MADEIRA ISLANDS
GENERAL INFORMATION: The Madeira archipelago is made up of the Islands of Madeira, Porto Santo, Desertas and Selvagens. It was discovered by the Portuguese navigators in the XV century and has been a Portuguese territory ever since. It is of interest to note that all the islands were completely uninhabited at the time of their discovery. The name of the group islands is taken from the largest island Madeira. The Madeira landmass encompasses approximately 770 sq. km and is located in the Atlantic Ocean, 1,000 km from mainland Portugal and 870 km from North Africa. The topography is mountainous and the highest point is 1,862 metres. The scenery is spectacular and the vegetation diverse.
POPULATION
The population is approximately 265,000 of which 100,000 live in the capital Funchal and are all mainly of Portuguese origin, with a small expatriate British community.
POLITICAL STRUCTURE
Madeira was discovered and colonised by the Portuguese in 1419 and partial political autonomy was eventually granted in 1976. Madeira is represented in Lisbon by five members who are elected by universal suffrage.
Portugal has a written constitution, which defines the political structure and the role of the legislature. The Madeira Regional Parliament is an elected body, which legislates on Madeira interests such as the budget, and its responsibilities are defined in the constitution.
The Madeira Government cannot however, overrule decisions made by the Central Government in Lisbon nor override political unity with Portugal.
INFRASTRUCTURE AND ECONOMY
Communications are good; there are six daily flights to and from Lisbon, the Portuguese capital, and Lisbon Airport is an international air transport hub. The flight from Lisbon to Madeira is one hour and thirty minutes. There are also flights from Madeira to other European countries including five direct scheduled flights a week to London.
Madeira has an excellent digital telecommunications system with direct dialling to most countries. Postal and courier services are also good offering next day deliveries to mainland Portugal.
LANGUAGE
Portuguese is the national language, English is taught in schools and is used daily in commerce and international trade.
CURRENCY
Portuguese Escudo.
EXCHANGE CONTROL
None.
TYPE OF LAW
Civil Law.
PRINCIPAL CORPORATE LEGISLATION
Portuguese Companies Code (Codigo das Sociedades Comerciais).
COMPANY INFORMATION:
TYPE OF COMPANY FOR INTERNATIONAL TRADING
Sociedade por Quotas - Limitada (Lda s) or Sociedade Anónima (SA).
By legislation first put before the Portuguese Parliament as long ago as 1980 and enacted in 1986 the Madeira Free Trade Zone was established which gives substantial tax concessions to companies incorporated on the Island.
In 1993, Portuguese legislation allowed the incorporation of Lda's or SA's with one sole quota/share holder for companies operating within the Madeira Free Trade Zone - so called "Sociedade Unipessoal" - Single Member companies.
Portuguese legislation provides for the incorporation of a pure holding company called SGPS (Sociedade Gestora de Participacoes Sociais).
The SGPS has been specifically designed to take advantage of European Union Directive 90/435. The terms of that Directive require that dividends paid by a subsidiary located in one EU state to a parent located in another EU state must not be subject to any form of withholding tax as long as certain conditions are met - the most important of which is that the parent company cannot be exempt from taxation in its country of incorporation. The SGPS is therefore subject to a rate of tax of 36% on dividends received from subsidiaries situated in other EU states but 95% of the dividend income is exempt from taxation. Thus, the effective rate of taxation on dividends is 1.8% only. The SGPS must not undertake activities other than holding shares in other companies. This type of company is therefore of considerable use to any company located outside the EU which wishes to invest within the EU. Additionally, because the company is nominally subject to 36% tax, it would appear as though such a company would fall outside the provisions of the anti-tax haven legislation enacted by Japan. Under that legislation the profits of a foreign subsidiary of a Japanese company are taxed in the hands of the Japanese parent on a current year basis unless it can be demonstrated that the profits are subject to a rate of tax of at least 25% in the hands of the subsidiary.
The Madeira SGPS would appear to fit this criteria and may therefore be extremely beneficial as an investment vehicle for a Japanese parent company. The Madeira companies described above have the following characteristics:
PROCEDURE TO INCORPORATE
Once name approval has been obtained and a Licence obtained for the proposed entity to operate within the Madeira Free Trade Zone, a Public Deed is executed before a Notary Public. The Public Deed is then registered at Commercial Registry of Madeira.
RESTRICTIONS ON TRADING
A Madeira company cannot undertake any business that is not specified in its constitution.
A Madeira Company cannot undertake the business of Banking, Insurance, Assurance, Reinsurance, Fund Management and Asset Management (other than its own assets) without prior consent and licensing.
POWERS OF COMPANY
The powers and objects of a Madeira Company are contained within its constitution and have to be specific.
LANGUAGE OF LEGISLATION AND CORPORATE DOCUMENTS
Portuguese, but translations can be provided.
REGISTERED OFFICE REQUIRED
Yes, must be maintained in Madeira.
READY MADE COMPANIES AVAILABLE
Yes.
TIME TO INCORPORATE
60 working days.
NAME RESTRICTIONS
A name that is similar to or identical to an existing company. A name that in the opinion of the Registrar may be considered undesirable or offensive. A name that may imply an illegal activity. A name that may imply government patronage.
All Madeira companies must include words to describe clearly the objects of the company, e.g. consulting, engineering, marketing and trading.
LANGUAGE OF NAME
Legislation was passed in September 1995 allowing the approval of foreign names for companies operating within the Madeira Free Trade Zone. A company name must refer to a company's main object clause.
NAMES REQUIRING CONSENT OR A LICENCE
The Portuguese names and their foreign language equivalent for bank, building society, savings, loans, insurance, assurance, reinsurance, fund management, asset management, investment fund or any name that may imply an activity associated with the banking and insurance industries.
SUFFIXES TO DENOTE LIMITED LIABILITY
Limitada (Lda).
Sociedade Anónima (SA).
DISCLOSURE OF BENEFICIAL OWNERSHIP TO AUTHORITIES
None.
COMPLIANCE:
AUTHORISED AND ISSUED SHARE CAPITAL
Esc. 1 million minimum authorised and issued for Lda.
Esc. 10 million minimum authorised and issued for SA.
CLASSES OF SHARES PERMITTED
Madeira Limitada (Lda) Companies do not issue shares. Instead quotas are registered at the Commercial Registry of Madeira and members are issued with notarised extracts from the Commercial Registry of Madeira to record their ownership.
Madeira Sociedade Anónima (SA) companies may issue either registered or bearer shares with voting or non-voting rights.
Madeira Sociedade Unipessoal (Single Member) SA companies must issue registered shares with voting or non-voting rights, but may not issue bearer shares.
BEARER SHARES PERMITTED
SA companies only.
TAXATION
All Madeira companies are exempt from tax on income obtained from activities carried on outside of Portugal until 31 December 2011. An SGPS pays tax at a rate of 36% on dividends received from EU subsidiaries but 95% of that income is exempt from tax making an effective rate of tax on those dividends of 1.8%. The SGPS is otherwise exempt from all tax.
DOUBLE TAXATION AGREEMENTS
Companies licensed to operate within the Madeira Free Trade Zone are for all purposes Portuguese resident, and therefore can in most cases benefit from the double tax treaties signed by Portugal.
Portugal has signed double tax agreements with the following countries: Austria, Belgium, Bulgaria, Brazil, Czech Republic, Finland, France, Germany, Hungary, Ireland, Italy, Mozambique, Norway, Poland, Republic of Korea, Spain, Switzerland, United Kingdom and Venezuela. Negotiations are nearing completion with other countries.
LICENCE FEES
US$ 750 Application Fee and US$ 1,500 Annual fee. Both are reduced by 1/3rd to US$ 500 and US$ 1,000 respectively for companies represented by licensed management companies.
FINANCIAL STATEMENT REQUIREMENTS
The accounts of a Madeira company must be prepared in the Portuguese language and currency in accordance with Portuguese accounting rules. Madeira companies are obliged to file monthly or quarterly VAT returns and annual accounts. An audit is only required for companies which have a substantial level of assets and turnover and/or large number of employees.
Normally the fiscal year ends on 31st December, and accounts must be approved by the shareholders before the 31st March of the following year. A tax form must be filed with the authorities before the end of May.
DIRECTORS
It is normal to appoint two directors to a Limitada and three to a SA. The directors must be natural persons of any nationality and need not be resident in Madeira.
SHAREHOLDERS
The minimum number of shareholders for a Lda company is two, and five for a SA company. SA companies must have an odd number of directors*. Companies incorporated as a "Sociedade Unipessoal" may have one shareholder.
POPULATION
The population is approximately 265,000 of which 100,000 live in the capital Funchal and are all mainly of Portuguese origin, with a small expatriate British community.
POLITICAL STRUCTURE
Madeira was discovered and colonised by the Portuguese in 1419 and partial political autonomy was eventually granted in 1976. Madeira is represented in Lisbon by five members who are elected by universal suffrage.
Portugal has a written constitution, which defines the political structure and the role of the legislature. The Madeira Regional Parliament is an elected body, which legislates on Madeira interests such as the budget, and its responsibilities are defined in the constitution.
The Madeira Government cannot however, overrule decisions made by the Central Government in Lisbon nor override political unity with Portugal.
INFRASTRUCTURE AND ECONOMY
Communications are good; there are six daily flights to and from Lisbon, the Portuguese capital, and Lisbon Airport is an international air transport hub. The flight from Lisbon to Madeira is one hour and thirty minutes. There are also flights from Madeira to other European countries including five direct scheduled flights a week to London.
Madeira has an excellent digital telecommunications system with direct dialling to most countries. Postal and courier services are also good offering next day deliveries to mainland Portugal.
LANGUAGE
Portuguese is the national language, English is taught in schools and is used daily in commerce and international trade.
CURRENCY
Portuguese Escudo.
EXCHANGE CONTROL
None.
TYPE OF LAW
Civil Law.
PRINCIPAL CORPORATE LEGISLATION
Portuguese Companies Code (Codigo das Sociedades Comerciais).
COMPANY INFORMATION:
TYPE OF COMPANY FOR INTERNATIONAL TRADING
Sociedade por Quotas - Limitada (Lda s) or Sociedade Anónima (SA).
By legislation first put before the Portuguese Parliament as long ago as 1980 and enacted in 1986 the Madeira Free Trade Zone was established which gives substantial tax concessions to companies incorporated on the Island.
In 1993, Portuguese legislation allowed the incorporation of Lda's or SA's with one sole quota/share holder for companies operating within the Madeira Free Trade Zone - so called "Sociedade Unipessoal" - Single Member companies.
Portuguese legislation provides for the incorporation of a pure holding company called SGPS (Sociedade Gestora de Participacoes Sociais).
The SGPS has been specifically designed to take advantage of European Union Directive 90/435. The terms of that Directive require that dividends paid by a subsidiary located in one EU state to a parent located in another EU state must not be subject to any form of withholding tax as long as certain conditions are met - the most important of which is that the parent company cannot be exempt from taxation in its country of incorporation. The SGPS is therefore subject to a rate of tax of 36% on dividends received from subsidiaries situated in other EU states but 95% of the dividend income is exempt from taxation. Thus, the effective rate of taxation on dividends is 1.8% only. The SGPS must not undertake activities other than holding shares in other companies. This type of company is therefore of considerable use to any company located outside the EU which wishes to invest within the EU. Additionally, because the company is nominally subject to 36% tax, it would appear as though such a company would fall outside the provisions of the anti-tax haven legislation enacted by Japan. Under that legislation the profits of a foreign subsidiary of a Japanese company are taxed in the hands of the Japanese parent on a current year basis unless it can be demonstrated that the profits are subject to a rate of tax of at least 25% in the hands of the subsidiary.
The Madeira SGPS would appear to fit this criteria and may therefore be extremely beneficial as an investment vehicle for a Japanese parent company. The Madeira companies described above have the following characteristics:
PROCEDURE TO INCORPORATE
Once name approval has been obtained and a Licence obtained for the proposed entity to operate within the Madeira Free Trade Zone, a Public Deed is executed before a Notary Public. The Public Deed is then registered at Commercial Registry of Madeira.
RESTRICTIONS ON TRADING
A Madeira company cannot undertake any business that is not specified in its constitution.
A Madeira Company cannot undertake the business of Banking, Insurance, Assurance, Reinsurance, Fund Management and Asset Management (other than its own assets) without prior consent and licensing.
POWERS OF COMPANY
The powers and objects of a Madeira Company are contained within its constitution and have to be specific.
LANGUAGE OF LEGISLATION AND CORPORATE DOCUMENTS
Portuguese, but translations can be provided.
REGISTERED OFFICE REQUIRED
Yes, must be maintained in Madeira.
READY MADE COMPANIES AVAILABLE
Yes.
TIME TO INCORPORATE
60 working days.
NAME RESTRICTIONS
A name that is similar to or identical to an existing company. A name that in the opinion of the Registrar may be considered undesirable or offensive. A name that may imply an illegal activity. A name that may imply government patronage.
All Madeira companies must include words to describe clearly the objects of the company, e.g. consulting, engineering, marketing and trading.
LANGUAGE OF NAME
Legislation was passed in September 1995 allowing the approval of foreign names for companies operating within the Madeira Free Trade Zone. A company name must refer to a company's main object clause.
NAMES REQUIRING CONSENT OR A LICENCE
The Portuguese names and their foreign language equivalent for bank, building society, savings, loans, insurance, assurance, reinsurance, fund management, asset management, investment fund or any name that may imply an activity associated with the banking and insurance industries.
SUFFIXES TO DENOTE LIMITED LIABILITY
Limitada (Lda).
Sociedade Anónima (SA).
DISCLOSURE OF BENEFICIAL OWNERSHIP TO AUTHORITIES
None.
COMPLIANCE:
AUTHORISED AND ISSUED SHARE CAPITAL
Esc. 1 million minimum authorised and issued for Lda.
Esc. 10 million minimum authorised and issued for SA.
CLASSES OF SHARES PERMITTED
Madeira Limitada (Lda) Companies do not issue shares. Instead quotas are registered at the Commercial Registry of Madeira and members are issued with notarised extracts from the Commercial Registry of Madeira to record their ownership.
Madeira Sociedade Anónima (SA) companies may issue either registered or bearer shares with voting or non-voting rights.
Madeira Sociedade Unipessoal (Single Member) SA companies must issue registered shares with voting or non-voting rights, but may not issue bearer shares.
BEARER SHARES PERMITTED
SA companies only.
TAXATION
All Madeira companies are exempt from tax on income obtained from activities carried on outside of Portugal until 31 December 2011. An SGPS pays tax at a rate of 36% on dividends received from EU subsidiaries but 95% of that income is exempt from tax making an effective rate of tax on those dividends of 1.8%. The SGPS is otherwise exempt from all tax.
DOUBLE TAXATION AGREEMENTS
Companies licensed to operate within the Madeira Free Trade Zone are for all purposes Portuguese resident, and therefore can in most cases benefit from the double tax treaties signed by Portugal.
Portugal has signed double tax agreements with the following countries: Austria, Belgium, Bulgaria, Brazil, Czech Republic, Finland, France, Germany, Hungary, Ireland, Italy, Mozambique, Norway, Poland, Republic of Korea, Spain, Switzerland, United Kingdom and Venezuela. Negotiations are nearing completion with other countries.
LICENCE FEES
US$ 750 Application Fee and US$ 1,500 Annual fee. Both are reduced by 1/3rd to US$ 500 and US$ 1,000 respectively for companies represented by licensed management companies.
FINANCIAL STATEMENT REQUIREMENTS
The accounts of a Madeira company must be prepared in the Portuguese language and currency in accordance with Portuguese accounting rules. Madeira companies are obliged to file monthly or quarterly VAT returns and annual accounts. An audit is only required for companies which have a substantial level of assets and turnover and/or large number of employees.
Normally the fiscal year ends on 31st December, and accounts must be approved by the shareholders before the 31st March of the following year. A tax form must be filed with the authorities before the end of May.
DIRECTORS
It is normal to appoint two directors to a Limitada and three to a SA. The directors must be natural persons of any nationality and need not be resident in Madeira.
SHAREHOLDERS
The minimum number of shareholders for a Lda company is two, and five for a SA company. SA companies must have an odd number of directors*. Companies incorporated as a "Sociedade Unipessoal" may have one shareholder.