Offshore Trusts Report: Madeira
Legal Framework and Formation Rules and Fees
Madeira is a civil law jurisdiction, subject in general
to Portuguese law, and the trust thus does not exist as such. Portugal
has not ratified the Hague Convention on the law applicable to trusts
and their recognition. Nonetheless when the Free Trade Zone Legislation
of Madeira was enacted provision was made for the creation of offshore
Decree Law No 352/88 & Decree Law No 149/94 deal
with the registration and management of offshore trusts whereas
Decree Law 264/90 concerns authorization by Government of trust
corporations and branches. There are no unit trusts in Portugal
Portuguese residents cannot use Madeira offshore trusts.
The law forbids a trust to hold immovable property situate in Portugal
and to have either a settlor or a beneficiary who is a Portuguese
resident. All trust property should be based outside Portugal and
all trust income should be derived from non-Portuguese sources if
the favorable taxation regime governing entities licensed to operate
under the Free Trade Zone Legislation of Madeira is to apply.
For a Madeira trust to be valid it must satisfy
the following criteria:
The trust must pass the 3 tests of
certainty of intention, certainty of objects and certainty
and identification of the beneficiaries;
The settlor, the trustees, the beneficiaries
and the assets settled by the trust must all be identified
in the trust deed;
The trust period must be specified.
A power to accumulate income must
be specified in the deed;
The trust deed must stipulate a
foreign proper law governing the validity, interpretation
and administration of the settlement;
The trust deed must set out the
trustees powers of investment, the rights and obligations
of trustees and the relationships between trustees and beneficiaries
including any personal liability arising.
Trusts that are created in
or transferred to Madeira may emigrate without prior authorization
by exchanging the law governing the trust with the law of the
foreign jurisdiction to which the trust is going to migrate. The
trust deed can reserve the right to change the proper law governing
the validity, interpretation & administration of the trust
at any future point in time. A Madeira offshore trust is brought
into existence by the execution of a notarial trust deed in front
of a public notary.
There are a number of provisions
that protect trust confidentiality:
Although an offshore trust must be
registered in the private Trust registry located in the
Madeira free trade zone neither the trust deed nor the names
of beneficiaries and settlor need be registered;
A trustee who is opening a bank
account on behalf of a trust does not need to disclose the
names of the beneficiaries to the bank although the bank
may require such details for the purposes of its internal
The exchange of information agreements
contained in double taxation treaties only allow for the
disclosure of information relating to drugs or weapons trafficking;
European Union directives as transposed
on the Islands do require the local authorities to co-operate
in matters relating to drug trafficking, weapons trafficking
and money laundering but do not require the local authorities
to cooperate with foreign investigators in matters of tax
Disclosure of the details of a trust
is only allowed pursuant to a court order (See Article 11
of Decree Law No 264/90). An unauthorized breach of the
confidentiality provisions contained in article 11 will
result in criminal sanctions.
Trust companies must be audited
annually and must retain a statutory auditor on their board of
directors. They must keep books of account relating to the trusts
A trustee company pays an
annual license fee of around EUR2,400, at the time of writing.
Where trust income arises
in Portugal it is taxable in the hands of the trustees as if the
trustees were both legally and beneficially entitled to the income.
The reasoning behind this principle is that Portuguese law does
not recognize the concept of a trust and so does not recognize
the distinction between legal and beneficial ownership for the
purposes of taxation. By way of exception income arising through
investments made through companies licensed to operate under the
Free Trade Zone Legislation of Madeira is not considered to have
arisen within Portugal for tax purposes.
Jersey Proposes Infrastructure Levy
Jersey is consulting on the introduction of a land development charge, to be called the Jersey Infrastructure Levy.
ADGM Establishes REIT Regime
Abu Dhabi Global Market, the low-tax international financial center, has introduced a private real estate investment trusts regime.
Jersey Research Highlights China HNW Succession Issues
Jersey's financial services promotion agency, Jersey Finance, has published new research on the key challenges facing wealth management practitioners working with China's wealthiest individuals.
NZ Foreign Trust Numbers Expected To Fall
Fewer than 70 out of 11,645 New Zealand foreign trusts have reregistered following the introduction of tougher disclosure and eligibility requirements, with only three weeks left to go before the final deadline.
Abu Dhabi Tax-Free Zone To Launch Foundations
Abu Dhabi Global Market, the low-tax international financial center, is seeking feedback on its proposal to allow the formation of "foundations," a trust-like entity widely used in civil law jurisdictions.
IoM Consults On Funds Sector Rules
The Isle of Man Financial Services Authority, which supervises the island's financial services sector, is seeking feedback on draft guidance dealing with the governance of collective investment schemes.
Dubai Tax-Free Zone Seeing New Business From India
The Dubai International Financial Centre, the leading financial hub in the United Arab Emirates, has become an increasingly popular destination for Indian banks, financial institutions, and fund managers, the zone has said.
Guernsey Issues Warning On 'Sark Company Registry'
The Guernsey Financial Services Commission has issued a warning concerning an entity named "Sark Company Registry," while investigations are ongoing.
Abu Dhabi Free Zone Hopes To Attract Venture Capital Firms
Abu Dhabi Global Market, the low-tax international financial center, has unveiled a regulatory framework for managers of venture capital funds.
Australian Budget Targets Housing, Tax Compliance
Australian Treasurer Scott Morrison's 2017 Budget focused on measures to cool the housing market and crack down on tax avoidance.
Australia Delays Action On Stapled Structures
The Australian Government has decided to extend a review into the taxation of stapled structures. It will not tackle the issue at the upcoming Budget.
BVI Financial Firms Need To Develop New Niches
BVI Finance, the financial services industry promotional agency, has said the industry must actively adapt to target new opportunities and promote new offerings internationally.
ADGM Revises Pooled Fund Capital Req's
Abu Dhabi Global Market, the low-tax international financial center, has revised the capital requirements applicable to managers of collective investment funds, with effect from April 10, 2017.
ADGM Consults On Allowing REITs
Abu Dhabi Global Market, the low-tax international financial center, is consulting stakeholders on plans to allow the establishment of private real estate investment trusts.
Gibraltar To Offer Foundations
Gibraltar's Parliament recently passed a bill permitting the establishment of Private Foundations.