On 21 September 2022, the Court of Justice of the European Union (CJEU) issued its judgment concerning the European Commission's decision that Portugal's Madeira Free Zone scheme constituted illegal State aid. In the decision, issued in December 2020, the Commission found that Portugal's Madeira Free Zone scheme constituted illegal State aid, especially to the extent that aid was granted under the scheme to companies that had not met conditions as per prior Commission decisions. The conditions include that the tax reductions under the scheme may only benefit companies that create jobs in Madeira and that the tax reductions may only apply to activities effectively and materially performed in Madeira. As a result of the decision, Portugal was required to recover aid granted under the scheme to companies that (i) received more than EUR 200,000 under the Madeira Free Zone aid scheme; and (ii) cannot show that their taxable earnings or jobs created are linked to activities effectively performed in the region.

In February 2021, Portugal brought an appeal action against the decision, including seven pleas in law and main arguments. In the judgment, the CJEU determined that the appeal was essentially made up of 11 pleas, which were all considered and rejected. As such, the CJEU dismissed the appeal in its entirety and the Commission decision stands.