The location of a business, for example, should not be overlooked.

This is even one of the most important decisions you have to make. Whether to be close to your target audience, to your suppliers, or simply to be close to your home, choosing the location of your business has several implications.

Fortunately, with the increasingly global economy and the constant development of technologies, there are opportunities that can be taken advantage of, thus changing the traditional variables to take into account when choosing your company's location: we speak of the fiscal variable.

When choosing a location, you should therefore assess the tax implications that a particular region of the country or even the world has for your activity.

You should know if your company's headquarters can operate in a different location than the “operational” part. We mean that you can separate the company's headquarters for tax advantage in a certain region of the globe, from the “operational” part to obtain benefits being close to customers and suppliers, for example.

In the specific case of Portugal, there is a location to fix the headquarters of your company, or even a business unit of your company, with clear advantages for you and your business.

Meet the International Business Center of Madeira - IBC (technical name), better known as the Madeira Free Trade Zone.

In this location, among other incentives, the IRC rate is only 5% for all taxable profit resulting from sales abroad (exports of goods and / or services).

Does this imply that I have to move to Madeira and move my entire company?

No. The Zona Franca da Madeira was created over 35 years ago in order to encourage regional economic development. As a consequence, there is a tax incentive program that the Portuguese State grants (Article 36 of the Tax Benefits Statute - EBF) to attract tax revenue and foreign investment, whether continental or foreign, and thus contribute to employment in the Autonomous Region of Madeira - RAM.

You can set up your company's headquarters in Madeira and will be taxed on IRC in RAM - 5% -, but maintain or create your logistics on the continent or anywhere in the world or even have a company in Madeira just to operate your international business.

Everything will depend on the structure and type of business of your company. Therefore, it is reinforced that you do not need to go live with all your team to Madeira. Although it is a beautiful place with excellent infrastructure at all levels!

The main benefit for your business is to undertake your idea with extraordinary tax benefits - it is thus an opportunity for several businesses to establish their headquarters at the CINM.

What are the main benefits?

When you license your company in the Madeira Free Trade Zone until December 31, 2020, you will benefit from all tax privileges and benefits until the end of 2027.

The advantages include:

• Very attractive tax system and approved by the EU.
• Credible, regulated, transparent and stable tax regime;
• Low operating costs compared to other European jurisdictions;
• Implementation of business with lower costs in terms of wages, facilities, telecommunications, energy and others;
• It is under the principles of the Treaty on European Union, taking advantage of the principle of freedom of establishment and the provision of services;
• Legal protection of Portuguese laws and Double Taxation Agreements entered into by the Portuguese State.

Attention: the Madeira Free Trade Zone is a project approved by the European Union under state aid, being duly regulated nationally and communally. It is not classified as offshore and, therefore, all opportunities in this program can be used by entrepreneurs for the successful expansion of their business.

What are the fiscal benefits?

In addition to the benefits, one of the main IBC flags is the very attractive tax benefits for companies, when compared to benefits from other European capitals.

In the Madeira Free Trade Zone, you can count on a reduced rate of corporate income tax - 5% on transactions with entities not resident in Portugal, except for those that are also licensed by the IBC, whose taxation is also 5%. See 1 Article 36-A No. 1 of the EBF.

Tax benefits are also subject to one of the following annual maximum limits:

• 15.1% of annual turnover;
• 20.1% of the gross added value obtained annually;
• 30.1% of annual labor costs.

Other fiscal benefits you can count on:

1. Exemption from the obligation of withholding tax on the payment of royalties, services to third parties with which Portugal has a Double Taxation Agreement (ADT);

2. Exemption from withholding tax in the distribution of dividends to partners / shareholders, provided they are not resident in the national territory and non-resident or domiciled in countries, territories or regions with a privileged tax regime, clearly more favorable, included in the list approved by the Portuguese State. Cfr. Article 36-A, nº 10 al. a) EBF;

3. Exemption from withholding tax on payment of interest to shareholders, and other forms of remuneration for supplies, allowances or capital advances, provided that they are not residents of the country and non-residents or domiciled in countries, territories or regions with privileged taxation regime, clearly more favorable, included in the list approved by the Portuguese State. Cfr. Article 36-A nº 10 al. b) EBF;

4. Exemption from withholding tax on capital gains on the sale of shareholdings of companies licensed in the IBC to partners and shareholders not resident in Portugal provided they are not resident in jurisdictions included in the list of Portuguese tax havens;

5. Exemption from taxation on capital gains obtained in the sale of subsidiaries under the conditions of participation exemption - Cfr. Article 51ºC of the CIRC;

6. Participation exemption regime applicable worldwide for dividends, reserves, capital gains and losses;

7. 80% reduction in stamp tax rates (Imposto de Selo), city tax on transactions (IMT), city tax on real estate (IMI) and regional and municipal spills. Cfr. Article 36-A, No. 12 of the EBF;

8. Reduced rate of 2.5% in the taxation of royalties received from foreign companies. Cfr. Article 50A of the CIRC in conjunction with Article 36A of the EBF;

9. In relations with countries that have not entered into an ADT with Portugal (in the case of Angola), the withholding tax paid in those countries (international double tax tax credit) may be deducted from the IRC rate in the following 5 years. Cfr. Article 91 and 91-A of the CIRC;

10. Exemption from withholding tax on dividends, interest and royalties received from EU subsidiaries, provided that the requirements of the mothers and daughters directive or the interest and royalties directive are met. Cfr. Council Directive 2011/96 / EU, of 30 November 2011;

11. Exemption from notary fees and registrations. Cfr. Article 8 of Decree-Law no. 234/88 of 5 July;

12. Current VAT rate - 22%