Ahead of the commencement of the procedures for the first Portuguese offshore wind auction, the Public Consultation on the Proposal for Offshore Renewable Energies Zoning Plan ("PAER") on the Portuguese seabed allocation for windfarm projects will be open from October 30 to December 13, 2023.

The need to designate areas for offshore wind farms requires an effort to reconcile activities in the national maritime space, particularly commercial fishing, and environmental conservation.

In the preparation of its Preliminary Environmental Report, the working group appointed by the Portuguese government concluded that there are significant knowledge gaps, especially concerning the complexity and state of marine ecosystems and the impact of infrastructure installation on the marine environment.

By discussing them with all the relevant industry sectors and stakeholders, it is possible to combine uses and activities in the national maritime space while respecting marine ecosystems and safeguarding underwater cultural heritage.

The Portuguese government has in mind that the use of maritime space should not be exclusive. And that, on the contrary, different activities must coexist, considering various constraints such as biodiversity protection, safeguarding fishing, maritime transport, recreation, leisure, and cultural heritage.

The release of the Final Environmental Report expected before the end of December and will incorporate all necessary amendments and adjustments to prevent significant environmental impacts, taking into account the contributions from the Public Consultation.

The Portuguese Government presented the State Budget proposal for 2024. In this newsletter, we summarise the main tax changes foreseen in this proposal.

Personal income tax

The main proposed changes to Personal Income Tax (PIT) are the following:

• Former residents PIT. The former resident tax regime, which includes a 50% tax exemption applicable to employment income and professional income, will be amended. Under the new rules, the exemption will now have a limit of €250,000 and will cover taxpayers who become tax residents between 2024 and 2026 and who have not been resident in Portugal in any of the previous five years. The exemption is limited to five years.
• Youth PIT. The exemptions of the Youth PIT regime are now as follows:

- 100% in the first year, with a limit of 40 times the value of the Social Support Index;

- 75% in the second year, with a limit of 30 times the value of the Social Support Index;

- 50% in the third and fourth year, with a limit of 20 times the value of the Social Support Index; and

- 25% in the fifth year, with a limit of 10 times the value of the Social Support Index.

• PIT brackets update and PIT rates reduction. The PIT brackets will be updated in 3%. As an example, the first bracket will increase from €7,479 to €7,703 and the last from €78,834 to €81,199. PIT rates up to the fifth income bracket will be reduced according to the following table:

• Minimum income. The minimum income subject to PIT increases from €10,640 to €11,480.
• Deduction of training and education expenses. The expenses incurred in connection with professional training will be deductible by up to 30%.
• Employee’s housing tax incentives. Between 2024 and 2026, employment income in kind related to the use of a primary residence, located in Portuguese territory, and provided by the employer, will be exempt from PIT and social security contributions, as long as it does not exceed the rent ceiling established by the Rental Support Program (Programa de Apoio ao Arrendamento). However, this exemption does not apply to holders of a direct or indirect stake of at least 10% in the employer's share capital or voting rights.
• Employee profit sharing. The amounts paid to employees as a profit share (gratificações de balanço), will be exempt up to 5 times the amount of the guaranteed minimum monthly wage. To be eligible for this exemption, the fixed earnings per employee must increase, in 2024, in average, 5% or more. However, this income will have to be considered when calculating the rate applicable to the aggregated taxable income.
• Non-habitual residents. The non-habitual resident regime will be revoked. However, it will continue to apply to:

- Taxpayers who, on the date of publication of the 2024 State Budget, are registered as non-habitual residents and the ten-year period has not elapsed yet; and

- Taxpayers who, until 31 December 2023, meet the conditions for registration as non-habitual residents or hold a valid visa on this date, provided they apply until 31 March 2024.

• Annual tax returns. If the taxpayer does not file the annual tax returns after being notified by the Portuguese Tax Authorities, the Portuguese Tax Authorities will calculate the tax income on the basis of the PIT withholdings that have been made, the application of the minimum income and the expenses that are known to the Portuguese Tax Authority.

CIT

Regarding Corporate Income Tax (CIT), we highlight the following proposals:

• Startups CIT rate. Companies that qualify as startups will be subject to CIT at a rate of 12.5% on the first €50,000 of taxable income provided that such companies:

- Are innovative companies with a high growth potential or which have been recognised as suitable by ANI, due to their R&D activities or technology sector certification;

- Have completed at least one round of venture capital financing or received equity or quasi-equity contributions from, inter alia, business angels; and

- Have received investment from the Portuguese Development Bank (Banco Português de Fomento), or from funds managed by it, or by its subsidiaries, or from one of its equity or quasi-equity instruments.

• Intangible assets tax deduction. The acquisition cost of intangible assets will be tax deductible if it is autonomously recognised in the taxpayer's individual accounts pursuant to the accounting rules, as follows:

- Industrial property, such as trademarks, permits, production processes, models or other similar rights, acquired for consideration and which do not have a limited period of time: in equal shares, during the first 20 tax years after the initial recognition; and

- Goodwill acquired in a business combination: in equal shares, during the first 15 tax periods after initial recognition.

• Autonomous taxation. The autonomous taxation rates for light good vehicles, motorcycles or motorcycles will be reduced from 10%, 27.5% and 35% to 8.5%, 25.5% and 32.5%.
• Capitalisation funds. Capitalisation funds managed by social security institutions referred to in articles 94 and 106 of Law 4/2007 of 16 January 2007, as well as the remuneration of public debt paid to these entities will be CIT exempt.
• Remuneration of public debt. The remuneration of public debt will also be CIT exempt when paid to social security institutions.

VAT

In what concerns Value Added Tax (VAT), the following proposed changes stand out:

• End of Zero VAT. The basic food basket will no longer benefit from the zero VAT rate approved to mitigate the effects of inflation.
• Assistance to disabled people. The provision of services that consist of providing a visit, guided or not, to different events, of a recreational and cultural nature, to people accompanying others with a degree of permanent disability, duly proven by a medical certificate of multipurpose disability issued under the terms of the applicable legislation, equal to or greater than 60%, and on which they depend for their visit, will be VAT exempt.
• Goods and services subject to intermediate tax. Juices, nectars and carbonated waters, when supplied within the scope of catering, will benefit from the intermediate fee.

Special Consumption Taxes

Rules on special consumption taxes will also change as follows:

PETROLEUM AND ENERGY PRODUCTS DUTY (ISP)

• Coloured and marked diesel. The special rules approved in relation to the use of coloured and marked diesel by small farmers, holders of family farming status, small fish farmers and for small-scale artisanal and coastal fishing using coloured diesel and marked with an annual consumption of up to 2,000 litres, of 0.06 euros per litre on the reduced rate applicable to the equipment used, will remain in force in 2024. This subsidy will be increased by 0.04 euros per litre for small farmers with family farming status.
• Artisanal fisheries, coastal fisheries, small fish farmers and sea salt extraction companies. A subsidy corresponding to the discount on the final price of gasoline consumed equivalent to that resulting from the reduction in the rate applicable to diesel consumed in the respective activity remains in force in 2024. The subsidy corresponding to the discount on the final price of liquefied petroleum gas (LPG) equivalent to that resulting from the reduction in the rate applicable to diesel consumed in the respective activity will also be maintained.
• Products used in the production of electricity, electricity and city heat or gas (with the exception of biofuels, biomethane, green hydrogen and other renewable gases):

- Products falling within CN codes 2710 19 62 to 2710 19 67 and CN 2710 20 32 and 2710 20 38, used for the production of electricity and cogeneration, or city gas on the mainland, will be taxed at a rate corresponding to 100% of the ISP rate and a rate corresponding to 100% of the CO2 emission surcharge;

- Products falling within CN codes 2710 19 43 to 2710 19 48, CN 2710 20 11 to 2710 20 19, CN 2710 19 62 to 2710 19 67, CN 2710 20 32 and 2710 20 38, 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 now 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, an increase foreseen in the previous State Budget. An increase to 100% will take place on 1 January 2025;

- Products falling by CN code 2711, used in the production of electricity, electricity and heat (cogeneration) or city gas, by entities carrying out such activities as their main activity, with the exception of those used in the autonomous regions, will be taxed at a rate corresponding to 50% of the ISP rate and at a rate corresponding to 50% of the additional charge over CO2 emissions, which had been foreseen in the previous State Budget;

- Products falling under CN codes 2701, 2702, 2704, 2713 and 2711 12 11 which are used in installations subject to an agreement on the rationalization of energy consumption (ARCE), and fuel oil with a sulphur content of 0,5% or less, classified under CN codes 2710 19 62 and 2710 19 66, will be taxed at a rate corresponding to 65% of the additional charge over CO2 emissions. This change was already contemplated in the previous State Budget. On 1 January 2025, an increase to 100% is approved.

BEVERAGE FEES

• Tax on alcoholic beverages. The rates will be updated and will reach in case of (i) beers, between 9.64 euros/hl and 33.85 euros/hl, (ii) fermented, still, and sparkling beverages, 12.06 euros/hl, (iii) intermediate products, 87.92 euros/hl and (iv) spirits, 1,602.51 euros/hl. Regarding the rate for consumption in the Autonomous Region of Madeira, the rate increases to 1,379.07 euros/hl.
• Tax on non-alcoholic beverages. The taxable unit will be updated, and the tax rate will range from 1.16 euros/hl (sugar content less than 25g/l), 6.95 euros/hl (sugar content is less than 50g/l and equal to or greater than 25g/l), 9.26 euros/hl (sugar content less than 80g/l and equal to or greater than 50g/l) and 23.18 euros/hl (sugar content equal to or greater than 80g/l). In liquid form, the values increase to €6.95/hl, €41.72/hl, €55.62/hl and €139.06/hl, respectively; and in the form of powder, granules or other solid forms increase to €11.59/hl, €69.53/hl, €92.71/hl and €231.78/hl per 100 kilograms of net weight, respectively.

TOBACCO TAX

• Regular tobacco. Increase of the specific element to EUR 151.88 and of the ad valorem element to 1%.
• Heated tobacco. Increase of the specific element to EUR 0.0935/g. The tax shall not be less than half of the equivalence-weighted minimum tax on cigarettes of 0.325 g of heated tobacco per unit of cigarette.
• Cigars and cigarillos. The mileage of cigars and cigarillos increases to €451.92 and €151.88 respectively.
• Fine-cut tobacco, other smoking tobacco, snuff, chewing tobacco. Increase of the specific element to €0.091/g, and the amount of the tax may not be less than two-thirds of the minimum tax on cigarettes weighted by the equivalence factor of 0.5g of those tobacco products per unit of cigarette.
• Liquid for electronic cigarettes. Introduction of a tax of €0.351/ml for nicotine-containing liquid and €0.175/ml for nicotine-free liquid. In nicotine liquids, the tax may not be less than 25% of the minimum on cigarettes weighted by the equivalence factor of 0,05 ml of liquids. In the case of nicotine-free liquids, the tax may not be less than 12.5 % of the minimum on cigarettes, weighted by the same equivalence factor.

VEHICLE TAX (ISV)

• Rates. The ISV rates applicable to cars, motorcycles, tricycles, and quadricycles, will be increased in relation to their cylinder capacity and environmental component.
• Exemption for leased vehicles. Thisexemption will only apply if there is an operating lease agreement in place.

SINGLE CIRCULATION TAX (IUC)

• Rates. The IUC rates applicable to all vehicles will be updated.
• Old vehicles. Increase of the IUC for passenger cars and mixed-use vehicles registered between 1981 and June 2007 and motorcycles, mopeds, tricycles, and quadricycles registered since 1992 due to carbon emissions.
• Maximum ceiling. The annual increase in the rates applicable to categories "A" and "E" may not exceed €25.

REAL ESTATE TRANSFER TAX

The brackets used to calculate the Real Estate Transfer Tax (IMT) over the acquisition of urban property or units of urban property for housing purposes will be updated. As an example, the first bracket will be increased from €97,064 to €101,917.

Stamp Duty

Concerning stamp duty, we must highlight the following changes:

• Primary residence mortgage loans. The transactions involved in the temporary fixation of primary residence mortgage loans instalments and the capitalisation of principal and interest will be exempt of stamp duty.
• Other exemptions. Acts, contracts and transaction in which the Portuguese Development Bank (Banco Português de Fomento) is an intervening party or a recipient will be exempt.

SPECIAL CONTRIBUTIONS

The State Budget includes the following proposals:

• Special contributions. The special contributions that were in force in 2023 will continue to apply in 2024, including:

- Audiovisual contribution;

- Banking sector contribution;

- Banking sector solidarity surcharge;

- Pharmaceutical industry contribution; and

- Extraordinary contribution over suppliers of the National Health Service of medical devices.

• Ready-to-eat meals single-use packaging contribution. In addition to the extension of this contribution to other types of packaging (i.e. ready-to-eat and takeaway packaging or packaging of ready-to-eat meals at the point of sale to the consumer), the applicable rate is reduced from €0.30 to €0.10 per package, plus VAT.
• Energy sector extraordinary contribution. The extraordinary contribution on the energy sector (EESC) will remain in force in 2024 with some changes, including the following:

- Operators that transport crude oil and petroleum products will be taxed only when more than 50% of their annual turnover derives from this activity; and

- Assets that are qualified as substantial contributions in certain areas related to climate change and environmental protection by the Portuguese Environment Agency, I. P. and in accordance with the European Scheme for the Promotion of Sustainable Investment, should not be considered in the calculation of the contribution.

A contribution on very light plastic carrier bags equivalent to €0.04 plus VAT will be created for each lightweight carrier bag, in addition to the existing contribution applicable to lightweight carrier bags.

Tax Benefits

The 2024 State Budget proposal includes the following changes to the Tax Benefits Statute (EBF):

• Start-ups stock plans. The PIT incentive applicable to stocks plan will be amended as follows:

- The incentive will now be granted to entities that are eligible as start-ups in the year of approval of the respective plan;

- If the employee loses the Portuguese resident status, the gains tax will no longer be calculated over the positive difference between the market value and the exercise price of the option or right, but rather under the terms set out in the PIT Code, being the income partially exempted up to the value of 20 times the value of the Social Support Index; however, the income will be computed for determining the rate applicable to the overall income;

- The exemption will apply only once by the taxable person;

- The governing bodies of the company responsible for the plan will no longer be excluded from the application of the incentive.

• Waves increase incentive. The 150% relief applicable to companies or businesses that increase salaries of employees under open-ended employment contracts will only apply to employees covered by a dynamic IRCT and provided that the remuneration increases by, at least, 5% above the guaranteed minimum monthly wage.
• Companies’ capitalisation incentive. The tax relief applicable to the capitalisation of companies with headquarters or effective management in Portugal will be determined based on the average 12-month Euribor rate plus a spread of 1.5% (instead of the previous rate of 4.5%) or, in case of micro, small, medium-sized enterprise or mid-cap enterprise, 2%.
• Residential leases entered before the Urban Lease Law. Rents charged under these leases will be PIT exempt for the duration of the contracts. A municipal property tax (IMI) exemption will also apply.
• Urban buildings for housing purposes. Buildings or parts of buildings built as new, expanded, improved or acquired for consideration will be IMI exempted, upon the first transfer, in the part intended for lease for the tenant's primary residence.
• Scientific research and innovation incentive. 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 provided they:

- Develop (i) a career of higher education and scientific research, (ii) a qualified job within the scope of the productive investment contractual benefits regime or (iii) a research and development job;

- Present a level 8 of the National Qualifications Framework or higher.

This incentive may only be used once by the same taxable person.

• First-time set-up awards for young farmers. A coefficient of 0.1 is applied to the first-time set-up premiums for young farmers, and this income is considered only at 50% when covered by the organised accounting system.
• Common Agricultural Policy. Taxable persons receiving subsidies or subsidies under the CAP in 2024 may opt for their taxation in that year. The annual tax return may be submitted whenever the payment of the allowances or allowances takes place after the normal deadline for filing such returns.
• Expiry of tax benefits. The 2024 State Budget proposal includes, in the rule that excludes the 5-year limitation period for certain tax benefits, the benefit that refers to "capital gains obtained by non-residents".

The Portuguese government and some of the social partners (the Union Confederation - CGTP and the Industrial Companies Association – CIP, were left out) signed a "Reinforcement of the Medium-Term Agreement to Improve Incomes, Wages and Competitiveness" ("Reinforcement") within the context of the Standing Committee on Social Dialogue of the Economic and Social Council.

The purpose was to update the list from the 2022 Agreement, establishing specific goals and measures in the areas of labour and taxation. In general, the goals are aligned with the government's policy guidelines in this area and will also have an impact on companies. We highlight the following:

(A) Salary increases and other benefits

(i) 5% nominal increase in remuneration per employee by 2024;

(ii) Increase of the minimum monthly wage ("RMMG") to €820 for 2024;

(iii) Gradual reduction in Personal Income Tax ("IRS") and updates to the tax classes;

(iv) 100% increase in the deduction of union contributions from IRS;

(v) Increases in travel allowances to: (i) €0.40 per kilometre for personal vehicle usage; (ii) €62.75 for domestic/national travel; and (iii) €148.91 for international travel;

(vi) Tax incentives for employers providing housing for employees;

(vii) Exemption of amounts allocated to the Labour Compensation Fund ("FCT") for tax and contribution purposes;

(viii) Establishment of a mechanism for a phased and progressive exit from the labour market before the legal retirement age, allowing part-time retirement to be combined with income from work to facilitate the sharing of intergenerational knowledge; and

(ix) Development of a strategy to address challenges arising from the ageing of the workforce.

(B) Employers

(i) Strengthening contractual tax benefits for productive investment to promote the attraction and retention of highly qualified employees by extending the scope of eligible expenses to the wage costs of employees holding qualifications equal to or higher than a master's degree;

(ii) Reviewing and simplifying the Salary Enhancement Tax Incentive by: (i) Extending eligibility; (ii) Including non-negotiated instruments of collective regulation  (extension and working conditions ministerial ordinances) during 2023 and 2024; (iii) Reference to the salary enhancements supported by the employer as long as it is covered by negotiated instruments of collective regulation (collective bargaining agreements) celebrated less than 3 years ago;

(iii) Introducing a measure to support job retention in sectors vulnerable to seasonality, in order to reduce the intermittency of employment relationships and the associated unemployment, by providing certified vocational training during inactive periods;

(iv) Aligning the taxation of independent contractors more closely with employment taxation for service providers economically dependent on the contracting entity.

(C) Administrative simplification and contextual costs

(i) Establishing a One-Stop Shop for Employees and Companies to encompass all matters related to employment, training and social security, through a partnership between the Institute for Employment and Professional Training (IEFP), the Social Security Institute (ISS) and the Authority for Working Conditions (ACT), which will include online services;

(ii) Social Security payment slips will now be valid until the payment deadline;

(iii) Employers no longer need to notify Social Security when an employee becomes a pensioner; and

(iv) The procedures for reporting the posting of employees abroad will be revised.

The Reinforcement does not specify implementation dates for most of the measures outlined, although some are already reflected in the proposed State Budget for 2024.

The Portuguese Government has finally established the area for the Viana do Castelo technological free zone ("ZLT") to produce renewable energies off the in north cost of Portugal. The ruling was published on October 4 in the Official Gazette.

This new ZLT covers an area of 7.63 km² and is located in the National Maritime Spatial Planning (PSOEM) for Viana do Castelo. It corresponds to a total area of 47 km², bordering the Windfloat Atlantic offshore wind farm (with its 25 MW and covering an area of 11.25km²).

Installing research and development projects with more than 30 kW capacity in this ZLT will require a prior register at DGEG, the Portuguese Energy ministerial department.

The injection capacity into the public grid can be used for a period of six years from the availability of the connection infrastructure. This period may be extended by DGEG for half of the initial term.

The energy injected from these projects into the public grid will be freely tradable in the open market or through bilateral contracts.

Projects developed within the ZLT will be exempt from paying grid access tariffs and other charges related to grid contributions, but they may be subject to a fee established by the Portuguese Energy Regulatory Authority (ERSE) to partially cover the grid operators’ investment and operation of the connection infrastructure necessary for the operation of the ZLT.

The Portuguese Electric System Law had established in 2022 three ZLT aimed at promoting research and testing activities for technologies, products, services, business models, and specific regulatory frameworks regarding to electricity production, storage, and self-consumption. One of those areas is precisely located in Viana do Castelo and was assigned to renewable energy projects from oceanic source or location (the other two were dedicated, respectively, to the decommissioning process of the Pego coal-fired thermoelectric plant and the Rego do Mira irrigation perimeter).

The Decent Work Agenda has recently been regulated concerning the compensation limits due to remote employees, through Ministerial Ordinance 292-A/2023, of 29 September.

The Ordinance sets the maximum compensation amounts due to employees for additional expenses related to teleworking, which are not considered taxable income or a basis for social security contributions, as specified in Article 168 of the Labor Code, enshrining the following:

(i) The maximum amount of compensation excluded from taxable income and social security contributions corresponds to the following amounts per day for each expenditure category: (i) household electricity consumption - €0.10; (ii) personal Internet usage - €0.40 and (iii) personal computer or equivalent IT equipment - €0.50. Overall, considering the maximum daily amount of €1.00 and the provision of work for 22 business days, the monthly tax-exempt compensation amounts to €22.00.

(ii) The daily limits referred to in (i) are increased by 50% when the amount of compensation results from a Collective Bargaining Agreement entered into by the employer. Therefore, considering the provision of work for 22 business days, the monthly amount of compensation exempt from taxation can reach up to € 33.00.

(iii) The limit specified in (i) applies only to full days of teleworking effectively provided and resulting from a written agreement. A "full working day" is one in which the "work is carried out remotely, using information and communication technologies, in a location not determined by the employer, for periods of no less than one-sixth of the weekly working hours".

(iv) The amounts mentioned in (i) and (ii) are only applicable to compensation for the professional use of goods or services that are not directly or indirectly made available to the employee by the employer. The Ordinance deems “making available” as "offering, lending, placing at disposal, selling at a price below its market value or any other act that allows the use and fruition of electricity, the Internet and a computer or equivalent without the employee financially bearing the respective costs under normal market conditions."

The Ordinance came into force on October 1, 2023.

The advisory committee of the Portuguese Minister of Economy has approved the draft plan for the allocation of areas and volumes in the national maritime space for offshore windfarms (“PAER”) drafted by the Directorate-General for Natural Resources, Safety, and Maritime Services. 

For that purpose, the advisory committee work group appointed one year go by the Portuguese Government engaged in an in-depth consultation process from May to September 2023. During this period, collaborative efforts from diverse stakeholders shaped an acceptable solution to all while maintaining a balanced approach to accommodating various activities within the national maritime boundaries.

For instance, concerns were raised, particularly by the fishing industry and environmental advocacy groups, about potential environmental and biodiversity impacts in the context of offshore wind energy, and consequently, the working group responsible for defining the rules for the inaugural offshore wind auction revisited the designated auction areas.

According to the working group's proposal, there is the potential to generate up to 2 GW of electricity in Viana do Castelo, solidifying its role as a significant contributor to the Government's phased auction strategy aimed at awarding until 2030 up to 10 GW of offshore wind power.

By year-end, exploration opportunities will expand to encompass 3.5 GW in areas off Viana do Castelo, Leixões, and Figueira da Foz.

A recent announcement from the Ministry of Economy marks the beginning of the next phase, which will involve an upcoming public consultation, the details of which will be disclosed soon.

In the coming months, the Portuguese Government intends to initiate the first national auction for these purposes, with the initial tenders expected to be announced later this year and the actual competitions scheduled to take place in early 2024. 

Download the pdf below.

In Portugal, the gains obtained by employees or members of corporate bodies under stock plans are treated as employment income and subject to Personal Income Tax (“PIT”) at progressive rates.

To foster the use of these plans, Law 21/2023 approved a new tax framework that includes the following benefits:

• 50% PIT exemption on the gains obtained under the stock plans;
• Flat rate of 28%; and
• Deferral of taxation to the moment the stocks are sold, except in the following cases:

-  Change of residency; or

- Donations/succession.

The benefits will apply to employees and members of corporate bodies of the companies that:

• Qualify as a micro, small, or medium-sized enterprise or a small-mid-cap enterprise (<500 employees); or
• Carry out an activity in the innovation sector, which will be deemed to be the case if the company invests in research and development ("R&D"), patents, industrial designs, or computer programs at least 10% of its total costs or turnover.

To be entitled to these benefits, the employees or members of corporate bodies must retain the stocks or equivalent rights for at least one year.

Except in the case of companies that qualify as startups or as micro or small enterprises in the year prior to the approval of the plan, the following persons will not be eligible:

• Employees that hold, directly or indirectly, a stake of not less than 20% of the share capital or voting rights; and
• Members of the corporate bodies.

The new framework will apply to stock plans approved in the year 2023 and also to plans approved until 31 December 2022, provided that, in this case, they are made available by companies that, until 25 May 2024, are recognized as startups, under the law in force, or that demonstrate they were eligible as start-ups on the date of approval of the plan.

The Decent Work Agenda entered into force with Law 13/2023, of 3 April, which amended the Portuguese Labour Code and other connected legislation.

The main changes to the Portuguese Labour Code are the following:

• Economically Dependent Employees

Economically dependent self-employed employees who provide an activity to the same beneficiary and receive more than 50% of the proceeds of their activity from that beneficiary are now entitled to a set of rights, including: (i) representation of their social and professional interests by trade union associations and employees' councils, even if they are not members; (ii) negotiation of specific Collective Bargaining Agreements through trade union associations; (iii) application of existent and negotiated Collective Bargaining Agreements to employees, as provided for in their terms; (iv) administrative extension of a Collective Bargaining Agreement or arbitration award; and (v) establishment of minimum working conditions (article 10-A).

Specific legislation will further define the right of economically dependent self-employed employees to collective representation.

• Digital Platforms

An employment agreement presumption can be established between self-employed activity providers and digital platform operators if certain indicators are present, as follows: (i) the platform operator setts the activity provider's remuneration; (ii) the platform operator manages the provider's actions and presentation; (iii) the platform operator controls the activity provided, particularly through electronic means or algorithmic management; (iv) the platform operator restricts the activity provider's autonomy with regard to work organization, the ability to accept or refuse tasks, the use of subcontractors, the choice of clients, or providing activity to third parties via the platform; (v) the platform exercises labour powers over the provider, such as deactivating their account; and (vi) the work equipment and tools used by the provider belong to the digital platform operator or are operated by it through a lease contract.

The presumption, which may be rebutted, is applicable to the activities of digital platforms, including those regulated by specific legislation on remunerated passenger transportation in private vehicles from an electronic platform (article 12-A (12)).

• Algorithms and Artificial Intelligence

Collective Bargaining Agreements can only regulate the use of algorithms, artificial intelligence, and associated technologies in a way that is more advantageous to employees (article 3 (3)).  Legal rules on equality and non-discrimination are now applicable to decision-making based on algorithms or other artificial intelligence systems (article 24(3)).  Employers must inform job applicants about the use of algorithms and artificial intelligence (article 106).

• Discriminatory Practices

The grounds for claiming discrimination practices in access to employment, vocational training, or working conditions is expanded, particularly related to the exercise of parental rights, other rights regarding work life balance and caregivers’ rights (article 25 (6)).

Remuneration-related discrimination related to the award of attendance and productivity bonuses, as well as unfavourable assignments in terms of evaluation and career progression, are now considered "discriminatory practices" (25 (7)).

• Parental Protection

Exemption from work is now established in the context of adoption and foster care procedures (article 35 (1) (j)).

Parents now have the option, after enjoying 120 consecutive days of initial parental leave, to combine the remaining days of leave on a part-time basis each day.

It is compulsory for the mother to take 42 consecutive days of leave following childbirth (article 41).

The mandatory leave for the father is extended from the current 20 business days to 28 days, either consecutively or interpolated periods of at least 7 days, within the first 42 days following childbirth.  Of the 28 days, 7 must be taken consecutively after childbirth (article 43 (1)).

An additional right is established for the father to take 7 days of leave, consecutive or interpolated, if they are taken simultaneously with the mother's initial parental leave (article 43 (3)).

Parents now have the right to complementary parental leave, in the form of part-time work for three months, with a normal workload equal to half the full-time, for assistance to a child or adopted child not older than six years, provided that the leave is fully exercised by each parent (article 51 (1) (c)).

• Adoption and Foster Care

There are no longer time restrictions on employees pursuing for adoption or foster care (article 45 (1)).

Absences for adoption and foster family processes do not determine the loss of any rights and are considered as effective work, except as to remuneration (article 65 (1) (k)).

Absences due to gestational mourning, as well as absence for assisted reproduction consultation or prenatal visits, breastfeeding or lactation will not determine the loss of any rights and will be considered as effective work (article 65 (2)).

• Caregiver Employee

A caregiver employee is someone who has been recognized as an informal non-primary caregiver, in accordance with the applicable legislation, upon presentation of the respective proof (article 101-A).

Caregiver employees are entitled to annual leave of five consecutive business days, without pay (article 101 (B) (1) (6)).

During the leave, the caregiver employees cannot perform subordinate work or provide continuous services outside their usual residence (article 101 B (4)).

The caregiver employees are entitled to request part-time work, in a consecutive or interpolated manner, for a maximum period of four years (article 101-C), with flexible working hours, in a consecutive or interpolated manner (article 101-D), and are not required to perform overtime work for as long as assistance/caregiving is required (101 (G)).

The termination of fixed-term employment agreements (Article 143º/3) and dismissal (101º-F) of caregiver employees depends on the prior opinion of the Commission for Equality in Labour and Employment ("CITE").

• Duty to Inform Employees

The employer's duty to provide information to employees is expanded. The employee is now entitled to be informed of: (i) the identification of the user company in case of a temporary employee; (ii) the individual right to continuous training; (iii) in the case of intermittent work, the information provided for in the legally established framework; (iv) the parameters, rules, and instructions on which the algorithms or other artificial intelligence systems are based; (v) the duration and conditions of the probationary period, if applicable; and (vi) the method of payment of the remuneration, including the breakdown of its constituent elements (article 106 (3)).

It is not necessary to include all the elements in the employment agreement; given that if the deadlines are met, some of them may be the subject of later written or electronic communication to the employee.

The employer must ensure the conservation of proof of transmission or receipt of the information provided, which must be presented to the labour inspection service upon request (article107 (5) and (6)).

• Information Concerning The Provision of Work Abroad

The employee who carries out his activity in the territory of another State for a period exceeding one month is entitled to the following information: (i) remuneration to which he is entitled under the law applicable in the host State, in situations of posting; (ii) allowances related to posting and reimbursement of travel, accommodation and meal expenses; and (iii) official website of the host State (article 108(1)).

• Probationary Period

Employees seeking their first job or who have been unemployed for a long time will have their probationary period reduced or excluded depending on the duration of their previous fixed-term employment agreement (celebrated with a different employer) being equal to or greater than 90 days (article 112 (5)).

The probationary period may be reduced if the duration of a professional internship with positive evaluation for the same activity and a different employer has been equal to or greater than 90 days in the past 12 months (article 112 (6).

When the probationary period is longer than 120 days, the termination of the employment agreement by the employer becomes subject to a 30-day prior notice (article 114 (3)).

In the case of termination of open-ended employment agreements of employees seeking their first job or long-term unemployed, the termination is subject to communication to the Authority for Working Conditions (“ACT”) within 15 days after the termination (114 (6)).

Abusive terminations (in abuse of right) will be subject to the regime of the effects of unlawful dismissal, particularly with regard to the employee's right to claim: (i) compensation for damages (material and non-material); (ii) reinstatement in the company or compensation in lieu; and (iii) compensation for interim remuneration.

• Fixed Term Employment Agreements

In unfixed term employment agreements the expected duration of the agreement must now be included.

Compensation for the expiry of term employment agreements (both for fixed and unfixed term) is increased to 24 days of basic pay and seniority allowance for each complete year of service (articles 344 (2) and 345 (4)).

• Teleworking

The employment agreement and the applicable collective bargaining agreement must now determine the compensation, fixed or variable, due to the employee for additional expenses related to teleworking/hybrid work arrangements (article 168 (3)).

In the absence of an agreement on a fixed amount, additional expenses are deemed to be those corresponding to the acquisition of goods and/or services that the employee did not have before teleworking or working in a hybrid work arrangement, as well as those determined by comparing the corresponding expenses in the last month of face-to-face work (article 168 (4)).

The compensation is considered an expense for the employer and does not constitute work income for tax purposes up to the limit to be defined by ministerial order (article 168 (6)).

• Temporary Work

After reaching the maximum duration of the temporary work employment agreement, the succession in the same job or professional activity by a temporary employee or an employee hired for a fixed term, concluded with the same employer or company that is in a relationship of control or group relationship, or maintains common organizational structures, is prohibited. The prohibition applies before the expiration of a period equal to one third of the duration of the agreement, including renewals (article 179 (1)).

A fixed-term temporary employment agreement may now be renewed only 4 times (article 182 (2)).

The duration of subsequent temporary work agreements between different users concluded with the same employer or company in a controlling or group relationship or with a common organizational structure, cannot exceed 4 years; otherwise, the agreement will be converted into an open-ended employment agreement for temporary assignment (article 182 (8) and (9)).

• Overtime Work

Overtime work exceeding 100 hours per year must be paid at the hourly rate of pay with the following increases:

(a) 50 % for the first hour or fraction thereof and 75 % per subsequent hour or fraction thereof, on a working day;

(b) 100% for each hour or fraction thereof, on a mandatory or complementary weekly rest day or on a public holiday (article 268 (2)).

• Employee's Credits

In the event of termination of the employment agreement by any means, the employee can no longer waive the credits arising from the employment agreement (e.g. holiday and Christmas allowances, holiday pay and training credit hours), except if such waiver is made through a judicial transaction (article 337 (3)).

• Compensation in Case of Collective Dismissal

Compensation in case of collective dismissal is now 14 days' base pay and seniority payments for each full year of seniority (article 366 (1)).

In addition, the employee may also activate the labour compensation guarantee fund (article 366 (3)).

• Outsourcing

In outsourcing, the applicable collective bargaining agreement of the beneficiary of the activity also applies to the service provider, when more favourable, after 60 days of activity in favour of the acquiring company (article 498-A (1)).

Before that, the service provider is entitled to the minimum remuneration provided for in the collective bargaining agreement that binds the beneficiary of the activity (article 498-A, (3)).

It is not permitted to resort to the acquisition of external services through third-party entities to meet needs that were provided by an employee whose agreement was terminated in the previous 12 months due to collective dismissal or job position extinction.

• Collective Labour Relations

Even if there are no unionized employees, trade union activity can still be exercised in the company under specific applicable conditions, if it does not affect the normal functioning of the productive activity (article 460 (2)).

If an employee is already covered by an extension ministerial order, they can no longer choose a collective bargaining agreement (article 497 (5)).

In case of termination of a collective bargaining agreement, the recipient party may request arbitration from the President of the Economic and Social Council to assess the grounds for the termination, preventing the agreement from entering a survival regime (article 500-A).

• Application in Time and Entry Into Force

This Decent Work Agenda Law shall enter into force on 1 May 2023, except for matters relating to the termination and expiry of collective bargaining agreements and the arbitration process, which entered into force on 4 April 2023.

Employment agreements concluded before the entry into force of this law shall be subject to this framework, except for the regime applicable to the validity of the employment agreement and/or its effects, in which case the previously applicable regime shall remain in force.

Collective bargaining agreements clauses that contradict the new rules must be amended in the first revision that takes place within 12 months following the entry into force of this law, under penalty of nullity. However, a transitional period, until 1 January 2024, was established for the amendment of collective bargaining agreement clauses contrary to the new regime for payment of overtime work.

The new framework is not applicable to fixed-term employment agreements concluded before the entry into force of this law, regarding their admissibility, renewal, and duration, as well as the renewal of temporary employment agreements.