Madeira Offshore Company Formation:: Business Inc Online

Madeira is the largest Island in an archipelago of smaller islands, Porto Santo, Desertas and Selvagens, 850km (527 miles) southwest of Portugal. The Madeira Islands together with the Azores are unique part of the Portuguese Republic with constitutionally mandated autonomous statuses.

Madeira is a civil law jurisdiction and subject to Portuguese law which is a member of the European Union. Under Portuguese law there are recognizable business formations such as general partnerships and limited partnerships, and the sole proprietor. The most common formations are the Private Limited Liability Company (Sociedad por quotas de responsibilidade limitida - Lta) the Stock Corporation (Sociedade anonima – SA) which may also be limited by guarantee or unlimited; Holding Companies (sociedada gestora de participacoes sociais), which are corporate entities that take the form of the Private Limited Liability Company or Stock Corporation and that must not undertake any commercial activities other than holding shares in other companies to receive tax concessions.

Offshore operations usually take the forms of the Private Limited Liability Company, Stock Corporation, Holding Company, Trust Shipping Company and Trusts.

Advantages of the Madeira Offshore Company Formation

Company Formation expertise	Excellent
Charges	Good
Secrecy	Satisfactory
Banking services	Good
Legal system	Excellent
Political stability	Good
Prestige	Excellent

Foreign Investors are attracted to the jurisdiction because Madeira has an established International Business Centre with a Free Trade Zone and all Companies licensed to operate in Financial Centre before 31 December 2000 are completely exempt from income tax and Capital Gains tax on all activities carried outside Portugal until 31st December 2011. Location within the international Business centre also guarantees unfettered access to the European single market and the reduced payment of 12% VAT as opposed to the normal Portuguese rate of 17%. Companies licensed after 31 December 2000 are entitled to a reduced rate of income tax currently 2% compared to the rate applied to local businesses at 34%. Companies will also benefit from the double taxation treaties signed by Portugal.

There are no formal exchange controls in Madeira, although substantial transactions need to be reported to the Central Bank of Portugal, which regulates the banking sector.

Madeira compares less favourably to other Jurisdictions in terms of the efficiency of the incorporation process which can take up to 12 weeks to complete. The island also lacks the strict legislation of other Jurisdictions in protecting secrecy and the disclosure of beneficial ownership. As such the Madeira is more popular location for the foreign investor seeking access to the European Market.

Offshore Company Formation Formalities

The offshore vehicles of choice are the Private Limited Company and Stock Corporation. Madeira Company is restricted in undertaking business in banking, assurance, reinsurance Fund and Asset Management without the appropriate licence.

In respect of the formalities for incorporation Portuguese company law differs from other common law Jurisdictions in one major particular. Under Portuguese law the concept of shares and the shareholder are not recognized. Shareholders are known as "quota holders", capital is represented by "registered quotas" rather than shares and part ownership of a company is evidenced not by the issue of share certificates but by registration of the quota on the registration certificate. The concept of a Company Secretary is not recognized.

The requirements are as follows:

The minimum authorized registered quotas for a Private Limited Company is 5,000 euros and 50,000 euros for a Stock Corporation;
A minimum of one Director can be appointed to a Private Limited Company and three Directors to a Stock Corporation. The Directors must be a natural person, there are no nationality restrictions but foreign directors must be registered with the local tax and social security offices and must act through a resident agent in order to comply with the laws and fiscal requirements of Portuguese companies;
The minimum Quota holder for a Private limited Company is one and five for a Stock Corporation;
Private Limited Companies are not permitted to have the equivalent of bearer shares, but this is permitted to the Stock Corporation provided that the equivalent share capital is fully paid up;
A registered office must be maintained in Madeira where all legal documents, minute books, official accounting books and records must be kept;
Meetings must be held at the registered office;
A company can use a foreign name provided it refers to its main activity;
Company Accounts must be prepared in Portuguese.

Trusts

The concept of the Trust does not exist in Portuguese civil law and the vehicle of Offshore Trust became possible with the creation of the Free Trade Zone and its tax concessions. All off shore Trusts are exempt from taxation provided that the income does not arise from Portugal; if this occurs the tax is levied against the Trustee only. The Settlor and Beneficiaries must be resident abroad and Trust property should be abroad. Confidentiality of the Settlor and beneficiary are protected by statute.

Domestic Trusts are not available to Portuguese residents nor can they use Madeira offshore Trusts.

There are no unit trusts in Portugal or Madeira.

Taxation

Madeira’s taxes are not as modest compared to other Jurisdictions. Income tax is levied on a resident’s worldwide income at a rate of 12% rising to 40%; both the employed and the self employed make social security contributions. There are Capital Gains taxes and VAT is applied at the rate of 12% instead of the Portuguese rate of 17%.

The rate of corporate income tax in Portugal and Madeira is 34%, in addition to a municipal surcharge of 10%. However, Companies licensed in the Free Trade Zone, if registered before 2001, receive exemption from income tax and capital gains tax, Stamp Duty except in respect of transactions carried out in mainland Portugal, or with Portuguese residents. These exemptions apply until 2011.

Companies licensed in the Free Trade Zone are also exempt from Stamp Duty and death duties.

Holding Companies are taxed on income derived from its holdings at a nominal rate of 1.7% which is equivalent to 34% corporate tax on 5% of profits.

Banking

Madeira offshore banks permitted activities include foreign exchange, the management of investment funds and the issuance of negotiable securities as well as a normal range of banking services but they must hold an international banking licence in order to provide financial services to Portuguese residents.

Employment law

Madeira follows Portuguese law which has a national minimum wage, and maximum working hours which are set nationally. Employees receive 14 months pay each year, being 12 working months plus one holiday and one bonus month. Paid holiday entitlement is 22 working days.
Sickness and other social benefits are generous, and the employer pays a high national insurance contribution as a result.

Immigration and Residency

There are no admission restrictions to citizens of EU member states card and there is no requirement for work permits for EU workers. Non-EU workers are required to have both a residence visa and a work permit.

Geography, People, and Culture

Madeira was discovered by the Portuguese navigators in the 15th century and since that date has been part of Portuguese territory. The capital city is Funchal and the population is approximately 350,000. Portuguese is the official language but English is widely spoken in the commercial districts.

Communications are good, the island is well served by an international airport with daily flights to mainland Portugal and frequent flights to other countries. Shipping is well served by deep water ports at Funchal and Porto Santo, and the Island's telephone network is linked to mainland Portugal by cable and satellite giving easy, direct access to International networks.

Legal and Political system

Madeira has a constitutionally mandated autonomous status with its own Parliament and locally elected Government but is represented at the Lisbon Central Portuguese Parliament by five members who are elected by the citizens of Madeira. The Madeira regional parliament is elected and rules on such matters as the Budget, but cannot overrule any decision of the Central Portuguese government.

Economy

Madeira’s economy is based on tourism, fishing, farming and financial services. The Euro has replaced the Portuguese Escudo as Island’s official currency.

Legislation relating to offshore and non-resident business

If you require more information on any particular statute please contact us.
Decree Law No 262/86 (Companies Code)
Decree Law No 21/87 (Holding Companies)
Decree Law No 352/88 (Trusts)
Decree Law No 495/88 (Holding Companies)
Decree Law No 96/89 (Shipping Register)
Decree Law No 715/89 (Ship Registration)
Decree Law No 264/90 (Trust Companies)
Decree Law No 393/93 (Miscellaneous Shipping)
Decree Law No 10/94 (Offshore Banks)
Decree Law No 149/94 (Trusts)
Decree Law No 212/94 (Company Law)
Tax Reform Act 2000

Medeira Offshore Company Formation:

Offshore Company Formation Formalities