Published on and written by Cyril Jarnias
Setting up a structure in Madeira is a dream for many entrepreneurs: corporate income tax at 5% under the Madeira International Business Centre (MIBC), access to the European market, a regime validated by the European Union, and a pleasant working environment. But as soon as you get down to specifics, a question quickly arises: how much does it really cost to set up a company in Madeira and keep it running over the long term?
This article provides a detailed, quantified cost estimate to help you establish a realistic budget. It also explains the conditions necessary for Madeira’s tax advantages to become truly worthwhile.
General Overview: What Lies Behind “Setting Up a Company in Madeira”
Setting up a company in Madeira is not just about paying registration fees. The overall cost breaks down into three blocks: incorporation costs, public fees (licenses, annual duties), and operating costs (accounting, office, staff, banking, etc.).
Before going into detail, it is important to distinguish between two main situations:
Corporate income tax rate applicable to companies in the Madeira International Business Centre (MIBC) on qualified income, subject to conditions.
The costs of incorporation and operation are not very different in either case, but the MIBC adds specific fees (license fee, investment and employment requirements) which increase the bill… while drastically lowering the tax burden.
Choosing the Structure: Lda, SA, SGPS Holding, Branch Office…
Before any estimate, you need to choose the legal form. In Madeira, you will find the standard Portuguese structures.
Lda and SA: The Foundation of the Business Fabric
The most common form is the limited liability company, the Sociedade por Quotas (Lda.). It is designed for small and medium-sized enterprises.
For an Lda, several figures circulate in sources, reflecting both changes in Portuguese law and banking practices:
– Minimum legal capital: often stated as 1 euro per partner (or even 1–2 euros total capital in some texts), but other sources mention a declared capital of at least 2,000 euros, to be paid up by the end of the first financial year.
– In practice, many intermediaries recommend a capital of around 5,000 euros to be credible with banks and partners.
The public limited company, the Sociedade Anónima (SA), is intended for larger projects:
The minimum capital required to set up a Public Limited Company (SA) is 50,000 euros. At least 30% of this amount must be paid up, i.e., actually contributed, at the time of company registration. The balance of the capital may be paid in installments over a maximum period of five years. This capital is divided into shares. The SA is subject to a stricter governance framework than other company forms, generally including the establishment of a board of directors, more thorough auditing of accounts, and specific legal requirements concerning the creation of reserves.
Both types have one thing in common: the liability of partners is limited to their contributions. However, the cost of incorporation and operation is logically higher for an SA, if only because of the minimum capital and governance obligations.
Indicative Base Cost for Lda and SA
Several comparative tables give orders of magnitude for Madeira:
| Company Type | Registration Cost (approx.) | Annual Renewal Cost (approx.) | Typical Authorized Capital |
|---|---|---|---|
| Madeira – Lda | €2,090 | €1,225 | €5,000 |
| Madeira – SA | €2,050 | €1,225 | €50,000 |
These amounts correspond to standard packages, excluding specific regimes like the MIBC.
SGPS Holding and Service Companies: Specific Fees within the MIBC
Holding companies (SGPS) and service companies under MIBC license incur specific fees:
– Application/Installation fee: €1,000 for both a service company and an SGPS.
– Guarantee: a deposit equivalent to 15% of the annual fee.
– Base annual fee: €1,800.
For an SGPS, the rule changes after the first year:
From the 2nd year onwards, the fee consists of a fixed part of €1,800 and a variable part equal to 0.5% of the previous year’s profit. This variable part is calculated on the profit exceeding €1 million and is capped at €30,000.
This mechanism means that as soon as the holding begins to generate significant profits, the annual fee increases, but within a controlled framework.
Branch Office: An Alternative at a Slightly Higher Cost
Instead of creating a local entity, a foreign company can open a branch in Madeira. This option is generally a bit more expensive:
– Branch registration: from €15,000 according to some offers,
– Including approximately €3,900 for opening the branch and €1,100 for obtaining Portuguese tax numbers for the foreign manager and the parent company.
A branch avoids the need to establish local share capital, but does not necessarily grant access to the same preferential tax regimes as a fully resident company licensed under the MIBC.
Taxation Overview: When the 5% Becomes Interesting
The factor that often justifies the initial extra cost of setting up in Madeira is its tax regime.
Corporate Income Tax Rates: Standard vs. MIBC
The various rates appearing in the texts can be summarized as follows:
| Regime / Location | Standard CIT Rate | Reduced SME Rate (1st bracket) |
|---|---|---|
| Portugal (mainland) – standard regime | approx. 20–21% | approx. 17–19% (depending on the year, on €50,000) |
| Madeira – standard regional regime | approx. 14–14.7% | approx. 11–11.9% on the first €50,000 |
| Madeira – MIBC (qualified income) | 5% | – |
Within the MIBC, several important clarifications:
The reduced rate of 5% applies only to income from international activities (non-resident clients in Portugal or other MIBC companies). Activities with Portuguese or non-eligible clients are taxed at the standard Madeira rate. This regime, approved by the EU, is applicable until December 31, 2028, for income of companies licensed before December 31, 2026. For certain sources of income, the benefits may be extended until 2033 for these same companies.
In addition, companies under the MIBC benefit, subject to conditions, from exemptions from withholding tax on dividends, interest, and royalties for non-resident beneficiaries not located on blacklists, and from very broad exemptions from stamp duty and property taxes (up to 80% exemption on IMI, IMT, and stamp duty for certain acts).
When Taxation Offsets Incorporation Costs
A frequently cited example is a consulting company generating €500,000 in annual profit:
– In Germany (CIT + surcharges) at around 30%: €150,000 in tax.
– In Madeira under MIBC at 5%: €25,000 in tax.
Annual savings: €125,000. In this type of case, even an incorporation and annual operating budget of €70,000–€100,000 can be recouped very quickly.
Incorporation Costs: Realistic Range for Setting Up a Company
Figures vary depending on the service provider, the level of service (DIY or turnkey), and the complexity of the file (nominees, multi-shareholders, regulated sectors, etc.).
DIY Incorporation: The Irreducible Minimum
When an entrepreneur handles the administrative procedures themselves, several basic costs emerge for an Lda:
– Name reservation: approximately €75.
– Notary fees for the articles of association: €500–€1,000 depending on complexity and fees.
– Registration with the commercial registry: €220–€250 for a standard filing.
– “Empresa na Hora” portal: approximately €360 if using the physical one-stop shop.
The range mentioned for a “DIY” incorporation is around €1,300 to €1,600 when adding up these basic elements. This is valid for an ordinary company outside the MIBC, without in-depth legal support or ancillary services.
Incorporation with Professional Support: From Standard to Customized
As soon as you engage specialized firms, the amounts increase, but so do the services:
Overview of price ranges for services to set up a Portuguese limited liability company (Lda), depending on the level of assistance chosen.
Includes drafting articles of association, filing, basic procedures, and registered office management. Cost: €2,500–€4,000.
Incorporation, basic accounting setup, registered address, and post-registration formalities. Cost: €3,500–€5,500.
Packages advertised by some providers: €5,500 (standard), €6,000 (with bank account opening), €7,000 and up (with accounting services).
For companies targeting the MIBC, several offers combine incorporation + license + services:
A typical example of an “all-inclusive” package for a company under the IBC regime shows:
| Included Item | Indicative Amount |
|---|---|
| Incorporation + incorporation tax + registration fees | approx. €12,280 |
| Domiciliation and registered agent (1 year) | approx. €2,410 |
| Stamp duty and commercial registry fees | from €1,000 |
| Courier service (DHL / TNT) | approx. €275 |
| Miscellaneous / supplementary services | from €800 |
| Nominee director set | from €1,420 |
| Nominee shareholder set | from €1,420 |
| Compliance fees (simple structure) | €385 minimum |
Some firms advertise an overall price of €10,500 for setting up a company in Madeira with one year of services (address, agent, consultancy) and all taxes and fees for the first year included.
Specifics for the MIBC: In Addition to “Standard” Fees
For a company fully integrated into the MIBC (International Business Centre), the setup costs generally include:
Estimated cost of specialized legal assistance to put together an MIBC file, including analysis of substance, activity, and investment.
A fairly realistic estimate for companies seeking a sophisticated setup and full legal security points to €31,000 to €53,000 in setup costs, excluding share capital, when adding up:
– Preliminary model analysis (4–6 weeks).
– Incorporation (€3,000–€5,000).
– Specialized lawyer fees (€15,000–€25,000).
– MIBC license fees and deposits.
– Assisted bank account opening (often around €4,000).
Legal, Registration, and Compliance Costs
Beyond the advertised package, setting up a company in Madeira involves a series of more technical fees.
Registry, Notary, and Document Fees
Under the MIBC, a notable advantage is the exemption:
– Companies incorporated via the Private Deeds Registry Office for the IBC benefit from a total exemption from registry and notary fees for the deed of incorporation and certain related acts.
On the other hand, for the “general” regime or outside the IBC, you should budget for:
Court registry fees for filing a company’s articles of association typically range from 200 to 500 euros.
Added to this are legalization and translation costs:
– Sworn translation and notarization of foreign documents (passports, Kbis extracts, board resolutions) with Hague apostille.
– Some providers charge these procedures separately, sometimes bundled into a package of a few hundred euros.
Compliance Fees
Several intermediaries charge a compliance fee at each key stage of the company’s life:
– For a simple structure (one individual shareholder): €385.
– For each additional legal entity managed by the same provider: €165.
– For each legal entity external to the provider: €220.
– In more complex cases: €495, plus sometimes an additional €110 for added services.
These fees arise typically:
– at incorporation,
– at annual renewal,
– in case of liquidation or transfer of the company,
– upon change of director, partner, or beneficial owner,
– upon issuance of new powers of attorney.
They are therefore added to the original invoice, but reflect the cost of KYC/AML compliance in the EU.
Bank Account Opening and Management Costs
Opening a Portuguese business bank account is a mandatory step, as the share capital must be deposited there, and many transactions must pass through this account.
From a financial perspective:
– Professional assistance with opening: often charged around €4,000 to €4,950 depending on the provider and the target bank.
– Banks require:
– proof of actual activity in Madeira or Portugal,
– a local legal address,
– a Portuguese tax number (NIF) for the company and for the main directors/partners,
– proof of source of funds (enhanced KYC).
These costs do not cover account maintenance, which is charged by the bank according to its own fees.
Annual Operating Costs: The Real Bill Over Time
Once the company is created, recurring costs take over. They are decisive in the economic equation, especially if the tax advantages of the MIBC are not fully exploited.
Domiciliation, License, and Renewal
First, you need to distinguish purely “legal” fees:
– Registered office / agent: a typical package shows €1,800–€2,410 per year for the legal address and agent service.
– MIBC annual license fee: €1,800, payable each year to the regional government.
– Renewal of certain structures (Lda): announced costs around €1,130–€2,200 for the second year, depending on the provider.
For service or holding companies under the MIBC, where applicable, the variable part of the SGPS fee (0.5% of profit above €1 million, capped at €30,000) must be added.
Accounting, Audit, Payroll: The Compliance Infrastructure
Portuguese reporting obligations apply to all companies:
Our firm handles the complete management of your accounting, tax, and social security obligations in Portugal.
Preparation of annual accounts according to SNC (Portuguese standards) or IFRS international standards.
Filing of tax returns (Corporate Income Tax – CIT) and IES declarations (simplified business information).
Monthly or quarterly VAT returns, depending on the applicable regime based on your turnover.
Management and filing of social security and salary declarations on a monthly basis.
The corresponding costs are structured as follows:
– Basic annual accounting: often quoted between €1,200 and €2,500 per year for a simple small structure. For an MIBC company with several employees and a significant volume of transactions, amounts between €8,000 and €12,000 per year are mentioned.
– Audit: mandatory if, for two consecutive years, the company exceeds at least two of the following three thresholds:
– turnover > €3,000,000,
– total assets > €1,500,000,
– more than 50 employees.
In this case, audit fees often range between €3,000 and €10,000 per year for a medium-sized company (other sources mention €2,000–€5,000 for smaller structures).
– Payroll management: for a small team, payroll processing costs are estimated between €500 and €1,500 per year.
In parallel, Portuguese social security contributions amount to 23.75% of gross salary borne by the employer, plus the 11% employee share.
Office, Utilities, Telecom: A Not Insignificant Item
For MIBC companies with substance requirements, a real office is essential. Sources mainly give national orders of magnitude (Lisbon), but they remain useful for getting a ballpark figure.
A typical example, to be adapted to the specific context of the Madeira archipelago, taking into account its unique geographical, climatic, and cultural characteristics.
– Office rent in a major Portuguese city:
– €30–50/m²/month in prime Lisbon districts,
– a 50 m² office therefore costs €1,500–€2,500/month, i.e., €18,000–€30,000/year.
– In less central areas, you can find €10–€20/m²/month, which significantly reduces the bill.
For Madeira, rents are generally more moderate than in central Lisbon, but the annual order of magnitude for a small office of 30–80 m² can easily fall within the €10,000–€20,000/year range cited in studies.
Added to this are:
– Property charges, insurance, maintenance: an increase of approximately 10–20% of the annual rent amount.
– Electricity: €100–€300/month, i.e., €1,200–€3,600/year.
– Water: €50–€100/month, i.e., €600–€1,200/year.
– Gas: €50–€200/month, i.e., €600–€2,400/year.
– Telecom and internet:
– business internet connection: €50–€150/month,
– telephony: €50–€100/month,
– i.e., €1,200–€3,000/year overall.
Combining rent, charges, energy, and telecom, a small structure with a modest office can easily spend €15,000 to €30,000 per year just for its physical presence.
Salaries and Substance Requirements for the MIBC
The MIBC regime is not a mere paper regime: it requires real substance in Madeira.
To benefit from the 5% rate, it is necessary to comply with a set of main conditions defined by the current regulations.
– Option 1:
– create 1 to 5 full-time jobs within 6 months of starting operations,
– invest at least €75,000 in tangible or intangible assets within the first two years.
– Option 2:
– create at least 6 full-time jobs within 6 months, with no specific investment amount required.
Under the more “substance-heavy” regimes described, the requirements even mention:
– at least 3 full-time employees based in Madeira,
– a director or manager physically present in Madeira for at least 90 days per year,
– a recommendation of 4–5 employees for larger structures.
The basic annual salary costs mentioned for a small team fall within a range of €30,000 to €60,000 (depending on the number of employees and compensation levels), plus employer social security contributions (23.75% of gross).
These substance obligations explain why some analysts estimate that the total annual costs of a well-resourced MIBC structure (salaries, office, accounting, consulting) are around €70,000 to €100,000 per year.
Other Costs and Items Not to Be Underestimated
Beyond the major categories already described, several more discreet items add up.
Legal Reserve: An Indirect Impact on Cash Flow
All Portuguese companies are required to build up a legal reserve:
– Obligation to allocate 5% of annual profit to this reserve.
– Until it reaches at least 20% of the share capital.
– For an Lda, the reserve must reach a minimum of €2,500 regardless of the size of the capital.
This is not a cost in the strict sense, but a constraint of setting aside part of the profits, which can influence the ability to distribute dividends.
Sectoral Taxes and Specific Licenses
Certain activities entail additional licenses and taxes:
The annual cost of the food hygiene license for catering and beverage activities in Portugal.
These costs add to the general structure and must be integrated into the profitability study.
Nominees and Confidentiality Services
Even though European transparency limits anonymity, some entrepreneurs use nominee directors or shareholders for organizational or commercial discretion reasons.
Typical observed costs:
– Nominee director document set: from €1,420 (one-time or annual payment depending on the offer).
– Nominee shareholder set: from €1,420.
– Providers charging approximately €2,100/year for a passive corporate shareholder and up to €6,600/year for a combined director + nominee shareholder package.
These services increase the bill, but can make sense in certain international configurations.
Timelines: A Cost in Time to Factor In
The incorporation timeline is not a direct financial cost, but it influences when operations can start and therefore the return on investment.
The various sources mention:
Estimated total duration for the complete incorporation of an Lda in Madeira, from the start of procedures to final registration.
Overall, going from idea to an operational company fully benefiting from the MIBC regime can reasonably take 4 to 6 months, especially if aiming for good structuring.
How to Interpret These Costs: For Which Profiles Is Madeira Relevant?
Given the density of figures, it is useful to put them into perspective.
For a small independent professional simply looking for a low-cost company: Madeira is not necessarily the best option if you do not fully use the advantages of the MIBC. Between domiciliation, accounting, and administrative costs, the annual cost easily exceeds that of a simple registration in another member state with a more “standard” tax system.
However, for:
A consulting, IT, e-commerce, or intellectual property management company generating several hundred thousand euros in profit can optimize its structure via an international holding company (SGPS) to structure its European holdings. Meanwhile, a logistics or industrial company can take advantage of the free zone status to reduce its operational and tax costs.
the tax savings achieved (CIT at 5% on qualified income, exemption from withholding tax on dividends, exemptions from wealth taxes) can very largely offset:
– the €31,000–€53,000 in startup costs for a sophisticated project,
– the €70,000–€100,000 in annual operating costs for a well-resourced substance structure.
The key element is therefore the size of the project and the income profile: the more stable international profits the company generates, the more the tax differential compared to a country with 25–30% CIT matters.
Summary: How Much Should You Budget, Concretely?
By aggregating the data, we can establish three typical orders of magnitude, to provide a reference point (excluding share capital, taxes, and social charges):
| Project Profile | Incorporation Cost (range) | Annual Recurring Cost (excl. CIT) | Summary Comment |
|---|---|---|---|
| Small local Lda, light support | €1,300–€4,000 | €2,000–€6,000 | Little or no use of MIBC, simplified obligations |
| Lda/SA with pro package, non-MIBC | €3,500–€7,000 | €5,000–€15,000 | Regional/EU activity, standard Madeira taxation |
| MIBC structure with real substance (3–5 employees) | €31,000–€53,000 | €70,000–€100,000 | Full benefit of 5%, employment and investment obligations |
These figures remain indicative orders of magnitude, heavily dependent on:
– the chosen service provider,
– the complexity of the shareholding,
– the business sector (specific licenses, earlier mandatory audit, etc.),
– the salary level and the size of the office.
For expatriation to Madeira to be financially advantageous, the tax savings achieved over several years must be significantly higher than the initial and recurring costs of the process.
—
Ultimately, the cost of setting up a company in Madeira is not limited to a registration fee, but rather to a coherent set: incorporation, possible MIBC license, establishment of a real local presence (offices, employees, management), and compliance with a demanding accounting and tax framework. It is a significant initial investment, which makes perfect sense for ambitious international projects seeking to combine advantageous taxation, European legal security, and real roots in a developing island economy.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
