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Order 3034/2024, published on 21 March, was one of the last directives of the former Portuguese Government Energy Secretary of State which restored the clawback tax on the electricity produced in Portugal, setting new amounts for the advance payment by the producers to the TSO, applicable as from 1 January, 2024. The new advance payments, in a phased system following the return points of the Spanish energy tax, are now as follows:
Although, contrarily from the Spanish energy tax, where the taxable amount is the income generated in the sale of electricity, under the Portuguese clawback mechanism created in 2013 by Decree-Law no. 74/2013, allegedly to correct distortions in the price of electricity on the Iberian wholesale electricity market (it never took into consideration other long time existing tax distortions, such as the different VAT rates in Portugal and Spain, as it should have if we admit the mechanism would react to different taxation regimes), the Portuguese producers are taxed per unit of energy injected into the public service electricity grid. This difference will have a substantial negative impact on Portuguese producers, as the number of daily hours where the price of electricity in the Iberian market is close to zero, zero or even negative, is alarmingly increasing. Plus, as electricity prices continue to decrease to unthinkable values: in week 14 this year, the electricity average price in Portugal has reached €3,97MWh – a figure close to the amount of the clawback payment per MWh established for the second quarter of 2024. So, instead of correcting a hypothetical market distortion, the Portuguese clawback tax may well develop a cause of market distortion between Portugal and Spain and become another disincentive for investors to participate in the Portuguese renewables market. |
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The new Portuguese Biomethane Action Plan 2024-2040 ("BAP"), published 15 March, establishes a strategy to develop the biomethane market as a sustainable way to reduce greenhouse gas emissions and combat external dependence on natural gas, with the aim of replacing natural gas with biomethane by up to 18.6% by 2040. The PAB contemplates two phases with different time horizons and a transversal complementary axis to the two phases:
The PAB, as so many sectorial plans approved in recent times, is of a programmatic nature and it does not establish effective implantation measures to achieve any of its goals. Whether it will be of use for the incoming Portuguese Government to do so is yet to be seen. |
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This has been done through Order of the Portuguese Energy Secretary of State of 22 February, which adds a period of 10 months for promoters to comply with the following milestones:
These extensions apply together with those already approved in 2021, 2022, and 2023, confirming the challenges faced by promoters in obtaining licenses from the Portuguese Energy Ministerial Department (DGEG). This is more so concerning the holders of the grid capacity titles (TRC) that were awarded the 2019 and 2020 auctions in obtaining financing, because of the (sometimes very) low tariffs they committed to, highlighting the shortcomings of the bidding model chosen by the Portuguese Government. The Portuguese Government has also suspended (Order of Portuguese Energy Secretary of State of 23 February) the termination of the prior registry for renewable gas production units granting their promotors an additional period of 3 months to complete their plants’ construction. |
Not quite yet. The program for the tenders to award the Portuguese low-voltage grid ("LV") concessions was announced today by the Portuguese Government, through its Resolution no. 27/2024. However, it refers to end of October a decision on the number of concessions.
The following dates have been set:
- The Portuguese Energy Services Regulatory Authority ("ERSE") has until July 31st, 2024, to provide the municipalities the documentation regarding the assets allocated to the distribution grid;
- The municipalities have until October 31st, 2024, to agree on the creation of intermunicipal concessionaires;
- The municipalities that choose not to be part of a group of concessionaires have until October 31st, 2024, to confirm this intention, and to publish the technical studies on which this decision was based;
- The municipalities included in a group of concessionaries have until March 31st, 2025, to make all resolutions needed to launch the public tenders; an
- At last, the group of concessionaries representative has until June 30th, 2025, to launch the public tender procedure.
After the public debate in recent years, in which, for example, ERSE suggested dividing the continental territory into 3 concessions and the National Association of Municipalities suggested a single concession, the number of tenders and concessions will be definitively decided in October 2024, and the tenders will be launched until June 30th, 2025. We will have to wait for the results of the general elections, scheduled for March 10, to see if this program is kept by the next Portuguese government.
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For the first time in Portugal, the Lisbon Labour Court has acknowledged the existence of an employment agreement between a courier and a digital platform. This landmark decision is the result of a lawsuit filed by the Portuguese Public Prosecutor's Office, following an inspection conducted by the Authority for Working Conditions (Autoridade para as Condições do Trabalho). Law 13/2023, of 3 April (“Law 13/2023"), which amended the Portuguese Labour Code under the “Decent Work Agenda Law”, introduced new rules concerning the recognition of employment agreements in the context of digital platforms (new article 12-A). The existence of an employment agreement is now presumed when some of the following requirements are met in the relationship between the activity provider and the digital platform:
The Lisbon Labour Court ruled that all the aforementioned requirements were met, insofar as: (i) the digital platform manages the business between the courier and the service user (client); (ii) the employee provides their activity to the digital platform; (iii) the activity is provided against payment of a delivery fee; (iv) the platform exercises management power over the employee; and (v) the digital platform controls and supervises the provision of the activity, restricting the employee's autonomy. This court decision could result in heavy contingencies for digital platforms that fail to adapt their business models to the new Portuguese labour rules. It may also have retroactive effects, as it opens the door to labour rights claims that existed before this court ruling. In addition to the implications of this court decision, the Portuguese Public Prosecutor's Office reported filing more than a thousand lawsuits in the Portuguese labour courts based on similar assumptions. It is foreseeable that these digital platform companies will have to rethink how they employ couriers. Furthermore, companies providing services through couriers and digital platforms are expected to continue asserting that they are not transport providers, but mere intermediaries between the driver/courier and the customer, which is why these companies are most likely to appeal against these decisions. |
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For the first time in Portugal, the Lisbon Labour Court has acknowledged the existence of an employment agreement between a courier and a digital platform. This landmark decision is the result of a lawsuit filed by the Portuguese Public Prosecutor's Office, following an inspection conducted by the Authority for Working Conditions (Autoridade para as Condições do Trabalho). Law 13/2023, of 3 April (“Law 13/2023"), which amended the Portuguese Labour Code under the “Decent Work Agenda Law”, introduced new rules concerning the recognition of employment agreements in the context of digital platforms (new article 12-A). The existence of an employment agreement is now presumed when some of the following requirements are met in the relationship between the activity provider and the digital platform: 1. The digital platform establishes the remuneration for work performed on the platform; 2. The digital platform exercises management power and imposes specific rules, namely regarding how the activity provider presents themselves, their conduct towards the service user, or the provision of the activity; 3. The digital platform controls the provision of the activity; and 4. The platform owns the equipment and work tools used by the activity provider. The Lisbon Labour Court ruled that all the aforementioned requirements were met, insofar as: (i) the digital platform manages the business between the courier and the service user (client); (ii) the employee provides their activity to the digital platform; (iii) the activity is provided against payment of a delivery fee; (iv) the platform exercises management power over the employee; and (v) the digital platform controls and supervises the provision of the activity, restricting the employee's autonomy. This court decision could result in heavy contingencies for digital platforms that fail to adapt their business models to the new Portuguese labour rules. It may also have retroactive effects, as it opens the door to labour rights claims that existed before this court ruling. In addition to the implications of this court decision, the Portuguese Public Prosecutor's Office reported filing more than a thousand lawsuits in the Portuguese labour courts based on similar assumptions. It is foreseeable that these digital platform companies will have to rethink how they employ couriers. Furthermore, companies providing services through couriers and digital platforms are expected to continue asserting that they are not transport providers, but mere intermediaries between the driver/courier and the customer, which is why these companies are most likely to appeal against these decisions. |
Last January 10th, 2024, Council Regulation (EU) 2024/223 of December 22, 2023 ("Regulation 2024") amended and extended the rules in Council Regulation (EU) 2022/2577 of December 22, 2022 ("Regulation 2022") for the granting licenses for renewable energy production.
These are the main highlights of this new regulation:
(1) Member States must ensure that, for projects of overriding public interest, priority is given in the licensing procedure to the construction and operation of renewable power plants and the development of related grid infrastructure;
(2) For other power production projects to benefit from the prevailing public interest there can be no alternative or satisfactory renewable solutions;
(3) Licensing for the repowering of renewable energy plants in renewable energy zones and of the related grid infrastructure necessary to integrate renewable energy into the electricity system cannot exceed 6 months. If the plant’s capacity increase does not surpass 15%, the permit-granting process for the grid infrastructure is reduced to 3 months;
(4) The process of licensing the installation of solar energy equipment and co-located energy assets in existing or future structures may not exceed 3 months, provided that the main purpose of such structures is not the production of solar energy. The installation of such solar equipment is exempt from a case-by-case decision to carry out an environmental impact assessment.
Regulation 2024 will have, once in full force and effect (1st July 2024), an impact on the Portuguese regulatory framework, because:
a) The time DGEG (the Portuguese energy ministerial department) has now to amend the permits of a project to allow its repowering as set out in the National Electricity System Law (Decree-Law no. 15/2022), including the obtaining of the required opinions of external entities, cannot exceed 6 months;
b) Solar energy projects’ not reaching the mandatory thresholds (generating capacity ≥50 MW or the area occupied by panels and inverters is ≥100ha, or, in case it is installed in sensitive areas, has a generating capacity ≥20 MW or the area occupied by panels and inverters is ≥10ha) cannot now be required by DGEG or by APA (the Portuguese environmental agency) to conduct a case-by-case environmental impact assessment, no matter their potential environmental impact and location of the project.
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Portugal took the first relevant step in setting up the Voluntary Carbon Market ("VCM") with the publication of Decree-Law 4/2024 (“VCM Regulation”), following a public consultation between 8 February and 11 April 2023. The creation of this market aims to prevent greenwashing in the acquisition of carbon credits and to increase investor confidence when the European Union is developing its proposal for regulating VCMs. The VCM Regulation, although already incorporating EU principles, contemplates the eventual need for adaptation to new European legislation that may be approved. To register projects in the VCM, promoters of greenhouse gas ("GHG") emission reduction projects or carbon sequestration projects in Portugal must submit them at an online platform, which has yet to be created, with a report detailing (i) the start and minimum duration of the project, (ii) the method used to quantify GHG emissions or carbon sequestration, (iii) the identification of possible externalities and the conditions for monitoring GHG emissions. Each project must also be validated by a duly qualified independent verifier using criteria yet to be defined by Ministerial Order. According to the VCM Regulation, credits are generated by reducing GHG emissions or sequestering carbon, whereby reducing emissions, or sequestering 1 ton of CO2 generates 1 carbon credit. In turn, those unable to reduce their emissions can voluntarily purchase carbon credits. In this way, they compensate for their emissions by financing GHG emission reduction projects. Credits can take two forms:
Projects submitted to the Portuguese VCM cannot be submitted to other similar national or international trading systems. The Portuguese VCM start of operation is expected in 2024 once the online platform and ancillary legislation are in place, but the current political outlook makes it difficult. |
PERSONAL INCOME TAX
Regarding Personal Income Tax (PIT), the Parliament approved the following changes in addition to the changes contained in the Government's proposal:
- Statement of foreign income and assets. The 2024 State Budget establishes that the income subject to flat rates or not subject to PIT, more than €500, must be reported in the annual tax return, as well as the assets held in countries, territories, or regions with a clearly more favorable tax regime.
- Partial deduction of domestic worker's remuneration.The 2024 State Budget establishes a tax relief equal to 5% of the amount paid by any member of the household as remuneration for domestic work, with an overall cap of €200.
- Increased deduction of rents. The tax relief in respect of rents paid for permanent residence property, relating to lease agreements entered under the Urban Lease Framework, will be subject to a cap of €600 instead of the current cap (€502).
- Non-habitual residents. Despite the revocation of this regime, the 2024 State Budget allowed the registration as a non-habitual resident until 31 December 2024, provided that the non-resident submits one of following documents:
- Promissory employment agreement signed by 31 December 2023;
- Visa or residency permit valid until 31 December 2023;
- Visa application submitted by 31 December 2023;
- Lease agreement in respect of a property located in Portuguese territory signed until the 10th of October 2023;
- Reservation contract or promissory agreement for the acquisition of real estate located in Portuguese territory signed until the 10th of October 2023; or
- Enrolment or registration for dependents in an educational establishment domiciled in Portuguese territory completed until the 10th of October 2023.
- Progressive withholding tax rates applicable to independent workers.The 2024 State Budget requires the Government to implement the necessary software changes to apply progressive withholding tax rates to independent workers. However, for the time being, the current withholding tax rates will remain the same.
CORPATE INCOME TAX
Concerning Corporate Income Tax (CIT), no changes have been approved between the proposal and the 2024 State Budget.
VALUE ADDED TAX
As to Value Added Tax (VAT), the following additional changes were approved:
- VAT refund in congress, fair and exhibition organization activities. Entities whose main economic activity is the organization of fairs, congresses, and other similar events and/or travel agencies can now benefit from a total or partial refund of the VAT paid. This refund will only apply to expenses relating to the organization of congresses, fairs, exhibitions, seminars, conferences, and similar events.
- No duplication of VAT refunds. VAT refunds to private social solidarity institutions, the Armed Forces, security forces and services and firefighters will only occur in the following cases, to avoid duplication of benefits:
- The input VAT is not deductible; and
- The equivalent amount has not been refunded under another tax scheme.
SPECIAL CONSUMPTION TAXES
Concerning Special Consumption Taxes, we highlight the following changes:
- Products used in the production of electricity, electricity and city heat or gas (except biofuels, biomethane, green hydrogen, and other renewable gases): Products falling within CN code 2707 99 99, consumed in the Autonomous Regions of the Azores and Madeira and used in the production of electricity, electricity and heat (cogeneration), or city gas, by entities that carry out these activities as their main activity, will also be taxed at a rate corresponding to 75% of the ISP rate and with a rate corresponding to 75% of the additional charge over CO2 emissions. It is also set to rise to 100% on 1 January 2025.
- Tax on alcoholic beverages. Regarding the tax for consumption in the Autonomous Region of Madeira on spirits, the increase in the tax to 1,379.07 euros/hl was eliminated.
IUC
Regarding the Single Circulation Tax (IUC), the Parliament revoked the Government’s proposal foreseen for passenger cars and mixed-use vehicles registered between 1981 and June 2007 and for motorbikes, mopeds, tricycles, and quadricycles registered since 1992 due to carbon emissions as well as the maximum ceiling for the annual increase in category "A" and "E" taxes of €25.
RETT and MPT
Regarding the Real Estate Transfer Tax (RETT) and the Municipal Property Tax (MPT), no changes were made to the Government’s proposal.
STAMP DUTY
Regarding Stamp Duty, we highlight the following changes:
- Donations between family members. Donations between spouses or civil partners, descendants, and ascendants, up to the amount of €5,000, are now expressly excluded from the taxable basis of stamp duty. However, the exemption applicable to gratuitous transfers (donations and heritages) between spouses or civil partners, descendants, or ascendants, will remain regardless of the amount.
- Stamp duty exemptions on State transactions. The State will be exempt from stamp duty on transactions carried out through the General Directorate for Treasury and Finance, regardless of who is liable for the tax.
SPECIAL CONTRIBUTIONS
In what concerns the Special Contributions, the final version of the 2024 Budget State establishes that transport operators that are part of economic groups that operate in the refining or storage of crude oil or petroleum products will be subject to the extraordinary levy on the energy sector regardless of the percentage of total annual turnover.
TAX BENEFITS
Regarding Tax Benefits, we highlight the following changes:
- Incentive to companies’ capitalization. The deduction ceiling of €2,000,000 was increased to €4,000,000.
- Incentive to scientific research and innovation. Taxpayers who become tax residents and have not been residents in any of the previous five years may benefit from a flat rate of 20% over employment and self-employment for a 10-year period provided they are:
- Employees or members of corporate bodies in legal entities recognized as centres of technology and innovation;
- Members of corporate bodies in companies that benefit from investment contractual benefits;
- "Highly qualified" employees in (i) companies with relevant investments that benefit or have benefited from investment tax benefits and (ii) industrial and service companies that export at least 50% of their turnover;
- Qualified employees and members of corporate bodies in entities that carry out economic activities recognized by AICEP, EPE, or IAPMEI, IP as relevant to the national economy;
- Personnel whose costs are eligible under the R&D tax incentive system;
- Employees and members of corporate bodies in start-ups; and
- Employees or other professionals developed in the autonomous regions, to be defined by the respective regional governments.
- Benefits Applicable to the Entities Licensed in the Madeira Free Trade Zone. These benefits will be extended for one year, covering the income earned between 1 January 2015 and 31 December 2024, continuing to be taxed at a rate of 5% until 31 December 2028.
- Incentive to the Sale of Property to the State. The PIT and CIT exemption will apply not only to the capital gains from the sale of the property to the Portuguese State, autonomous regions, public housing companies, and local authorities, but also to the sale of land for construction to these entities.
For more information on the other tax changes introduced by the 2024 State Budget, click here.
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Portugal has recently transposed Directive (EU) 2019/2121, of 27 November 2019 ("Directive") on cross-border conversions, mergers and divisions of commercial companies, that amended Directive 2017/1132, of 14 June 2017 ("Directive (EU) 2017/1132"), on mergers and divisions of public limited liability companies at national level and cross-border mergers of limited liability companies at European level. This has been done through Decree-Law no. 114-D/2023, of 5 December ("Decree-Law") which made changes to the rules of the Commercial Companies Code, to the Commercial Registry Code and to Decree-Law no. 24/2019 on cross-border transformations, mergers and divisions, to be applicable within the European Union; removed restrictions on the exercise of freedom of establishment, and added protection to employees, creditors and shareholders in those actions. Of those changes, we highlight the following:
This Decree-Law will enter into force on 4th January 2024. |
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The Portuguese Energy Secretary of State, on November 28, 2023, issued the Ministerial Ordinance 397/2023 disclosing the model documents for the public tender procedures to award low-voltage ("LV") electricity distribution concessions in Portugal. The Decree-Law 15/2022 of 14 January 2022, known as the Portuguese Electricity System Law, empowers municipalities to manage low-voltage (LV) electricity distribution through concession contracts lasting for a period of 20 years. The Ordinance provides the instruments that municipalities must use when launching tenders for such concessions. The tender procedures will be divided into two phases: first, a qualification phase for the submission of applications; and a second phase for the submission of proposals by the candidates who have qualified in the initial phase. Regarding the award criteria, tenderers will be evaluated based on the criterion of the most economically advantageous tender for the contracting authorities, so no base price has been established. The discussion on the size of the concessions has a long history. Law 31/2017, of 31 May 2017, established that a territorial delimitation criterion will determine the number of competitive procedures to be launched. In 2019, the Energy Services Regulatory Authority ("ERSE") proposed a territorial delimitation in three regions of the country (North, Centre, and South), indicating that there will be three competitive procedures. However, municipalities have the power to decide on the territorial delimitation proposed by ERSE. If they choose to establish a different territorial area, they must demonstrate significant advantages for the public interest in doing so. These tenders were initially planned for 2019 because most of the concession contracts were set to expire between 2021 and 2022. Extensions have been granted to the concessionaires in the meantime. The publication of the model tender documents is a first step, but there is no indication of when the tender for awarding LV electricity distribution concessions will take place. So, it is unclear if this will happen soon or if stakeholders will continue to wait for a long period for their opportunity in this market. |