Following approval of the State Budget for 2014 by the Portuguese Assembly of the Republic and the reform of the corporate income tax, various changes have been made to the Portuguese tax regime, some of them of relevance to the International Business Centre of Madeira (IBCM). This presentation highlights the most relevant changes and its impact on the Madeira tax regime. Updated: January 30, 2014.

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Título
NEWCO © All rights reserved 2014
Madeira
Tax Reform 2014
We know how

2. Contents
1. Review of Madeira’s IBC tax regime
2. The Reform of the Corporate Income Tax
3. Opportunities
4. NEWCO
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3. 1. Review of Madeira’s IBC tax regime
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4. 4
Review of Madeira’s IBC tax regime
Madeira’s IBC tax regime | ceilings
After negotiations with the European Commission, the ceilings applicable to
the International Business Centre of Madeira have been increased by 36.7%!
Tax benefits have limits, depending on the number of employees (or
directors) under the above referred conditions:
If taxable income exceeds the limit, the excess will be taxed at 23% (general
regime in Madeira).

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2. The reform of the Corporate Income Tax (CIT)

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Tax reform | Main amendments
• New Participation Exemption regime applicable to worldwide dividends,
reserves, capital gains and losses.
• The withholding tax exemption is now extended to shareholders resident
in any jurisdiction with which Portugal has signed a double taxation treaty.
• Reduction of the CIT rate from 25% to 23% and introduction of a reduced
17% rate that will apply to the first €15k of the taxable income for small-
medium enterprises.
• The carry-forward period for losses is extended to 12 years (previously 5).
• Group taxation regime applicable to shareholdings of 75% (previously
90%).
• Elective regime for the exemption of the profits and losses of permanent
establishments (PE) not located in Portugal or in tax havens, provided
these have been subject to at least 13,8% corporate tax.
• New Patent Box regime that foresees the taxation of IP at 2,5%.
Corporate income tax reform

7. 7
Tax reform | Main amendments
• Amendment of the CFC rules.
• Amendments to the regime of depreciation and amortization.
• Amendments to the tax neutrality regime, in order to make it clearer
and widen its scope.
• Liquidation proceeds are now considered capital gains or losses.
• Increase of the related parties threshold for transfer pricing purposes,
from 10% to 20%.
• Extension to 5 years of the period available for use of the tax credit for
international double taxation. The credit is now determined on a per-
country basis, considering the total income.
• Introduction of a tax credit for international double taxation.
Corporate income tax reform

8. 8
Tax reform| Main amendments
• Option for deferral of exit tax if transfer is made to other EU or EEA
jurisdictions.
• Simplification measures on the formalities for application of tax treaty
benefits, participation exemption regime and interest and royalties
directive.
• CIT simplified elective regime for small and medium companies.
• Changes to the regime of deductible financial expenses.
• Retained and reinvested profits and reserves deduction regime up to
€ 5 million.
Corporate income tax reform

9. Participation exemption
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The profits distributed to companies resident in Portugal by their subsidiaries
and the capital gains or losses resulting from the sale of these shareholdings
no longer contribute to their taxable profit, provided that:
The Portuguese company holds, directly or indirectly, a participation
that is no less than 5% of the shareholder capital or the voting rights
of the entity that distributes the profits.
The participation is held (or maintained) for a period of 24 months.
The company is not subject to a tax transparency regime.
The subsidiary is subject to and not exempt from corporate income
tax. If resident outside the EU, corporate tax rate must not be lower
than 13,8%. This requirement may be waived under certain
conditions.
The subsidiary is not resident in a tax haven.
For cases in which the Participation Exemption regime does not apply, a
unilateral tax credit for international double taxation is now available.
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1
Corporate income tax reform
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10. Distribution of dividends
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The distribution of dividends from a Madeira company is exempt, provided the
shareholder is a company:
Resident in the EU, EEA or in a country with which Portugal has
signed a DTT.
The shareholder is subject to tax. If resident outside the EU,
corporate tax rate must not be lower than 13.8%.
The shareholder holds, directly or indirectly, a participation that is no
less than 5% of the capital or the voting rights of the entity that
distributes the dividends.
The participation is held uninterruptedly, for the 24 months that
precede the distribution.
In the case of distribution of dividends to companies resident in Switzerland
withholding tax may also be avoided if the requirements of the EU Directive
on interest and royalties are met.
Shareholders not resident in Portugal or in tax havens benefit from capital
gains exemption on the sale of the Madeira company.
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4
Corporate income tax reform

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3. Opportunities

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Double Taxation
Treaties
Opportunities

13. Opportunities
13
Holding

14. Opportunities
14
Intellectual Property

15. Opportunities
• Trading activities
• Shipping activities
• Asset management
And many others
15
Other Opportunities

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17. NEWCO
17
• Full service corporate service provider in Madeira and in Malta
• 23 years of experience
• Strategic values: Know-how, customer satisfaction, integrity, service
excellence and innovation

18. NEWCO
NEWCO ensures that its clients receive all the necessary support for
effectively establishing their companies in Madeira, namely with:
• Company incorporation and registration
• Supply of the respective registered office and related services, companies’
management and administration, fiduciary services
• Tax compliance, legal, financial, tax and accounting assistance, consultancy
and assistance in the creation of investment projects
• Services with the purpose to facilitate the setting-up of companies in
Madeira (offices, equipment, human resources…)
27

19. NEWCO
28
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Título
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