Madeira Holding Company Information

» Madeira Holding Company Overview
» Madeira Key Elements

» Information Downloads

Madeira Holding Company Overview


Definition

The SGPS (Sociedade Gestora de Participações Financeiras) is a company which sole objective is to hold participations in other companies. Due to its core business, the SGPS is not entitled to own less than 10% of the share capital of its subsidiaries. Because it is regarded as a Portuguese company, it may benefit from the tax treaties concluded by Portugal as well as the EU tax directives plus the tax incentives granted by the EU to the Madeira International Business Centre.

Legal Form

The SGPS can be constituted either as a “sociedade anónima” (public limited company- SA) or a
“sociedade de responsabilidade limitada” (private limited company- LDA).

Formation

The minimum share capital for incorporation of a SGPS company is €50.000 for a “SA” and €5.000 for a “LDA”.

Taxation

A SGPS is a company fully subject to tax. Two tax regimes apply to this company, depend on the country of origin of the income received. Income received from EU Member States is subject to a 25% corporate income tax while income received from treaty countries or third countries is subject to 2% income tax (3% from 2007 to 2011).
After the first year, the SGPS is subject to a licensing fee tax of 0,5% on the taxable income of the previous year. Such tax is levied on earnings exceeding €1.000.000 but with a maximum tax amount of €30.000.

Income

The taxable income of a SGPS is based on the company’s annual financial statements subject to adjustments. Expenses incurred exclusively for the purposes of the business are deductible while expenses incurred with exempt income are not deductible.

» Dividends Exemption

Dividends received from EU or Portuguese subsidiaries are exempt from tax if a minimum participation of 20% is held for at least 2 years.

» Capital Gains Exemption

Capital gains from the sale of shares are exempt from tax if shares were held for at least 1 year and provided the previous owner was not subject to any special corporate tax regime, transfer pricing or thin capitalization rules.
Nevertheless, capital gains are in any case exempt from tax with no restrictions if shares were held for a period of at least 3 years.

Besides the common advantages of a holding company, the SGPS may also enjoy from the following:

» Exemption from Withholding Tax on Payment of Dividends

Dividends paid out of profits derived from non-Portuguese companies are exempt from withholding tax, regardless of the place of residence of the shareholder.

» Exemption from Withholding Tax on Payment of Interest

Interest paid by the SGPS to EU or non-EU residents is exempt from tax regardless of the place of residence of the recipient.

» Capital Gains Exemption on Sale of Shares of the SGPS

Capital gains from the sale of shares of the SGPS are exempt from tax for non-residents. Such exemption is not available to residents of countries blacklisted by the Portuguese tax authorities.

Madiera Key Elements

	Formation
	Legal Form:		Sociedade anónima (SA); Sociedade de responsabilidade limitada (Lda)
	Minimum Subscribed Capital:		€50.000 (SA) €5.000 (Lda)
	Minimum Paid-Up Capital:
	Number of Shareholders:		1 (SA) 2 (Lda)
	Type of Shares:
	Substance Requirements:		Nil
	Taxation
	Capital Duty:		0%
	Net Worth Tax:		0%
	Corporate Income Tax:		25% (EU countries); 2% (third countries)
	Double Tax Treaties:		41
	Dividends Exemption:		100%
	Holding Requirements:		20% for 2 years (EU subsidiary)
	Capital Gains Exemption:		Yes
	Holding Requirements:		1 year
	Tax Credit:		Yes
	Relief of Losses:		Carry forward 6 years
	CFC Rules:		Yes
	Debt-to-Equity Ratio:		2:1
	Withholding Taxes
	Dividends:		EU Parent Co- 0% 12 Treaty Countries- 0% 13 Others- 0%13
	Interest:		EU Parent Co- 0%13 Treaty Countries- 0%13 Others- 0%13
	Royalties:		EU Parent Co- Treaty Countries- Others-
	Liquidation:		Nil

	Web
Double Tax Treaties	39KB