Shipping 2023: Trends And Developments

• Published date: 04 September 2023
• Subject Matter: Transport, Marine/ Shipping
• Law Firm: CF ' Maritime Legal Services
• Author: Ms C'tia Fernandes and Marina Pimenta

Introduction

Portugal is consistently growing as a reliable and modern flag state. The number of vessels flying the Portuguese flag continues to grow every year and the outlook is that this trend will remain. Through the International Shipping Register of Madeira (MAR), Portugal reached a prominent place within the shipping industry at a worldwide level. As a European flag state, Portugal offers confidence and consistency, while embracing a competitive operational regime.

Furthermore, through the Madeira International Business Centre (MIBC), Portugal offers a set of tax advantages that, when combined with those of MAR, embody a very attractive framework for ship-owners who wish to conduct business based in Europe.

The synergy between a high standard flag state and a business-friendly environment seems to be the key factor for the success of Portugal in shipping, with Madeira playing an important role. Madeira is one of two autonomous regions of Portugal and is an outermost region of the European Union (EU). The creation of the MIBC in 1980 and of the MAR in 1989, under the umbrella of the EU, represented important tools towards the development and diversification of the Madeira (emerging) economy.

With the main goal of attracting foreign investment, the MIBC and the MAR soon contributed to energise the regional economy and revitalise industries that were somehow dormant. The shipping industry, that once was paramount in Portugal, was almost non-existent at the time

the MIBC and the MAR were created. Both these regimes underwent various and substantial improvements over the years aimed at implementing international and European standards and reforming concepts and procedures.

In compliance with European regimes, the MIBC and the MAR demand transparency, substance and commitment. Although the MIBC allows for the incorporation (and operation) of companies in industry sectors other than shipping, the regime fits particularly well the shipping industry.

The MIBC Regime

As the major tax advantage, the MIBC regime allows companies to benefit from a corporate income tax of 5%. The access to this reduced rate requires companies to meet specific criteria. Indeed, companies are required to meet one of the following substance requirements:

• hire one to five local employees in the first six months of activity and make an investment of, at least, EUR 75,000 in tangible or intangible fixed assets in the first two years of activity; or
• hire six or more local employees in the first six months of activity.

The 5% corporate income tax rate is limited up to ceilings placed upon the annual taxable income, depending on the number of local employees created by the company, as follows:

• 1 to 2 employees: EUR2,730,000;
• 3 to 5 employees: EUR3,550,000;
• 6 to 30 employees: EUR21,870,000;
• 31 to 50 employees: EUR35,540,000;
• 51 to 100 employees: EUR54,680,000;
• more than 100 employees: EUR205,500,000;

Higher benefits will be awarded to companies with higher involvement with local communities.

The creation of local employment is the result of the policies of a regime...