Madeira IBC in 2024
A Madeira International Business Centre (IBC)/Free Trade Zone (FTZ) company is the lowest European corporate income tax jurisdiction. As a result, many international entrepreneurs considering Madeira company formation opt to set up a legal entity in the IBC/FTZ.
Advantages of a Madeira IBC
- A Madeira IBC company is perfect for booking international profits with minimal tax liability. This entity is therefore ideal for tax efficient international trading or as a holding company.
- Madeira is an attractive base for EU manufacturing because:
- A Madeira FTZ company is exempt from capital gains tax;
- Madeira has both skilled and unskilled labour, speaking multiple languages and available at relatively low cost;
- Madeira offers low operating costs compared to other European jurisdictions, particularly wages and utilities;
- The cost of living in Madeira is 50% lower than the rest of Europe;
- Certain types of finance-related businesses in Madeira can apply for International Service Entity status, which means that they will be outside the scope of GST. These companies are generally deposit takers, or trust or fund services businesses that primarily provide services to offshore customers.
- An EU VAT number can be obtained for this entity.
- A registered address is sufficient to complete Madeira IBC company registration. Our Client will not have to rent physical premises to conduct business with this entity.
- International entrepreneurs using an IBC company pay a corporate tax of only 5% until 31 December 2027, provided some conditions are met. This is the lowest corporate tax in the entire EU.
- A Madeira IBC company, if properly structured, can remit dividends to non-residents free of withholding tax.
- Unlike other European territories, Madeira IBC is not considered an offshore tax neutral jurisdiction. It is ruled by Portuguese law and considered a part of EU territory according to the EC Treaty (article 299). A Madeira IBC company is, for legal and tax purposes, a Portuguese company but with unique tax benefits.
- A Madeira IBC company can provide a Certificate of Residence issued by the Portuguese Tax Agency. In practical terms, this means companies will be able to access the Portugal’s international double taxation agreements.
Disadvantages of a Madeira IBC
- Corporate directors are not permitted with a Madeira IBC company.
- IBC companies can trade domestically with other Portuguese companies. However, profits arising from trade with Portuguese companies outside the IBC are taxed at the normal corporate income tax rate of 14.7%.
- All Madeira IBC companies must fulfill standard Portuguese tax obligations, including i) submitting annual accounts ii) lodging an annual corporate tax return iii) implementing the correct bookkeeping procedures (IAS/IFRS) iv) submitting a monthly or quarterly VAT return and reporting all tax invoices issued to customers and v) submitting a monthly social security return for resident employees.
- A Madeira IBC company must fulfil a series of substance requirements to benefit from the low corporate tax regime. Two options are available to our Clients:
- Option 1: employ at least one individual in Madeira within six months of company formation and invest at least €75,000 in acquiring fixed assets within the first two years of operation. These assets do not have to be acquired in Portugal, or be in Portuguese territory, and can be tangible or intangible.
- Option 2 – create at least six jobs within the first six months of operation. At least one employee must be resident in Madeira. The rest can be non-residents as long as their remuneration is paid from the company bank account.
- The reduced corporate income tax rate of 5% is applicable to a variable ceiling on the annual taxable income. The ceiling is directly related to the number of jobs created, as follows:
Number of Jobs Minimum investment required Ceiling on annual taxable income 1 to 2 €75,000 €2.73 million 3 to 5 €75,000 €3.55 million 6 to 30 - €21.87 million 31 to 50 - €35.54 million 51 to 100 - €54.68 million Over 100 - €205.5 million
Healy Consultants Group’s value-added services in Madeira
Recruiting local staff
- Healy Consultants Group will assist our Clients recruit quality employees in Madeira to fulfill IBC substance requirements.
- Candidates can be hired part-time or full-time based on our Client’s specific business needs.
- Our one-time fee for each staff appointment will be €550. Monthly salary and social security contributions must be paid by our Client directly to the employee and the Tax Agency.
Sourcing suitable investments
- Healy Consultants Group will assist our Clients identify investment opportunities that meet minimum Madeira IBC requirements.
- The most common investment type requested by our customers is i) real estate or ii) purchasing equity in an existing Portuguese company.
- Our one-time fee to locate i) investment property will be €2,500 and ii) potential companies looking for investment income starts at €3,500.
Healy Consultants Group complete Madeira business setup package feesOur fee to assist with Madeira business setup amounts to €17,800 and includes i) personal tax number (NIF) application ii) IBC company formation iii) Madeira legal registered address iv) corporate tax registration v) Portuguese multi-currency bank account vi) hiring one Madeira resident employee and vii) assisting with locating suitable investment property. An additional €1,000 applies if our Client requires our support with locating Portuguese companies to invest in.