Madeira

Geography, Population, LanguagesMadeira Offshore Company Formation

Madeira is an archipelago of islands of volcanic origin located in the Atlantic Ocean, 1,000 km from mainland Portugal and 870 km from North Africa. The name of the archipelago is taken from the largest island Madeira, besides which there are Porto Santo, Desertas, Selvagens and a group of smaller islands. The area of Madeira is approximately 828 sq. km. The topography is mountainous, and the highest point is 1,862 metres. The climate is Mediterranean subtropical. The scenery is spectacular and the vegetation is diverse.

The population is approximately 246,000, 100,000 of whom live in the capital Funchal. Most are of Portuguese origin, with a small expatriate British community.

Portuguese is the national language, English is taught in schools and is used daily in commerce and international trade.

History, Political Structure and Law

The Madeira archipelago was uninhabited until it was discovered in the 15th century by Portuguese navigators. Madeira became a Portuguese colony and is still legally and politically part of Portugal.

Since 1976, due to political changes in Portugal, Madeira has been an autonomous region with its own parliament and locally elected Government. The Madeira Regional Parliament is an elected body, which legislates on Madeira’s local interests such as the budget, and its responsibilities are defined in the constitution. The Madeira Government however can neither overrule decisions of the central government in Lisbon, nor override political unity with Portugal. 5 members elected by universal suffrage represent Madeira in Lisbon.

Despite Madeira’s autonomous status, most of the laws enacted by the central government and by the Portuguese parliament are fully applicable in Madeira.

The system of law is Civil Law. Portugal has a written constitution, which defines the political structure and the role of the legislature.

Economy and Infrastructure

Communications are good; there are six daily flights to and from Lisbon, the Portuguese capital, and Lisbon Airport is an international air transport hub. The flight from Lisbon to Madeira takes one hour and thirty minutes. There are also flights from Madeira to other European countries including five direct scheduled flights a week to London. Shipping is well served by deep-water ports at Funchal and Porto Santo.

Madeira has an excellent digital telecommunications system with direct dialling to various countries. The islands’ telephone network is linked to mainland Portugal by cable and satellite, giving easy, direct access to International networks. Postal and courier services are also good, offering next day delivery to mainland Portugal.

The local currency is the Euro (EUR). There is no exchange control in Madeira.

Company Incorporation

Under legislation first put before the Portuguese parliament as long ago as 1980 and enacted in 1986, the Madeira Free Trade Zone was established, which gives substantial tax concessions to companies incorporated on the Island.

The principal Corporate Legislation is the Portuguese Companies Code (Codigo das Sociedades Comerciais). The powers and objects of a Madeira Company are contained within its constitution and must be specific. The language of legislation and corporate documentation is Portuguese, but translations can be provided.

The types of Company used for international trade and investment are Sociedade por Quotas – Limitada (Lda’s) or Sociedade Anonima (SA). In 1993, Portuguese legislation allowed the incorporation of Lda’s or SA’s with one sole quota/share holder for companies operating within the Madeira Free Trade Zone – so called “Sociedade Unipessoal” – Single Member companies. Portuguese legislation provides for the incorporation of Holding-only companies called SGPS (Sociedade Gestora de Participacoes Sociais).

Trading and business activity are subject to the following restrictions:

  • A Madeira company is not permitted to engage in any business not specified in its constitution.
  • A Madeira Company does not have the right to engage in the business of Banking, Insurance, Assurance, Reinsurance, Fund Management or Asset Management (other than its own assets) without prior consent and a licence.

Incorporation procedure. Once the Company’s name has been approved and a licence to operate within the Madeira Free Trade Zone obtained, a Public Deed is executed before a Notary Public. The Public Deed is then registered at the Commercial Registry of Madeira. A registered office must be maintained in Madeira. Off-the-shelf companies are available.

Company names are subject to the following requirements and restrictions:

  • Legislation was passed in September 1995 allowing the approval of foreign names for companies operating within the Madeira Free Trade Zone. A Company name cannot be similar to or identical to that of an existing company.
  • Names that in the opinion of the Registrar may be considered undesirable or offensive are not permitted.
  • Names that may imply illegal activity are not permitted.
  • Names that may imply government patronage is unacceptable.
  • The names of all Madeira companies must include words to describe clearly the objects of the company, e.g. consulting, engineering, marketing, trading etc.
  • Portuguese names or their foreign language equivalents including the words Bank, Building Society, Savings, Loans, Insurance, Assurance, Reinsurance, Fund Management, Asset Management, Investment Fund, or any name that may imply an activity associated with the banking and insurance industries, require consent or a licence.
  • The name of a Company must end with a suffix denoting limited liability, such as Limitada (Lda) or Sociedade Anonima (SA).

It is normal to appoint two directors to a Lda and three to a SA. The directors must be natural persons of any nationality and need not be resident in Madeira. Unipersonal companies may have one shareholder.

The minimum number of shareholders for a Lda company is two, and five for a SA company. Their identity appears in the public record. Companies incorporated as “Sociedade Unipessoal” may have one shareholder and no share certificates are issued. Share-holding is described in the notarial deed when the company is set up or the structure altered.

Minimum authorised and issued share capital depend on the type of Company:

  • Ldas – EUR 5 000 minimum authorised and issued.
  • SAs – EUR 50 000 minimum authorised and issued.

The following classes of shares are permitted:

  • Madeira Limitada (Lda) Companies do not issue shares, but instead quotas are registered at the Commercial Registry of Madeira and members are issued with notarised extracts from the Commercial Registry of Madeira to record their ownership.
  • Madeira Sociedade Anonima (SA) companies may issue either registered or bearer shares with voting or non-voting rights.
  • Madeira Sociedade Unipessoal (Single Member) SA companies must issue registered shares with voting or non-voting rights, but may not issue Bearer Shares.
  • Bearer shares are permitted for SA companies only.

Annual Taxation and Fees

All Madeira companies are exempt from tax on income obtained from activities carried on outside Portugal until 31 December 2011. Nominal taxation is levied on Holding-only companies (SGPS). These are taxed on EU dividends at an effective rate of 1.7% (34% corporate tax on 5% of profits).

Companies licensed to operate within the Madeira Free Trade Zone are considered for all purposes to be Portuguese resident. Therefore they can benefit from the double taxation agreements signed by Portugal with the following countries: Austria, Belgium, Bulgaria, Brazil, the Czech Republic, Finland, France, Germany, Hungary, Ireland, Italy, Mozambique, Norway, Poland, the Republic of Korea, Spain, Switzerland, the United Kingdom and Venezuela. Madeira also is conducting negotiations on new agreements with other countries.

The licence fees are:

  • Application Fee – EUR 750;
  • Annual fee – EUR 1,500.

(Both fees are reduced by 1/3 to EUR 500 and EUR 1,000 respectively for companies represented by licensed management companies).

Financial statements:

The accounts of a Madeira company must be in Portuguese and prepared in accordance with Portuguese accounting regulations. Normally the fiscal year ends on 31st December, and accounts must be approved by the shareholders before 31st March of the following year. A tax form must be filed with the authorities before the end of May.

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