The 2024 Madeira Free Zone “trilogy”: GC dismisses application for annulment
Today, the General Court (GC) has delivered another judgment on an action for annulment of the Commission’s decision on SA.21259 concerning State aid implemented by Portugal for the Madeira Free Zone (Zona Franca da Madeira – ZFM) under the so-called Scheme III. The scheme involved tax benefits, including reduced corporate income tax and exemptions from municipal, local, and real estate taxes, aimed at promoting regional development and economic diversification in Madeira. The Commission had previously declared Scheme III incompatible with the internal market.
In its judgment, the GC upheld the Commission’s decision, reiterating its earlier position in Região Autónoma da Madeira v Commission (T-131/21). The Court endorsed the Commission’s assessment that the scheme was not applied in a manner that addressed Madeira’s structural economic challenges and that its implementation was neither appropriate nor proportionate to the objective of regional development. The Court also rejected the argument that the freedom of services and establishment could override the prohibition of incompatible state aid, emphasizing the fundamental nature of EU competition rules. It clarified that the incompatibility of Scheme III does not prevent companies in the Madeira Free Zone from operating or hiring outside Madeira but means that profits from activities outside the region cannot benefit from the scheme’s reduced tax rate.
For further information, see the GC’s judgment.
For other recent GC judgments on actions for annulment of the Commission’s decision SA.21259 see our PRs here (on T-724/22 and T-725/22) and here (on T-713/22 and T-720/22).