State Aid Case SA.21259 | Madeira Free Trade Zone – Tax scheme

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Author (Corporate)
Publication Date 2018-2020
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Summary:

Information Guide on an in-depth investigation conducted by the European Commission between 2018 and 2020 on whether Portugal applied the Madeira Free Zone (Zona Franca da Madeira - ZFM) regional aid scheme in conformity with previous decisions approving it.

Further information:

The ZFM was created by Portugal in 1987 to support economic development in Madeira, one of the European Union's outermost regions. The ZFM's objective is to attract investment to and create jobs in the islands. In this context, Portugal put in place a regional aid scheme providing support to companies establishing themselves in the ZFM. The Commission approved successive version of the ZFM regional aid scheme on several occasions. Under the approved scheme, the amount of aid granted to companies through corporate income tax reductions or other tax reductions is linked to the number of jobs that they create in Madeira.

The Commission initially carried out a preliminary assessment of how Portugal applied the ZFM aid scheme until its expiry at the end of 2014, taking into account the framework of the 2007 and 2013 Commission decisions approving the scheme. On 6 July 2018, the Commission announced the opening of an in-depth investigation to further investigate the country's application of the scheme. Concerns were raised over potential tax exemptions granted by Portugal to companies established in the ZFM.

On 4 December 2020, the European Commission revealed it had found the implementation of the aid scheme (Regime III) not to be in line with the Commission's State aid decisions of 2007 and 2013.

Related Link(s)
News
Reuters, 06/07/2018: EU to probe Portuguese tax deal for island of Madeira https://uk.reuters.com/article/idUKKBN1JW1BC
ECO News, 04/12/2020: Madeira Free Trade Zone “breached EU rules”, aid must be returned https://econews.pt/2020/12/04/madeira-free-trade-zone-breached-eu-rules-aid-must-be-returned/

Official
European Commission: DG Competition: State Aid Register: Case SA.21259 http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_SA_21259
European Commission: Press Release, 06/07/2018: Commission opens in-depth investigation into tax exemptions for companies in the Madeira Free Zone https://ec.europa.eu/commission/presscorner/detail/en/IP_18_4384
European Commission: Press Release, 04/12/2020: State aid: Commission concludes that the Madeira Free Zone (“Zona Franca da Madeira”) scheme not implemented in line with approved conditions https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2314
Reuters, 04/12/2020: Portugal's Madeira tax scheme breached EU state aid rules https://uk.reuters.com/article/idUKKBN28E24Z

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