Brief Memo on the Madeira International Business Centre and E-commerce Tax Optimization Planning
- Portugal
- 08/04/2008
- Albuquerque & Associados
The Madeira International Business Centre (“MIBC”) located within the Portuguese territory has become one of the most interesting and cost effective locations in Europe for the setting up of e-commerce companies.
In fact, all companies, based outside the EU, making a significant volume of sales of digital goods to individuals residing in the EU, will need to comply with the EU VAT Directive 2002/38/EC, which introduces the obligation of charging VAT in these operations. By incorporating a company in one of the EU Member States, the VAT rate applicable in that Member State will also be applicable to all EU e-services provided by the companies to individuals and unregistered traders.
The setting up of a company in the MIBC will allow companies to benefit from the lowest VAT rate in the EU at 14% (previously joint lowest with Cyprus and Luxembourg at 15%), combined with an attractive tax regime. The MIBC becomes, as such, an obvious location for all companies selling digital goods to E.U. residents.
- Why choose the MIBC?
Setting up a company in the MIBC allows for companies to benefit of both the application of Europe’s lowest VAT rate (14%) plus the unique fiscal advantages available to companies licensed in the MIBC (i.e. low corporate tax rate, no withholding tax on payments of dividends, interest and royalties, ability to take advantage of Portugal’s Double Taxation Treaties network and EU Directives, such as the Parent/Subsidiary Directive etc).
In addition, all the relevant EU directives on e commerce have been implemented into Portuguese law, such as e-commerce’s legal framework, e-signature and e-invoicing.
The MIBC encourages information technology operations and the Madeira island has invested heavily in state-of-the-art telecommunications. There are already a number of Internet Service Providers located in Madeira, with clear interest being shown in offshore e-commerce development.
Madeira is increasingly becoming the number one EU location for companies that want to install a centre of e-commerce activity. The island’s geographical location between continents, its good telecommunications links, sophisticated business infrastructure and the highly-educated work-force are all factors which attract the sales, marketing and administrative departments of retail operations, particularly those trading into EU and African countries.
By locating websites in Madeira to carry out functions previously based in EU high-tax jurisdictions such as sales and marketing, treasury management, supply of financial 2 services, and most of all, the supply of digital goods such as music, video, training, software etc, companies can take advantage of low rates of taxation for increasingly substantial parts of their operation.
Already some of the most important ISP EU based companies are located in Madeira making Portugal (trough the MIBC) the country of choice for EU Internet Service Providers wishing to offer broadband services.
Madeira’s position as a highly favourable location from which to deliver electronic services (e-business, telecommunications etc) is firmly established especially when considering that the VAT rate is expected to decrease by a further 1% (to 13%) with the approaching elections next year.
- Additional Information
For further information regarding VAT and related opportunities in the MIBC please
contact:
- António Mendonça Raimundo. Tel: +351 213 431 570, e-mail: [email protected]
- Henrique Nogueira Nunes. Tel: +351 213 431 570, e-mail: [email protected]
