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Portugal

28 April 2015

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Portugal's Madeira International Business Centre Regime to be Extended to 2027

Following approval by the EU Commission, The Portuguese government has submitted a bill to parliament containing new proposed rules for the Madeira (Island) International Business Centre (MIBC) regime, including an extension of the regimes benefits to 2027 for companies licensed between 1 January 2015 and 31 December 2020 to operate in the MIBC.

The main benefit for MIBC licensed companies is a reduced corporate income tax (CIT) rate of 5% on qualifying taxable income. The amount of taxable income that qualifies for the reduced rate is limited based on the number jobs existing in the relevant tax year. Under the new rules proposed in the bill, the caps will be as follows:

  • 1 to 2 jobs - up to EUR 2.73 million qualifies
  • 3 to 5 jobs - up to EUR 3.55 million qualifies
  • 6 to 30 jobs - up to EUR 21.87 million qualifies
  • 31 to 50 jobs - up to EUR 35.54 million qualifies
  • 11 to 100 jobs - up to EUR 54.68 million qualifies
  • Over 100 jobs - up to EUR 205.5 million qualifies

Taxable income exceeding the caps is subject to the standard Portuguese CIT rate of 21% (2015). In addition an overall tax benefit cap will apply regardless of the number of jobs. This cap is equal to 15.1% of annual turnover, 20.1% of annual gross value-added, or 30.1% of the total annual labor costs.

In order to gain the reduced tax rate benefit, companies must create at least six new jobs in the first six months of operation, or create at least one to five new jobs in the first six months and invest at least EUR 75,000 in assets in the first two years.

Additional benefits include a tax exemption for dividend and interest payments to non-resident shareholders, as well as a capital gains tax exemption on gains from the disposal of shares in the MIBC company by non-residents. These benefits are restricted if the shareholder is resident in tax haven or blacklisted jurisdiction, and generally will not apply if the shareholder is directly indirectly controlled by a Portuguese resident.

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