Company formation Madeira. Company Formation, offshore company formation, offshore company, limited company,company formation
Company Formation Madeira: Sociedades Gestoras de Participações Sociais
- Index Company formation Madeira
- Company formation Madeira: Tax incentives statute
- Company formation Madeira: A region fit for investment
- Tax planning via a network of international tax advisers and attorneys
- Why form a company in a foreign country with a tax accountant specialized in international tax law?
- Basic Considerations regarding the Formation of Companies in „Zero-Tax Havens“ i.e. in countries that have not entered into Double Taxation Agreements with other countries
- Offshore Company Formation: Tax haven rankings
- Examples for the legal reduction of corporate taxes
- DTA permanent establishment concept
- Our services and fees
- Parent companies and their subsidiaries in the European Union
- OECD: Articles of the Model Convention with Respect to taxes on income and on capital
- Beware of cheap founders!
Company Formation Cyprus: Corporate Tax only 12.5% – Cyprus Holding: no taxation! Learn more
Holding Companies Madeira
The regime applicable to S.G.P.S. –Sociedades Gestoras de Participações Sociais (Portuguese pure holding companies) in Madeira is, undoubtedly, one of the best tools available today to structure investments in the European Union, given that:
- The E.U. Parent/Subsidiary Directive applies, exempting from taxation the income received from E.U. affiliated companies;
- Income received from non-E.U. subsidiaries, as well as worldwide income derived from interest and services, will be taxed at reduced tax rates of 4% to 5%; ·
- There is full participation exemption on worldwide capital gains received;
- No withholding taxes on the distribution of dividends to companies in other member states of the European Union or in the European Economic Area or on the worldwide payment of interest and royalties;
- Access to Portugal’s network of Double Taxation Agreements.
Company Formation Madeira
Madeira’s economy depends very much on tourism and on subsidies from the Portuguese State and the EU. The International Business Centre Madeira (IBCM) in the Free Trade Zone was created to offer an additional sector for the island’s economy. With full approval from the European Commission, Madeira is an internationally respected jurisdiction. The laws governing the IBCM are well-founded and in accordance with Portuguese law and EU Directives.
Company Formation Madeira: Taxation Madeira/Portugal
The table below shows the corporation tax rates for newly established companies (new corporations) up to the year 2020. Example: Incorporation 2008: Tax rates 2008+2009 = 3%; 2010-2012 = 4%; and from 2013 onwards = 5% corporation tax per annum
The use of the low taxation rates requires creating a certain number of jobs in relation to the taxable income/profit.
Up to an income/profit of € 2 million, 1 to 2 jobs are required. Part-time jobs count as well as full-time jobs.
In addition it is a requirement that if no more than 5 jobs are created, a minimum amount of € 75,000.00 must be invested in the first two years.
Our fees already include the provision of 1 employee. We can also assist you in portraying the minimum investment of € 75,000.00.
|Work Places/Jobs||Reduced tax rate up to the following income/profit|
|1-2||€ 2.0 million|
|3-5||€ 2.6 million|
|6-30||€ 16.0 million|
|31-50||€ 26.0 million|
|51-100||€ 40.0 million|
|above 100||€ 150.0 million|
All joint stock companies (old corporations) licensed before 31.12.2000 are totally tax-free until the end of 2011. As of 2012 they will then be taxed at 5%. At the same time the preferential tax rate will probably depend on the number of jobs created.
The SGPS is a special form of holding company. According to the EU parent-subsidiary directive, the holding company can receive dividends from other subsidiaries within the EU without any deduction of capital gains tax. The so-called old corporations with the legal form of SGPS benefit from total tax exemption up to and including 2011. Any other income of the holding company is taxed at the reduced tax rate of 22.5% instead of the Portuguese standard rate of 25%. No capital gains tax is charged for dividends paid by the Madeira SGPS.
A reduced turnover tax rate of 16% applies on Madeira, giving it one of the lowest rates in Europe. This is especially interesting for data services offered via the Internet in the form of downloads for example.
Company formation Madeira: Madeira Geography
Madeira is a group of islands with a surface area of 314 square miles spread across an area of 5,000 square kilometers and forming part of an archipelago located in the Atlantic Ocean between Africa and the Azores. The islands are on the same latitude as the Moroccan city of Casablanca, are approximately 700 kilometers from the coast of northwest Africa, and consist of Madeira, Porto Santo and several small deserted islets. The capital city is Funchal, on Madeira.
The climate is sub-tropical and rainfall is plentiful. Madeira is covered in lush green vegetation with the temperature ranging from 17°C to 24°C in the summer and averaging 13°C in winter. The islands experience micro-climates which lead to distinct climatic variations between one area and another. Thus in May and June the west coast experiences plenty of sunshine whereas an enveloping cloud known as “el capacete” often blocks out the sun over Funchal bay.
The airport of Santa Caterina on Funchal has daily flights to Lisbon, taking 90 minutes, and connections to many other European cities. Madeira uses Greenwich Mean Time, plus one hour in summer.
Madeira Population, Language and Culture
Madeira was discovered by Portuguese explorers in the 15th century and was subsequently colonized by farmers from the Algarve region of southern Portugal. In the Portuguese constitution of 1821 Madeira was recognized as part of metropolitan Portugal.
The population is about 245,800 making Madeira one of the European Union’s most populated regions with an estimated average population density of 195 persons per square mile. The Islands are largely Roman Catholic and as with most traditional societies the church exercises a strong influence over organs of government and the cultural life which largely revolves around religious and harvesting festivals.
The official language is Portuguese, but English is quite widely spoken, particularly in business. Madeirans tended to emigrate in search of work until recently, when the trend has somewhat reversed. The global Madeiran diaspora is supposed to be near 1m. The Madeiran life-view was traditionally somewhat melancholy, although tourism and EU money infusions have tended to flatten out this idiosyncracy, like so many others.
Company formation Madeira: DTAs
At the time of writing, the following countries have double-tax treaties with Portugal (an * indicates that the treaty is under negotiation or awaiting ratification):
Company Formation Madeira: Types of Company
Madeira Private Limited Liability Company
The Private Limited Liability Company (Sociedad por quotas de responsibilidade limitida – Lta) (PLLC) has a minimum of one shareholder (‘quota-holder’) and minimum capital (‘registered quotas’) of EUR5,000. Prior to the execution of the notarial deed of incorporation 50% of the share capital of the company or another amount designated by the authorities (previously 400,000 escudos), whichever is the lesser, must be deposited with a bank. This sum can be withdrawn for corporate purposes after the execution of the deed.
PLLCs are not permitted to have bearer shares but nominees are permitted (even though Madeira is a civil law jurisdiction which does not recognize the concept of a bare trust). The minimum number of directors is one.
Madeira Stock Corporation
The Stock Corporation (Sociedade anonima – SA) has a minimum of 5 shareholders (‘quota-holders’) and minimum share capital (‘registered quotas’) of EUR50,000. Prior to the execution of the notarial deed of incorporation 33% of the share capital of a Stock Corporation or another amount designated by the authorities (previously1.5m escudos), whichever is the lesser, must be deposited with a bank. This sum can be withdrawn for corporate purposes after the execution of the deed.
By way of exception, the Stock Corporation can have one shareholder if that shareholder holds as a nominee, if the company includes the name “Sociedade Unipersonal” in its name and where the company is not the sole shareholder in a subsidiary.
Stock Corporations are permitted bearer shares so long as their share capital is fully paid up. The transfer of bearer shares can be by way of registration, by way of deposit with a financial institution or by physical delivery. When bearer shares are transferred by registration the transfer of ownership only occurs upon the completion of the re-registration process in the company books. When they are transferred by deposit with a financial institution the transfer of ownership occurs when the re-registration process is completed in the institution’s books. When bearer shares are transferred by physical delivery the transfer of ownership occurs on acquisition of physical ownership.
If the share capital is less than EUR200,000 only one director is permitted; if the share capital is more than EUR200,000 any number of directors can be appointed. Nominees are permitted. Shares of no par value are not permitted.
In the case of Stock Corporations, accounts are a matter of public record. The information to be filed with the tax authorities must include a statement listing the registered shareholders.
Unlike common law jurisdictions, a Madeira Stock Corporation normally includes a statutory audit committee in its composition. A statutory audit committee (conselho fiscal) is an internal auditing board which is composed of one person where the share capital of the company is less than 20m escudos and 3-5 persons if the share capital of the company is above 20m escudos. At least one member of the committee has to have a relevant accountancy qualification. Alternatively, a Stock Corporation can have a three-tiered supervisory structure, with a directors’ board (directao), a shareholders’ board (conselho geral), and a certified auditor (revisor oficial de contas).
Madeira Holding Company
A Holding Company (sociedada gestora de participacoes sociais) is a corporate entity which for a period of at least 12 months holds at least 10% of the voting share capital of the company in which it has a participating shareholding. Holding companies are governed by Decree law 495/88 and Decree Law No 21/87.
Holding companies can be either Private Limited Liability Companies or Stock Corporations and must have their accounts audited annually. The initials SGPS must be included in the Holding Company’s name.
A Holding Company is not permitted by law to buy its own shares, purchase debentures in companies in which it does not hold a participating shareholding (subject to certain exceptions), make loans other than to companies in which it holds part of the share capital or engage in any commercial activities other than holding shares in other companies.
Mixed Holding Companies: As its name suggests, a Mixed Holding Company can both hold shares in other companies and trade in its own right. It cannot engage in the type of trading activities which are carried on by banks and financial institutions and which require licensing and authorization from the Bank of Portugal.
A Mixed Holding Company must combine its activities. Its trading activity cannot be exclusively limited to the holding of shares; nor can it be a pure trading company which does not hold shareholdings in any other company. Mixed Holding companies can be either Private Limited Liability Companies or Stock Corporations. License authorization comes from the regional authorities.
Most European Union member countries do not accept that the Parent Subsidiary Directive No 90/435 on withholding tax on dividends applies to Mixed Holding Companies.
NB: The Tax Reform Act of December 2000 somewhat reduced the tax advantages of both Pure and Mixed Holding Companies, particularly for Portuguese residents.
Madeira is a civil law jurisdiction, subject in general to Portguese law, and thus the trust does not exist as such. Portugal has not ratified the Hague Convention on the law applicable to trusts and their recognition.
Nonetheless when the Free Trade Zone Legislation of Madeira was enacted, provision was made for the creation of offshore trusts. Decree Law No 352/88 & Decree Law No 149/94 deal with the registration and management of offshore trusts whereas Decree Law 264/90 concerns authorization by Government of trust corporations and branches. The property of trusts must be outside Portugal, and their income must be derived from outside the country.
An offshore trust lasting for more than one year needs to register in the Free Trade Zone registry, although the identity of the beneficiaries need not be disclosed. Neither settlor nor beneficiaries may be residents of Portugal. Only Stock Corporations (see above) and branches of foreign trust corporations licensed to operate under the Free Trade Zone Legislation of Madeira can act as trustees.
Trusts are not subject to the vestigial exchange controls operated by the Bank of Portugal. Trusts are not subject to tax.
Trusts are free to emigrate without authorisation by substituting their proper law with that of another jurisdiction.