Madeira Corporate Tax - Guide for International Expansion

Are you considering expanding your business to Madeira? Understanding the corporate tax landscape in this Portuguese autonomous region is essential for making informed business decisions.

Madeira, officially the Autonomous Region of Madeira, is a Portuguese archipelago in the North Atlantic Ocean that offers unique business opportunities. As an autonomous region of Portugal and an outermost region of the European Union, Madeira follows Portuguese corporate tax law while offering special incentives through initiatives like the International Business Centre of Madeira (CINM).

Whether you're exploring the Madeira Free Trade Zone or establishing a traditional business presence, having the right financial infrastructure is crucial. Wise Business can help streamline your international payments and currency management as you navigate Madeira's business environment.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

Madeira Corporate Tax Rate in 2025

The standard corporate income tax (IRC) rate in Madeira is 14% for companies resident for tax purposes in the Autonomous Region of Madeira. This is significantly lower than mainland Portugal's standard rate of 20%.¹

For small and medium-sized enterprises (SMEs), a reduced rate of 11.2% applies to the first €50,000 of taxable income in Madeira, compared to 16% for the same threshold in mainland Portugal.¹

However, the most attractive rate is available through the International Business Centre of Madeira (CINM), where qualifying companies can benefit from a reduced corporate tax rate of just 5%. This regime allows the incorporation of new entities until 31 December 2026, with benefits applicable until 31 December 2028.^{2 3}

Companies operating under the CINM regime must meet specific requirements, including job creation thresholds and minimum investment amounts. The 5% rate applies to different income ceilings based on the number of employees created, ranging from €2.73 million for companies with 1-2 employees to €205.5 million for companies with more than 100 employees.^{2 3}

Read more about Corporate Tax Planning best practices

How to Pay Corporate Tax in Madeira

Corporate income tax in Madeira is paid in euros through the Portuguese Tax and Customs Authority (Autoridade Tributária e Aduaneira). As an autonomous region of Portugal, Madeira follows the national tax administration framework but applies regional rates and incentives approved under its fiscal autonomy.⁴

Companies must file their annual corporate tax return (Modelo 22) and settle any tax due generally by 31 May following the end of the financial year. The tax year usually corresponds to the calendar year, unless a company has adopted a different accounting period approved by the tax authority.⁵

Madeira also applies a regional corporate income tax surcharge (derrama regional), which may vary depending on the level of taxable profit. Companies under the IBC regime are subject to reduced rates for this surcharge, as set by the regional government.¹

Let's say your company has a turnover of €1.5 million and operates with a profit margin of 10%, giving it a taxable profit of €150,000.

Under Madeira's standard corporate tax rate of 14%, the tax owed would be:

€150,000 × 14% = €21,000

However, if your company qualifies for the CINM regime with the 5% rate:

€150,000 × 5% = €7,500

This represents a significant saving of €13,500 compared to the standard rate.

When expanding your business to Madeira, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to expand internationally with local EUR account details. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in Madeira

To stay compliant with Madeira’s corporate tax law, companies must follow local accounting, auditing, and tax filing rules under the Madeira corporate tax policy.⁶

• Maintain accounting records:
  All IBC-licensed companies must keep official books of accounts in Portuguese and in euros (EUR). These must be available for inspection by Portuguese authorities.

• Auditing requirements:

  • Stock corporations need an audit if they meet two of these three criteria for two consecutive years: 250+ employees, €20M+ in assets, or €40M+ in income.
  • Private limited companies need audited accounts if they meet two of the following: 50+ employees, €1.5M+ in assets, or €3M+ in income.

• Corporate tax filings:
  Tax returns are submitted through the Portuguese Fiscal Authorities’ website.

  • Income Declaration: Due by the last working day of May.
  • Annual Simplified Company Information (IES): Due by the last working day of June.
  • VAT Returns: Filed monthly or quarterly based on turnover.

• Payroll compliance:
  Withhold personal income tax (11.6%–48%) and social security (11% employee, 23.75% employer) and pay by the 20th of the following month.

The federal corporate tax rate for IBC companies is just 5% on taxable profits, among the lowest in the EU.

International Expansion to Madeira

Madeira, an autonomous region of Portugal and a fully integrated part of the European Union, provides a strategic gateway for global business expansion. The country is located in the Atlantic Ocean, about 900 km southwest of Lisbon, and connects Europe, Africa, and the Americas.⁷

The archipelago’s capital, Funchal, is a thriving business hub supported by strong infrastructure and daily flight connections to major European cities, including Lisbon, London, Paris, Zurich, and Hamburg.⁷ This accessibility, combined with Madeira’s stable political environment and low crime rate, makes it one of Europe’s safest and most convenient locations to invest and operate.

The International Business Centre (IBC) is a major driver of foreign investment in Madeira. It is a program formally approved by the European Union as a legitimate economic development initiative. The IBC positions Madeira as a well-regulated, OECD-recognised model for ethical tax efficiency within the EU.⁸ Companies operating under this framework benefit from a highly competitive Madeira corporate tax rate of just 5%, guaranteed until 2027.⁹

In addition to this reduced rate, Madeira’s corporate international tax regime includes several other advantages. For instance, participation exemption on dividends and capital gains, no withholding tax on royalties, services, or interest paid to third parties, and tax credits for international double taxation.¹⁰ This combination creates one of Europe’s most attractive global corporate tax environments.

Madeira’s appeal extends beyond taxation. Investors can also benefit from Portugal’s Golden Visa program by investing in local real estate, offering a path to EU residency.¹¹ If you’re planning to establish your business in Madeira, you should follow the steps below:¹²

1. Start with market research to understand Madeira’s business environment and identify opportunities.
2. Prepare a detailed business plan tailored to your target market and industry.
3. Choose your business location and determine the most suitable legal entity type.
4. Reserve and approve your business name through the National Company Registrar (RPNC).
5. Register your company with the Private Deeds Registry Office.
6. Register for taxation with the Portuguese fiscal authorities to ensure compliance.
7. Open a local bank account to manage finances and file corporate tax under Madeira’s streamlined system.

Discover the top 5 best Corporate Tax softwares

Incorporation of Business in Madeira

Setting up a business in Madeira follows a transparent, well-regulated process that aligns with Portuguese corporate tax law and European Union standards. Depending on the company’s preferred method, incorporation can be done through the Private Deeds Registry Office or via a private lawyer.

Below is a quick overview of how to incorporate your business in Madeira, especially within the International Business Centre (IBC) framework.⁶

Step 1: Name Approval

• Request a name approval certificate and provisional identification card from the National Company Registrar (RNPC).
• Applications can be made online and submitted by a shareholder or an authorised representative.
• The certificate remains valid for 180 days for registration and one year after incorporation.
• Companies must notify the RNPC of their intention to operate under Madeira’s IBC regime.

Step 2: Company Incorporation

• The company can be incorporated by public deed at the Private Deeds Registry Office or via private documentation through a lawyer.
• Required documents include the name approval certificate, identification documents of shareholders, auditor’s report (if applicable), and authorisation from the Regional Secretary for Finance.
• IBC companies are exempt from registration and notarial fees.

Step 3: Commercial and RNPC Registration

• Submit all incorporation documents to the commercial registry within 90 days of the public deed.
• The company’s formation is then published in JORAM, the Official Journal of Madeira, and optionally in a local newspaper.

Step 4: Declaration of Beginning of Activity

• File this declaration at the local tax office within 15 days of registration.
• Include the company’s identification documents and certified forms signed by the official accountant.

Step 5: Social Security Registration

• Complete registration at the Regional Social Security Centre within 30 days of starting operations.

Business Entity Types in Madeira

Under Portuguese law, several types of entities can be incorporated in Madeira:¹³

• Private Limited Company (Lda.): The most common structure for small to medium businesses. It can have a single shareholder and requires a minimum capital of €1 per shareholder. Management is handled by one or more appointed managers instead of directors.
• Share Company (S.A.): Designed for larger enterprises, this entity requires a minimum share capital of €50,000 and a board of directors. If the capital is under €200,000, one director is sufficient.
• Branch Office: For foreign companies wishing to establish a local presence without creating a separate legal entity. There are no minimum capital requirements.
• SGPS Company (Pure Holding Company): A special entity formed as an S.A. or Lda. Its sole purpose is to manage shareholdings in other companies and sometimes provide services or loans to them.
• Foreign and local shareholders: Individuals or corporations are both allowed. Companies must maintain their head office in Madeira, while branches are required to appoint a local legal representative.

International Corporate Tax Best Practices

Here are some of the best strategies to ensure compliance with local tax laws, save more money, and reduce tax burdens.

• Stay compliant with local and international tax laws

Complete the legal registration process in every country where your business operates. File all required tax returns on time to avoid penalties, and ensure you stay up to date with local tax laws to remain fully compliant.

In the same vein, companies should understand and adhere to global standards set by organisations like the Organisation for Economic Co-operation and Development (OECD). With frameworks like Base Erosion and Profit Shifting (BEPS) and Pillar Two Global Minimum Tax companies can ensure they are transparent, prevent tax avoidance, and avoid legal risks.

• Leverage double taxation treaties (DTTs)

DTTs are essential in making sure that you're not taxed on the same income twice. Therefore, CFOs and Directors need to have a clear understanding of these treaties between the countries in which your business operates and how they can potentially relieve your tax burden. Portugal has an extensive network of double taxation agreements that apply to businesses operating in Madeira.

• Maintain up-to-date and transparent financial records

Maintaining clear and up-to-date financial records helps companies prepare accurate tax returns, reducing the risk of errors that could lead to penalties. Additionally, having organised financial records simplifies the process during financial audits.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to Madeira efficient and simple. It's the one account for managing your money globally.

With a Wise Business account, you can:

• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

• Get paid like a local: Use local account details for 8+ major currencies to easily receive payments from customers or investors.

• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

• Streamline your accounting: Integrate with tools like Xero or QuickBooks to simplify tracking your company's international finances.

• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

Wise is designed to support every step of your journey, from paying your first registration fee to receiving international payments and managing your global treasury.

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FAQs - Corporate Tax in Madeira

Who is liable for corporate tax in Madeira?

Companies resident in Madeira are taxed on their worldwide income, following Portuguese corporate tax law. A company is considered resident for tax purposes if it has its registered office or place of effective management in Madeira. Non-resident companies are only taxed on Portugal-source income attributable to a permanent establishment in Madeira.

Are there any tax incentives for businesses in Madeira?

Yes, Madeira offers significant tax incentives through the International Business Centre of Madeira (CINM). The main incentive is a reduced corporate tax rate of 5% for qualifying companies, compared to the standard 14% rate. Companies can register for this regime until 31 December 2026, with benefits applicable until 31 December 2028.

Additional benefits include exemption from withholding tax on dividends paid to non-resident shareholders (except those in blacklisted jurisdictions), 80% exemption from stamp duty on documents and contracts, and 80% exemption from municipal property tax and property transfer tax.

What is the tax treatment of dividends in Madeira?

Non-resident shareholders of CINM companies benefit from full exemption from withholding tax on dividend distributions, provided they are not resident in jurisdictions included in Portugal's blacklist. Portuguese corporate shareholders are also exempt if they hold at least 10% participation for 12 consecutive months.

For companies operating under the general Madeira tax regime, standard Portuguese dividend taxation rules apply, which may include withholding taxes depending on the recipient's residence and applicable double taxation treaties.

What is the process for registering for corporate tax in Madeira?

Companies must register with the Portuguese tax authorities (Autoridade Tributária e Aduaneira) and obtain a tax identification number (NIPC). For companies seeking CINM benefits, a separate application must be made to the Sociedade para o Desenvolvimento da Madeira, S.A. (SDM), which manages the CINM regime.

The CINM application can be made by existing companies (Portuguese or foreign) or by companies to be incorporated. Successful applicants receive a licence once they provide proof of company creation and registration.

What are the common pitfalls to avoid regarding corporate tax in Madeira?

Key pitfalls include failing to meet the economic substance requirements for CINM benefits, such as not creating the required number of jobs in Madeira or not maintaining adequate business operations on the island. The European Commission has emphasised that profits subject to tax reductions must be exclusively Madeira-sourced and that benefiting companies must actually create and maintain jobs in Madeira.

Other common issues include missing filing deadlines, failing to pay the required establishment and operating fees for CINM companies, and not properly documenting compliance with the regime's requirements. Companies should also be aware that certain activities are excluded from CINM benefits, including intra-group activities, financial and insurance sectors, and companies in financial difficulties.

Sources used in this article:

1. PwC Tax Summaries: Portugal Taxes on Corporate Income
2. International Business Centre (IBC) Madeira: Tax Benefits
3. PwC Tax Summaries: Portugal Tax Credits and Incentives
4. Government of Portugal: Corporate Income Tax (IRC) Information
5. PwC Tax Summaries: Portugal Tax Administration
6. IBC Madeira: Guide to International Services (eBrochure page 15)
7. Prometheus International: Portugal Tax Information
8. Croneri Library: Portugal Tax Compliance (Subscription required, likely to break)
9. Madeira Management: MIBC General Overview (PDF)
10. Tax Move CI: Taxation in Madeira
11. FASP: Top 10 Reasons to Buy in Madeira (Investment/Lifestyle focus)
12. Global Citizen Solutions: Madeira Company Formation
13. IBC Madeira: Company Formation
    Sources last checked 28/10/2025