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International Business Centre of Madeira

 

The International Business Centre of Madeira

also known as Madeira Free Trade Zone, was created formally in the 80’s as a tool of regional economic policy. It consists of a set of incentives, mainly of a tax nature, granted with the objective of attracting inward investment into Madeira, recognized as the most efficient mechanism to modernize, diversify and internationalize the regional economy.
 
The decision to create the International Business Centre of Madeira was the result of a thorough process of analysis and study. Other small island economies, with similar geographical and economic restraints, had successfully implemented projects of attraction of foreign direct investment based on international services activities, becoming therefore examples of successful economic policies.
 
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Sectors of Activity

The IBC comprised initially four main areas of activity: the Industrial Free Trade Zone, the International Shipping Register of Madeira – MAR, the International Services and the Financial sector. The later sector was however not included in the regime approved for activities licensed as of 2003 and is therefore deemed to be discontinued by the end of 2011.

Several activities are undertaken within these different sectors, such as trading, consulting and marketing activities; e-business and telecommunications; the holding of participations through a Portuguese pure holding company; the holding of intellectual property; manufacturing, assembling and warehousing activities within the industrial park as well as the registration of commercial vessels and yachts in MAR and the undertaking of shipping and charter activities.
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Tax Regime and E.U. Status

Since the beginning, favorable operational and fiscal conditions have been offered in the context of a preferential tax regime, fully recognized and approved by the European Commission in the framework of State aid for regional purposes and under the terms of the Ultra-peripheral Regions set in the Treaties, namely Article 299º of the Treaty of the European Union. 

The IBC of Madeira has therefore been fully integrated in the Portuguese and E.U. legal systems and, as a consequence, it is regulated and supervised by the competent Portuguese and E.U. authorities in a transparent and stable business environment, marking a clear difference from the so-called “tax havens” and “offshore jurisdictions”, since its inception.    
 
In 2007, the European Commission authorized the new State aid regime for new companies incorporated between 2007 and 2013 and the extension of the deadline of the tax reductions until the end of 2020.
The present tax regime is outlined in Article 36º of the Portuguese Tax Incentives Statute. 
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International Business Centre of Madeira in Numbers

Overall, on the 31st of December 2008 the IBC had nearly 3.400 licensed entities dedicated to international services as well as to manufacturing and assembling activities undertaken within the Industrial Free Trade Zone.

Total Number of Companies by Type of Activity



MAR, on the other hand, has over 230 registrations of different types of vessels, from commercial ships and oil rig platforms to leisure and commercial yachts.
 

Total Number of Registrations by Type of Vessel

You may consult the full statistics of Madeira's IBC here.
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The Contribution for the Local Economy

Available data clearly demonstrates the contribution that this development programme has brought to the local economy over its 20 years of existence:
 
  • Impact in the local labour market, through the creation of qualified jobs for the young population but also for madeiran professionals who have returned to Madeira thanks to the opportunities now created;

  • An increase in productivity due to the transfer of know how and the implementation of new business practices and technologies;

  • Indirect influence on other sectors of activity: business tourism benefits from the visits of investors and their clients and suppliers, and other sectors such as real estate, telecommunications and other services benefit from the increase of their client base;

  • Impact on direct sources of revenue: the setting up in recent years of a significant number of e-business and telecommunication companies has created more than 100 qualified jobs and has contributed, in terms of VAT payments, for a revenue of several millions Euros collected by the Regional Government of Madeira, corresponding in 2004 to 21% of the total revenues of VAT collected in the region;

  • An estimated contribution of 21% of the regional GDP, in 2002, a very significant figure considering that the IBC had existed for only 15 years at the date;

  • In 2007, about 2.900 direct and indirect jobs had been created by the companies licensed within the IBC. In addition, the wages paid by IBC companies corresponded to 10% of the total paid in the Region, excluding the public administration, and were 70% higher in average than the wages paid in the other sectors of activity in Madeira.



Total Jobs by Business Sector1


 Business Sector Jobs 
 Financial Services2  170
 Industrial Free Trade Zone  820
International Services2 1,868
Sub-Total 2,858
MAR3 1,477
 Total  4,335

1 As of the 31st of December 2007 
2 Direct and indirect jobs
3 Crew members aboard vessels registered in MAR


Madeira Autonomous Region and Madeira's IBC GDP and GVA


  Madeira Madeira's IBC   Madeira's IBC  
   2000  2001  2002  2000  2001  2002  2000  2001  2002
  106 Euros %
GDP  3055  3219 3406 646 591