Madeira is a group of islands in the North Atlantic Ocean. The capital and financial centre is Funchal. Madeira was settled by the Portuguese in 1418 and in 1976 was granted limited autonomy. The Madeira Regional Parliament is an elected body and its responsibilities are set out in the Constitution. It cannot overrule decisions of the Central Government or break the political link with Portugal.

The Madeira Free Trade Zone was established to promote the development of the islands and a company incorporated in the zone but operating outside Portugal is entitled to tax concessions until 2011. It pays tax at 2% for 2006 and thereafter 3% during the remainder of the life of the concession. In contrast to other offshore centres however Madeira is an integral part of Portugal and companies registered there qualify for the benefits of the Portuguese double taxation agreements.

Madeira companies are formed under the Portuguese Companies Code (Codiga das Sociedades Comerciais). The company generally used for international trading is the Societe por Quotas-Limitada (Lda) or the Sociedade Anonima (S.A). A company operating only in the free zone is only required to have one member. It is also possible to form a pure holding company - Sociedade Gestora de Participacoes Socias. A company incorporated in the Madeira Free Trade zone needs a license to operate there and cannot engage in banking, fund management or insurance activities unless licensed for the purpose.