2024-10-04

The low-voltage electricity grid in Portugal ("LV") is operated by private entities awarded with a concession granted by the municipalities. The exiting concessions were to expire between 2021 and 2022 but remained effective as the new tenders were not launched.

The former Portuguese Government announced earlier this year a calendar for the new public tenders which stipulated its launch until 30 June 2025.

This calendar is no longer applicable following the announcement of the Resolution no. 122/2024, of 2 September by the ruling Portuguese Government.

A new entity named the Low Voltage Coordination Commission (“LVCC”) has now been set. It will have as its more immediate responsibility preparing until 15 December 2024 a new calendar for the launching of the tenders.

The previous calendar stipulated that municipalities were to indicate whether they intended to launch the tender for the respective concession individually or as a group with other municipalities by 31 October 2024.

This date is no longer effective and therefore the uncertainty regarding the number of future concessions remains.

 

 

 

 

 

 

 

 

 

 

© 2024 MACEDO VITORINO

2024-09-19

Decree-Law 57/2024 has repealed the Extraordinary Contribution on Rentals (“CEAL”). This contribution was created by Law 56/2023 and regulated by Ministerial Order 455/E-2023, applying to owners of local accommodation properties (“AL”).

The CEAL was calculated by applying a 15% rate to the value obtained by multiplying the gross private area of the properties by the local accommodation economic coefficients and urban pressure coefficients.

The main objective of CEAL was to mitigate the negative externality caused by AL in the housing market, particularly the shortage of properties available for residential use in certain urban areas. By taxing properties used for AL, the goal was to increase the supply of housing and, with the revenue collected, fund public housing policies.

The CEAL for the year ending on December 31 was initially due to be paid by June 25, with the first contribution expected by June 25, 2024. However, from its inception, doubts arose regarding the constitutionality of this measure, as financial contributions generally imply a bilateral relationship, meaning compensation for services rendered or benefits received by the taxpayer.

With the change in the Portuguese Government – which had pledged to repeal the CEAL – the deadline for paying the CEAL for December 31, 2023, was extended. Since the repeal of the CEAL is retroactive to December 31, 2023, the obligation to pay the contribution for 2023 has also been eliminated.

In addition to repealing the CEAL, the Portuguese Government also amended the Municipal Property Tax Code (“MPT”), which previously prevented properties used for AL from benefiting from a reduction in the Taxable Asset Value (“TAV”) based on the property’s age, resulting in an increased IMI for those properties.

2024-09-09

Following the presentation of the Economy Acceleration Program, the New Strategy for Housing and other initiatives from the Government and other parties, several acts on tax matters have been published. In this newsletter we summarize the main changes.

PERSONAL INCOME TAX (PIT)

  • Reduction of the general PIT rates applicable to the first 6 income brackets between 0.25% and 1% (Law 33/2024).
  • Automatic updating of the PIT brackets according to the rate of change in the gross domestic product deflator and the rate of change in GDP per employee (Law 34/2024).
  • Updating the value of the specific deductions in income categories A (income from dependent employment) and H (pensions) in line with the increase of the Social Support Index (“IAS”), from €4.0104 to €4.350,24 (Law 32/2024).
  • Increase in the PIT deduction of from housing rents effective 1st January 2025 from €600 to €800 (Law 36/2024).

PROPERTY TRANSFER TAX (PTT) AND STAMP DUTY

  • Exemption from PPT and Stamp Duty on the purchase of housing by young people up to and including the age of 35 (Decree-Law 48-A/2024), which will be applied when the following conditions are met:

-         The property is intended for own and permanent habitation;

-         The price or tax value, if higher, is equal to or less than € 316,771; and

-         In the year of acquisition, the buyer is not considered dependent for PIT purposes;

VAT

  • Increase of the electricity consumption limit to which the reduced VAT rate applies from 100 kWh (or 150 kWh, in the case of large families) to 200 kWh (or 300 kWh, in the case of large families), with effect from 1st January 2025 (Law 38/2024).

OTHER TAXES

  • Parliament authorisation for the Government to repeal the extraordinary contribution on real estate allocated to short-term rental, with retroactive effects from 31st December 2023 (Law 35/2024).
2024-07-31

Ministerial Ordinance 176-B/2024/1 approved the Incentive Scheme for Companies named ‘Grid Flexibility and Storage’, with funds from the Recovery and Resilience Plan (“PRR”), which aims to install at least 500 MW of energy storage capacity on the electricity grid (either at transmission or distribution level) by the end of 2025 with a total investment of €99.75 million. Please find below the main features of this subvention:

  • All public or private legal renewable electricity producers are eligible for a non-refundable subsidy of up to 20 per cent of the eligible costs, with a maximum amount per project of €30 million.
  • Allocation of subsidies will prioritize storage projects which will connect to licensed electricity production centers.
  • Investments must be for the installation of BESS at grid scale with a nominal power of at least 1 MVA and that ensures charging and discharging at maximum power for a minimum of two hours, associated with independent production centers of an installed power of more than 1MVA, using renewable energy sources directly connected to the Portuguese electricity grid.
  • Eligible expenses include: (i) costs related to the electricity storage systems, (ii) construction or adaptation of infrastructure costs, including auxiliary equipment and battery management and control systems and (iii) costs of technical assistance for the project and relevant awareness actions with the target public.
  • Works must begin within 6 months of signing the acceptance terms with the Environmental Fund (Fundo Ambiental) of the Portuguese Energy and Environment Ministry and must be completed by December 31, 2025.
  • The acceptance terms will define the payment schedule, which must be made upon presentation of proof of the expenses associated with the project.

The Tender Notice was published on the 31st of July. Applications must be submitted at the Portuguese Environmental Fund website by the 2nd of September 2024.

2024-07-09

The Economy Acceleration Programme, approved by the Portuguese Government, contemplates 60 economic and tax measures aiming to promote the growth of Portuguese companies, develop new financing mechanisms and foster entrepreneurship. Among these measures, we highlight the following tax measures:

  • Gradual reduction of the general corporate income tax rate by 2% per year until it reaches 15% (currently 21%) and gradual reduction of the special  SMEs rate applicable to the first €50,000 of net profit from 17% to 12.5%;
  • Minimum corporate income taxation of 15% applicable to multinational groups and large national groups – implementation of Directive 2022/2523;
  • Creation of a VAT group framework, which will allow the netting of VAT to be delivered to the State and to be reimbursed by the State;
  • Increased eligibility of the cash VAT framework, allowing access to companies that have not reached a turnover of more than €2 million in the previous year (currently €0.5 million);
  • Extension of the access to the "participation exemption", reducing the minimum holding requirement to 5% (currently 10%);
  • Extension of the stamp duty exemption applicable to cash pooling transactions;
  • Increase of the deductibility of financing expenses incurred in merger operations, with the increase of the threshold from €1 million to €2 million;
  • Tax deduction of capital gains and dividends on assessment of personal income tax up to 20% of capital contributions in all capitalisations of companies;
  • Creation of a current account between the Tax Authority and the companies that will later be extended to the public administration;
  • Expansion of the list of qualified professions to which the personal income tax rate of 20% will be applied on income from categories A and B (dependent and self-employment work);
  • Revision of the Tax Incentive System for Business R&D (the so-called "SIFIDE");
  • Revision of the tax deductibility rules applicable to goodwill assets, extending the list of assets and operations covered by the deduction.
The majority of the announced measures will have to be discussed and approved in the Parliament. Given the current political configuration of the Parliament, it is possible that some of the measures will be subject to changes. A summary of the measures is available (in Portuguese) here.
2024-07-04

Law 31/2024 of 28 June approved a set of tax changes to promote capital markets. The law entered into force on 29 June 2024. In this newsletter we review the key measures.

1. Tax incentives to long-term investment

Capital gains arising from disposal of securities are currently subject to Personal Income Tax (PIT) at a rate of 28%.

Under the new rules, capital gains in respect of securities admitted to trading or shares/units of open-ended Collective Investment Undertakings (“CIU”) in contractual or corporate form will be partially exempt, depending on the relevant holding period, as follows:

Holding Period

PIT Exemption

Less than 2 years

N/A

Higher than 2 years and less than 5 years

10%

Higher than 5 years and less than 8 years

20%

Higher than 8 years

30%

2. Taxation of income paid by Loan IAFs or SICPE

Alternative investment funds specialized in loans (“Loan AIFs”) and securities investment companies for the promotion of the economy (“SICPE”) will be subject to the tax framework applicable to venture capital alternative investment funds (“Venture AIFs”), including the following rules:

  • Income paid to investors will be subject to withholding tax at a rate of 10%, with certain exceptions (e.g. non-resident entities); and
  • Capital gains arising from the sale of investment units will be taxed at a rate of 10% when obtained by non-residents who do not benefit from an exemption.

3. Taxation of income paid by CIUs dedicated to affordable leases

Income paid by CIUs that invest in real estate to rent under the Affordable Rental Programme will be partial exempt from income taxes (PIT and CIT). To qualify for this exemption, the CIUs must meet the following conditions:

  • Be incorporated by the end of 2025; and
  • The CIU regulations must impose that at least 5% of their total assets are composed of real estate assets allocated to the Affordable Rental Programme.

The exemption will vary between 2.5% and 10%, depending on the percentage of the CIU eligible assets, i.e. the percentage of their assets that include properties allocated to affordable rental, as follows:

Eligible Assets

Tax Exemption

Less than 5%

N/A

Between 5% and 10%

2.5%

Between 10% and 15%

5%

Between 15% and 25%

7.5%

More than 25%

10%

In addition, CIUs whose eligible assets represent more than 25% of their total assets will benefit from a 25% reduction in Stamp Duty on the net value of their assets.

4. Tax incentives to listing on regulated markets

Micro-companies, small companies , medium-sized companies or small-medium or medium-capitalisation companies that list their shares on a regulated market or perform a public offering for the first time will be entitled to an additional CIT relief equal to 100% of the incurred costs if at least 20% of their shares are publicly held.

These companies will also benefit from an additional CIT relief equal to 50% of the incurred costs on the second listing on a regulated market, with no minimum share capital dispersion requirement.

For this purpose, the following conditions must be met:

  • Maintaining regular accounting in accordance with the accounting standards and other legal provisions applicable to the relevant sector;
  • Not having their taxable profit determined through indirect methods; and 
  • Not having any outstanding tax or social security debts.

 

2024-06-07

On May 27th, 2024, the Portuguese Government published three Resolutions on important investments to be implemented in the country, establishing the following:

  1. The location of the new Luís de Camões Airport, in Alcochete, and rules for its construction (Resolution No. 66/2024);
  2. Measures to strengthen the traffic capacity of Humberto Delgado Airport (Resolution No. 67/2024); and
  3. A calendar for the completion of studies on the third Tagus crossing and the high-speed connection between Lisbon and Madrid, by Infraestruturas de Portugal, S. A., (Resolution No. 68/2024).

New Luís de Camões Airport

Luís de Camões Airport will fully replace Humberto Delgado Airport, although both will remain in operation while the construction of the new airport is not completed, to minimize the consequences of disruption to passenger air traffic.

ANA Aeroportos has 6 months to draft the initial report and 36 months to prepare the tenders for New Lisbon Airport, including a public consultation report; an environmental impact assessment; a financial report, and a technical report. 

Reinforcement of the traffic capacity of Humberto Delgado Airport

According to the report of an Independent Technical Commission (CTI), the new airport will not be operational before 2030, requiring the reinforcement of the current capacity of Humberto Delgado Airport to accommodate the growth of passenger traffic in the coming years.

This entails investments in the airport's subsystems: such as taxiways, airstrips, aprons, terminals, and accessibility; as well as an increase in the number of air movements. The Government has set up a monitoring group to work to achieve an annual traffic volume of 40 to 45 million passengers.  It also determined that investments at Humberto Delgado Airport should be limited to only those necessary, considering the temporary nature of the solution.

Third Crossing on the Tagus and High-Speed Rail

Infraestruturas de Portugal, S.A. is obliged to anticipate the conclusion of the studies on the main topological characteristics of the third crossing of the Tagus on the Chelas-Barreiro axis, by the end of 2024, to allow a final decision by the Government.

The emerging costs must receive European funding, through the Portugal 2030 Programme, in the amount of EUR 1,980,000, with the national counterpart being supported by funds to be included in the Activity Plan and budget of Infraestruturas de Portugal, S.A.

The third crossing of the Tagus will be developed in a road-rail model, and eventually a road component.

As for the financing model, and taking into account the multimodality of this infrastructure, as well as the existence of an autonomous concession model for the various crossings of the Tagus, it should be evaluated through a management solution that includes: (i) the construction of a new crossing and (ii) the operation and maintenance of the three crossings of the Tagus, once the term of the current concession has expired.

2024-06-07

On May 27th, 2024, the Portuguese Government finally launched the first electronic tender to purchase biomethane and hydrogen produced by water hydrolysis using electricity generated from renewable energy sources.

The tender establishes the purchase of the following maximum quantities:

  • Biomethane: 150 GWh/year with a maximum price of €62/MWh; and
  • Hydrogen: 127 GWh/year, with a maximum price of €127/MWh.

Transgás, S.A., in its capacity of Wholesale Supplier of Last Resort, will directly contract with producers to purchase the auctioned quantities. These agreements will last for 10 years from the first grid injection and must start within 36 months from the date of the award.

The auction is split into three main phases:

  • Qualification: bidders shall submit the tender application and provide a provisional bond in the amount of 1% of the base price in €/MWh/year, multiplied by the energy the promoter intends to bid for over 10 years;
  • Bidding: the tender is designed under a "descending clock" type, with multiple sequential rounds, and the outcome will be based on the price and quantity offered by the bidders;
  • Awarding: successful bidders will be awarded with a certificate granting the right to sell the biomethane or hydrogen and will be required to replace and provide a new bond in the amount of 1% of the final bid price in €/MWh/year, multiplied by the awarded energy capacity for 10 years.

Any legal entities meeting the tender requirements can take part in the auction if they are registered as producers of renewable or low-carbon gases at the time of the application.

Promoters have until June 12th to request clarifications on the tender documents and must submit their applications by July 26th.

The tender documents can be accessed on the Tender Platform or the DGEG website.

2024-05-06

In our modern days, it has become increasingly common to replace wet ink signatures with electronic signatures. As such, it is important to understand the legal effects of electronic signatures, in what situations they are allowed and what are their requirements, particularly in the labour and employment context.

These are questions usually raised by our Clients.

Within the Portuguese legal framework, electronic signatures are governed by Decree-Law 12/2021 of 9 February, which ensures the implementation of Regulation (EU) 910/2014 into Portuguese law.

Regulation (EU) 910/2014 foresees that qualified electronic signatures have the equivalent legal effect of handwritten signatures and establishes the principle that an electronic signature should not be denied legal effect on the grounds that it is in an electronic form or that it does not meet the requirements of the qualified electronic signature.

(A) Types of electronic signatures and their probative force

The different types of electronic signatures, explained below, correspond to different levels of security and trustworthiness, which has an impact on the probative force of each type of e-signature, particularly important in legal disputes, as follows:

(1) Simple electronic signatures – e.g. handwritten scanned signatures or online drawn signatures with mouse or touchpad.

This type lacks cryptographic security measures, being the least secure form of e-signature.

These signatures have the probative force of a private document subject to the free discretion of the court.

(2) Advanced electronic signatures – e.g. DocuSign or AdobeSign signatures.

To be considered as advanced electronic signatures, they must be uniquely linked to the signatory and capable of identifying him/her. Additionally, these signatures must be created using electronic signature creation data and must be linked to the data signed therewith in such a way that any subsequent change in the data is detectable.

These signatures also have the probative force of a private document subject to the free discretion of the court.  

(3) Qualified electronic signatures – e.g. electronic signature with the Portuguese citizen card or the Digital Mobile Key provided by the Portuguese Government or by the trust service providers Multicert or DigitalSign certificates.

These signatures are created by a secure signature creation device and are based on a qualified certificate for electronic signatures.

Qualified certificates for electronic signatures are provided by qualified providers, whose status is granted by the competent national authority and made official in the "National Trusted List" of each EU member state. Therefore, in order for electronic signatures to be qualified, they must be issued by a qualified certification body.

A qualified electronic signature in an electronic document is legally equivalent to a handwritten signature, i.e., qualified electronic signatures have the probative force of a private document with recognized authorship.

(B) E-signatures in the employment context

In light of the above, it is important to ascertain what types of electronic signatures are valid in the employment context and under what circumstances they can be used.

(1) When should qualified electronic signatures be used?

According to the Portuguese Labour Code, open-ended employment agreements, as a rule, do not require a written form, allowing for their signature with simple, advanced, or qualified e-signatures.

However, several provisions under the Portuguese Labour Code require a written form, such as:

a) Term employment agreements;

b) Employment agreements with foreign employees;

c) Multiple employer agreements;

d) Temporary employment agreements;

e) Part-time work arrangements;

f) Teleworking agreements;

g) Agreements to provide work with exemption from working hours;

h) Disciplinary procedures;

i) Termination of employment by mutual agreement; and

j) Non-competition agreements and permanence agreements.

For these agreements and arrangements, wet ink signatures from both the employer and the employee are required. Therefore, when electronically signed, it is advisable to use a qualified digital signature to confer equivalent legal effects as wet ink signatures.

(2) When should simple or advanced electronic signatures be used?

Simple and advanced electronic signatures are suitable for situations where the law does not mandate a written form, for instance:

a) Communications to employees;

b) Human resources policies;

c) Employee handbooks;

d) Performance evaluations;

e) Promotion letters;

f) Recommendation letters;

(3) In what situations e-signatures cannot be used?

Electronic signatures - even if qualified - cannot be used in legal transactions or documents requiring notarized documentation or notarization of signatures.

Also, if the documents need to be personally delivered to an authority (e.g., documents to be delivered by employees to Social Security to obtain unemployment benefits), only wet signature is allowed.

Overall, electronic signatures serve as a legally valid and efficient method for daily operations, especially for employer companies, emphasizing the importance of understanding their types and legal ramifications.

2024-04-09

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:

  • First quarter: 2.16 €/MWh, per unit of energy injected into the public service electricity grid;
  • Second quarter of 2024: 3.24 €/MWh, per unit of energy injected into the public service electricity grid; and
  • Third and fourth quarters: 4.31 €/MWh, per unit of energy injected into the public service electricity grid.

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.