www.pwc.pt/tax

An attractive special tax regime, together with Portuguese tax benefits and a competitive participation exemption regime, makes Madeira International Business Centre a unique window for investment.

Madeira An opportunity to invest

The “job creation” concept is quite broad, giving investors the possibility to choose an option which better suits the project at hand.

2 PwC

Why Madeira is an opportunity to invest?

Madeira, a Portuguese island located in the Atlantic Ocean, offers a special taxation regime for companies established within the Madeira International Business Centre (MIBC). This regime provides several tax benefits, making it an attractive location for international investment structures.

The basis of taxation of MIBC companies is the general Portuguese regime. However, several benefits and exemptions make the MIBC a very interesting platform to invest abroad.

MIBC companies are eligible to benefit from European Directives and Double Taxation Treaties (DTT) signed by Portugal. Combined with the Portuguese participation exemption regime, interesting solutions with low taxation may be obtained.In order to be eligible, companies have to start their activity within 6 months upon issuance of the license and fulfil one of two possible specific substance requirements of this regime:• create at least 6 jobs in the first six

months of activity; or• create 1 to 5 jobs in the first six

months of activity and have a minimum of EUR 75 000 of CAPEX in the first two years of activity.

Number of jobs created

Thresholds of income (euros)

1-2 2 millions

3-5 2.6 millions

6-30 16 millions

31-50 26 millions

51-100 40 millions

Over 100 150 millions

With all characteristics combined, MIBC offers companies:• corporate income tax rate of 5%, up

until 2020, applicable to foreign sourced income and limited to thresholds of income defined by the number of jobs created;

• taxable income above the applicable threshold is subject to the standard tax rate (currently of 23%);

• additional Municipal Surtaxes may be also due on income above the threshold;

• a very competitive participation exemption regime, allowing for dividends and capital gains exemption regarding 5% shareholdings ;

• optional exclusion of profits/losses regime of permanent establishments abroad;

• patent box regime and special tax depreciation for certain intangibles without limited useful life;

• no withholding on dividends paid to EU/EEA or DTT country shareholders with a 5% shareholding, held for 24 months;

• no withholding tax on interest, royalties and service fees;

• no taxation on capital gains realized by non-residents on the sale of shares in MIBC companies;

• VAT rates of 5%, 12% and 22%;• exemption from Stamp Duty, Property

Tax and Property Transfer Tax;• access to EU Directives and Regulations

and the Portuguese DTT network;• 20% flat rate on high-added value

employment activities and several exemptions on non-Portuguese sourced income applicable to non-residents moving to Portugal;

• “Golden Visa”, granting free movement within the Schengen area, available to non-EU nationals aiming to invest in Portugal.

2. Medium-sized investments may benefit from a low tax rate, when compared to other typical EU holding locations• The 5% tax rate foreseen in the MIBC is

lower than other European regimes.• Medium-size investments are not hindered by the

job creation condition - only 6 jobs are required to benefit from a EUR 21.87 million threshold.

• No tax refund is required to benefit from low taxation, providing companies with more liquidity and easefulness with the management of their treasury.

3. A business-friendly environment

Madeira - an opportunity to invest 3

Is a good choice because...

1. MIBC has unique advantages for international investments, namely in Africa, South America and in Portuguese Speaking Countries• MIBC is a reference hub for outbound investment, combining

a premium participation exemption regime and a 5% corporate income taxation on non-exempt income.

• Several Conventions with the countries of the aforementioned regions are in place, and are accessible to MIBC companies.

• Portugal has special links with Portuguese Speaking Countries, bettering Portugal’s position as a hub for investments to and from these emerging areas. Conjointly, the community of Portuguese Speaking Countries amounts to a 255 million people market, value which is strikingly increased if we consider the surrounding economic integration regions.

• Strong cultural and institutional links with these countries, thus benefitting business relationships.

• Portugal holds the 31th position in the World Bank’s “Doing Business 2014” ranking – considerably better than other typical EU holding locations.

• Several Agreements on Mutual Promotion and Protection of Investments (AMPPI) were concluded by Portugal with “investment cluster” countries, ensuring investments’ safety.

• MIBC is not on the OECD black-list, and is duly authorised by the European Commission as a lawful state aid regime.

• Non-resident individuals moving to Portugal may benefit from a tax rate of 20% for high added value employment income, combined with several exemptions on foreign sourced income.

© 2014 PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda 2014. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda. which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

www.pwc.pt/tax

Jaime Estevesjaime.esteves@pt.pwc.ptT: +351 213 599 601F: +351 213 599 995

LisbonPalácio Sottomayor, Rua Sousa Martins, 1 - 2º Esq., 1069-316 Lisboa, PortugalTel +351 213 599 000Fax +351 213 599 999

Oportoo’Porto Bessa Leite Complex, Rua António Bessa Leite, 1430 - 5º, 4150-074 Porto, PortugalTel +351 225 433 000 Fax +351 225 433 499

Contacts