L 217/62
EN
Official Journal of the European Union
22.8.2022
4.2.
Comments from Portugal
(63)
The comments submitted by Portugal in the letter of 26 September 2018 are summarised in the following recitals.
(64)
Portugal argues that a negative decision on the ZFM scheme would have dramatic and irreparable effects on the economic sustainability of Madeira (82).
The Commission should therefore take into account the outermost region status of Madeira, which is recognised in Article 349 TFEU.
(65)
Portugal further argues that the Commission should consider in its assessment the economic impact of the ZFM scheme in the development of the region (83), particularly by considering its economic effect on the national, European and international trade (84).
(66)
Finally, Portugal considers that the ongoing in-depth investigation would discriminate Madeira against other jurisdictions, which apply preferential income tax rates and escape State aid rules (85).
Existence of aid
(67)
Portugal considers that the ZFM scheme does not involve State resources (i.e. an increase in expenditure or even a reduction in revenue for the public budget).
The scheme does not correspond to ‘real tax expenditure’ but simply to a virtual tax expenditure or even accounting fiction (‘theoretical tax revenue losses’) (86).
Portugal further explains that companies are only established in the ZFM, and invest there, following the existence of the tax relief.
Otherwise, without the tax benefit, they would not have established in the ZFM or paid the usual taxes applicable in continental Portugal or in Madeira (87).
(68)
Portugal argues that the ZFM scheme forms part of the general economy of the Portuguese tax scheme (88).
Portugal further considers that, according to Commission’s practice (89), a low tax rate applied in an entire Member State or autonomous region should be seen as a general measure and, therefore, it does not confer an advantage to the companies established in the ZFM (90).
(82) In 2016, the ZFM enabled collection of nearly EUR [100-200] million in corporation tax (almost [15-25] % of the total taxes collected in that year in the region).
It would imply the relocation of more than [1 000-2 000] companies registered in the ZFM to other regions or countries and strong increase of unemployment in the region (in 2014, there were [4 000-6 000] direct, indirect and induced jobs in the ZFM, which amounted to [1-10] % of the total employment in Madeira).
See letters from Portugal of 2 May 2017, p. 6, and of 26 September 2018 (Annex I), p. 62.
(83) In the period 2012-2015, on average, the activity of the ZFM, according to the information provided by the Regional Statistics Directorate of Madeira (‘Direção Regional de Estatística da Madeira’), represented around [1-10] % of Gross Value Added (GVA) and [0,5-10] % of the employment of the AMR.
The activities linked to trade, transport and storage and to accommodation and catering have contributed most to the total GVA of the companies established in the ZFM (about [70-80] %).
The manufacturing activities, linked to industry, contributed most to the total employment generated in the region ([30-40] %).
In 2014, the ZFM amounted to [1-10] % of the value added generated in the region, i.e. approximately EUR [200-400] million, ‘Tax and economic analysis report – Madeira Free Trade Zone’, Ernest & Young, September 2018, pp. 60-62 (Annex I to the letter from Portugal of 26 September 2018)’.
(84) In 2014, ZFM companies ensured 79 % of the exports (EUR [50-200] million).
In 2016, compared to 2014, the exports to the European community raised from [20 000-30 000] to [30 000-40 000] thousands of euros.
The food and agricultural sectors represented the main volume of exports, followed by the machinery and textiles sectors, which had undeniable positive effects on the development of the European economy.
See ‘Tax and economic analysis report’, Ernest & Young, 24 September 2018, p. 68.
(85) Malta, Luxembourg, Netherlands and Cyprus.
See letter from Portugal of 26 September 2018, pp. 14-16.
(86) The General State Budgets of 1999 to 2004 state: ‘This exemption ... represents tax not levied on income which, in the absence of this benefit, would not exist’ (2002 General State Budget), or ‘the removal of the current scheme ... would certainly not lead to this tax revenue being obtained’ (2004 General State Budget).
(87) Letter from Portugal of 26 September 2018, paragraph 50, p. 18.
(88) Letter from Portugal of 26 September 2018, paragraph 29, p. 13, and letter from Portugal of 11 September 2017, p. 30.
(89) Commission Decision (EU) 2019/1252 of 19 September 2018 on tax rulings SA.38945 (2015/C) (ex 2015/NN) (ex 2014/CP) granted by Luxembourg in favour of McDonald’s Europe (OJ L 195, 23.7.2019, p. 20).
(90) ‘Tax and economic analysis report’, Ernest & Young, 24 September 2018, p. 67.