Free Trade & Financial Zone in Madeira, Portugal

by Mariska Clark on April 8, 2009

The Madeira Archipelago is situated in the North Atlantic. It enjoys a favorable geographical location as it lies between the African coast and Lisbon (Portugal).

The Island of Madeira is an offshore banking center and it is recognized by the EU. It is part of the Portuguese territory for all legal purposes and also when it comes to international treaties for the avoidance of double taxation. It is also integrated in the EU as Portugal is a Member State. It is called the Tax Haven of Portugal.

The authorities of Madeira have created the offshore sector called the International Business Centre. The offshore banking units are authorized to operate under the Free Trade Zone Legislation. Overall, the Free Trade Zone of Madeira includes several types of activities: offshore financial activities; offshore international services; industrial free zone; international shipping register.

The offshore banking Madeira activities are carried out in the Offshore Financial Center usually through offshore branches of national or foreign financial units.

The Ministry of Finance is responsible for granting authorization to an offshore banking branch after an assessmentOffshore Banking Madeira procedure made by the Madeira Regional Government and the Central Bank of Portugal.

The offshore banking branches may carry out international banking operations such as exchange activities, management of investment funds and pension funds, issuance of securities, financial leases, insurance etc.

There was established a privileged fiscal system valid in the Free Trade Zone of Madeira, for example there is exemption from corporate tax income which is available until December 31, 2011 (this provision is applicable for those entities that have been registered before 2001); exemption from withholding tax on income paid to entities participating in their share capital; exemption from withholding tax on income paid to non-residents as interests, royalties, services fees related with the company’s activity in the Free Trade Zone of Madeira. According to Madeira Reform Tax Act 2000, which was finally adopted by EU in 2002, entities which were register after 2001 are enjoying a reduced rate of tax of 1% in 2003-2004; 2% in 2005-2006; 3% in 2007-2011.

All employees of offshore banks are subject to the principle of bank secrecy. Any disclosure of information can only be realized if there is a court writ for it.

Approximately 42 banks and other financial institutions are authorized to carry out offshore banking Madeira operations in Madeira. There are both national and international banks involved in the offshore banking activity either through branches or incorporated subsidiaries.

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