Authorises the creation of Madeira's International Business Centre
DECREE-LAW No. 500/80
The creation of a free zone in the Autonomous Region of Madeira constitutes an old aspiration of the people of Madeira, strengthened by numerous interventions of the different bodies of the Region's own Government which expresses the feelings of the population itself.
One must recognise the special geo-strategic position of Madeira, characterised by a specific type of economy combined with a peculiar social-political configuration that oblige the establishment of a free zone, whose main object will be to promote new industries with views to improve the economic and social development of the region.
THUS: The Government decrees, under the terms of paragraph a) No. 1 of Article 201 of the Constitution the following:
Article 1
The creation of a free zone is authorised, in the Autonomous Region of Madeira.
Article 2
The free zone referred to in the previous Article assumes an industrial nature, constituting an area for free importation and exportation of merchandise.
Article 3
The definition of the legal fiscal-mode to be applied to the merchandise, the nature, territorial extent, the characteristics of the free zone and regulations for the industrial activities therein shall be set out in a Regulatory Decree* to be published by the Government of the Republic, with the approval of the Regional Government.
Article 4
Merchandise entered into the free zone which thereafter have or not undergone manufacturing, transformation or reparation, after their entry, may be channelled to other parts of the Republic, or exported to other countries being there considered an imported article subject to all respective duties.
Article 5
The execution of the provisions set out in this statute will take into consideration whatever is stipulated as a result of the negotiations for Portugal's entry into the EEC.
Article 6
The present statute is valid the day following its publication.
Current as at 1st February 1996
TAX AND FINANCIAL INCENTIVES
Modifies Article 41 of the Statute of Tax Benefits, approved by DL no. 215/89 of the 1st of July which partially revokes DL no. 165/86.
DECREE LAW No. 84/93
The evolution of the process of European financial integration, which modifies in a positive manner the comparative advantages which Free Trade Zones and Offshore Centres, established within the European Community offer to companies wishing to operate in the international markets, as well as the experience acquired with the system of fiscal incentives granted to the Free Trade Zones of Madeira and Santa Maria Island, justify a re-definition of their respective frameworks, in order to avoid economic distortions in the Portuguese national territory and to re-affirm the principle that these fiscal benefits are not applicable to operations involving residents in the aforementioned territory.
Thus:
In accordance with the legislative authority granted by Law no 2/92, of the 29th of March, and in the terms of lines a) and b) of no 1, of Article 201 of the Portuguese Constitution, the Government decrees the following:
Article 1
Article 41 of the Tax Incentives Statute, attached to Decree-Law no 215/89, of the 1st of July, is hereby amended to the following:
Article 41
Madeira and Santa Maria Free Zones
1. Entities located in the Madeira and Santa Maria Island Free Zones are entitled to exemption from corporate or individual taxes, until the 31st of December, 2011, on the following terms:
(a) Entities located in the respective industrial free trade zone, in relation to income resulting from the carrying on of activities of an industrial nature, envisaged in Article 4 (1) and qualified under the provisions of Article 4 (2) and (3), of Regulatory Decree nº 53/82, of the 23rd of August and Regulatory Decree nº 54/82 of the of the same date, as well as activities that are accessory or complementary to the one above;
(b) Entities duly licensed that carry on the activity of maritime transport, in relation to income derived from the carrying on, within the institutional ambit of the respective free zone, of the above-mentioned activity, except income from the transport of cargo or passengers between national ports;
(c) Credit institutions, in relation to the income from their activities, provided that their activity excludes the taking of deposits, or other repayable funds from the public, the granting of credit, including the provision of guarantees and other obligations, financial leasing and factoring, which have as their contracting party a resident in Portuguese territory or that can be imputed to a permanent establishment of a non-resident located there, unless they are entities located in the free zones;
(d) Entities that carry on the activity of investment and fund management, in relation to the income derived by them from the management of funds, the units of participation of which are exclusively acquired, on issue, by non-residents in Portuguese territory, except for the permanent establishments which they may have there, and the investments of which are exclusively in financial assets issued by non-residents or other assets located outside Portuguese territory, without prejudice to up to 10% of the global net value of the fund consisting of cash, bank deposits, certificates of deposit or investments in the interbank markets;
(e) Entities that carry on insurance or re-insurance activity, in the non-life field, and that operate exclusively with risks located in the Free Trade Zones or outside of the rest of Portuguese territory, in relation to the income from their activities;
(f) Pension fund management companies, and those of life assurance or re-insurance, that undertake activities obligations exclusively with non-residents of Portuguese territory except for the permanent establishments of such non-residents situated there, in relation to the income from their activities;
(g) Holding companies ("SGPS's"), in relation to the income derived by them from shareholding in companies which are non-residents of Portuguese territory, except for the free zones, or of other Member- States of the European Community;
(h) Entities referred to in a), in relation to income derived from the activities carried on in the demarcated industrial zone not included in a), and other entities not mentioned in the above paragraphs, in relation to the income from their activities within the institutional ambit of the respective free zone, provided that, in both cases, the income is a result of activities carried on with entities located in the free zones, or with non-residents of Portuguese territory, except for their permanent establishments located there outside of the free zones.
2. Entities which participate in the share capital of companies located in the free zones and mentioned in paragraphs a), b), g) and h) of 1) above are exempt without any formalities, from corporate or individual taxes, until the 31st of December, 2011, in relation to:
(a) the profits placed at their disposal by those companies, in the proportion of the sum of the exempt part and the non-exempt one which arises from income earned outside Portuguese territory, of the net profit of the corresponding accounting period, increased by net worth variations not reflected in that profit.
(b) the income from interest and other forms of remuneration of shareholder loans, allowances or advances of capital made by them to the companies or due to the non-withdrawal by them of profits or remuneration's placed at their disposal.
3. For purposes of applying the provisions of the preceding section, the following rules apply:
(a) If the amount of the profits placed at the disposal of the shareholders includes the distribution of reserves, it will be considered that, for the purpose of the calculation of the exempt part referred to in a) of the preceding section, that the older reserves are those first distributed;
(b) Entities resident in Portuguese territory are not entitled to the exemption envisaged in the preceding section, except if they are shareholders of the companies referred to in section 1. (a) or (b).
4. Interest on loans obtained by entities located in the free zones, provided that such loans are for the purpose of financing investments and the normal functioning of the borrowers within the ambit of the free zone, and provided that the lenders are non-residents in the rest of Portuguese territory, except for their permanent establishments located there, are exempt from corporate tax.
5. Income from the grant or temporary licensing by entities non-resident in Portuguese territory (excluding their permanent establishments placed there but outside the ambit of the free zones) of patents, utilization licenses, models, industrial models or designs, trade marks, names and insignia, manufacturing or conservation processes and analogous rights, as well as the income from the provision of technical assistance and from the provision of information acquired through experience in the industrial, scientific or commercial sectors is exempt from corporate or individual tax provided it relates to the activity carried on within the ambit of the free zone;
6. Income paid by the credit institutions located in the free zones, whatever the activities carried on by their permanent establishments located there, in relation to the financing of the balance sheet liabilities of these permanent establishments, provided that the recipients of that income are entities located in the free zones or non-residents of Portuguese territory, except for their permanent establishments located there outside of the free zones, is exempt from corporate or individual tax.
7. Income paid by trust companies and offshore branches located in the free zones to the users of their services provided that these are entities located in the free zones or non-residents in the rest of Portuguese territory, are exempt from corporate or individual tax.
8. The crew members of the ships registered at the International Shipping Register, created and regulated within the ambit of the Madeira Free Zone, or at the International Shipping Register, to be created and regulated, under the same conditions, within the ambit of the Santa Maria Free Zone, are exempt from individual tax in relation to the remunerations received in that capacity and while the registries are valid.
9. The provisions of the preceding section do not prejudice the consideration of the exempt income for purposes of Article 72º of the Individual Tax Code (determination of the rate applicable to non-exempt income).
10. Income obtained in Portuguese territory, except the free zones, is excluded from the corporate and individual tax exemption, as stated in the previous sections, considering as such:
(a) Income envisaged by respectively, Article 17º of the Individual Tax Code and Article 4 (3) and following of the Corporate Tax Code, income from securities representative of the national public debt and securities issued by the Autonomous Regions, by local governments, by public institutes or public funds and, also, any income from other securities that could be classified as public funds;
(b) All income from services provided to individuals or collective persons resident in Portuguese territory as well as to permanent establishments there of non-resident entities, except for entities located in the free zones.
11. Documents, books, papers, contracts, operations, acts and products covered by the General Stamp Tax Table in respect of entities licensed in the Madeira and Santa Maria free zones are exempt from stamp tax, except if they have as their recipient or intermediaries entities resident in Portuguese territory or permanent establishments of non-resident entities located there.
12. The tax regime envisaged in sections 2, 4, and 5 applies to the concessionaire companies of the free zones and their respective shareholders or owners and to the acts and operations practised by them in connection with their corporate objects, with the former being entitled also to exemption from corporate tax until the 31st of December, 2017.
Article 2
This Decree-Law shall come into effect on the 1st of January, 1993.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information please contact:
Christina Perriera Madeira Fiducia Management LDA Rua 31 de Janeiro No 81-A 5E -9050 Funchal Madeira Portugal
Related links:
Click Contact Link
Click Contact Link
