Companies operating in the Madeira Free Trade Zone (ZFM) cannot include the purchase of passenger cars as eligible investment for the regime’s reduced corporate tax rate, according to a binding ruling published by the Regional Tax and Customs Authority (AT-RAM). The decision was signed by the Regional Director of AT-RAM on the 17th of July and published today on the Finance Portal after a request from a Madeira-based IT consultancy licensed to operate within the Free Trade Zone. AT-RAM said that, as a general rule, buying a passenger vehicle does not satisfy the legal conditions needed to qualify for the ZFM’s reduced 5% corporate income tax (IRC) rate. Under the special tax regime approved for outermost regions under European Union rules, qualifying companies pay 5% on profits from eligible activities in the archipelago instead of Madeira’s standard 13.3% corporate tax rate. The benefit depends on the number of jobs created and maintained in the autonomous region, and new businesses must also make a minimum investment of €75,000 in tangible or intangible fixed assets during their first two years of activity. The company argued that a passenger vehicle used for business travel, meetings with clients, suppliers and local organisations should count toward that investment, noting that its two managing partners both live on Madeira and personally provide the consultancy services. AT-RAM rejected that view, saying eligible assets must be directly tied to the company’s economic activity and form a permanent part of its productive structure in Madeira, and that passenger cars are mixed-use assets that can serve both business and private purposes.
