This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
 

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 trusts.

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 or Madeira.

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 controls;

  • 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 evasion;

  • 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 being administered.

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.

   

The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

New Zealand

New Zealand: Legal Framework and Formation Rules and Fees
New Zealand: Review of the Law of Trusts
New Zealand: Taxation of Trusts

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees

 



Latest News

Jersey Proposes Infrastructure Levy
23/6/2017
Jersey is consulting on the introduction of a land development charge, to be called the Jersey Infrastructure Levy.

ADGM Establishes REIT Regime
20/6/2017
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
15/6/2017
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
27/6/2017
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
2/6/2017
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
22/5/2017
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
19/5/2017
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'
18/5/2017
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
15/5/2017
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
10/5/2017
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
2/5/2017
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
13/4/2017
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
11/4/2017
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
6/4/2017
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
4/4/2017
Gibraltar's Parliament recently passed a bill permitting the establishment of Private Foundations.