Madeira International Ship Register has claimed it will be exempt from an investigation launched this week by the European Commission into the misuse of tax breaks.
The register has found itself under scrutiny as it operates within the Madeira free trade zone that offers EC-approved tax incentives to businesses to encourage economic growth and employment.
Launching the probe, Margrethe Vestager, EC Commissioner for Competition, said Brussels now has “concerns” as to whether concessions offered by the zone followed the guidelines set down by the European Union on state aid.
Vestager said: “Our regional aid rules are particularly flexible when it comes to supporting the EU’s outermost regions, including Madeira.
“Under these rules, fiscal aid can only be granted if it contributes to the creation of real economic activity and jobs in the assisted region. We will now investigate whether the Zona Franca Madeira [Madeira free trade zone] fiscal aid scheme approved by the commission in the past has been applied correctly by Portugal.”
Madeira's free trade zone, which includes an industrial zone, was created to attract businesses and jobs to the region in 1987. To date, the EC has approved the incentives offered by the zone to 2027.
Real jobs?
Incentives offered in the zone include corporate income tax reductions and exemptions from regional and municipal taxes.
A key issue for the EC investigation is whether the incentives “create real jobs”, as intended under EU guidelines.
However, responding to the probe Madeira flag director Nuno Teixeira denied the investigation would involve the register.
Teixeira told TradeWinds: “The recently announced investigation into the previous tax regime of Madeira’s International Business Centre will be restricted to the companies set up in Madeira under that regime only, and will not have any impact on the International Shipping Register of Madeira or on the vessels registered therein.”
Corporate tax in Madeira is charged at just 5%.
For Madeira-flag ships, non-Portuguese crew members do not pay into Portugal’s social security scheme, and all crew members are exempt from income tax.
The Madeira International Ship Registry has proved a popular flag for European shipping companies, particularly from Germany, which are seeking to relocate tonnage back to Europe from offshore open registries.
According to Clarksons' world fleet monitor, Madeira is currently the world’s 17th largest flag state and has grown from 183 vessels of 4.2 million gt in 2014 to 456 vessels of 14.7 million gt this year.
