Tax optimization – foreign structures

TAX OPTIMIZATION IN MADEIRA

Madeira is an attractive destination in terms of tax optimization.

We offer various tax optimization possibilities using foreign structures, including Madeira, a territory belonging to the EU.

This island is a politically independent Portuguese territory with its own administration. Locating business activity in Madeira is connected with very competitive tax rates without the threat of double taxation. The local tax regime is extremely attractive, which acts as a magnet for investors willing to optimize their tax costs.

Under the IBC (International Business Centre of Madeira) tax regime, income generated in Madeira is subject to a reduced 5% tax rate. However, it is worth noting that this applies only to certain forms of business activity, including international services (trade, consultancy, holding services, expert services), production and warehousing in free trade zones, and international shipping (shipping by sea, registration of vessels, oil rigs, and yachts).

Madeira is not a "tax haven". Why then choosing Madeira’s tax regime is so attractive?
The International Business Centre of Madeira is a special regime that consists of a set of incentives, including:

• limited bureaucracy (with reference to running business activity in Portugal, among others),
• political and social stability,
• low costs of running a business.

What are the benefits of tax optimization in Madeira?

A company that functions under the IBC regime is entitled to:

• a reduced tax rate of 5% on its income,
• exemption from mandatory withholding tax at source on interests and royalties,
• exemption from capital gains tax resulting from the sale of equity interests in a company (not applicable to entities domiciled in “tax havens”),
• exemption from stamp duty, local taxes, notary and registration fees (only applicable to companies running business activity in Madeira).

What are the conditions?

To function within the legal framework of the IBC, a company must:

• begin business activity within six months from receiving the license (for companies rendering international services),
• begin business activity within one year from receiving the license (industrial and shipping businesses),
• include at least one employee and/or director on its payroll,
• in case of having fewer than six employees (or directors) in the first two years of running business activity, the company must incur capital expenditure of at least 75,000 euros to purchase fixed tangible or intangible assets.

There are some limits, however:

The benefits derived from functioning within the IBC regime are connected with the number of people employed by a given entity, and the tax base is tightly correlated with this number. The tax rate of 23% is applicable to income exceeding the top limit, as shown in the table.

What are the preferred forms of business organization in Madeira?

In most cases, these are equivalent to Polish limited liability companies (sp. z o.o.), joint-stock companies (S.A.) that guarantee anonymity, and holding companies (Portuguese SGPS).

How long does it take to set up a company in Madeira?
The average time needed to complete all the formal requirements is between 15 and 45 days.

What is the minimum share capital?
It is just 1 euro!

What are the costs connected with establishing a company in Madeira?
The average cost is about 10,000 euros, and includes the cost of establishing the company, registration costs, and costs connected with opening a bank account.

Tax optimization in Madeira is clearly not just a passing fad in business. For many companies, it is the optimal way to ensure their growth. Bearing in mind the utmost care about your finances, we can help you with meeting all the formal requirements connected with tax optimization in Madeira, which will definitely lower the operating costs of your company.

Please contact us for more details.