It is no secret that here in FRESH we have been advocates of Madeira island for a long time.
Even after a considerable rise in property prices that outpaces most of mainland Portugal, we continue to believe that Madeira is a great investment and this is for a mixture of reasons, including taxation.
Madeira is a year round quality destination - perfect place for a holiday home
Anyone who is lucky enough to get to Madeira understands its appeal as soon as they walk out of the airport. The airport is right on the sea and the sea changes colours. There is an instant island feel of tranquility. Getting to Madeira, you know you are on holiday. Driving to the main city, Funchal, is along the coast with beautiful views of the sea.
Madeira is a year round destination with sub tropical weather. It is pleasant throughout the entire year and one of the few places you can escape to during cold European winters, just a short flight away. It is also cooler in the summer than Lisbon and most of Southern Europe due to the mitigating effect of water - it's an island!
Madeira has many festivals throughout the year, giving people additional reasons to come in any season. The fireworks display at new year's eve is a 360 degrees spectacle, is the best in Europe and attracts tens of thousands of visitors.
This means that Madeira is never empty. It is of course somewhat seasonal but has many tourists even in low seasons so the effects of seasonality are not felt as strongly as the Algarve for example.
Madeira offers amazing hikes, Hawaii-like landscape alongside beaches. It has unique flora and a specific culture and it has the kindest people in Portugal. It attracts quality tourists - the type of tourists that come for nature and landscape and not the ones who come for parties and shattering houses.
Madeira is a digital nomad and increasingly an expat hub
In the past, Madeira was known as mainly a destination for couples or retirees (or as it has been dubbed "for the newly weds and nearly deads"). This has changed dramatically in the pandemic. The digital nomad village project led to Madeira becoming a hotspot for digital nomads, marked on any list of digital nomad destinations. The reputation of Madeira as a fantastic destination has spread to wider expat communities and it is now increasingly known as a great place to live in Portugal.
The rise of expat inhabitants has created a boom in quality restaurants catering for every taste, a new international school (Brave generation academy) and a growing infrastructure to support new residents.
Being entirely dependent on foreign investment, Madeira has had far less of push back by local population and the general sentiment to new migrants remains incredibly positive.
Favorable regulation - housing
Madeira has been excluded from the most aggressive effects of the "Mais Habitacao" reform of the 2023 socialist government. Whilst in most of the mainland apartments can no longer obtain a short term rental license, in Madeira it continues to be possible, and normally quick, to obtain such a license, though an approval of all the building is required.
Independent houses can obtain AL licenses (short term rental) normally without any problem. This enables the golden combination of "live some of the year, get a good return the rest of the time".
Tax benefits in Madeira - corporation taxes
Madeira is a great place as the basis of a company in Portugal.
Standard companies based in Madeira enjoy a corporation tax of 11.7% on the first 50,000 Euros each year and 14% on the remainder, compared to 17% on the first 25K and 21% on the remainder in the mainland. This a big difference.
In additional, Madeira still has, until 2027, a special tax regime that enables companies to operate in the "Madeira business center" and benefit from a 5% corporation tax on foreign sourced income in addition to simplified rules of no withholding taxes and a reduction in tax on the first purchased property.
To qualify for a Madeira IBC company, one must create at least one job (which can be the owner) and an investment of a minimum of 75,000 Euros in Madeira, as well as the payment of approximately 2,000 Euros annual fee.
Tax benefits in Madeira - gateway to TISRI, the new NHR
Under the 2024 budget, Madeira has been given the authority to continue to grant NHR-like tax benefits with extensive exemptions on foreign income and a reduced rate for personal income. Whilst this program does not include retirement benefits, it can make a huge difference to people who are still working.
Madeira is yet to publish the decree defining the conditions, but we expect that as soon as it does, there will be a strong push to move to the island, leading to further increase in property prices.
Conclusion
We believe that for all of these reasons taken together, Madeira will continue to grow and increase in popularity and property owners will enjoy strong returns and capital gains.
