Madeira Residence and Liability
for Taxation
An
individual is considered to be resident if:
- he
is physically present in Portugal (or
Madeira) for more than 183 days in a calendar
year; or
- if
he has a residence at his disposal in
Portugal on December 31 which he intends
to use as his permanent residence (ie
he establishes domicile).
Individuals
who are resident in Portugal pay income tax
on their world-wide income.
Taxable
income falls under eight headings:
- Employment
income;
- Self-employment
income;
- Commercial
or industrial profits;
- Agricultural
income;
- Income
from capital;
- Rental
income;
- Capital
gains;
- Pensions;
- Other
income.
Non-resident
individuals pay tax on their Portuguese-source
income only, under the following headings:
- Income
from scientific, artistic or technical
services performed in Portugal;
- Income
derived from a commercial permanent establishement;
- Investment
income;
- Pensions;
- Income
and capital gains from movable or immovable
property.
Madeira
Income Tax
Various deductions and offsets are allowed
against income; the following are some of
the main ones:
- There
is a deduction from salary, maximum EUR3,400;
- Self-employment
expenses are deductible, with various
provisos;
- Rules
for calculating commercial income are
as for Corporate Income Tax;
- Expenses
can be deducted from real estate income;
- There
is a deduction from pensions;
- Some
types of capital gain are abated by 50%,
including real estate gains;
- There
are dependent allowances, and deductions
are permitted for some parts of health
care costs, insurance premiums and education
expenses;
- There
is double taxation relief for international
income;
- Some
types of income from savings and investments
are wholly or partly exempted from tax;
- Capital
gains from shares held more than 12 months
are exempt, but the ownership must be
disclosed.
Portuguese
individual income tax rules apply to individuals
in Madeira. Income tax in Portugal is charged
at progressive rates ranging from 11.5% to
46.5%.
For
the tax years 2012 and 2013 income exceeding
EUR153,300 is subject to a 2.5% solidarity
surcharge.
Income
tax and social security contributions are
collected on a PAYE basis by employers on
behalf of the government.
Tax
returns must be filed annually by 15th March
(employees), 30th April (self-employed and
othes including non-residents).
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Madeira
Social Security Taxes
Employers and employees make social security
contributions in Madeira: the employee pays
11% of salary (10% if a director); the employer
pays 23.75% of salary (21.25% for a director).
The employer deducts the social security contribution
along with income tax. The self-employed also
make contributions.
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Madeira
Stamp Duty
Stamp Duty is levied on various transactions
in Madeira; the most important are:
- banking
transactions at 3 or 4% of the amount;
- documents
connected with loans, debt etc at 0.5%
of the amount;
- bills
of exchange at 0.5% of the amount.
The municipal property transfer tax applies
to sales of real estate and is payable by
the purchaser at 10% on urban properties and
8% otherwise. There are a number of exemptions,
including urban residential properties below
certain threshhold values, and the acquisition
of land for residential construction.
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Madeira
Value Added Tax
VAT applies in Madeira, as part of the EU,
but is at the rate of 22% from April, 2012
(14% prior) instead of the Portuguese rate
of 23% from April, 2012 (20% prior).
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Madeira Municipal Property
Tax
Municipal Property Tax (Contribuicao Autarquica)
is charged on the value of every property
located on Portuguese territory on December
31 and is payable in the following April.
Urban
residential property is exempt for between
4 and 10 years if its value does not exceed
an amount designated by the authorities.
The
Municipal Property Tax is normally deductible
for income tax purposes.
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