Madeira

Economic and Legal Climate

Madeira, an autonomous region of Portugal, is an archipelago situated in the Atlantic Ocean. It offers a favorable business environment with a robust economy driven by tourism, agriculture, and the services sector. Madeira is known for its International Business Centre (IBC), which provides a highly attractive tax regime for companies. The legal system is based on civil law, influenced by Portuguese law, providing comprehensive legal protections and a transparent regulatory framework. As part of Portugal, Madeira benefits from being within the European Union (EU), offering access to the European Single Market.

Official Languages

The official language of Madeira is Portuguese. However, English is widely spoken in business and tourism sectors, making it accessible for international investors. Engaging local legal and business experts fluent in Portuguese is advisable for dealing with regulatory and administrative matters.

Banking System

Madeira has a well-developed and regulated banking system overseen by the Banco de Portugal, the central bank of Portugal. The island hosts a variety of local and international banks offering comprehensive financial services. The banking sector is known for its stability and strong regulatory standards, supporting both domestic and international business operations.

Maintenance Costs

Maintenance costs for companies in Madeira are relatively low compared to other European jurisdictions. Annual compliance requirements include renewing business licenses, filing tax returns, conducting audits, and maintaining proper accounting records. These processes are straightforward and affordable, contributing to lower ongoing operational expenses.

Setting Up Costs

Setting up a company in Madeira involves several costs, including incorporation fees, legal fees, and registration with the Commercial Registry Office. The process includes drafting the company’s articles of association, obtaining a tax identification number, and registering for VAT. The incorporation process can typically be completed within a few weeks if all documentation is in order.

Corporate Tax Rate

Madeira offers an attractive corporate tax regime through its International Business Centre (IBC). Companies registered under the IBC benefit from a reduced corporate tax rate of 5% until 2027, provided they meet certain substance requirements. Additionally, there are no withholding taxes on dividend payments, interest, or royalties to non-residents, and no capital gains tax on the sale of shares.

Territorial or Non-Territorial Principles

Madeira, as part of Portugal, operates a worldwide tax system, meaning resident companies are taxed on their global income. However, companies benefiting from the IBC regime enjoy significant tax advantages, making it highly tax-efficient for international businesses.

Currency Regulation

As part of Portugal and the Eurozone, Madeira imposes no significant restrictions on foreign exchange transactions, allowing for the free flow of capital within the EU and internationally. The currency used is the Euro (EUR).

Advantages of Setting Up a Company in Madeira

1. Attractive Tax Regime: Reduced corporate tax rate and other tax incentives through the International Business Centre (IBC).
2. Strategic Location: Madeira’s location in the Atlantic Ocean provides a strategic base for operations between Europe, Africa, and the Americas.
3. Stable Legal System: The Portuguese civil law system provides strong legal protections and clear regulations for businesses.
4. High Quality of Life: Madeira offers an excellent quality of life, with a pleasant climate, stunning landscapes, and high safety standards, making it an attractive destination for expatriates.
5. Business-Friendly Environment: Transparent regulatory framework and supportive government policies facilitate easy company setup and growth.

Disadvantages of Setting Up a Company in Madeira

1. Small Market: Madeira’s domestic market is relatively small, which may limit local growth opportunities.
2. Economic Dependence: The economy's reliance on tourism and a few key sectors can pose risks in times of sectoral downturns.
3. Language Barrier: While English is widely spoken in business circles, proficiency in Portuguese is essential for many legal and administrative matters, necessitating local expertise.

Conclusion

Madeira offers a highly attractive environment for setting up a company, with its favorable tax regime, strategic location, and high quality of life. Despite challenges such as the small market size and economic dependence on a few key sectors, the overall advantages make Madeira a compelling choice for international investors. Global Expand can assist you in navigating the process of establishing a company in Madeira, ensuring a smooth and successful entry into this advantageous and business-friendly jurisdiction.