CJEU – Recent Developments in Direct Taxation 2023

S. 2181. T 95/21 – Portugal v. Commission (Zona Franca da Madeira)

1.1. Introduction

In 2015, the European Commission (EC) requested information to the Portuguese State to assess whether the application of the Madeira Free Trade Zone (“MFTZ”) tax regime was compliant with the EC’s (State aid) decisions. The information gathered led to an in-depth investigation initiated in 2018. Subsequently, the EC concluded that unlawful State aid had been granted and therefore so ordered the recovery of the amounts.

The Portuguese Republic appealed the EC’s decision to the General Court of the European Union (“General Court”), which ruled in favour of the EC. A subsequent appeal was filed before the Court of Justice of the European Union (CJEU) and such ruling is now pending.

1.2. Legal background

A special tax regime for companies operating in the Madeira Autonomous Region was first introduced by Decree-Law 500/80, 20 October 1980, it included a broad set of tax benefits with the purpose of promoting investment and the region’s economic and social development.

After joining the European Economic Community in 1986, the Portuguese Republic created the MFTZ (including a special tax regime). The EC approved th...