tax reform 2014: what has changed in the madeira tax regime?

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Título

NEWCO © All rights reserved 2014

Madeira Tax Reform 2014

We know how

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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1. Review of Madeira’s IBC tax regime

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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

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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

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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

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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Corporate income tax reform

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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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Corporate income tax reform

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3. Opportunities

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Double Taxation Treaties

Opportunities

Opportunities

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Holding

Opportunities

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Intellectual Property

Opportunities

•  Trading activities

•  Shipping activities

•  Asset management

And many others

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Other Opportunities

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NEWCO

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•  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

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…)

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NEWCO

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89% of clients

Consider that NEWCO has a wide knowledge of all issues related to their jurisdiction

87% of clients

Recognize that NEWCO offers leading services in its sector of activity

93% of clients

State that they are highly likely to recommend our company to their peers and partners

“Honest and Professional.” Giuseppe Luongo President YOUTHSTREAM GROUP Monaco

“I consider the understanding of customer needs and willingness to accommodate and find appropriate solutions the key differentiator of NEWCO service.”

Luís Franco Vice-President, SurveyMonkey Palo Alto, EUA

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Título

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THANK YOU.

Frederico Gouveia e Silva frederico.silva@newco.pro skype frederico.silva.newco M. (+351) 967 819 308 Jorge Veiga França jvf@newco.pro Skype jvf.newco M. (+351) 965 235 692 www.newco.pro

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