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.

 The path has been extended, but the European Union (EU),  has one goal in mind: transparency and equal pay. In this sense, in March 2021 the Proposal for a Directive of the European Parliament and of the Council was presented, strengthening the application of the principle of equal pay for equal work or work of equal value between men and women through wage transparency and compliance monitoring mechanisms.

In December 2022, Parliament and the countries of the European Union managed to reach an agreement in negotiations on pay transparency measures.

A general vote on the Directive is awaited and it will come into force 20 days after publication in the Official Journal, with the Member States having 3 years to transpose it into their respective legal systems. We present below the main axes and measures of the Directive:

• Pay transparency for job seekers

Employers will now be required to provide information about the salary amount for the vacancy they advertise and may do so in the vacancy announcement itself or at a time prior to the job interview.

In addition, the candidate may not be asked for any information regarding his salary history during any phase of the recruitment process.

• Pay transparency and career progression in the employing entity

Employees will now have the right to simple access to salary and career progression criteria, as well as to request information from the employer on their individual salary level and average salary levels, broken down by gender, for categories of employees performing the same functions as them or functions of equal value to them. 

• Salary transparency at an external level

Employers with more than 250 employees will have to publicly report the gender pay gap in categories of employees performing the same job or jobs of equal value.

Employers who demonstrate a pay gap on the basis of these factors of more than 5% and who cannot justify such a gap with objective, gender-neutral factors must either conduct a joint pay review with employee representatives or, if not applicable, appoint one or more employees to do so.

Confidentiality clauses that do not allow employees to disclose their remuneration are also prohibited.

• Consequences of violating pay transparency and equality

Employers who violate the defined rules and whose employees suffer pay discrimination may be required to pay compensation to the employees concerned, including the amount of the pay gap they should have received as well as their bonuses.

Similarly, sanctions will be defined by the Member States for employers who violate the principle of transparency and equal pay, including the imposition of fines.

It should be noted that in cases of violation of these principles, the onus will be on the employer to prove that there was no wage discrimination.

Yesterday, Decree-Law 21-B/2023, of March 30,  extended until December 31, 2023 the exceptional and temporary mechanism for adjusting the production costs of electricity in the Iberian Electricity Market (MIBEL) set by Decree-Law 33/2022, of May 14.

Those measures were applied by Portugal and Spain last year to face the strong instability in the energy sector, and included the setting of a reference price for natural gas consumed in the production of electricity traded at the MIBEL - a measure that would be in force until May 31, 2023.

In addition, this new regulation, which comes into force today, excludes from the cost of liquidation of the market adjustment value, consumption related to:

• Fixed-price electricity supply contracts entered into before April 26, 2022; and
• Contracts of hedging instruments entered into after April 26, 2022 and before March 7, 2023 and referring to the period between the months of May and December 2023.

It also requires the market agents to communicate to the appointed electricity market operator, to the global manager of the SEN and to ERSE the information relating to the contracting, within:

• 5 days, as of March 31, 2023, for the case of fixed price contracts entered into before April 26, 2022 and for hedging instruments applicable in the month of May 2023; and
• 15 days for hedging instruments applicable in the months of June to December 2023.

The Portuguese government simplified the environmental requirements for the implementing, among others, renewable energy production plants, through Decree-Law no. 11/2023, of February 10th, also known as "Environmental Simplex", which is expected to reduce the project’s construction timelines. We highlight below the more impacting ones.

The Environmental Impact Assessment (“EIA”) is waived in the case of:

• Solar plants,  irrespectively of their location, where the area occupied by solar panels is equal to or less than 100 ha;

• Wind farms with 20 towers located outside sensitive areas or wind farms with 10 towers, if located in sensitive areas, with special conditions for over-equipment of existing wind farms; and

• Transmission grid lines up to 20 km and 110 kV.

When a project is located outside environmentally sensitive areas, EIA is will not be required for:

• Solar power plants where the installed area is less than 15 ha, is not located less than 2 km from other solar plants with more than 1MW and when the connection to the national grid is made by voltage line equal to or less than 60 kv and with length smaller than 10 km;

• Solar plants where there is only one tower, at a distance greater than 2km from another tower.

The Environmental Simplex added two new rules to produce renewable energy:

• In relation to the alternative grid lines, the deadline for the declaration of EIA is 90 days or it is deemed as approved; and

• Solar self-consuming units are exempt from EIA when installed in built structures or buildings (except classified) or in artificial areas, existing or future.

The use of water produced for re-used to produce energy, in particular hydrogen, is now subject, in some cases, to a prior communication; In the case of decentralized systems, a production license was replaced by a prior communication; and if PEA does not decide in 20 days counted of the communication, the person concerned may start his activity.

The current energy crisis has set the background for the introduction of a new tax policy both at EU level and at EU Members States, arguably to fight high energy prices on most vulnerable families and companies and the ongoing inflationary cycle. In this framework, Portugal has enacted a new contribution to certain companies’ surplus profits: the so-called windfall profits’ tax.

This new contribution has its origins in the Council Regulation (EU) 2022/1854 of 6 October 2022 on an emergency intervention to address high energy prices, including a mandatory temporary solidarity contribution aimed at taxing surplus profits of companies and permanent establishments in the European Union (“EU”) operating in the crude petroleum, natural gas, coal, and refinery sector and on food retailers; as their profits in 2022 were not profits these companies would or could be expected to have under regular circumstances.

On 31 December 2022, Law 24-B/2022, of 30 December (the “CST Law”) established two solidarity contributions taxing surplus profits: (i) the Energy Temporary Solidarity Contribution on energy companies and (ii) the Food Distribution Temporary Solidarity Contribution on food retailers. Both contributions are temporary and only applicable to profits considered to be extraordinary in the tax periods (for corporate income tax purposes) starting in the years 2022 and 2023.

In the next lines, you will find some detail on the scope, taxable subject, taxable amount, and revenue allocation of the Portuguese Energy Temporary Solidarity Contribution (“CST Energia”), where the CST Law implements Chapter III of Council Regulation (EU) 2022/1854 on the measure concerning the crude petroleum, natural gas, coal, and refinery sectors.

1. Who pays for the new CST Energia?

The CST Law, in its article 2 (that follows closely art. 1 of Council Regulation (EU) 2022/1854), establishes that CST Energia applies to resident corporate taxpayers whose main activity is commercial, industrial, or agricultural and non-resident corporate taxpayers with a permanent establishment in Portugal, that (in both cases) operate in the crude oil, natural gas, coal and refinery sectors.

Article 2/1/b of CST Law defines taxpayers operating in the crude oil, natural gas, coal, and refinery sectors as those with at least 37.5% of their turnover deriving from extraction, mining, petroleum refining, or coking plant sectors, as per Regulation (EC) 1893/2006 of the European Parliament and of the Council.

The above excludes companies operating renewable electricity production plants in Portugal from the scope of the CST Energia.

2. On which surplus profits falls CST Energia?

Surplus Profits are the taxable profits that are above a 20% increase of the average of the taxable profits in the four fiscal years starting on or after 1 January 2018. In such cases, a rate of 33 % will apply. When the average of the taxable profits is negative, it is equal to zero and the energy temporary solidarity contribution is levied on the total taxable profits.

3. How and when is CST Energy paid?

The CST Energia must be paid through an official model declaration (to be approved by the member of the government responsible for finance). This declaration must be electronically sent to the Tax Administration before the 20^th of the 9th month following the end date of the tax period to which it relates. Taxpayers must pay this contribution on an individual and autonomous basis, even when the Special Taxation Regime of Company Groups, provided by the Corporate Income Tax Code, is applicable.

4. Where to go the revenues from CST Energia?

The Portuguese government does not yet know to how much they will amount, but, as expressed in the Council Regulation (EU) 2022/1854 and in the CST Law, revenues from CST Energia will be allocated to:

(1) Financial support measures to final energy consumers, especially vulnerable families;

(2) Financial support measures to help reduce energy consumption; such as through demand reduction auctions or tender schemes, lowering the energy purchase costs of final energy customers for certain volumes of consumption, promoting investments by final energy customers into renewables, structural energy efficiency investments or other decarbonization technologies;

(3) Financial support measures to support companies in energy-intensive industries, if they are made conditional upon investments into renewable energies, energy efficiency, or other decarbonization technologies; and

(4) Financial support measures to develop energy autonomy, in particular investments in line with the REPowerEU objectives.

How and when will that happen? Nobody knows yet as the CST Law does not add any clarity to this.

The State Budget for 2023 was approved by Law 24-D/2022, of 30 December (OE 2023) with some changes compared to the proposal presented by the Government.

In this newsletter, we review the main changes approved by the Portuguese Parliament.

PIT

Regarding Personal Income Tax (PIT), we highlight the following novelties compared to the Government's proposal:

• Commercial/industrial crypto assets activities. In the case of the application of the simplified tax regime 15% of the revenues will be taxed, with the exception of income from crypto asset mining in which case the percentage will be 95%. The cessation of activity and change of residence will be assimilated into the disposal of crypto assets. Crypto assets that are unique and not fungible with other crypto assets are excluded from the concept of crypto assets for PIT purposes.
• Remuneration derived from operations related to crypto assets. Remuneration derived from crypto asset transactions (e.g. staking) will be considered for PIT purposes as capital income. This remuneration will be exempt from withholding tax, being the taxpayers obliged to report the income to the tax authorities. When the remuneration takes the form of crypto assets, the income will be taxed as capital gains at the moment of disposal of the crypto assets received.

Capital gains resulting from the sale of crypto assets. The change of residence will be assimilated to disposal for consideration. Capital gains will be calculated according to FIFO (First In, First Out) rules. The exclusion of taxation of capital gains and capital losses will apply not only in respect of disposals that relate to crypto-assets held for a period of 365 days or more but also those that are made against the delivery of new crypto-assets – in this case, the crypto-assets received will be attributed an acquisition value equal to the acquisition value of the crypto-assets delivered. The exclusions from taxation will not apply when the taxpayers or the debtors of the income are not resident in another Member State of the European Union or the European Economic Area or in another State or jurisdiction with which an international double taxation treaty, bilateral or multilateral agreement providing for the exchange of information for tax purposes is in force.

• Crypto asset transactions carry forward period. The carry forward period will not apply where the beneficiaries or the entities paying the income are residents in a country or jurisdiction without information exchange instruments for tax purposes.
• Real estate capital gains obtained by non-residents. Non-residents taxpayers will no longer benefit from the flat rate of 28% on capital gains arising from the disposal of property and such capital gains will be subject to the rules applicable to residents’ taxpayers, i.e. inclusion of 50% of the capital gains and taxation according to the general and progressive rates (up to 48% plus solitary rate up to 5%).
• Deduction of VAT from newspapers. In 2023, taxpayers will be allowed to deduct part of the VAT borne by any member of the household in connection with the acquisition of subscriptions to periodical newspapers and magazines, both in physical and digital format.

CIT

With regard to Corporate Income Tax (CIT), we highlight the following changes:

• Taxation of income related to crypto assets (simplified regime). Income from crypto assets that are not considered capital income, capital gains, and losses, or asset increases, are taxed by applying a coefficient of 0.15. Income from crypto asset mining activity is subject to a coefficient of 0.95.
• Autonomous taxation of electric vehicles. Automobiles powered exclusively by electric energy, whose acquisition cost exceeds the value defined by the resolution of the Government, will be subject to autonomous taxation at a rate of 10%.
• Deductibility of expenses with travel cards. Expenses incurred with the acquisition of travel cards for staff will be deductible at 150% instead of 130%.

VALUE ADDED TAX

As to Value Added Tax (VAT), the following changes are highlighted:

• Increase the VAT exemption Limit. The previous VAT exemption limit of €12,500 will be increased to €13,500 in 2023, €14,500 in 2024, and €15,000 in 2025.
• Extension of the deadline for submitting VAT returns. The deadline for filing the VAT returns for the month of June or the second quarter is extended to 20 September, and the payment deadline is extended to 25 September.
• Reduction of VAT rate on vegetable-based drinks and butters. Vegetable-based drinks, yogurts, butters, margarines, and creams will now be taxed at 6%.
• Reduction of the VAT rate on biomass equipment. The supply and installation of solid biomass local space heaters with a rated thermal input not exceeding 50 kW and solid biomass boilers with a rated thermal input not exceeding 500 kW meeting certain conditions, as well as pellets produced from biomass will now be taxed at 6%.

REAL ESTATE TRANSFER TAX

Regarding Real Estate Transfer Tax (RETT), the following measures stand out:

• Exemption on the acquisition of real estate for resale. The exemption will now apply to taxpayers who prove that in the last two years they have resold property previously acquired for this purpose, increasing the previous required period of only one year.
• Taxable value in the exchange of real estate. The real estate which is transferred within one year of the date of the exchange will no longer be covered by the rule which determines that the taxable value will be the taxable asset value when higher than the difference in values. For this purpose, the exchanger who has transferred the property must declare this fact to the Tax Authority within 30 days.

MUNICIPAL PROPERTY TAX

With regards to Municipal Property Tax (MPT), the following changes were included:

• Increase of MPT on vacant buildings. Degraded buildings or ruins where the state of conservation has been caused by a natural disaster or calamity will be excluded from the MPT increase applicable to vacant buildings.
• Increase of MPT on uninhabited houses or houses used as local accommodation. Municipalities may increase the MPT rate to be applied to buildings located in areas of urban pressure, as follows

- up to 100% in cases where the buildings are used for local accommodation.

- up to 25% in cases of houses that are not rented or in use as the taxpayer's own permanent residence.

A further 50% increase may apply whenever a taxpayer is a legal person or other equivalent entity.

• Vacant properties located in areas of urban pressure. Municipalities may increase the MPT rate for buildings that have been vacant for more than one year - instead of the current two - and the limit may be increased by:

- 25% whenever the urban building or autonomous fraction is destined to habitation and, in the year to which the tax relates, is not rented or allocated to the taxpayer's own and permanent residence.

- 50% whenever a taxpayer is a legal person or other equivalent entity.

STAMP DUTY

In terms of stamp duty, we highlight these new rules:

• Exemption on Housing Loans. Extensions of mortgage loan contracts entered between 1 November 2022 and 31 December 2023 will be exempt. Likewise, new contracts for debt refinancing will be exempt, as well as, under certain conditions, the provision of new guarantees/security related to existing loans.

TAX BENEFITS

The State Budget includes the following changes:

• Benefits applicable to students’ rental income. Rental income arising from municipal programs providing student accommodation for displaced students and with a rent limit will now be exempt from PIT and CIT.
• Investment Tax Code. The percentage of relevant investments that may be deducted in the computation of CIT is increased from 25% to 30%.

For more information on the other tax changes introduced by the State Budget 2023, please click here.