On 18th October 2023, Directive (EU) 2023/2413 of the European Parliament ("Directive") was published, amending Directive (EU) 2018/2001, Regulation (EU) 2018/1999 and Directive 98/70/EC regarding the promotion of energy from renewable sources, and revoking Council Directive (EU) 2015/652. The Directive enters into force on 20th November 2023 and aims to reduce greenhouse gas emissions, energy dependence and energy prices through strategies that must be adopted by the Member States. We highlight the following: (1) Member States should provide a framework facilitating the purchase of electricity from renewable sources, removing obstacles to the supply of electricity from renewable sources, such as those related to licensing procedures, and addressing the development of the necessary transmission, distribution and storage infrastructure for renewable energy; (2) To increase the share of renewable energy used by the construction sector, Member States should set target for 2030 and introduce appropriate measures in national regulations for this purpose (for instance requiring the use of minimum energy from renewable sources); (3) Member States should identify areas in their national territory with potential for speeding-up the development of renewable energy projects (on land, artificial surfaces, inland waters and at sea); (4) Member States should establish appropriate polices and measures to increase the share of renewable sources consumed by the industry sector; and (5) Member States should require relevant economic operators to enter data on the transactions carried out and the sustainability characteristics of the fuels used, including their greenhouse gas emissions, in the Union database, as well as ensure the accuracy of such data. Member States are required to execute this directive until 21st May 2025. |
The call for expression of interest in the offshore wind auction announced by the Portuguese Government at the beginning of October is now open. Interested parties will be invited to participate in a dialogue phase aimed at discussing multiple options related to pre-qualification and bidding models. The purpose of the auction is to award a title for the reservation of injection capacity in the Portuguese public electricity grid for the generation of electricity by offshore wind power plants located at sea and allocate seabed rights for the use of the national maritime space. The auction will encompass the areas defined in the draft Allocation Plant for Offshore Renewable Energies (PAER), which is currently under public consultation and be accessed via ConsultaLEX Portal or the PARTICIPA Portal. Expressions of interest must be submitted to the Portuguese Directorate of Energy (DGEG) until 14 November via email to offshore@dgeg.gov.pt, accompanied with a set of documents, including, inter alia, identification of the company and the promoter's representative, track record of onshore and offshore development of renewable energy projects, identification of the interested lots, financing models and development plans for equipment supply chains and project assembly. |
The first auction is expected to be launched by the end of the year and will allocate approximately 3.5 GW of capacity, distributed across seven lots located in Viana do Castelo (2), Leixões (1), and Figueira da Foz (4), each lot having approximately a total capacity of 500 MW.
On October 4th, 2023, the Portuguese Prime Minister announced a request for expressions of interest in the first Portuguese auction of offshore wind energy. The task force appointed by the Portuguese Government one year ago to support the deployment of the 2023-2030 Portuguese offshore wind plan had already recommended a preliminary phase for expressions of interest as an initial step towards gauging the interest of potential promotors. In this preliminary phase, companies will express their intention to participate in the competitive procedure, promoting the formation of consortia of participants, and indicating the trade-offs and investments they intend to make. This expression of interest will have the mere purpose of identifying potential candidates. Therefore, it will not grant any participation rights. In the pre-qualification phase, scheduled for the end of the year but most likely to occur at the beginning of 2024 and lasting no less than 3 months, the bidders will have to fulfill the criteria set by the auction rules, as a condition to participate in the tender stage. Interested parties will have to demonstrate the technical feasibility of the project, previous experience in implementing wind farms, financial viability, and sustainable business models, as well as a positive economic impact. The Portuguese Energy Secretary of State, Ana Fontoura, mentioned in a recent public event that starting by tendering the rights of use of the maritime space is a possibility because it would give time to the bidders to gain first-hand experience in the design of the projects (not having to offer immediately with a price offer that could be too expensive for consumers); as well as would allow them to eventually consider merchant projects without a feed-in-tariff for the sale of electricity. The final stage would be the auction of 'contracts for difference' (CfD) for the sale of electricity. The inaugural auction will assign approximately 3.5 gigawatts (GW) of capacity, distributed across seven lots located in Viana do Castelo (2), Leixões (1), and Figueira da Foz (4), each lot having approximately a total capacity of 500 MW. Of these, it is intended to have 2 GW in operation by 2030. Despite all these recent announcements, there is still great uncertainty on the tender structure and whether the timings set by the Portuguese Government will be kept. Hopefully, the soon-coming notice for the manifestations of interest will thread some light on what comes next. |
The Portuguese Government has presented the draft State Budget Law for 2024 (SBL 2024). Below is a summary of the key changes impacting employment and labour law: (A) Provisions Concerning the Public Administration and the Public Business Sector (i) Mobility situations existing as of the entry into force of SBL 2024, with a maximum duration limit occurring in 2024, may exceptionally be extended until 31 December 2024, by mutual agreement. This extension also applies to mobility situations whose end occurs before the entry into force of SBL 2024. (ii) The subsistence allowance, overtime, and night work schemes, as provided in Decree-Law 106/98 of 24 April, as amended, and in the Portuguese General Law on Public Employment, shall apply to employees of public foundations governed by public law, public foundations governed by private law and public establishments, without prejudice to the provisions of collective bargaining instruments. (iii) Public entities with employees under individual employment contracts may contract health and personal accident insurance, provided it is intended for the majority of employees, as well as other insurances required by law or provided for in a collective bargaining instrument. (iv) Public legal persons, even if they enjoy administrative autonomy or statutory independence, must recruit employees for open-ended or fixed-term employment contracts, in accordance with the provisions of the budget implementation decree-law, otherwise the recruitment will be null and void. (v) Public business sector companies shall recruit employees for open-ended or fixed-term employment contracts, following the terms of the budget implementation Decree-law, otherwise the contracts shall be deemed null and void. (vi) Public bodies or services are responsible for presenting a plan for the development of their employees, under the terms defined in the budget implementation Decree-law, applying, as a rule, the collective bargaining instruments and other legal or contractual instruments in force or, in their absence, the provisions of the budget implementation Decree-law. (vii) Retired persons with relevant experience in the areas of railway maintenance or as train drivers may work for public companies in the railway sector that provide public passenger transport while maintaining their retirement pension, along with up to 75% of the remuneration corresponding to their category and, as applicable, level or salary position held at the time of retirement, as well as their working regime. (B) Specific Provisions for Public Companies (i) Public companies pursue a policy of optimizing operating expenses that promote operational balance, pursuant to the provisions of the budget implementation Decree-law, without prejudice to ensuring the necessary administrative and financial autonomy, particularly, for the execution of budget items relating to the hiring of employees. (ii) Public companies are limited in their indebtedness to 2%, which must be calculated in accordance with the terms to be defined in the budget implementation Decree-law, without prejudice to their necessary administrative and financial autonomy to implement the budget items relating to investment programs provided for in the SBL. (C) Amendment to the Tax Benefits Statute The costs corresponding to the salary increase for employees with open-ended employment contracts, for purposes of determining the taxable profit of IRC taxpayers and IRS taxpayers with organised accounting, are considered at 150 % of the respective amount, accounted for as a cost for the year. The final text of the 2024 State Budget is now awaited to be approved and published. |
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:
- 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.
- 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.
CIT Regarding Corporate Income Tax (CIT), we highlight the following proposals:
- 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.
- 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.
VAT In what concerns Value Added Tax (VAT), the following proposed changes stand out:
Special Consumption Taxes Rules on special consumption taxes will also change as follows: PETROLEUM AND ENERGY PRODUCTS DUTY (ISP)
- 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
TOBACCO TAX
VEHICLE TAX (ISV)
SINGLE CIRCULATION TAX (IUC)
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:
SPECIAL CONTRIBUTIONS The State Budget includes the following proposals:
- 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.
- 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):
- 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.
- 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.
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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. |