Internet and e-commerce industry in Madeira

Madeira, Portuguese archipelago located in the North Atlantic Ocean, represents one of the Autonomous regions of Portugal, with Madeira Island and Porto Santo Island being the only inhabited islands. Meantime Madeira, populated by almost 246,000, is the part of the European Union as an outermost region. The island’s amazing coastline nature allures tourists from the entire world. Besides, Madeira is notable for having settled up the Free trade zone, also called the Madeira International Business Centre, that represents a tax-privileged economic area, provides an incentive for companies, offering them financial and tax benefitss via a whole range of activities exercised in the Industrial Free Zone, the Off-Shore Financial Centre, the International Shipping Register organisation, and the International Service Centre. Surely, the process of becoming an international tax-haven and offshore centre was prompted by successful deployment of Internet and related services.

Being a part of Portugal, Madeira has a highly developed telecommunications infrastructure, with advanced, modern and flexible Internet and related services sector. The main Internet service operator in Madeira is Portugal Telecom, the former monopolist and current incumbent of the Portugal’s telecom market. Besides, Madeira independently has its own Internet services providers. The largest of them is Cabo TV Madeirense, SA.

The other ISPs with smaller market-share on the island are represented by:

• KPNQwest Portugal
• Telepac

• Vodafone 
• Equant
• NovisNet
• Dixcart.Net Serviços de Internet Lda

With the wide range of Internet services providers operating on the Madeira’s ICT market, the variety of Internet connection services are available.

Earlier, in 2002, Madeira became the country of choice for EU ISPs offering broadband services, due to its low Value added tax rate and the advantages of the International Business Centre. Thus, British Telecom moved its broadband internet division BTopenworld to Madeira, where it joined Virgin.net, a new flat-rate internet service, a joint venture between the Virgin Group and cable provider NTL, which established its financial base in Madeira. A bit later, Orange (former Freeserve) joined BT and Virgin.

Internet code top-level domain (ccTLD) for Madeira is Portugal’s .pt, managed by Fundação para a Computação Científica Nacional (FCCN). Two years registration agreement is just $99 for both .pt .com.pt. There are no any special restrictions or requirements for the registration under the domain. Like in Portugal the registration directly at the following second-level is also available in Madeira, however with some restrictions.

• .com.pt - no restrictions; online registration
• .edu.pt - education
• .gov.pt - Government of Portugal
• .int.pt - international organizations or diplomatic missions in Portugal
• .net.pt - telecommunications providers
• .nome.pt - individuals (nome is Portuguese for name)
• .org.pt - Non-profit organizations
• .publ.pt - publications (e.g. newspapers)

The island authorities encourage ICT operations, and the island has been investing heavily in state-of-the-art telecommunications. With a number of Internet Service Providers operating on Madeira’s telecom market, clear interest also being shown in offshore e-commerce development.

The increasing competitiveness in island’s e-commerce industry and the improvement of the jurisdiction's internal efficiency through e-government may become fundamental tools in stimulating the creation of new economic activities and the enhancement of ICT innovation in Madeira.

  Earlier, in 2006 Madeira, set a target to learn how other small and dynamic economies, such as Luxembourg, Malta, The Isle of Man and Singapore, managed to overcome their own difficulties and developed strategies to respond to the challenges of the constantly changing global economy. And Madeira managed to draw the moral from these countries’ successful experience that is reflected in island’s advanced e-commerce and offshore infrastructure. Meantime, Madeira still needs to reinforce its presence worldwide and must use the strengths of the International Business Centre (MIBC), created by Dixcard and its tourism industry.

Dixcart Management (Madeira) Lda. represents a company incorporated in Portugal and registered in Madeira under the provisions of the International Business Centre Legislation which permit companies to undertake activities from Madeira whilst enjoying tax exemptions. 

Madeira's position as an integral part of Portugal and a full member of the EU makes the International Business Centre a very attractive proposition.

The main Dixcart's goal is to help clients to incorporate companies in Portugal, to register them in the International Business Centre and provide ongoing management and administrative facilities for those companies.

The International Business Centre established with the active support of the Portuguese Government in compliance with the EU consists of four important sections:

• The Free Trade Zone, which came first, and was intended for use by manufacturing companies; 
• The International Services Centre, which has no exact location, but allows service companies associated with the Free Trade Zone to establish themselves anywhere in Madeira and take advantage of the Free Trade Zone's exemptions;
• The Offshore Financial Centre, which provides an equivalent regime for banks, trust management and other financial sector companies; and
• The Madeira Shipping Register, which provides for ships and shipping companies.

With Value Added Tax at one of the lowest standard rates in the EU, Madeira has become an ideal location for a data center delivering digitalized services to Europe. Companies registered in Madeira’s offshore jurisdiction enjoy additional tax saving opportunities. 

Madeira’s Free Trade Zone Legislation of 2007 enables companies trading from Madeira to pay a reduced rate of corporation tax until 2020. This rate varies from 5% down to 0%, depending on some criteria, such as when the company was registered.

Thereby, new companies licensed to carry on business there between January 1, 2007 and December 31, 2013 to benefit from a reduced tax rate of 3% in 2007-2009, 4% in 2010-2012 and 5% in 2013-2020.

In turn, Madeira is also considered to have benefited from the EU’s decision to apply its VAT to digital downloads by consumers. Since 2003 VAT has been payable by the supplier of goods and services downloaded over the Internet in the EU, including downloads of software, music and videos from non-EU companies, subject to de minimis rules. Before, these products had escaped VAT, which ranges from 14% on the Portuguese island of Madeira to 25% in Sweden.

As for the main offshore activities conducted in Madeira, they are represented by followings:

• Madeira Financial Holding and investment
• Madeira Trade Marketing and Distribution
• Madeira Banking
• Madeira Trust Management
• Madeira Ship Management and Maritime Operations

As a majority of offshore jurisdictions with many thousands of offshore enterprises Madeira has a great opportunity to become a centre of e-commerce activity. Madeira’s geographical location between continents, its highly developed ICT infrastructure, matured business sector among other important factors is to increasingly attract foreign companies, particularly from the EU.