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Offshore corporations in a changing offshore world. Alternative tax havens and offshore strategies. Offshore corporations in a changing offshore world. Alternative tax havens and offshore strategies.

Madeira, Portugal

• Free Trade Zone Company
• Little-known, low profile option
• Tax free or low tax if revenues arise abroad
• Corporate anonymity possible

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with Michael Isaacson

The Portuguese government has been a particularly zealous supporter of the war against the evils of tax competition and "black" money.

Apart from scrapping its tough bank secrecy laws, Portugal has even suggested that it may enact legislation prohibiting its nationals from utilising offshore online banks that offer anonymity. How it would manage this is anyone's guess -- perhaps Beijing-style censorship of offensive sites?

But there is more. In their determination to make life super-tough for the tax-shy, the Portuguese administration is also pinning their hopes on another big brother tactic: People whose living standards appear in excess of their declared earnings would be forced to prove their tax declarations were correct. Failure to do so would result in taxation on the basis of what the authorities "presume" is their real income. Beware wearing that expensive frock in downtown Lisbon!

It might come as a surprise then to learn that Portugal has its very own tax havens -- and one of these is Madeira.

Arquipelago Da Madeira is a Portugal-run archipelago of volcanic origin in the North Atlantic Ocean. The islands have limited autonomy in local matters but, to all intents and purposes, they are an integral part of Portugal. As a consequence, Madeira has all the "benefits" of full EU membership.

Companies formed in Madeira are subject to the standard Portuguese Companies Code. Importantly, however, Madeira-based companies benefit from tax breaks provided under the Free Trade Zone legislation (most recently revised in 2000).

Provided that a source of revenues is outside of Madeira, the following tax rates apply:

  • Companies formed before 2001 operate tax-free until 2011
  • Companies formed in 2001 - 2002 pay a 1% tax
  • Companies formed in 2003 - 2004 pay a 2% tax
  • Companies formed in 2005 - 2006 pay a 3% tax

The tax rates are to be revised in 2011.

There are two forms of companies available: The Limitada (Lda) and the Sociedade Anonima (SA).

The Lda requires two directors and the SA three. These may be individuals or corporate entities, be of any nationality and needn't be local residents. There is no legal requirement to appoint a company secretary.

Both Lda and SA companies operating in the Free Trade Zone of Madeira can be incorporated with a single shareholder. The authorised share capital for an Lda is 5,000 Euros; for an SA, it is 10,000 Euros.

Interestingly for an administration so hung up on the evils of anonymity, there is no requirement to disclose the details of the beneficial owner to government authorities.

It is clear that Madeiran companies have a lot in common with the corporations so reviled by the OECD and FATF in their onslaught against Pacific and Caribbean havens.

Although the author would advise against banking in Portugal, Madeiran companies prove useful time and time again as tax-free and low-key trading entities.

Finally, it is worth noting that recent legislation also makes Madeira one of the few jurisdictions outside the Anglo-Saxon sphere to recognise the establishment of offshore trusts.


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