The tax exemption granted by the Portuguese authorities to companies in the Free Zone of Madeira (ZFM) is "unlawful aid that can not be considered compatible with the internal market," a preliminary ruling published today by the European Commission said.
In the preliminary ruling concerning the in-depth investigation of the tax exemptions granted by the Portuguese authorities to ZFM companies, Brussels concluded 'in advance that the scheme introduced by Portugal constitutes unlawful aid which can not be considered compatible with the internal market'.
In particular, the European Commission has "serious doubts" about the application of "income tax exemptions from actual and physically carried out activities in the region" and "linking the amount of aid with creating and maintaining real employment in Madeira"
The EU's Executive Director therefore urges Portugal to submit within one month of receipt of the letter signed by European Competition Commissioner Margareta Vestagger addressed to Minister of Foreign Affairs Augusto Santos Silva "all the information and data documents needed to assess compatibility of the aid / measure ".
This information includes a "full list of all companies registered in the ZFM for each year of the scheme, ie between 2007 and 2014, indicating the amounts of aid received each year" as well as a proof of income origin and the actual place of work of the beneficiary's employees and all 'arguments not previously submitted regarding the compatibility of the scheme applied by Portugal'.
"If not, the Commission will adopt a decision on the basis of the information available", recalls the letter in which Brussels reminds Portugal that "any unlawful aid considered to be incompatible must be recovered from the beneficiary".
On July 6, the European Commission announced that it has begun an in-depth investigation into the tax exemptions granted by the Portuguese authorities to companies in the Free Trade Area of Madeira (ZFM), on the grounds that they are not in line with the State aid rules.
Brussels stated that "in monitoring the implementation of State aid decisions, the Commission has carried out a preliminary assessment of the way in which Portugal implemented the ZFM aid scheme until its expiry at the end of 2014." and "doubts whether the Portuguese authorities have complied with some of the basic conditions under which the scheme was approved by the 2007 and 2013 decisions", so a thorough investigation has begun.
The Commission stated that it had doubts as to whether Portugal fulfilled two conditions: whether the profits of the companies benefiting from a reduction in income tax were derived exclusively from the activities carried out in Madeira and whether the beneficiary companies actually generated and maintained jobs in Madeira ".