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.

Susana Vieira

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

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 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.

When the COVID-19 pandemic started, several European regulatory authorities took measures aimed at mitigating issues arising from the effects of social distancing and mandatory confinement. After the declaration of the state of emergency in Portugal, for example, we saw  a sharp increase in data volume and a significant change in the profile of data transfers, a trend that stabilized during the current month (see data in respect with April and data in respect with May).

For a better understanding the EU regulators’ market intervention, we analyzed data gathered by Cullen International, comprising a sample of 20 countries, including Germany, Austria, Belgium, Croatia, Denmark, Spain, Finland, France, Greece, Ireland, Italy, Luxembourg, Norway, Poland, the Netherlands, Portugal, the Czech Republic, the United Kingdom, Romania and Switzerland. Intervention was grouped in five different areas: (i) data volume management, (ii) portability, (iii) spectrum, (iv) wholesale prices and (v) other.

Our first conclusion is that, in 40% of the counties (of Belgium, Croatia, Finland, Luxembourg, the Netherlands, and Switzerland), regulators intervened in only one area. In 30% of the sample, there was no intervention. In the remaining countries, Denmark intervened in two, Spain, France, Ireland and Italy intervened in three areas, and the Portuguese regulator worked in four areas.

Interestingly enough, it seems there is no correlation between the intensity of regulatory intervention and the impact of the pandemic in each jurisdiction, which leads to the conclusion that, apparently, different risk awareness lead to different predisposition to intervene.

Measures taken by regulators in telecommunications networks ranged from restrictions to streaming services and suspension of functionalities and/or services (if they required the presence of workers on site), to the suspension of the right of cancellation of contracts. At regulator-operators level, measures varied from the suspension of obligations and licensing procedures to the collection of fees. In addition to these, there have also been some cases of interventions in wholesale prices.

Public intervention in Portugal proved to be the most intense, and in addition to the suspension of administrative procedures (see here the situation of the auction 5G), it focused on data volume management, consumer protection and portability, either directly or indirectly through public awareness campaigns in order to avoid overloading the network infrastructure.

Contact tracing has been a priority for app developers over the past few weeks. Local teams, corporations and governments have put efforts into developing apps that trace proximity between smartphones users, which in this case are potential hubs for contagion. The utility of these apps is that once a member of a community is diagnosed with the virus, the chain of transmission may easily be traced back.

These apps pose questions on how data collected is treated (you can read more on this here) and how efficient the technologies used are. The technologies used by tracing apps range from Bluetooth to geolocation, to newer technologies such as DP-3T (Decentralized Privacy-Preserving Proximity Tracing).

All of these technologies have their perks and challenges. Tracing via Bluetooth, for example, will rely on the power of frequencies transmitted from each smartphone to determine proximity: the closer the smartphone is, the higher should be its signal. In theory, that is, because different models and manufacturers build mobile devices that will measure signal strength differently. The measurement is RSSI (Received Signal Strength Indicator). In case different smartphones receive different RSSI measurements, then the measuring accuracy is compromised.

Not only the measurement of signal strength is a weak link, but for measuring to occur, the Bluetooth-running apps must run permanently, which shortens smartphones’ battery life and will most likely be disabled by manufacturers and/or consumers.

Geolocation, also used by some of these apps, shares a certain level of inaccuracy with Bluetooth technology (BLE). As safe distances between people go, people should distance themselves from others at least two meters, but the most common geolocation technologies used are not accurate enough.

On one hand, GPS, which is the most accurate of all (able to determine location of up to five meters, which is still short), will only be able to track people outdoors, will be troubled by weather-related events and is very energy-consuming.

BLE geolocation, on the other, requires infrastructure for the emitting devices nearby to be precisely located by third parties which is an issue that is also shared by Wi-Fi. Network providers could use network triangulation to locate devices, but this technique lacks accuracy as the number of base stations for triangulation varies.

DP-3T, in its turn, is not different technology-wise. Rather, DP-3T is a response to privacy concerns as it is a decentralized alternative to manual tracing of citizens: it is a privacy-by-design type of tracing, rather than a whole different way of locating devices. DP-3T uses Bluetooth and it reverts the process: if a smartphone has stored a record of any of a diagnosed patient’s ephemeral identifier (EphID), then the app knows that the user has been in contact with an infected user.

CP's new collective agreements were published in the “Boletim do Trabalho e Emprego”. These agreements replace the previous ones signed around 20 years ago. There are two agreements, one for general professional categories, and the other for train drivers. The negotiation was directed by the Labor Law team of Macedo Vitorino & Associados.

The new agreements were concluded by CP and the trade unions representing all the professional categories: SMAQ, SFRCI, FECTRANS/SNTSF, ASSIFECO, SNAQ, ASCEF, SINFB, SINFA, SINAFE, SINDEFER, SNEET.

The general collective agreement was published in the Boletim do Trabalho e Emprego of May 9, and SMAQ collective agreement in the Boletim do Trabalho e Emprego of March 29.

In summary, the new collective agreements include:

(i)     Increases of the base salaries (€15,00 for all employees);

(ii)    Increase of the meal allowance to €7,60;

(iii)   Increase of the seniority benefits to €24,00;

(iv)   Increase of the stopover allowance to 18,5%;

(v)    A driving bonus of €4.91/day paid for 13 months to all operational employees who meet the requirements defined in the respective clause;

(vi)   The posting of a map of stopovers and shifts 15 days in advance, which can however be only 10 days in advance;

(vii)  Supplementary allowance for medical insurance; and

(viii) Health insurance and pre-school allowance.

The signing of the new collective agreements is part of the principle of collective autonomy and the right to collective bargaining, enshrined among the rights, freedoms and guarantees of employees, specifically in no. 3 of article 56 of the Portuguese Constitution.


Collective bargaining, which includes the signing of Collective Agreements, allows for the adaptation of labor standards, organization of working time, as well as the regulation of a variety of labor issues that have no provision in labor law, ensuring the adaptability of labor legislation to those specified by companies.