The Portuguese Government approved today the Portuguese Climate and Energy National Plan (Plano Nacional de Energia e Clima or “PNEC”) for the decade 2020-2030. This plan set an agenda to reach the goal of the decarbonization of the Portuguese economy by reaching a reduction of 30% of the greenhouse gases emissions until 2030.
To reach that target, the Portuguese Government sets several goals (to be reached until the end of the decade) such as:
- Raising the weight of renewables in the power generation (from 31% to 47%);
- Reaching a percentage of 20% of electric vehicles in the total traffic; and
- Reducing the consumption of primary energy.
The development of the industries connected with the growing concerns with environmental sustainability may provide opportunities for several investors. The agenda set on PNEC, ambitious as it is, will certainly provide many chances for that, as the photovoltaic auctions and the approval of the National Hydrogen Plan illustrate.
The Portuguese Government passed Decree-Law 26/2020, which extends the legal moratorium on bank credits and expands the scope of its application.
In March 2020, a legal moratorium on credits was approved for a period until 30 September 2020, through Decree-Law 10-J/2020. Since then more than 514 thousand families and companies have benefited from this regime, a measure that has mitigated the impacts of the temporary lack of liquidity arising from the COVID-19 pandemic.
Considering the urgent need to support the economy recovery and relieve the financial effort that bank credits entail for companies and families, the Government decided to extend the legal moratorium until 31 March 2021.
In addition to this extension, the situations eligible to the moratorium were also widened and will now cover the proven loss of income of at least 20% - to protect borrowers who do not fall in the previous eligible situations -and also to citizens not-resident in Portugal.
It was further established that the moratorium will apply to the following situations, irrespectively of whether they affect the borrower or other household members, namely:
- Preventive isolation or sickness;
- Assistance to children or grandchildren;
- Reduction of the normal working period or suspension of the employment contract, due to a business crisis;
- Unemployment;
- Employees entitled to the extraordinary support for the reduction of a self-employed person economic activity;
- Employees from entities which has been closed during the state of emergency or during a public calamity situation due to legal or administrative statutory requirements;
- Proven reduction of the overall income of the household of at least 20%.
In relation to natural persons, the moratorium will now apply to all mortgage credit contracts (and not just housing credit), residential property leasing, consumer credit for education purposes and any form of subsidized credit, without any penalty.
The applications for the moratorium should be submitted no later than 30 June 2020. Entities already covered by the moratorium will automatically benefit from the new rules, unless they notify their opposition by 20 June 2020.
You may find more information on the legal moratorium here.
Following the measures adopted in the context of the COVID-19 pandemic, the Portuguese Government approved new rules (Decree-Law nr. 27-B/2020, of 19 June):
Fast Track Lay-off
- Extension of the simplified lay off regime, provided for in Decree-Law n.º 10 G/2020, of 26 March for companies that have used the simplified lay off and reached the 3 month renewal limit, until July 31;
- Application of the same regime of the simplified lay-off, as of August 1, only for companies and establishments whose activity is suspended by legal or administrative imposition of a governmental source; and
- Application of the current simplified lay-off regime to companies that have not yet applied to this regime, and may only submit the initial application until June 30, with the possibility of a monthly extension up to a maximum of 3 months, that is, until September 30.
Benefiting from the simplified lay off regime, companies that are in one of the above-mentioned situations benefit from Social Security payment exemption, under the terms established in Decree-Law 10 G/2020, of 26 March.
Stabilization subsidy
- Support is given to employees with an income of up to two minimum wages in February and who have suffered a loss of basic wage, i.e. who have a basic wage higher than one minimum wage, and who have been lay off in one of the months between April and June;
- Payment of support in a lump sum in July, considering the constant amounts of wages delivered up to July 15, 2020; and
- Payment is made by Social Security automatically and unofficially, being variable between the minimum amounts of €100.00 and the maximum amount of €351.00.
Extraordinary financial incentive to normalize the activity
- Creation of an extraordinary financial incentive for the normalization of activity for companies that are in a position to resume their activity, provided that they have benefited from the simplified lay-off regime or the extraordinary training plan provided for in Decree-Law nr. 10-G/2020 of 26 March;
- Possibility for the employer to opt for one of two modalities to which this support corresponds:
a) Support in the amount of a national minimum wage (635.00), paid in one lump sum, for each employee who has been covered by the simplified lay-off; and
b) Support in the amount of two minimum wages (€1,270), paid in two instalments over six months, for each employee who has been covered by the simplified lay-off.
Opting for the measure enshrined in point b) (€1,270), the employer also has direct exemption from payment, at 50%, of the Social Security contribution, for employees who were covered by the lay-off in the last month of the support. However, when the last month of application of the simplified lay off is July, the number of employees to be taken into consideration for the purpose of the said exemption will be that of the lay-off application for the month of June.
The employer who opts for the support referred to in paragraph b) (€1,270), also benefits from the right of total exemption from the payment of Social Security contributions in the three months following the end of the support, when he has at his service employees, on open ended contract, in a higher number than that observed, on average, in the three homologous months. The exemption refers only to those new employees hired, and the employer is subject to the duty to maintain the employment level for a period of 180 days.
The new law also clarifies some rules regarding the possibility/impossibility of accumulation of support, namely:
- Impossibility of cumulation of the regime of simplified lay-off and support for the gradual resumption of activity;
- Possibility of using the support for the gradual resumption of activity after the end of the simplified lay-off regime;
- Possibility of using the reduction or suspension measures provided for in the Labor Code ("traditional" lay-off) after the end of the simplified lay-off regime;
- Impossibility of accessing support for the gradual resumption of the activity, the employer having previously resorted to the extraordinary incentive to normalize the activity.
The Portuguese Government will also enact a new law, to create the rules for the new fast track lay-off regime to be applied from 1st August, which will only allow the reduction of the normal working period, without the possibility of suspension of the employment agreements.
The COVID-19 pandemic effects on the Portuguese economy imposed the implementation of exceptional and urgent measures. Following the approval of the Economic and Social Stabilization Programme last week, the Government approved the draft Supplementary Budget. In this newsletter we described the main tax measures proposed by the Government.
1. Exceptional investment tax credit
Companies which invest in fixed tangible assets, biological asses and intangible assets between 1 July 2020 and 30 June 2021 will get a tax relief in an amount equal to 20% of the investment (with a limit of €5 million). The annual deduction is limited to 70% of the CIT.
Companies that benefit from this tax relief may not terminate employment contracts by way of collective dismissal or job extinction in the following three years.
2. M&A tax incentives
2.1 Mergers
SMEs that absorb other SMES by merger in 2020 will not be subject to the limitation on tax losses deduction which takes in consideration the proportion of the assets of the merged companies for a period of three years.
This rule will apply to mergers of SMEs that (i) have been operating for more than 12 months, (ii) do not result from a demerger which occurred in the previous three years, (iii) whose activity is substantially identical and (iv) which are not bound by special relationships.
Companies that benefit from this incentive cannot distribute dividends in the following three years.
The merged companies will be exempt from State tax surcharges during the first three years.
2.2 Acquisitions
Companies that acquire shareholdings in SMEs “in difficulty” until 31 December 2020 will be entitled to deduct the tax losses generated by such SMEs. The eligibility of the SMEs will be assessed under the Guidelines on State aid for rescuing and restructuring non-financial undertakings in difficulty.
The deduction will be pro rata to the portion of the share capital acquired as follows:
- The amount of losses to be deducted in each period may not exceed 50% of the taxable profit of the acquiring entity, subject to the limit applicable to the deduction of losses in each year;
- The percentage of the stake to calculate the total amount of losses to be deducted by the acquiring entity will be based on the average percentage in each period.
The special rules will only be applicable if the acquired entity does not terminate employment agreements by way of collective dismissal or job extinction and distribute dividends in the following three years.
3. Tax losses carryforward
Tax losses generated in 2020 and 2021 may be carried forward in the following 10 years instead of the current 5-year period. SMEs will continue to benefit from a 12-year period.
Companies will also be able to deduct up to 80% (instead of the 70% threshold) the tax losses generated in 2020 and 2021.
In addition, the deadline for deducting tax losses generated before 2020 will be suspended in 2020 and 2021.
4. Limitations on advance payments
Following the extension of the first advance payments of the Personal Income Tax (“PIT”) and Corporate Income Tax (“CIT”) to August 2020, self-employed workers and companies will benefit from an exceptional limitation on advance payments.
Self-employed workers will be able to settle the total amount of the advance payments up to the deadline of the third payment, on 20 December, without any penalty.
Companies may be exempted from advance payments, in part or in full, as follows:
- Companies whose monthly invoicing average dropped at least 20% in the first six months of the year (comparing to the previous year) will benefit from an exemption of up to 50% in the first and second advance payments for the 2020 tax period;
- Companies whose monthly invoicing average dropped at least 40% (comparing to the previous year), or in case of companies in the accommodation, catering and similar sectors, will benefit from a total exemption from the first and second advance payments.
Lastly, companies which are partially exempted will be able to settle advance payments up to the deadline for the third advance payment.
5. Tax and social security payments by instalments
Tax and social security debts recorded between 9 March and 30 June 2020 may be added to the debt payment plans of companies in insolvency, restructuring or recovery proceedings, without the need to provide any guarantees.
6. Solidarity surcharge on the banking sector
Portuguese credit institutions and branches of credit institutions with head-office outside of Portugal will be subject to a solidarity surcharge of 0.02% of the amount of the liabilities (adjusted) and 0.00005% of the value of derivative instruments.
Following the set of measures adopted in the context of the COVID-19 pandemic, the Portuguese Council of Ministers enacted a new plan on June 6, which aims to encourage the return to professional activity, the increase in the number of working hours and the income earned by employees.
To encourage the maintenance of employment and the gradual resumption of economic activity, the following measures were adopted:
Simplified lay-off
- Extension of the simplified lay-off regime, as provided for in Decree-Law 10 G/2020, of 26 March, until the end of July;
- Application of the simplified lay-off regime, enshrined in the law identified in the previous point, from August onwards, only for companies and establishments whose activity is suspended by legal or administrative imposition.
Support to employment in the resumption of activity
- From August onwards, companies that can resume their activity, but have a drop in turnover of 40% or more, can benefit, between August and December 2020, from a progressive recovery support mechanism.
- This support only allows the reduction of working hours, but not the suspension of employment contracts, and is modulated according to the company's fall in invoicing. This way, the companies most affected can make greater reductions in normal working hours and the respective wages of their employees.
- The new support will be allocated, between August and September, in a differentiated manner according to the break in invoicing: (i) a reduction of up to 50% in working hours may be made in the event of a drop in revenue of 40% or more; (ii) a reduction of up to 70% in working hours may be made in the event of a drop in invoicing of 60% or more.
- Between October and December: (i) a reduction of up to 40% in the working hours may be made in the event of a 40% or more billings; (ii) a reduction of up to 60% in the working hours may be made in the event of a 60% or more billings.
In order to benefit from the new support, companies have to comply with the following conditions:
(i) Prohibition of collective dismissal, due to the extinction of the job and due to inadaptation on the employee, while the support is in force and in the following 60 days;
(ii) Prohibition of distribution of profits while the support is in force.
Extraordinary financial incentive to normalize the activity
- Creation of an extraordinary financial incentive for the normalization of activity for companies able to resume their activity under 'normal' conditions and which have benefited from the simplified lay-off scheme or the extraordinary training plan, provided that they have not accessed the phasing-in support mechanism.
The incentive may be granted, according to the company's choice, through one of two modalities:
a) A bonus of two minimum wages (1,270 euros) for each employee who was in a simplified lay-off and who resumes to wok;
b) A bonus of one minimum wage (635 euros) for each employee who was in a simplified lay-off and who resumes to work.
To access the first modality (a), the employer must comply with the following conditions: prohibition of collective dismissal, due to job extinction and inadaptation, as well as the duty to maintain the employment level during the implementation of the support and within 60 days thereafter.
The company will benefit from a 50% reduction in social security contributions in the first three months. If, in these three months the corporation creates more jobs, it will be exempt from payment of social security contributions for a period of two months in proportion to the employment gain, provided that it maintains that employment gain for a period of six months.
As regards the second modality (b), the employer must comply with the following conditions: prohibition of collective dismissal, due to job extinction and inadaptation, as well as the duty to maintain the employment level, during the implementation of the measure and in the following 60 days.
In short: with the deconfinement, the Portuguese Government has chosen to take new measures to support the economy and the employment, fostering the reduction of the normal period of work instead of the suspension of employment contracts.
For companies that remain closed due to legal obligation, the suspension of employment contracts is still allowed.
Our most sensitive information, say banking or browsing data, is kept secure by rather resilient encryption methods. With current computing capabilities, it is a very difficult task for a computer to run the necessary math in order to extract information from encrypted data. That is not the case, however, with quantum computing.
At their smallest, computers are made up of transistors, which process the smallest form of data: bits or 0s and 1s. Contrary to regular machines, which operate in bits, quantum computers process qubits, which carry not one of those two values, but any of those two. Because they operate in qubits, they are able to process data unseemingly faster.
If a regular computer were to guess the combination of two bits, it would take, at worst, four different tries (22 – 00, 01, 10, 11) before guessing it. A quantum computer would only require the square root of that, because each qubit carries any of the two values. When processing large numbers this makes a huge difference.
While it is not expected that quantum computers will be commercially viable or even sufficiently developed anytime soon to squander computing as it is today, a number of the encryption algorithms used today are not quantum-resistant.
Having considered the above, it is not uncalled for that organizations are rethinking their cybersecurity standards in order to protect their data in view of new developing technologies, namely quantum computing.
Portugal signed up for EU’s Quantum Communication Infrastructure initiative (“EuroQCI”). The initiative trusts on developing a network over the next ten years for sensitive information to be shared. As with anything that may be ill-used, quantum computing poses a serious cyberthreat. EuroQCI will use quantum technologies to ensure the secure transfer and storage of sensitive information. As computer parts are now as small as the size of an atom and current computing is reaching its physical limits, the EuroQCI aims at making quantum computing and cryptography a part of conventional communication networks, which is in line with Portugal’s strategy to strengthen the country’s digital ecosystem.
Objective number one of Portugal’s National Cybersecurity Strategy is to ensure national digital resilience by leveraging inclusion and cooperation in order to bolster the security of cyberspace in view of threats which may jeopardize or cause disruption of networks and information systems essential to society. Currently, the EU’s Study on the System Architecture of a Quantum Communication Infrastructure (within the EuroQCI initiative) is open for contributions on the future of quantum network infrastructures. The consultation is open until 10 June 2020.
3 months have passed since the beginning of the Covid-19 pandemic in Portugal. The state of emergency, declared in 19 March 2020, was followed by the state of public disaster, declared in 3 May 2020. Covid-19 mitigation and containment measures are being progressively lifted. Several new legislation has been enacted and amended in a very short period of time. We hope the following may help you keeping track of the rules applicable to lease agreements.
1. Housing leases
Payment of rents falling due between 1 April 2020 and June 2020 may be deferred by tenants whose households have suffered a significant income reduction (determined pursuant to these rules). Deferred rents must be paid in monthly instalments of not less than 1/12 of the total amount during 1 year as from July 2020, together with the rent of the relevant month.
Tenants must have informed the landlord they wish to make use of these rules in writing at least 5 days before the relevant rent falls due (or until 27 April 2020 for the rent falling due in April).
Alternatively, tenants may file an application with the Portuguese Institute for Housing and Urban Rehabilitation (Instituto da Habitação e da Reabilitação Urbana - IRHU) to obtain an interest-free loan to cover payment of rents falling due during the above-mentioned period. Recent legislation extended the possibility of applying for these loans until 1 September 2020. However, the period of time to which the deferral of rents is applicable was not amended, which is likely to raise some practical issues.
Landlords suffering a significant income reduction arising of the suspension of payment of rents by tenants now permitted, may also apply for an interest-free loan with IRHU to cover income they stop receiving.
2. Commercial leases and shopping centers
Tenants with businesses under lockdown or activity restrictions due to Covid-19 mitigation and containment measures may defer payment of rents falling due between 1 April 2020 and (i) 1 September 2020 or (ii) the first month after lockdown or restrictions are lifted, whichever occurs first. The above mentioned rents must be paid in monthly instalments as from (i) 1 September 2020 or (ii) the end of the first month after lockdown or suspension are lifted, as applicable, prorated in monthly statements until June 2021, together with the rent of the relevant month.
For example, restaurants and shopping centers under lockdown/ activity restrictions were authorized to operate in full as from 1 June 2020 (except in certain geographical areas of the country, where some restrictions remain in force).
Tenants with restaurants or stores in shopping centers may defer payment of rents of April, May and June 2020. The deferred amount must be paid in 12 monthly instalments, beginning in July 2020 and until June 2021.
3. Cessation of lease agreements
Landlords in housing leases cannot terminate the agreements with grounds on delay of the tenants in paying rents falling due in the period specified in section 1 unless such tenants fail to pay the deferred rents as explained above.
Commercial leases and shopping center agreements cannot be terminated, early terminated or otherwise ended and tenants cannot be evicted nor claimed any penalties with grounds on the delayed payment of rents during the period of lockdown or activity restrictions and until the end of the first month after lockdown or restrictions are lifted or 1 September 2020 (as applicable).
However, in case housing or commercial leases or shopping center agreements cease by initiative of tenants, the deferred rents will become immediately due and payable.
In addition to the above, and until 30 September 2020:
- Effects of early termination of housing and commercial agreements by landlords are suspended;
- Expiry of housing and commercial agreements at the end of the relevant duration is suspended, unless tenants do not object to cessation of the lease; and
- Effects of notices preventing automatic prorogation of housing and commercial agreements, as well as and revocation of any such agreements, by landlords are also suspended.
4. Court deadlines and proceedings
Since 3 June 2020, court deadlines and proceedings are, generally, not suspended.
However, actions and special eviction procedures and proceedings for delivery of leased immovable property, in case of the tenant may be placed in a fragile situation due to lack of housing or other social critical reason remain suspended until further legislation is enacted.
Statute of limitation and deadlines for exercising rights in connection with such actions and proceedings also remain suspended.
After consecutive months of social and economic restraints, due to the health crisis caused by the Covid-19 pandemic, Portugal has gradually returned to normality upon the end of some exceptional measures including, among others, the end of the suspension of the court deadlines.
Law 16/2020 of May 29 establishes the suspension of the court deadlines effective as of 3 June 2020. Consequently, judicial proceedings, which have been stopped since 9 March 2020, will return to their normal course. For example, if, for filing a defense (to be filed within 30 days), a period of 20 days had elapsed on 8 March, the outstanding 10-day period will count from 3 June, which will correspond to the 21st day of the deadline to file the response to the claim.
As for urgent claims (precautionary measures, insolvencies, and special restructuring procedures), the deadlines are no longer suspended from 7 April 2020; they were suspended between 9 March and 6 April 2020. For these and judicial proceedings in general, the diligences to take place in person will also come back, but with some slight differences.
Final hearings and proceedings involving the hearing of witnesses will take place in person, even though the means of distance communication (teleconference, video call or other equivalent) will be kept as optional, if they are not detrimental. In other proceedings (e.g. preliminary hearings), the means of distance communication will be used as a preferred option (except in cases where their use is not feasible), which would be a welcome measure to be kept in the future.
Some exceptional protective measures will however continue in force, inter alia:
(a) The suspension of the debtor's filing for insolvency;
(b) Suspension of actions and special eviction procedures and proceedings for delivery of leased immovable property, in case of tenant's weakness due to lack of housing or other critical reasons; and
(c) The suspension of acts to be performed in enforcement or insolvency proceedings related to the judicial delivery of the family residence, as well as the suspension, at the request of the recipient, of court sales of property that may cause harm to his/her sustenance, and provided that the suspension does not cause serious or irreparable harm to the other party.
Regarding the measures taken during the state of emergency, you may also see our previous publications, available here.
Under the plan to survey the containment measures associated with the COVID-19 pandemic, the Government approved new measures, among which a new teleworking and work organization regime.
Contrary to the exceptional measures adopted during the state of emergency, where teleworking was made mandatory, it ceases to be compulsory from June 1st, excluding some exceptional cases.
The new rules are as follows:
(i) Teleworking can be adopted in accordance with the Labor Code (e.g. by means of a written agreement between the parties);
(ii) Teleworking regime remains mandatory when, regardless of the employment relationship and whenever the functions in question allow it, the employee specifically requests it in the following cases:
a) If the employee is protected by the exceptional immunodeprived and chronically ill legal regime, provided that such situation is certified by a physician;
b) If the employee is disabled or has a degree of incapacity of 60% or more;
c) If the employee has a dependent child under the age of 12, or, regardless of age, with a disability or chronic illness, who attends an educational establishment or social equipment to support early childhood or disability, who remains closed by legal or administrative authority determination, considering that the measure only applies to one of the parents, regardless of the number of dependent children or dependents, outside periods of school breaks;
d) If there is an impossibility of physical spaces and work organization to comply with the guidelines of the Health State Agency (Direção Geral de Saúde) and the Labor State Agency (Autoridade para as Condições de Trabalho), to the strict extent necessary for their fulfilment (e.g. physical distance between employees).
Whenever teleworking is not adopted, specific work organization measures may be implemented:
a) The adoption of service schedules for employee rotation between the teleworking regime and the usual workplace, which may be daily or weekly; and
b) Adoption of differentiated entry and exit times, as well as breaks and meals.
The new measures may be applied only if the maximum limits for the normal working period and the right to daily and weekly rest provided for by law or applicable collective agreements are ensured.
The new working time arrangements may be applied by the employer under his power of direction, provided that the applicable legal procedure is respected.
The legal procedure determines that workers and their representative organizations must be consulted and given 7 days' notice (or 3 days in the case of a microenterprise) before the new work organization is implemented (article 217, Labor Code).
In a nutshell: teleworking can remain, under the general rules of the Labor Code, but is no longer compulsory, as it was during the state of emergency, at the peak of the Covid-19 pandemic.
The Portuguese 2020 Solar Auction Second Public Session was held yesterday with further information on the auction rules and specifications, and confirming the three methods of remuneration (fixed tariff, market scheme and market scheme with storage) announced in the first public session.
The map of the auction with the relevant substations was finally revealed. It comprises 12 lots with a wide capacity range, from 10 MVA to 109 MVA, in a total of 700 MVA, all located in the Alentejo and Algarve regions.
The auction rules, specifications and draft agreements to be executed by the winning bidder were also disclosed to promoters and are now available in the online platform https://leiloes-renovaveis.gov.pt/.
The current lack of grid capacity in the areas subject to this tender and the constrains related to the Covid-19 pandemic outbreak lead to the extension of the post-auction timetable schedule compared to last year’s auction. According to this new schedule, promoters have now 48 months (42 months if the project is not subject to environmental impact assessment) from the award of the grid capacity title to obtain the relevant operation license, instead of the 36 months (or 30 months) initially planned. Awarded projects are expected to reach COD in June 2024.
Promoters may submit their applications from 8 June to 31 July via the online platform, and the bidding phase shall take place by end of August.
Requests for clarification can be submitted by email to the address jurisolar@dgeg.gov.pt until 3 June at 1:00pm.
You can read more about the solar auction on our paper “The Portuguese 2020 First Solar Auction”, to be updated and complemented with the auction documents soon.