Although Madeira is located some distance from the continent, forming a company in Madeira, specifically within its International Business Centre (IBC), offers unique advantages like a low corporate tax rate of 5 percent for qualifying companies.
This makes it an attractive option for entrepreneurs and businesses seeking to benefit from the EU membership and tax incentives.
In this article, we’ll look at what is required for a company formation in Madeira if you want to start a business in Portugal.
You’ll also learn more about:
⚠️ Portugal Nationality Law Changes 2025
On June 23, 2025, the Portuguese Government announced plans to amend the Nationality Law and the legal framework governing immigration. The proposals have passed the plenary vote on October 28, 2025, which marks a significant step forward in the legislative process.
Among the measures under discussion are an increase in the residence requirement for nationality from five years to ten years – seven years for nationals of CPLP and EU countries – and a change to how residency time is calculated, so that the clock would start when residency is issued rather than when the application is submitted.
These changes are not yet law. They must still undergo Presidential review. At that stage, the President may promulgate the law, issue a veto, or request a review by the Constitutional Court. The final text may still be amended, including any transitional provisions or possible grandfathering rules, but they might not be enacted because the law is not final until its promulgated.
For the latest information regarding these changes, read Portugal Nationality and Citizenship Changes 2025
Benefits of Setting up a Company in Madeira
The autonomous region of Madeira is much smaller than mainland Portugal, but that doesn’t mean there aren’t numerous benefits to starting a company on the island.
The MFZ (Madeira Free Trade Zone), also known as the International Business Centre of Madeira (IBCM), is a special economic zone created by the Portuguese government in the ’80s to attract foreign investment and stimulate economic activity in the Madeira region.
With the European Union’s approval, the free trade zone offers a range of tax benefits and financial incentives for companies and individuals seeking to operate internationally. Here are some of the benefits of forming a company in Madeira:
Tax benefits: Companies registered in the MFZ benefit from a significantly reduced corporate tax rate (often as low as 5%) on income derived from international activities.
EU-Compliant: The MFZ operates under strict EU regulations, ensuring transparency and compliance with international standards.
Diverse opportunities: The zone’s incentives benefit companies in sectors such as shipping, logistics, financial services, trading, and technology.
Employment benefits: Hiring local staff provides companies with additional tax deductions, ensuring the MFZ contributes to the regional economy.
Strategic location: Madeira’s location between Europe, Africa, and the Americas makes it an ideal base for international operations, especially in logistics and trade.
Golden Visa compatible: If you want to start a business in Madeira, you could qualify for the Madeira Golden Visa.
Madeira Company Formation Types
Similar to the mainland, there are four distinct types of companies that you can form in Madeira.
Limited Liability Company
A Limited Liability Company (Lda), known as “Sociedade por Quotas” in Portuguese, is the most common business structure for small to medium-sized enterprises in Madeira. This type of company provides shareholders’ liabilities limited to their contributions to the company’s capital, protecting personal assets.
It requires a minimum of two shareholders, although a single shareholder (Lda.) is also permitted. The required minimum share capital is modest, typically €1 per share, making it accessible for entrepreneurs.
Branches
Branches are extensions of the primary company incorporated outside Madeira, allowing foreign businesses to establish a local presence without forming a separate legal entity. The branch operates as part of the parent company, which retains liability for its operations.
Establishing a branch is simpler and faster than incorporating a new entity, as it relies on the existing structure of the parent company and can benefit from the same tax incentives as local companies if they are registered under the IBC.
However, branches must comply with Portuguese accounting and reporting standards but have fewer administrative requirements than standalone companies.
SGPS Company
A “Sociedade Gestora de Participações Sociais” (SGPS) is a holding company designed to manage shares in other companies. This structure is particularly advantageous for larger corporations and investment groups.
SGPS companies in Madeira were primarily established to oversee and manage subsidiaries and investments rather than engage in active trade or services. They also benefit from favorable tax treaties and exemptions on dividends and capital gains.
While this setup provides a framework for consolidating ownership and streamlining decision-making, they must adhere to Portuguese corporate law, including maintaining proper governance and financial records.
Share Company
A joint-stock company (S.A.) can be established with a single shareholder and a minimum capital of €50,000. The management of such companies must be overseen by a board of directors, the size of which is specified in the company’s bylaws. If the share capital is less than or equal to €200,000, only one director is required.
How to Form a Company in Madeira
You must follow several steps to successfully start a business in Madeira, which is similar to starting a business in Portugal.
Approve the name of your company
You are free to use any name you wish for your company, but the authorities must approve it. A name approval certificate and a provisional identification card are requested through the National Company Registrar (RNPC).
The certificate will be valid for 180 days for registration purposes and for one year following the company’s incorporation. Companies must notify the RNPC of their intention to incorporate and operate within the legal framework of the International Business Company (IBC) of Madeira.
Apply for a license
The next step in forming a company is to apply for a license through Sociedade de Desenvolvimento da Madeira (SDM), the IBC’s official concessionaire.
Two applications must be completed, both of which go to the Regional Government of Madeira. The information on the application must include:
- Approved company name and address
- Activity to be undertaken and the respective European Nomenclature of the Economic Activity (NACE) code
- Total value of the investment
- Indication of the number of jobs to be created
If the application is successful, the license is granted to the company as soon as the applicant provides proof of the company’s formation and registration. All supporting documents for the license application must be translated into Portuguese and legalized.
Incorporate your company
Portuguese companies, including licensed IBC companies, can be formed and registered by public deed requested at the Private Deeds Registry Office or, more commonly, through a private document prepared by a private lawyer.
The documentation submitted to the notarial office must include:
- Company name approval certificate as listed in public records
- Provisional company identification card
- Copy of the identification documents of the applicants
- Report from the Official Account Auditor for capital shares entrances in goods
- License and Authorization from the Regional Secretary for Finance and Public Administration
Business registration and publication at the Official Journal
It might seem like an endless bureaucratic loop, but you are only a few steps away from trading in Madeira. Next in the paperwork process is having the business registration published in the JORAM, the Official Journal of the Autonomous Region of Madeira.
The required documents that need to be submitted to the commercial registry within 90 days of the public deed include:
- Company’s incorporation public deed
- Company name approval certificate
- Beginning of activity declaration
Additionally, companies can publish their business registration in local newspapers.
Declaration of beginning of activity
When the company is successfully established, it must declare its beginning of activity to the local tax administration. This is done by submitting the correct documentation that includes:
- The specific form, available at the tax office, in triplicate and duly certified, with information
- Regarding the official accountant responsible for the company’s books of accounts
- Provisional company identification card
- Copy of the public deed;
- Copy of identification and fiscal cards of the shareholders and official accountants
- Companies must submit the declaration within 15 days of the Commercial and RNPC registration
Social Security registration
Within 30 days of beginning activity, the last step in the process is to register with the regional social security administration. The following documents must be presented:
- Tax payer’s identification card
- Company’s incorporation public deed
- Company’s identification card
- Record of proceedings of the election of the members of the board and forms of income
- Copy of the fiscal card of the members of the board
- Fiscal document of the beginning of activity
Cost of Setting Up a Company in Madeira
There are several fees associated with a company formation in Madeira. For example, service-oriented companies must pay an application fee of €1,000 and a guarantee of 15 percent of the annual fee, which is set at €1,800.
For SGPS companies, there is also a €1,000 application fee and a 15 percent guarantee of the annual fee. However, the annual operating fee of €1,800 is for the first year only. Every year after that, the annual fee is €1,800 plus 0.5 percent of the previous year’s profit. The first €1 million are exempt and capped at a maximum of €30,000.
Company Requirements by Law
Forming a company in Madeira is only one step in running a successful business on the island. Every company must adhere to several legal requirements to continue operating.
Legal reserve: The legislation requires companies to allocate 5 percent of the annual profits to establishing a legal reserve, which must be at least 20 percent of the share capital. The legal reserve for LDA companies is required to have a minimum amount of €2,500.
Auditing requirements: All companies operating under the legal framework of Madeira’s IBC are required to maintain proper accounting records. These records must be made available for inspection by the relevant authorities upon request.
Corporate tax returns: Periodical tax returns must be submitted to the Portuguese authorities through the Portuguese Fiscal Authorities website, and periodical income declarations must be submitted by the last working day of May.
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