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Madeira: Country and Foreign Investment

Relationship with the EU

This page was last updated on 30 June 2021.

Madeira is part of Portugal and is fully integrated into the European Union. However, a number of special local regimes, accepted by the EU, make Madeira a particularly advantageous location for many types of business within the Union. See the Free Trade Zone below; also see Offshore Business Sectors and Offshore Legal and Tax Regimes.
Madeira was deemed an outermost region of the European Union by the declaration on the outermost regions of the community attached to final act of the Treaty of the European Union and the Treaty of Amsterdam. Both of these treaties provided for the possibility of regional aid schemes, including special tax incentives to stimulate economic and social development.

There have often been conflicts between the imposition of EU regulations and directives and the tax regime particular to Madeira. For example, companies that, between 1 January 2003 and 31 December 2006, applied for and obtained a proper licence to carry out their activities within the MIBC benefited from a reduced rate of corporate tax of 1% in 2003-2004, 2% in 2005-2006 and 3% in 2007-2011. However, companies are obliged to create a certain number of permanent jobs. Companies that create more than five jobs will have access to the regime without further conditions. Those that create between one and five jobs will be eligible only if they undertake a minimum investment of €75,000 during the first two years of operations.

In January 2008, the Portuguese government issued a decree that allows new companies licensed from January 2007 to December of 2013 to enjoy reduced corporate tax rates of 3% between 2007 and 2009, 4% between 2010 and 2012 and 5% between 2013 and 2020. Companies licensed to operate within Madeira's International Business Centre before the year 2001 continued to benefit from a full exemption from corporate tax until the end of 2011, as well as from withholding taxes on dividends, royalty payments and capital duty. As of 2012, such companies fall under the new regime which is valid until the year 2020.

In July 2018, the EU started a thorough investigation into the tax exemptions companies in Madeira may be enjoying. This was due to ongoing concerns that the tax exemptions are being exploited by companies that do nothing to ensure growth in the region. The European Commission stated that it had "doubts that Portugal complied with its requirements" and is investigating whether the tax benefits in question constitute illegal state aid. The investigation continues.

 

 

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