300 million euro tax reductions for companies

(By Nina Chestney – Thomson Financial)

Brussels – The European Commission said it has approved tax reductions totaling 300 million euro until 2020 for companies setting up on the Portuguese island of Madeira between 2007 and 2013.

Madeira is a free trade zone, otherwise known as Zone Franca Da Madeira (ZFM).

The commission said the state aid is subject to the creation of jobs and there are strict safeguards as to its implementation.

Competition commissioner Neelie Kroes said: “The aid will contribute to attract investment and economic activity to Madeira, supporting cohesion in the EU and regional development in this outermost region.

ZFM comprises and industrial free zone, an international services centre and an international shipping register. New companies licensed to conduct business there between Jan 1, 2007, and Dec 31, 2013, will benefit from a reduced tax rate of 3 percent in 2007-2009, 4 percent in 2010-2012 and 5 percent in 2013-2020.

Access to the scheme will be restricted to companies that meet specific eligibility criteria, based on the number of permanent jobs created, the commission said.

The tax benefits will be limited by a ceiling placed on the taxable base per company, ranging from 2 million euro (where less than three new jobs are created) to 150 million (where more than 100 new jobs are created). The companies involved will have to start business within a fixed time limit — six months in the case of international services and one year in the case of industrial or shipping activities — beyond which they will lose their licenses.

Admission to the ZFM is also restricted to the activities included in a list drawn up by the Portuguese authorities on the basis of the statistical classification of economic activities in the EU.

Financial and insurance intermediary activities, financial and insurance auxiliary activities and “intra-group services” — which means coordination, accounting and distribution centers — are excluded from admission.

Nina Chestney

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