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Madeira: Country and Foreign Investment

Free Trade Zone

In the 1980s a deep sea port was constructed at Canical, 19 miles from Funchal, where only a fishing village had existed before and it was here that an industrial free trade zone was established. The industrial free trade zone now measures some 296 acres in size. A large number of companies engaged in such diverse activities as foodstuffs, tobacco, metal works and electrical appliances have set up there.

Since the establishment of the original Free Trade Zone, the concept has broadened out. With the active assistance of the Portuguese government, and the compliance of the EU, the Madeiran authorities have constructed an offshore sector known as the International Business Centre (MIBC). This consists of four sections:

  • The Free Trade Zone, which came first, and was intended for use by manufacturing companies;
  • The International Services Centre, which has no exact location, but allows service companies associated with the Free Trade Zone to establish themselves anywhere in Madeira and take advantage of the Free Trade Zone's exemptions;
  • The Offshore Financial Centre, which provides an equivalent regime for banks, trust management and other financial sector companies; and
  • The Madeira Shipping Register, which provides for ships and shipping companies.

The principal attraction of operating within the International Business Centre is that all entities licensed to operate there are entitled to highly attractive fiscal exemptions and reliefs offered under the Free Trade Zone legislation. See Offshore Legal and Tax Regimes for further details.

Goods and raw materials imported into the Free Trade Zone are free of import duty, and manufactures exported from the zone are duty-free in the single market except in respect of that part of their value that can be attributed to non-EU origin. The zone is therefore ideal for 'screwdriver' assembly plants for imports into the EU. The zone also has some exemptions from EU import quotas.

A further attraction of locating a factory in the industrial free trade zone is access to special subsidies provided by European Community structural funds. Currently the European Community will refund up to 50% of the training costs of apprentices in certain trades and up to 50% of the purchase costs of energy-saving technology.

By the end of 2003, over 5,000 entities had been licensed under the Free Trade Zone Legislation (including 50 within the financial center alone). More than 5,000 jobs had been created directly and indirectly at that point.

After a hiatus in the formation of new companies during 2001 and 2002 while the EU investigated Madeira's MIBC, a new regime was approved by the EU at the end of 2002; but it does not provide for the inclusion of new financial services companies.



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