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Starting a Business in Madeira: The Ultimate Guide

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Starting a business in Madeira may not be the first choice of many entrepreneurs though some of the incentives might make you pause for thought.

As the Portuguese jurisdiction jostles for investment in an already crowded market, it offers low corporate tax rates and other incentives which are well worth taking a look at.

Knowing all of these, and indeed knowing about all these small, often overlooked jurisdictions, is part of our business. We gather data from all over the world, saving you the leg work to help find the best, most suitable jurisdictions for all of our clients.

Starting a Business in Madeira

Benefits of Company Registration in Madeira

Despite lying around 900km southwest of the Portuguese capital Lisbon, Madeira’s capital Funchal is a cosmopolitan city encouraging foreign investment. While Portuguese is the official language of the island group comprising the inhabited islands of Ilha da Madeira and Porto Santo, English is widely spoken.

There are several USPs, including tax benefits, some of which we have already touched upon, that we will go into greater detail about.

Low Corporate Tax Rates

The current tax regime permits the incorporation of a new company in Madeira until the end of 2023, guaranteeing a reduced corporate tax rate of 5%, applicable on taxable income, until the end of 2027.

Regarding international services activities, this reduced rate applies to profits derived from operations exclusively carried out with non-resident entities or other companies operating within Madeira.

Yet there are no restrictions on the cultivation of business activities with Portuguese companies, which will be taxed at 14.7%.

Double Taxation Treaties

All companies licensed to operate in Madeira benefit from the large network of international treaties to avoid double taxation agreed by Portugal, with the likes of Britain, Canada, and the United States.

Supporting Services

Eager for investment, you can rely on full government support when you set up a company in Madeira.

Management Companies are corporate service providers specialized in supplying accounting services.

Madeira also has a local University and technical schools for foreign entrepreneurs to cherrypick employees from.

Retention Tax

Non-resident single and corporate shareholders of a company in Madeira enjoy a total exemption from withholding tax on dividend remittances from fellow Madeira businesses as long as they are not residents in jurisdictions blocklisted by Portugal.

In addition, Portuguese corporate shareholders are also exempt if they hold participation of at least 10% for 12 months consecutively.

Benefits of Company Registration in Madeira

Madeira Company Types

Limited Liability Company

A Madeira LLC is a joint stock company.

It can be a private limited company (LDA) that can be incorporated with a single shareholder and a minimum authorized capital of €1 per shareholder. You will not need to appoint directors, only a manager, to this private joint stock company.

But a limited liability company in Madeira can also be a share company (SA). This public joint stock company can also be incorporated with a single shareholder with a minimum authorized capital of €50,000. If the share capital is not over €200,000, these require only one director.

Branches

A branch has no minimum capital requirements.

SGPS Company

SGPS companies must either be an LDA or SA, and their primary focus is the management of shares held in other companies. They are licensed to lend credit to the companies where they have shares.

Companies must maintain the head office in Madeira, while branches are required to retain legal representation.

Madeira Company Types

Forming a Company in Madeira

The International Business Centre (IBC), aka Madeira Free Trade Zone, was born in the 1980s to offer tax incentives to energize business activity in the region. To get set up you must follow these steps.

Approve the Name of Your Company

You must request a name approval certificate and a provisional identification card from the National Company Registrar (RNPC – Registo Nacional de Pessoas Colectivas). You can do this in person or online.

Apply for a License

Your application, translated into Portuguese, must be submitted to the Sociedade de Desenvolvimento da Madeira (SDM), the Regional Government of Madeira body that administers the IBC’s free economic zone regime.

It must include the name of an existing company in Portugal or abroad or a company to be incorporated. Branches of existing businesses may also be licensed.

All the following relevant details must be included in the license application:

  • Company name and address
  • Activity to be undertaken and NACE code
  • The total value of the investment
  • Indication of the number of jobs to be created.

All documents supporting the license application must be translated into Portuguese and legalized.

Companies licensed to operate in the IBC pay license and annual fees. There is a charge for service businesses of an application fee of €1,000 and an annual fee of €1,800.

SGPS businesses need to pay an application fee of €1,000 with annual operating fees of €1,800 for the first year and €1,800 plus 0.5% of the previous year’s profit, the first €1,000,000 being exempt for subsequent years.

Incorporate Your Company

You may form and register your company by public deed via the Private Deeds Registry Office or by private document through a private lawyer. The following documentation must be submitted to the Notarial Office in the case of a public deed:

  • Company name approval certificate
  • Provisional company identification card
  • Copy of the applicants’ IDs
  • Official Account Auditor Report
  • License and authorization from the Regional Secretary for Finance and Public Administration.

Business Registration & Publication at the Official Journal

You need to submit the following documents to the private conservatory of the commercial registry to complete the business registration:

  • Company’s incorporation public deed
  • Company name approval certificate
  • Beginning of activity declaration.

The official publication will be in JORAM, the Official Journal of the Autonomous Region of Madeira. Companies may also request publication about the business registration in a local newspaper.

Declaration of Beginning of Activity

Companies must declare the beginning of the activity to the local tax authorities. The following documents must be submitted:

  • The specific form, available at the tax authorities, in triplicate and duly certified, with information regarding the official accountant responsible for the company’s books of accounts
  • Provisional company identification card
  • Copy of the public deed
  • Copy of identification and fiscal cards of the shareholders and official accountants.

Social Security Registration

You need to proceed with the registration at the Social Security Administration within 30 days from the beginning of the activity. The following documents must be presented:

  • Taxpayer’s identification card
  • Company’s incorporation public deed
  • Company’s identification card
  • Record of proceedings of the election of the members of the board and forms of income
  • Copy of the fiscal card of the members of the board
  • Fiscal document of the beginning of the activity.

Whether it’s a foreign company targeting the European market or one attracting local customers, you will require official approval to form a company in Madeira.

This is where we can come in. Our specialist team can assist you with your company’s charter, ease your path to becoming a tax resident, help you acquire a Portuguese VAT number, and open a local bank account.

Or we can help you start an offshore company somewhere else. We can advise on a range of low-tax jurisdictions throughout the EU and beyond, let our team provide give you the benefit of our years of experience across multiple jurisdictions so you can go where you’re treated best.

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