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Taxation & Tax treaties Tax Reform Act 2000 The Tax Reform Act 2000 made some changes to the tax benefits granted to MIBC companies. The Act also requires that companies wishing to benefit from the tax incentives must provide documentary evidence proving that all transactions are with non-Portuguese residents. Manufacturing companies in the Free Trade Zone Receive exemption from income tax and capital gains tax, including the transactions carried out in mainland Portugal or with Portuguese residents.This only applies to duly incorporated entities within the Industrial Free Zone of Caniçal. For other entities the exemption does not apply in transactions carried out in mainland Portugal or with Portuguese residents. Service and Financial Companies Service and financial companies in the MIBC, including banks and insurance companies, licensed before 2001 receive tax exemption until 2011 on revenues derived from other companies within the MIBC and on revenue derived from non-residents on Portuguese territory. In December 2002, a new regime was approved by the E.U., for companies licensed as from 1/1/2004. This new regime foresees a minimum taxation of 1% in 2003 and 2004, 2% in 2005 and 2006, and 3% in 2007 until 2011 - subject to certain limitations and conditions. SGPS Holding Companies The SGPS tax regime is described below:
Mixed Holding Companies
* The treaties with Brazil and the USA exclude MIBC companies. This table lists the percentage rates of withholding tax on payments made from Treaty countries to Portugal and vice versa. When two rates are quoted, the lower one applies to payments from a company in which the payee has 10% participation - this is the usual level in OECD model treaties. Death Duties No death duties are payable in Madeira on the transfer of a shareholding in a company licensed to operate under the MIBC Legislation unless the shareholder was resident in Portugal. Stamp Duty and Capital Transfer Tax No stamp duties are levied on the documents or transactions of companies incorporated under the MIBC Legislation. Capital Transfer Tax applies to real estate purchases made by Free Trade Zone companies, except that the purchase of land or buildings for use as a head office is exempt. Standard rates apply: 8% for urban properties and 10% for rural ones. VAT VAT applies in Madeira at the rate of 15% (21% in Portugal). Trusts Offshore Trusts established in the International Business Centre under MIBC Legislation have Madeira-resident trustees. All income earned by a trust and all income distributed in favour of a beneficiary is free of tax in Madeira unless the source of that investment income is Portugal in which case it is taxed in the hands of the trustee. Taxation of Foreign Employees There is in fact no distinction between the employees of resident or non-resident operations. It is a question of individual status; residents and non-residents are treated differently of course. Most types of compensation and benefit paid to employees are taxable; there are no special privileges or exemptions for expatriate workers, except that the officers and crew of ships registered under the Madeira Shipping Registry are exempt from income and social security taxes. |
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