5 reasons why you should set up a company in Madeira in 2025

Author: Roberto Castro Mendonça, without the use of artificial intelligence.

You're ready to launch a new project and finally set up your company in Portugal. But where exactly should you do it? Does location even matter? After all, Portugal is a small country, right?

Not quite, you’ll see. If you're thinking of starting a business in Portugal, Madeira should be at the top of your list—and not just for its breathtaking views and fantastic cuisine. There are far more compelling reasons, which you'll discover below.

1. Madeira International Business Centre (IBC)

The well-known Madeira International Business Centre tax regime provides a highly attractive 5% corporate income tax (CIT) rate on profits generated from operations exclusively conducted with non-resident entities or other companies within the IBC.

Additional tax benefits include exemptions from withholding tax on dividends, interest, royalties, and service payments. Moreover, companies benefiting from this regime enjoy full access to Portugal’s extensive network of tax treaties, EU directives, and the VAT system.

To qualify, businesses must meet specific requirements, such as job creation and minimum investment thresholds.

Contact us to know whether the IBC would fit your business well.

2. Reduced Corporate Income Tax Rate (14.7%)

While the standard corporate tax rate in Mainland Portugal stands at 20%, Madeira, under the Portuguese Constitution, is authorised to implement a lower rate to attract investment.

As a result, Madeira has consistently maintained a significantly lower standard CIT rate of 14.7%, applicable to all companies and types of business — without requiring specific investments or job creation conditions, unlike the IBC.

3. Lower CIT Rate for SMEs (11.9%) on the First €50,000

Small and Medium-Sized Enterprises (SMEs) benefit from an even lower corporate income tax rate of 11.9% on the first €50,000 of taxable income.

Any taxable income exceeding this threshold is taxed at the general 14.7% rate. This measure further enhances Madeira’s appeal to entrepreneurs and growing businesses.

4. No Municipal Surcharge

In Portugal, municipalities can impose a municipal surcharge on corporate taxable profits before corporate income tax, typically ranging between 0% and 1.5%.

Unlike most municipalities in Mainland Portugal, Madeira has largely opted to eliminate this surcharge, offering yet another tax advantage for businesses operating in the region.

In practice, a company in Madeira may be subject to a CIT rate of 14.7%, while its competitor in Mainland is subject to a rate of 21.5% (20% standard rate plus municipal surcharge). A difference that certainly cannot be neglected.

5. Lower Personal Income Tax (PIT) Rates

Madeira also applies personal income tax rates up to 30% lower than those in Mainland Portugal.

As of 2025, the first five brackets of the progressive tax scale benefit from a 30% reduction, while the remaining four brackets have smaller reductions.

Perhaps even more interesting is that a lower tax rate of 19.6% applies to the distribution of dividends to resident shareholders, compared to the 28% rate in Mainland Portugal. This means a significantly lighter tax burden for business owners and employees, making Madeira an attractive destination for companies looking to optimise their tax positions.

Madeira has even more advantages for companies!

While the five advantages outlined in this article are certainly compelling, there are three times as many other reasons to incorporate a company in Madeira. An international environment, highly qualified professionals, full EU integration, and funding for specific and innovative projects are just a few worth mentioning.