, boats etc. Healy Consultants Group assists our multinational Clients to meet each of these conditions.
- Madeiran LLC business activities that enjoy the low corporation tax of 5% includes i) holding company ii) investment company iii) stock corporation iv) trust and v) shippping company.
- As a holding company of EU and non-EU subsidiaries, investment income received by the Madeiran LLC only suffers 5% corporation tax.
- If the Madeiran LLC fails the economic substance requirements, annual net profits suffer 14.7% corporation tax.
- If a Madeiran LLC conducts commercial, agricultural or industrial business, it will suffer a surtax of i) 2.1% of annual net profits between €1.5 million to €7.5 million ii) 3.5% of annual net profits between €7.5 million to €35 million and iii) 6.3% of annual net profits above €35 million respectively. Examples of commercial, agricultural or industrial business activities include i) agriculture (subsistence and commercial) ii) mining iii) forestry iv) grazing v) hunting and gathering vi) fishing and vii) quarrying.
- The EU’s parent subsidiary directive allows subsidiaries domiciled in the EU to make payments to a Madeiran holding company, without suffering local withholding tax.
- There is no Madeiran withholding tax on dividends paid to non-resident shareholders. Other overseas payments exempt from Madeiran withholding tax include i) intellectual property, ii) technical services, iii) management fees, iv) head office expenses, v) interest payments and iv) royalty payments.
- There is no capital gains tax on the sale of shares in international subsidiaries of a Madeira LLC.
- A Madeira LLC which holds a Certificate of Residence issued by the Portuguese Tax Authority can access Portugal’s double tax treaty network. This includes i) all European Economic Area (EEA) countries ii) Brazil iii) Mozambique iv) Korea and v) Venezuela.
Social security tax
- To enjoy the fiscal benefits, a Madeiran LLC must have at least one resident employee. Consequently, employers contribute a monthly 23.75% social security payment on employees’ monthly gross salary.
- Non-resident directors of a Madeira FTZ company will be exempt of Portuguese social security contributions if they are already paying social security in their country of residence.
Value Added Tax
- Madeira is a Portuguese territory and Madeira companies have a Portuguese VAT number. As a result, a Madeira company can directly access the free circulation of goods and services within the EU.
- VAT in Madeira is levied at between 5% and 22%. Goods and services qualifying for the reduced rate include pharmaceuticals, agricultural products and transport services.
- VAT returns are filed every month by the 10th day of the following month. If the company’s annual turnover is less than €650,000, quarterly VAT filing is allowed.
Other accounting and tax considerations
- Each company director must secure a Portuguese personal income tax number. the same rule applies to the bank signatory of a Madeiran or Portuguese corporate bank account. Healy Consultants Group assists our multinational Clients to timely secure this personal income tax number.
- Municipal property tax is levied at between 0.3% and 0.8% of the tax registration value (TRV) of the property in Madeira. A higher tax of 7.5% on the TRV is levied on property in Madeira owned by companies resident in a number of blacklisted jurisdictions, mostly tax neutral. Exemptions or reductions in the property tax may apply. A tax of between 5% and 10% is levied on property transfers.
Legal and compliance considerations
- Each Madeiran LLC must i) appoint a minimum of one director and one shareholder ii) appoint one resident director iii) appoint a company secretary and iv) maintain a legal registered office address. Healy Consultants Group assists our multinational Clients with each of these requirements.
- The Madeiran tax year is the calendar year. Consequently, corporate income tax returns must be submitted before 30 May in the year following the accounting period. Returns are submitted electronically to the Portuguese Tax Authority. Late corporation tax returns suffer annual interest of 4%.
- During the accounting period, corporation tax is payable in three advance instalments in July, September and December. The final instalment (deficit or excess) is payable with the annual return of 30 May of the year following the accounting period. Late payments suffer a penalty of 4.786%.
- Directors’ and shareholders’ information is published on an open online register, together with the annual audited financial statements.
- At its legal registered office address, a Madeiran LLC must maintain accounting and tax records in Portuguese. Annual financial statements must be prepared by a Madeiran certified accountant and in Portuguese.
Healy Consultants Group fees for accounting and tax support
These accounting and tax fees are an estimate of Healy Consultants Group fees to efficiently discharge your annual company accounting and tax obligations. Following receipt of a set of draft accounting numbers from your company, Healy Consultants Group will more accurately advise accounting and tax fees.
Madeira accounting & tax task € VAT registration 950 Annual tax and accounting fees (active trading company) 2,300 Annual tax and accounting fees (dormant company) 950
Healy Consultants Group will be happy to provide a monthly bookkeeping service for your Madeira company. Typically, our Accounting & Tax Department (ATD) team will receive a Dropbox of data from our Client and will immediately thereafter timely supply our Client with i) a general ledger, ii) trial balance, iii) monthly and quarterly management accounts and iv) monthly and quarterly government reporting, including sales tax and payroll. For further details of our bookkeeping service and our fees, visit this page.
Clients should be aware of their personal and corporate tax obligations in their country of residence and domicile. They must fulfil these obligations annually. Let us know if you need Healy Consultants Group’s help to clarify your annual reporting obligations.