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MADEIRA - AN INTERNATIONAL BUSINESS CENTRE
Welcome to Madeira, the Pearl of the Atlantic
and the Industrial Free Trade Zone
This Autonomous Region of Portugal placed in the middle of the Atlantic Ocean is proud to welcome you to one of the World's most beautiful territories. Madeira discloses to its visitors precious treasures of natural beauty. The hospitality of its inhabitants, the mild climate, the quality of its hotels and services and its landscape are unequalled throughout the World. In Madeira you will find astonishing images of delight.
Madeira is the right place for leisure and business. With its flourishing International Business Centre, Madeira offers unique conditions for both tourism and business.
The island of Porto Santo was the first to be discovered. This event took place in 1418 with Madeira being discovered the following year. The discovery of the Archipelago of Madeira was not planned but happened during an expedition to Guinea, in which the fleet was overtaken by a storm, taking them to the island of Porto Santo.
The exploration of the islands started immediately after their discovery, initially by the command of D. João I, the King of Portugal. Some years later, the control and administration of the islands was conceded to the captains who issued local laws. During this period the islands developed their self sufficiency through the development of natural resources. The discoverers and their families, the first settlers, soon found other s to join them.
The island of Madeira developed more quickly than Porto Santo, mainly because of its rich vegetation, the abundance of water for irrigation and its inaccessibility, which afforded protection from invasion by pirates.
In 1508, D. Manuel I, King of Portugal, by Royal Decree, elevated Funchal to the status of "City". At this time, Funchal was considered one of the most important cities in the Portuguese Kingdom, and also the first city built by Europeans, outside Europe.
The number of inhabitants on the Archipelago of Madeira increased rapidly through the centuries. In 1580, there were 21,800 inhabitants and in 1891 a census revealed an increase to 132,223 inhabitants. With the increase in population, the region was also given autonomy from the mainland government. In 1766, the Marquis of Pombal, Prime Minister of the Portuguese Kingdom, granted Madeira the authority to mint her own money and in 1901 it was granted administrative autonomy to the District of Funchal.
However it was only after the Revolution of 1974 that the Archipelago of Madeira reached full autonomy (both economic and political) to become the Madeira Autonomous Region (Região Autónoma da Madeira).
Madeira Island, known as the "Pearl of the Atlantic" is the largest and most important island in the Archipelago of Madeira which also comprises the following islands:
· Porto Santo, the "Golden Island" and the first to be discovered;
· Desertas of islands, consisting of Deserta Grande, Bugio, Ilhéu Chão and Prego do Mar;
· Selvagens Islands, consisting of Selvagem Grande, Selvagem Pequena and Ilhéu de Fora.
Madeira is located between coordinates 30° 1' and 33° 80' North latitude and 15° 51' and 17° 16' West longitude. The capital of the archipelago is Funchal, lying 978 kilometres southwest of Lisbon (Portugal).
Porto Santo is a small island very different from Madeira. The land is flatter and vegetation scarce, making it more and than Madeira. The island's main attraction is a fine sandy beach approximately 9 km long.
The Desertas and Selvagens of islands, with very poor vegetation and harsh conditions, are uninhabited.
Madeira has a climate which is believed to be one of the healthiest in the world. The temperature is fairly uniform during the year, providing the possibility of enjoying the sun in winter as well as in summer. Calculations of the hours of sunshine for the last 30 years reveal an average of 166 hours of sunlight in January and 255 hours in September.
Air temperatures fluctuate from 16°C to 19°C in winter and 21°C to 25°C in summer with an annual average of 20°C. Sea temperatures vary from 18°C to 23°C. There are approximate 80 rainy days per annum in Madeira with an average rainfall of 775 mm. The northern region of the island is generally wetter than the south, where Funchal is located.
The Portuguese Constitution of 1976 granted political and administrative autonomy to Madeira. From a political point of view, that meant that Madeira now has its own government and legislative assembly (parliament). However, this autonomy cannot override the supreme power and political unity of the Portuguese Republic.
The Madeira Regional Assembly is elected by the residents of the region and has the power to create laws in areas of special importance to the region, provided such laws do not contradict the Constitution and the general laws of the Republic. This power is also restricted by the fact that the Regional Assembly can only create laws in areas where the Assembly of the Portuguese Republic has no exclusive powers.
The Regional Government is politically responsible to the Regional Assembly and its President is appointed by the Minister of the Republic, having considered the results of the elections to the Regional Assembly. The Regional Government defines the political direction of Madeira, namely creating regional regulatory decrees and supervising the public services.
One of the main characteristics of Madeira is its political stability, with the Social Democratic Party in regional power with an absolute majority since 1976. The President of the Regional Government has remained unchanged since 1978.
MADEIRA
· INTERNATIONAL SERVICES
· INDUSTRIAL FREE TRADE ZONE
INTERNATIONAL SERVICES
The International Services is a broad definition given to one of the four areas that make up Madeira's International Business Centre, where trading, holding, management, trusts, consulting, and any other type of service-oriented companies may be formed. From these activities, it is particularly interesting to highlight the establishment of trusts as well as the operation of holding companies.
In fact, although Madeira is a jurisdiction governed by civil law, it is also a business centre competing directly within the international market. For this purpose, Madeira has enacted legislation allowing the formation and management of trusts. The assets of a trust registered in Madeira may not include immovable assets located in Portuguese territory. A unique point concerning trusts in Madeira is that the settlor may select the trust law of the country under which the trust is to be administered.
It is also important to highlight the regulations concerning the use of holding companies within Madeira's IBC. Two types of holdings may be formed in Madeira: pure and mixed holdings, whose characteristics are as follows:
a) A pure holding company is defined by Portuguese law as an SGPS ("Sociedade Gestora de Participações Sociais"), whose activity is exclusively the management of shares held in other companies. Portuguese holding companies are exempt from taxation on the income received from EU affiliated companies, in accordance with the EU directive EEC/90/435. b) The SGPS structure has been used by European companies wishing to reduce the tax burden applicable to the income obtained from their affiliated companies spread throughout the EU, and for non-EU multinationals which set up holding companies in Madeira as part of their worldwide network in order to enhance their overall tax-planning on a cost-effective basis. c) Mixed holdings are companies which may carry out other activities, in addition to the management of shares held in other companies. As far as their tax treatment is concerned, they are totally exempt from taxation, except for any income acquired through operations in Portuguese territory.
INCENTIVES AND ADVANTAGES
Although some of the benefits applicable to companies undertaking service operations in Madeira have already been referred, it is worthwhile to highlight them in detail, and stress their importance in comparison with other jurisdictions:
A total exemption from taxation until the year 2011, except for any income obtained in Portuguese territory.
The already described system of SGPS holdings, which is probably one of the best ways to structure investments in Europe available today.
The access to Portugal's network of double taxation treaties, which makes it possible to further enhance the tax efficiency of investments through Madeira. The tax treaties may be used for both direct and indirect flows of income.
The operational costs available on the island. Salaries, office rentals and real estate prices compare very favourably with other European jurisdictions.
Companies incorporated within Madeira's IBC are considered for all purposes as fiscally resident in Portugal, a status which not only grants the above-indicated tax benefits, but also provides them with a VAT number. This does not take place in other IBC centres, where it is difficult to qualify for residence.
Finally, all the legislative framework that governs Madeira's International Business Centre was presented and approved by the European Commission, a fact which coupled with the supervision of the Bank of Portugal and other important institutions, characterizes Madeira as a sound and reputable business centre, with all the warranties of security and credibility attached thereto.
ADVANTAGES FOR TRADINGS, TRUSTS AND OTHER SERVICE COMPANIES
Exempt, until the year 2011, from corporate taxes on the income obtained from operations carried out exclusively with other entities established within the legal framework of the International Business Centre or with non-residents in Portuguese territory.
Exempt from corporate taxes on the interests from loans contracted by entities licensed within the legal framework of the International Business Centre provided the loan is used within that same framework and as long as the lenders are non-residents in Portuguese territory.
Shareholders non-resident in Portuguese territory are exempt, until the year 2011, from corporate and individual taxes in relation to:
1 ) dividends resulting from the income of these entities obtained through their operations within the legal framework of Madeira's International Business Centre, excluding the proportion of the income not exempt obtained from operations carried out in Portuguese territory. 2) income from interests and other forms of loans, bonds, and advances of capital given to these entities.
Foreign companies operating in Madeira's International Business Centre will additionally not be subject to restrictions on:
- The transfer of profits and capital invested; - The transfer of funds connected with trade; - The importation of funds.
TYPES OF COMPANIES WHICH MAY BE FORMED
Among the various legal structures available according to Portuguese law, investors have generally chosen the stock corporation (S.A.) and the Private limited company (Lda.). In addition, two other legal structures are available, since they are often used to operate in Portugal and, therefore, within the legal framework of Madeira's Free Trade Zone.
These are the Branch and the S.G.P.S. (Portuguese holding company). The main characteristics of these various forms of companies are the following, according to the Portuguese legislation inforce:
Private limited company (Lda.), with a minimum of 2 shareholders and a minimum capital of Euro 5,000. This type of company does not need to appoint directors; the minimum requirement is to appoint a manager who, by law, has the powers to undertake the management of the company.
Stock Corporation (S.A.), with a minimum of 5 shareholders and minimum capital of Euro 50,000. These companies may issue bearer shares provided all the share capital is fully paid up. Non-voting preference shares may be issued up to a maximum of 50% of the share capital. Redeemable preference shares may also be issued provided they are fully paid up. The management of these companies must be guaranteed by a board of directors made up by an odd number of members.
Branch. There are no minimum capital requirements for a branch, unless it relates to a bank, in which case either a minimum capital of an acceptable amount applies, or the Head Office must provide a full guarantee for the branch's operations.
S.G.P.S. (Portuguese Holdings), it must have the legal form of an S.A. or Lda. company and must have as its single object the management of shares held in other companies. It may render services and, in certain cases, lend credit to the companies in which it holds shares. It qualifies for the 90/435/CEE Directive.
The S.A. and the Lda. Companies licensed to operate in the IBC may be incorporated by means of D.L. 212/94, of the 10th of August, with one shareholder who may be an individual or a company, national or foreign.
INDUSTRIAL FREE TRADE ZONE
It consists of an industrial park located in the eastern end of the island, in the village of Caniçal, approximately 30 km from Funchal, the capital of the archipelago of Madeira. It is an integral part of Portuguese territory and, consequently, of the European Union, although with specific characteristics which turn it into an exceptional case where goods may enter, either of EU origin or not, without any restrictions or duties and for an unlimited period of time.
The Industrial Free Trade Zone has been created to receive activities which, by their nature, involve the physical movement of goods. All goods, regardless of their nature, quantity, origin and destination, may be imported into the Zone in order to be stored, repaired or transformed with few formalities and with a total exemption of import duties and quotas, provided they are not a threat to national security or public health. For this purpose, the Industrial Free Trade Zone has a total area of 138 hectares. Investors of all nationalities, including Portugal, may establish operations in the Zone. The licences to operate are granted for a minimum of five years.
The Zone is being developed in three phases. Each existing plot has direct access to all basic infrastructures, such as water supply, sewerage and energy supply and telecommunications. Likewise, the Zone has at the disposal of its investors a sea terminal sufficient to guarantee the unloading of bulk cargo. The bulk cargo area has two galleries with facilities for suction and discharge of solid and liquid materials. The terminal has elevation and movement means, among which we highlight a movable crane of great capacity. It is supported by various buildings, namely for the customs authorities and the terminal's management services and personnel.
Types of operations which may be carried out within the Zone
The legislation in force allows the setting up of any industrial or warehousing activity, provided they do not represent a threat to national security or the environment. Although operations involving high value added products, which may be exported by air, have greater advantages in using the Zone, given the applicable customs procedures, no discrimination is made regarding the activities authorised within the Zone. The best proof of this fact is the wide nature of activities which are already fully operational: assembling of computer parts, plastics, food products, tobacco, fish-processing and cleaning products. The origin of these companies is also quite diverse: Brazil, France, Italy, Spain, Portugal and South Africa.
INCENTIVES AND ADVANTAGES
Madeira's IFTZ offers a wide range of both tax and customs incentives which form a unique package, unrivalled by any other Free Trade Zone. That is, Madeira can be of great benefit for non-European companies wishing to penetrate into the EU Single Market more easily, and for European companies aiming at reducing their operational costs and enhancing their tax efficiency . Among these incentives, we highlight the following:
Total exemption from taxes on profits and dividends until the year 2011. This fact alone makes Madeira a very attractive location for investment, since it also benefits from the double taxation agreements ratified by Portugal, thus enhancing all applicable benefits.
Full membership in and consequent access to the European Union. For example, a non-EU company may import non-EU raw materials which may be transformed and marketed within the EU. The finished good, when entering the EU, will pay import duties only on the basis of the value of non-EU materials incorporated.
Possibility to benefit from exemption from import duties on the raw materials and components incorporated into the finished product, if marketed within the EU single market, according to E.U. Commission Regulation 1487/97, of the 28th of July, specifically approved for Madeira's Industrial Free Trade Zone.
Competitive operational costs.
In addition, Madeira's IFTZ has other characteristics which, in some cases, may also become important competitive factors:
The islands' geographical location, with speedy access to the European, African, and American markets.
Political and economic stability.
Modern telecommunications.
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