The Madeira deadline is real. It is also the least interesting part
Every adviser in Portugal is currently selling you a date. The date is genuine: licence by 31 December 2026 and your company is taxed at 5% until 2033. But the date is not what decides whether the regime is worth anything to you. Four other things do, three of them are in the statute, and one of them was confirmed by a court twelve days ago.
The benefit now runs to 2033, not 2028
If you read about this regime more than a year ago, the number in your head is wrong. Until the end of 2025 the statute granted the reduced rate only until 2028, which made the arithmetic marginal for anyone licensing late. Article 73 of Law 73-A/2025, the 2026 State Budget, published on 30 December 2025 and in force since 1 January 2026, moved that horizon to 31 December 2033. The licensing cut-off did not move: it is still 31 December 2026.
So the shape of the decision has changed. A company licensed in the last weeks of 2026 now gets seven clear years of the reduced rate rather than two. That is long enough to justify building something real in Madeira, which is precisely what the regime has always demanded and what most of the people selling it leave out.
- Estatuto dos Benefícios Fiscais, Article 36.º-A — regime for entities licensed in the Madeira Free Zone from 1 January 2015. Consolidated text, Diário da República.
- Law 73-A/2025, Article 73 — DR n.º 250/2025, Supplement, Series I, 30 December 2025, in force from 1 January 2026. The amendment that moved the benefit to 2033.
- European Commission decision of 4 December 2020 — found that the previous Madeira regime had not been implemented in line with the approved conditions.
- EU court judgment of 8 October 2026 — rejected the annulment action brought by six Brazilian companies against that decision.
What the 5% rate is actually worth to you
The headline rate is not the number you pay. The regime caps the taxable income that can reach 5%, and the cap moves in steps with the number of jobs you maintain. Put your own figures in.
What the statute requires, in the order it will catch you
These are not guidelines. They are the text of Article 36.º-A, and the European Commission has already demonstrated once what happens when they are treated loosely.
One year if the activity is industrial, maritime or air transport. This is not a formality: a licence held by a company that has not begun operating is a licence at risk. Plan the licence date backwards from the date the business can actually start.
Either one to five posts in the first six months together with at least €75,000 invested in tangible or intangible fixed assets within the first two years; or six or more posts in the first six months, in which case no investment minimum applies. Below one post there is no regime at all.
The 5% reaches income from operations with entities installed in the free zone or with non-residents of Portugal. Portuguese mainland customers are outside it. If your market is domestic Portugal, this regime is the wrong instrument and no structuring fixes that.
The taxable-income ceiling tied to jobs, from €2.73m at one or two posts to €205.50m above a hundred. And separately a ceiling of 20.1% of gross value added, 30.1% of payroll costs or 15.1% of turnover generated in Madeira. Both apply; whichever bites first is your real limit.
The statute says income and costs count as generated in Madeira only when attributable to activity carried on through an adequate business structure located in the Autonomous Region. That sentence is the whole substance test, and it is the sentence the 2020 Commission decision turned on.
Jobs buy headroom in steps, not smoothly
The jump from five to six employees multiplies your ceiling by more than six. It is the single most consequential hiring decision in the regime, and it is nowhere in the marketing.
Part-time and intermittent staff count proportionally, measured in annual work units. Workers supplied by temporary employment agencies, staff on occasional secondment, and plurality-of-employers arrangements where the lead employer is not itself licensed in the free zone are all excluded from the count.
Four ways to be excluded that people discover late
If your main activity falls under NACE 70.10, head office activities, or 70.22, business and management consultancy, and the work is intragroup, the statute excludes you by name. This catches a great many structures that were sold as “a Madeira management company”.
Article 36.º-A n.º 8 a)The whole of NACE section K is out, with one carve-out: companies whose main activity is managing non-financial shareholdings, NACE 64.20, are inside and taxed under n.º 1. A holding company qualifies; a lending or insurance vehicle does not.
n.º 8 a), with n.º 7 e) and n.º 9Shareholders are exempt from IRS or IRC on distributed profits until 31 December 2033 — but not shareholders resident in Portugal, except in industrial and shipping entities, and not shareholders in blacklisted jurisdictions. For a Portuguese founder this can erase most of the advantage at the second step.
n.º 10 and n.º 11 b)Steel, synthetic fibres, coal and shipbuilding; agriculture, forestry, fishing, aquaculture and extractive industry; undertakings in difficulty within the meaning of the General Block Exemption Regulation; and any entity under a pending recovery order from a Commission state-aid decision.
n.º 8 b) to e)The substance test is not theoretical. It was upheld on 8 October
This is the part of the story that advisers selling a deadline tend not to raise, and it is the part that should shape your decision more than the date.
- On 4 December 2020 the European Commission found that the earlier Madeira regime had not been applied in line with the conditions it had approved
- The two conditions were jobs genuinely created in Madeira, and reductions applied only to activity effectively and materially carried out there
- Recovery followed, reaching companies that had relied on the regime in good faith for years
- On 8 October 2026 an EU court rejected the annulment action brought by six Brazilian companies against that decision
- The jobs have to be real jobs, held by real people, working in Madeira
- The activity generating the income has to happen through a structure that is actually there
- A registered address with a mail forwarder is not a structure, and has not been for years
- The cost of getting this wrong is not a lost benefit going forward; it is repayment of benefits already taken
We would rather say this plainly than win the engagement: if what you want is a 5% rate without putting anything in Madeira, do not do this. The regime is good, it is lawful, and it is defensible — for a business that genuinely moves part of itself to the island. For anything else it is a liability with a seven-year fuse.
The successor regime: agreed in principle, published nowhere
Licensing open until 31 December 2026, reduced rate until 31 December 2033. Consolidated and in force since 1 January 2026. This is the only version anyone can actually read and plan against.
Law 73-A/2025, Article 73In July 2026 the Regional Secretary for Finance said the methodology and its underlying reasoning had been agreed with the European Commission, and that the process had moved to discussion with the national government. No text accompanied the statement.
Statement, July 2026The regional government has said it aims to publish the new framework before the end of 2026, to avoid a gap in which no company can be licensed at all. As of today nothing has been published and no Commission decision on the new regime has appeared. In June 2026 the opposition criticised the agreement for being kept confidential.
Status as at 20 October 2026Which gives the decision its real shape. You are not choosing between licensing now and licensing later on similar terms. You are choosing between a set of rules you can read, which closes in a fixed number of days, and a set of rules nobody outside two governments has seen, which may arrive before the gap opens or may not.
What the remaining weeks have to contain
The licence is the last step, not the first. Working backwards from 31 December, here is what has to happen before it.
Before anything else, confirm the business is not an intragroup head office, a management consultancy or a section K financial activity. This is a half-day of work and it determines whether the rest is worth doing.
One to five posts with €75,000 of investment, or six-plus with none. Model the real cost: employer social security at 23.75%, fourteen payments a year, and the premium Madeira commands for qualified staff. Then compare it against the tax saved at your profit level.
Corporate documents, apostilles where owners sit outside Portugal, tax numbers for every shareholder, and the business plan the licence application rests on. For non-resident owners this is the step that takes the longest and the one you cannot compress.
Treat 31 December as a legal cliff, not a target. A file submitted in the final fortnight that comes back with a query has nowhere left to go, and the regime does not grant extensions for administrative bad luck.
What people ask once they have seen the ceilings
What exactly is the 31 December 2026 deadline?
It is the last date on which a company can be licensed to operate in the Madeira International Business Centre under the current regime. Article 36.º-A of the Estatuto dos Benefícios Fiscais, as amended by Article 73 of Law 73-A/2025, taxes entities licensed between 1 January 2015 and 31 December 2026 at 5% IRC until 31 December 2033. Miss the licensing date and the current regime is closed to you, whatever happens to the successor.
Does the 5% rate apply to everything the company earns?
No, and this is where most expectations break. The reduced rate reaches only income from operations with entities installed in the free zone or with non-residents of Portugal. Selling to Portuguese mainland customers falls outside it. On top of that the benefit is capped twice: by a taxable-income ceiling tied to the number of jobs maintained, and by a ceiling of 20.1% of gross value added, 30.1% of payroll or 15.1% of turnover generated in Madeira.
How many employees do I actually need?
At least one. Article 36.º-A n.º 2 offers two routes: create one to five posts in the first six months together with €75,000 of investment in tangible or intangible fixed assets within two years; or create six or more posts in the first six months with no investment requirement. The posts must be real employment in Madeira — agency workers and seconded staff are expressly excluded from the count.
I run a holding company. Does that qualify?
A company whose main activity is managing non-financial shareholdings (NACE 64.20) is inside the regime and taxed under n.º 1. But if your main activity is head-office activities (70.10) or management consultancy (70.22) and the work is intragroup, you are expressly excluded, as is anything in NACE section K financial and insurance activities. The line between a holding company and an excluded intragroup head office is narrower than it looks.
What happened on 8 October 2026?
An EU court rejected the annulment action brought by six Brazilian companies against the European Commission decision of 4 December 2020, which found that the earlier Madeira regime had not been applied in line with the conditions the Commission approved. The conditions were the same two that matter today: jobs genuinely created in Madeira, and reductions applied only to activity effectively and materially carried out there. It is a reminder that the substance test is enforced retroactively, with recovery.
Should I wait for the successor regime instead?
You would be waiting for something nobody has read. In July 2026 the Regional Secretary for Finance said the methodology had been agreed with the European Commission, and the regional government aims to publish the framework before the end of 2026 to avoid a gap in licensing. But no diploma has been published and no Commission decision on the new regime has appeared. The known rules expire on 31 December; the unknown ones may or may not be better.
Find out in a day whether this is for you
Send us the structure: who owns the business, where those people live, what it sells and to whom. We will tell you whether the exclusions catch you, what the job requirement really costs at your profit level, and whether the remaining weeks are enough. If the answer is that the MIBC is wrong for your case, that is what the reply will say.