Madeira Free Trade Zone: Tax advantages guaranteed until 2033

The primary effect of this extension lies in the consolidation of the reduced 5% corporate income tax (CIT) rate for entities licensed in the ZFM over profits generated from eligible activities and resulting from operations with foreign entities or other ZFM entities. It is also notable that as a rule, the participation exemption regime applies, and there is no withholding tax on dividends for foreign investors that own equity in ZFM-licensed companies.

This long-term fiscal stability is a highly valued element for international investors and operators, as it facilitates business and corporate structuring with renewed legal security (this regime has been extended twice since its adoption in 2015). The extension ensures that companies already operating under the ZFM regime have the 5% CIT rate on their eligible profits secured until 2033, provided they maintain strict compliance with the established conditions. Additionally, this decision creates a window of opportunity for new businesses, as projects obtaining their official license to operate in the ZFM by 31 December 2026 can benefit from the full regime until 2033.

It is essential to stress that maintaining these tax benefits until 2033 is intrinsically linked to the rigorous fulfilment of economic substance requirements, reflecting the regime's nature as EU-approved state aid. Companies must create and maintain employment positions in the Autonomous Region of Madeira, ensuring that the tax benefit correlates directly with the local creation of value and jobs. The benefits are subject to annual maximum limits (plafonds) on eligible taxable income, which are determined by the number of jobs created and maintained.

This extension of the regime by more than seven years beyond the previously guaranteed deadline of 2028 provides formal acknowledgement of the mechanism's strategic importance for regional development within the European Union.