If you’re considering a prolonged stay in Portugal, aiming to run your own business in the jurisdiction, and interested in leveraging the legitimate advantages of a residence permit otherwise known as a Golden Visa alongside tax incentives within this country, registering a sole proprietor in Madeira is a comprehensive solution.
Foreign business owners have the opportunity to register a sole proprietorship in Madeira. However, residents of sanctioned countries should take note that to open a bank account, they will need to demonstrate residency in a European country or initiate the process of obtaining a residence permit in Portugal. Seasoned experts from Q Wealth are ready to offer comprehensive assistance in this regard.
What is the ideal country for non-residents seeking to register sole proprietorships? Which international location boasts the most attractive tax rates for sole proprietors? Is it possible to manage a sole proprietorship in Madeira remotely while still generating income from foreign sources? Feel free to get in touch with Q Wealth experts to get answers to these questions and more!
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Why opt for a sole proprietorship in Madeira?
It doesn’t take long at all to register a sole proprietorship in Portugal. Many people from other countries find Madeira Island in Portugal to be a fantastic choice when it comes to relocating their businesses, initiating self-employment or registering sole proprietorships (referred to as recibos verdes in Portuguese), and taking advantage of lower taxes for both residents and non-residents.
Registration of a sole proprietorship in Madeira comes with minimal administrative hurdles. For those who have more ambitious plans than just remote freelancing and are interested in European residency, there exists a Golden Visa program designed for registering sole proprietorships and companies (subject to specific eligibility criteria).
Also, pay attention to the NHR (Non-Habitual Resident) tax residency option. This opportunity allows foreign nationals to reside, work, establish enterprises, and travel in the European Union, all while enjoying a tax exemption on global income for up to 10 years.
Opting to incorporate a company in Madeira’s Free Trade Zone that boasts low taxes is a decision that established investors often make. Take advantage of professional guidance and launch your business in the offshore zone, all under advantageous conditions!
Perks for sole proprietors in Madeira
An autonomous region of Portugal, Madeira boasts its own government and individual tax rates that set it apart from the mainland. Nevertheless, Madeira adheres to the same laws and regulations for everyday life and business as both Mainland Portugal and the broader European Union.
With its attractive incentives and tax benefits, Madeira is a great chance for foreign entrepreneurs to capitalize on the possibility of acquiring an EU residence permit and enjoying tax advantages. You can use this opportunity if you register a company in Madeira’s International Business Center (IBCM).
Let’s explore some other advantages of registering a sole proprietorship in Madeira in 2023:
- No minimum share capital requirements.
- An opportunity to participate in the Golden Visa program, potentially leading to European citizenship.
- The advantageous geographic location of the island at the intersection of Europe, Africa, and the Americas, which makes it a valuable hub for international trade.
- No currency controls and an opportunity for freelancers from other countries to work remotely.
- Tax incentives, including the Non-Habitual Resident (NHR) status. Despite the country’s comprehensive tax system for individuals, entrepreneurs, and freelancers, non-habitual tax residents of Portugal or Madeira can avoid taxes on global income for up to 10 years.
- Unrestricted access to Europe, both as a sole proprietor in Madeira and for visa-free travel across EU countries.
Don’t hesitate to contact Q Wealth experts to seamlessly get your NHR status in Portugal in next to no time.
Taxes for sole proprietors in Madeira in 2023: benefits to enjoy
Income tax for freelancers (sole proprietors) who live in Madeira follows these rules:
- Income Tax in Madeira (IRS): The tax you pay on your earnings in Madeira changes depending on how much you make. It starts at 0% and can go up to 47.5%, based on how much money you earn each year.
- Value Added Tax (VAT) in Madeira: If you’re someone who works for yourself, like a freelancer or a sole proprietor in Madeira, there are times when you need to pay VAT. This happens if your yearly income goes above a certain amount. In 2023, the normal VAT rate in Portugal is 22%, but it’s lower at 5% for businesses in the IBCM.
- Social security contributions in Madeira: They work similarly to those in the rest of Portugal. They’re calculated and paid following the set procedure, with due consideration of the money you made in the 3 months immediately preceding the reporting period. For exact details about contributions, including those for social security, you are welcome to consult the Q Wealth team during a personal consultation.
In Madeira, sole proprietors fall into a category B tax group (self-employed). For them, the tax rates are usually less than what people in Mainland Portugal pay. It all eventually depends on how much money they make in a year.
How can foreign nationals register as sole proprietors in Madeira?
Although not overly complex, the procedure for registering a sole proprietorship in Madeira does involve specific aspects and requirements:
- To register a sole proprietorship in Madeira, you’ll need to obtain a local tax identification number (Número de Identificação Fiscal).
- For foreigners looking to register a sole proprietorship in Madeira, it’s necessary to translate documents into either Portuguese or English, get them notarized, and then either have them apostilled or legalized through a consulate.
- If you’re aiming to take advantage of tax benefits under the Non-Habitual Resident (NHR) status, the procedure requires you to first become a tax resident of Portugal (or Madeira) and subsequently apply for the NHR status. This means additional requirements for the applicant:
- having a residence permit from Portugal or another European country
- holding a long-term property rental agreement in Madeira that makes you eligible for residency
- living in the country for at least 183 days per year.
- Seeking assistance from our professional (an agent) is advisable when you’re applying for self-employment (sole proprietorship or freelancing) in Madeira. Our experts will make sure your documents meet the set requirements and offer initial guidance for your move to Portugal and the procedures for obtaining residency or NHR status.
- It is possible to set up a bank account for your sole proprietorship based in Madeira directly in Portugal, on the island itself, within a payment system, or even internationally. Mind that tax authorities may request residents to declare the income received in the local account of the sole proprietor. This helps them to accurately track the actual earnings of the entrepreneur.
- In Madeira, sole proprietors are obliged to issue invoices or receipts (recibo) for each financial transaction, even when they deal with foreign clients.
- Furthermore, it’s obligatory to file annual tax returns.
You can choose if you want your business address to be the same as where you live or somewhere else in Portugal (or Madeira). That’s totally up to you.
Documents required to register a sole proprietorship in Madeira
Here are the documents a foreign citizen shall submit to register a sole proprietorship in Madeira assisted by Q Wealth experts:
- notarized copy of their passport with an apostille or consular legalization
- document verifying their permanent residence address (such as a bank statement dated within the last 3 months)
- proof of their tax residency number
- power of attorney issued on the form provided by Q Wealth experts, with notarization, apostille, or consular legalization.
It takes just 1 day to register a sole proprietorship in Madeira.
Essential documents you will need to open a business bank account in Madeira
A sole proprietor in Madeira shall declare their incoming funds, which necessitates a bank account. You can open an account with a bank in the country where you’re registering your sole proprietorship. Also, feel free to maintain additional accounts abroad.
To open an account in Portugal, you will need to submit the following documents to Q Wealth experts:
- legalized copy of the applicant’s passport (specifically for a sole proprietor in Madeira) that meets the set criteria
- verification of your permanent residence address
- tax identification number from your country of residence.
FYI: Whether you are a resident or non-resident of Portugal, you have the opportunity to register a sole proprietorship in Madeira. Nonetheless, the most advantageous way to secure tax advantages is by acquiring the Non-Habitual Resident (NHR) status, which requires you to establish tax residency in Madeira. This arrangement allows a sole proprietorship to benefit from a tax-free period of up to 10 years on worldwide income. It offers significant advantages, especially for freelancers and digital nomads.
What are the costs associated with registering a sole proprietorship in Madeira?
Below, you will find the rates for Q Wealth services mentioned in this article:
- EUR 1600 – sole proprietorship registration in Madeira
- EUR 250 – obtaining a tax identification number in Portugal (NIF)
- EUR 350 – translation and notarization services.
It will cost you EUR 4000 or more to open a bank account in Portugal. For the exact cost of setting up an overseas bank account, kindly seek guidance from Q Wealth experts or explore the most up-to-date options available.
A bank account abroad: where can a non-resident set up one for their personal and corporate needs?
In conclusion
A part of Portugal and Europe, Madeira offers a favorable environment for obtaining European citizenship, running your own business, working remotely, and enjoying lower taxes compared to other countries. While the requirements for residency and citizenship have become more stringent on the mainland of Portugal in recent years, Madeira is actively seeking to attract a higher number of investors to the country.
Wishing to improve the region’s economic performance, the government of Madeira provides foreign nationals with various incentives and advantageous conditions for business incorporation. If a sole proprietorship is not sufficient for your needs, we recommend you explore the option of setting up a Limited Liability Company (LLC) in the International Business Center (IBCM) on the islands.
Feel free to reach out to Q Wealth experts with any inquiries you may have, and receive a free consultation followed by practical recommendations on a fee basis.
