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tax system


Entities operating under the jurisdiction of the IBC benefit from the European Union's most competitive tax system:

in relation to members
Members that invest in the capital of a company of the IBC are exempt from:
withholding tax on dividend and interest payments;
capital gains tax resulting from the sale of equity interests in the company;
tax on income from company liquidation proceedings

This tax relief is accessible to members that are non-resident in Portugal or members operating in the IBC.


in relation to the company
Companies licensed prior to January 2001

Companies licensed to operate under the jurisdiction of the IBC before 1 January 2001 are exempt from:
corporate tax (IRC) until 2011;
the obligation to withhold tax on royalty, interest and service payments;
stamp duty on company capitalisation;
municipal transaction tax (IMT) and municipal property tax (IMI);
notary public and registrar fees.

Madeira also has the European Union's lowest VAT rate: 14%.

N.B. NewMadeira has companies holding a pre- 1 January 2001 licence available for its clients.
requirements
Licensed by the Madeira Regional Government to operate in the IBC;
exemption from withholding tax only applicable on payments to non-residents in Portugal or on payments to other entities operating in the IBC;
corporate tax (IRC) exemption on income from outside Portugal or on income from other entities operating in the IBC;
in regard to maritime transport companies, corporate tax exemption is only not extensible to income from the transport of passengers or freight between Portuguese ports;
exemption on municipal transaction tax and municipal property tax is only applicable to real estate located in Madeira and registered for company business use;
no requirements of substance exist.


Companies licensed after January 2007

Companies licensed to operate in the IBC after 1 January 2007 benefit from the same exemptions detailed above, except for corporate tax (IRC) exemption. The corporate tax (IRC) rate is:
2007  -  2009: 3%;
2010  -  2012: 4%;
2013  -  2020: 5%.
requirements
The requirements are the same as those for companies licensed prior to 2001, except for some requirements of substance that are applicable.





Some business sectors have specific tax relief:

pure holdings
SGPS - Sociedades Gestoras de Participações Sociais holding companies comply with the requirements of the parent subsidiary directive, thereby allowing the SGPS to receive dividends from subsidiaries domiciled in the European Union exempted from withholding tax at source in the origin country.

The tax system of SGPS holding companies is as follows:
equity interests in the European Union
100% participation exemption on dividends and capital gains;
services rendered and interest: Corporate tax rate of 22.5%.


equity interests in non-EU countries
Corporate tax rate of 0 - 5% on income from dividends;
100% participation exemption on capital gains;
services rendered and interest: Corporate tax rate of 0 - 5%;
exempt from obligation to withhold tax at source on royalty, interest and service payments;
exempt from stamp duty on company capitalisation;
exempt from municipal transaction tax (IMT) and municipal property tax (IMI);
exempt from notary public and registrar fees.


requirements
Specific requirements of SGPS holding companies:
licensed by the Madeira Regional Government to operate in the IBC;
exempt from withholding tax at source on payments to non-residents in Portugal or on payments to other entities operating in the IBC;
exemption on municipal transaction tax and municipal property tax is only applicable to real estate located in Madeira and registered for company business use.




maritime transport
Corporate tax exemption/relief is applicable to all income from this business activity, except for the transport of passengers or freight between Portuguese ports.

The crew of vessels registered in the International Shipping Register are exempt from income tax.

Shareholders residing in Portugal can also enjoy the above-described tax relief.


industrial free zone
Corporate tax exemption /reduction is applicable to all income of an industrial nature from business implemented in the Industrial Free Zone, including income obtained in Portugal.

Shareholders residing in Portugal can also enjoy the above-described tax relief.



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