GSL / Foreign Companies Audit / Madeira

Audit of a company of Madeira, financial statements, accounting, consulting in Madeira

The island of Madeira belongs to the state of Portugal. Madeira is known for its unique landscapes and mild climate. It is a special international economic zone: low corporate tax rate, transparent financial system, advantages of the European Union, exemption from certain types of taxes, security and quality of life. Registering a business in Madeira attracts more and more investors. There are obligations for filing financial statements and auditing: the basic laws and regulations of Portugal are respected in this respect.

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Service packages Legislation Tax System Audit Services
Preparation and submission of accounts
100 - 350 EUR per hour
Audit of financial statements
100 - 350 EUR per hour
Preparation and submission of VAT / VIES / INTRASTAT returns
100 - 350 EUR per hour
Registration for the OSS (Union One-Stop Shop) – for intra-EU distance sales of goods and services
from 595 EUR
Consulting services and support during tax audits
100 - 350 EUR per hour

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General requirements

In order to start and develop a business in Madeira, it is necessary to have an office on the island, to officially appoint an accountant, a resident director and to create jobs.

Currently, the preferential regime in Madeira is only available to companies registered before December 31, 2023. In order to benefit from the tax incentives and pay corporate tax at a rate of 5%, companies need to be registered in the Madeira International Business Center (MIBC) and a special license.

All companies registered at the Madeira International Business Centre have the same rights and obligations as any other Portuguese company.

Madeira companies are also subject to the anti-avoidance and autonomous taxation rules in force in Portugal (albeit at reduced rates).

Under the MIBC, companies are registered for three main types of activities:

  1. Industrial Free Trade Zone - a free trade and manufacturing zone.
  2. International Services - international services.
  3. International Ship Register - international shipping register.

Companies registered in Madeira are required to prepare and submit accounts:

  • financial statements - annually;
  • VAT returns - quarterly (if the company's turnover exceeds 650 000 EUR, the returns must be submitted monthly);
  • reports on wages and social insurance contributions - monthly.

The statements must be prepared in Portuguese in accordance with the Portuguese accounting standards.

There are 3 levels of accounting standards structure:

Level 1 - use of international accounting standards (IAS/IFRS) adopted by the European Union. Since 2005, companies listed on the stock exchange are required to use international accounting standards.

Level 2 - use of accounting and financial reporting standards (NCRF). These are national standards applicable to companies with limited disclosure, given that their reports are not intended for investors in regulated markets.

Level 3 (simplified regime) - use of accounting and financial reporting standards for small entities (NCRF-PE). Simplified treatment applies to small companies that do not exceed two of the following three limits:

  • total net sales and other income - 8 000 000 EUR;
  • total balance sheet - 4 000 000 EUR;
  • average number of employees for the reporting period - 50.

The accountant is responsible for all books of account. The accountant must be a certified accountant (member of the Câmara de Contabilistas Certificados), a member of the official Portuguese Society of Accountants.

All transactions of companies based in Madeira / Portugal must be properly recorded in the accounts with original supporting documents.

Invoices must be issued by computerised invoicing software duly authorised by the Portuguese tax authorities (in this case, invoices must contain the Portuguese expression "Processado por computador", i.e. "Processed by computer").

Portuguese law also requires that all accounting documents be kept in Portugal.

Audit of accounts

Limited companies (SA) as well as private limited companies (Lda.) must have their accounts audited every time two of the following three conditions are fulfilled for two consecutive years:

  • annual turnover - more than 3 000 000 EUR;
  • the total book value is higher than 1 500 000 EUR;
  • the total number of employees exceeds 50.

Timelines for preparation and filing of financial statements

As a rule, the financial year ends on 31 December.

Statements must be approved by 31 March of the year following the reporting year.

The tax return must be filed by 31 May.

Tax is paid in three instalments:

  • by 31 July, the first instalment of corporate tax is paid;
  • the second instalment of corporate tax is due by 30 September;
  • the third instalment of corporate tax is payable by 15 December.

Liability for delay

Failure to comply with the statutory deadlines carries heavy penalties.

Failure to pay the Madeira International Business Centre's annual operating fee on time may result in the cancellation of the relevant licence.

Failure to submit a tax return within the legal deadline is punishable by a fine from 150 EUR to 3 750 EUR.

If the tax authority finds inaccuracies or omissions in the tax return, the fine will range from 3 750 EUR to 22 500 EUR.

Consolidated financial statements

Madeira companies are subject to the tax and accounting requirements applicable to Portuguese companies, therefore Madeira companies are required to present consolidated accounts at the General Meeting of Shareholders within 5 months after the end of the financial year. The consolidated accounts must be prepared in accordance with the requirements of IFRS.

A parent company is exempted from the obligation to prepare a consolidated annual report if, at the date of the parent company's balance sheet, the parameters of the entities whose accounts were to be consolidated do not exceed the limits of two of the three criteria set out below (based on their most recent annual accounts):

  • balance sheet currency - 7 500 000 EUR;
  • annual turnover - 15 000 000 EUR;
  • average number of full-time employees - 250.

The consolidation exemption does not apply to public companies whose shares are listed on a stock exchange. The consolidated accounts of such companies must be prepared in accordance with Generally Accepted Accounting Principles and accepted by the members of the International Organisation of Securities Commissions.

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