Madeira Financial Holding and Investment
A
Holding Company
(sociedada gestora de participacoes sociais
- SGPS) is a tax-effective way of holding
participations in subsidiary or related trading
companies, including licensing companies,
and those for the collection of royalty, franchise
or interest income, wherever situated.
If
a trading subsidiary is in the Madeira International
Business Centre then income from it will be
completely tax-free until 2011 if the subsidiary
was registered before 2001. Taxation will
rise to a maximum of 3% for companies founded
after that. Capital gains realised within
the Holding Company on the other hand are
taxable at the Portuguese rate. Roll-over
provisions were removed by the Tax Reform
Act of December 2000.
A
Holding Company is not permitted by law to
buy its own shares, purchase debentures in
companies in which it does not hold a participating
shareholding (subject to certain exceptions),
make loans other than to companies in which
it holds part of the share capital or engage
in any commercial activities other than holding
shares in other companies.
See Offshore Legal
and Tax Regimes for details of the taxation
of Holding Companies, which receive generous
tax breaks on income from their holdings.
Mixed Holding
Companies can both hold shares in other
companies and trade in their own right;
however they have disadvantages, including
that many EU states do not accept that they
fall within the Parent and Subsidiary Directive,
which can limit their tax-effectiveness.
They
cannot engage in the type of trading activities
which are carried on by banks and financial
institutions and which require licensing
and authorization from the Bank of Portugal.
BACK
TO TOP
Madeira Trade Marketing
and Distribution
Madeira has encouraged commercial activity
and manufacturing, especially in high technology,
taking advantage of its membership of the
EU, by creating its International Business
Centre, and particularly the Free
Trade Zone which has been successful
in attracting both EU and non-EU companies
with trading interests across EU tariff
borders.
Apart
from low taxation, and exemption from customs
duties, companies in the International Business
Centre have access to certain types of EU
grant or assistance. For a company importing
or trading in physical goods in the EU,
a Madeiran Holding
Company can be combined with a base
in the International Business Centre to
give a very effective result. The island's
inclusion in the EU's VAT regime is also
helpful in many trading situations.
Along
with other offshore jurisdictions, Madeira
is a suitable place in which to base e-commerce
services for retail or wholesale distribution
of material or non-material goods: see Offshore-e-com.com
for extended descriptions of how such businesses
can take advantage of the combination of
offshore and e-commerce.
Madeira
Banking
Until 2001, international and Portuguese banks
could establish offshore subsidiaries or branches
anywhere in Madeira in the 'Offshore Financial
Centre' to take advantage of the Free Trade
Zone Legislation. Permitted activities included
foreign exchange, the management of investment
funds and the issuance of negotiable securities
as well as a normal range of banking services.
Unless
an offshore bank holds an international banking
license it cannot supply financial services
to Portuguese residents. The law on the licensing,
regulation and supervision of offshore banks
and financial institutions is set out in Decree
Law No 10/94.
Offshore
banks are supervised by the Madeira Development
Company. Additionally the Bank of Portugal
oversees and regulates banking matters; the
regulations are the same as those that apply
to the establishment of financial institutions
in mainland Portugal and involve prior authorization
from the Bank of Portugal or the Ministry
of Finance. Capital requirements were high
at 3.5 billion escudos prior to the issue
of a banking license.
It
took between 5-7 months for the license application
to be processed. The banks of European member
states were subject to less stringent authorization
requirements than non European Union financial
institutions, under the EU 'passport' rules.
A
bank must pay an annual license fee of US$25,000.
Around 40 banks and other financial institutions
are currently licensed to operate under the
Free Trade Zone Legislation. They include
such household names as Chemical Bank, Citibank,
Deutschebank and ABN-Amro.
It
appears that under the new 'acceptable state
aid' scheme approved by the EU in late 2002,
newly-established financial services companies
will no longer be able to take advantage of
the MIBC regime.
BACK
TO TOP
Madeira Trust Management
Madeira is a civil law jurisdiction, subject
in general to Portuguese law, and the trust
thus does not exist as such. Portugal has
not ratified the Hague Convention on the law
applicable to trusts and their recognition.
Nonetheless
when the Free Trade Zone Legislation of Madeira
was enacted provision was made for the creation
of offshore trusts. Decree Law No 352/88 &
Decree Law No 149/94 deal with the registration
and management of offshore trusts whereas
Decree Law 264/90 concerns authorization by
Government of trust corporations and branches.
The property of trusts must be outside Portugal,
and income derived from outside the country.
An
offshore trust lasting for more than one year
needs to register in the Free Trade Zone registry,
although the identity of the beneficiaries
need not be disclosed. Neither settlor nor
beneficiaries may be residents of Portugal.
Only Stock Corporations (see above) and branches
of foreign trust corporations licensed to
operate under the Free Trade Zone Legislation
of Madeira can act as trustees.
Trustees
require authorization from the regional Government
of Madeira and at least 51% of the shares
must be held by nominees. A transfer of more
than 5% of the shareholding in a trust company
requires the approval of the regional Government.
Trust
companies must be audited annually and must
retain a statutory auditor on their board
of directors. They must keep books of account
relating to the trusts being administered.
A trustee company pays an annual license fee
of around US$2,000.
BACK
TO TOP
Madeira Ship Management
and Maritime Operations
See Offshore Business
Review – Shipping for a more general
treatment of offshore shipping registries.
Under
the Free Trade Zone Legislation vessels and
yachts may be registered at the international
ship registry of Madeira under the Portuguese
flag provided their activities do not amount
to transportation of goods between Portuguese
ports. Transportation between Portuguese ports
and foreign ports is allowed.
The
shipping registry delegates some of its functions
and recognizes certificates issued by specified
classification societies . Among the functions
that may be delegated are the supervision
and enforcement of rules concerning stability,
bulk cargo, on board security as well as the
issuing of international certificates concerning
conventions and resolutions of the International
Maritime Organization and the OLO.
The
classification societies currently recognized
by the Madeira registry are Lloyds Register
of Shipping, Bureau Veritas, Det Norske Veritas,
Registro Italiano Naval, American Bureau of
Shipping, Germanischer Lloyd, Rinave Portuguesa
and Nippon Kaiki Kyokai. Other classification
societies may in added to the list in the
near future.
In
assessing crew composition and minimum crew
requirements the objective of the registry
technical commission is to guarantee safety
and the preservation of the quality of life
abroad and at sea. The captain and 50% of
the crew must be nationals of European Union
member states, save where it is shown that
such a composition is not possible or where
non compliance with these conditions is justified
by special circumstances. Crew composition
requirements do not apply to yachts.
A
fixed fee of EUR1,800 is payable to the registry
upon registration. Thereafter there is an
annual fixed fee of EUR1,400. Additionally
a fee which varies according to tonnage must
be paid both at the time of initial registration
and annually.
In
March, 2004, new regulations were introduced
allowing the registration of charter yachts
in the International Shipping Register.
See
Offshore Legal and
Tax Regimes for details of the taxation
of ships and shipping companies in Madeira.
BACK
TO TOP
