The Portuguese Government approved the Decree-law 12/2020, of 6 April transposing Directive (EU) 2018/410 of the European Parliament and of the Council, approved in the sequence of the Paris Agreement and its decarbonization goals.

Entities on the national list of facilities covered by the ETS list may benefit from free of charge emission permits, upon request to the Portuguese Environmental Agency (Agência Portuguesa do Ambiente, I.P.) (“APA”) in a specific form for the collection of data and methodology report. The criteria for the allocation of free of charge emission permits are based on fully standardized measures which set benchmarks at Community level.

Emission permits not granted under the free of charge method shall be subject to a sale in auction, the revenue from which shall be used for measures contributing to the development of a competitive and low carbon economy.

For the first time in Portugal, ETS of low emission installations (up to 25.000 tCO2eq) will not need an emission permit, provided that they are subject to measures allowing an equivalent contribution of emission reductions, or very low emission installations (up to 2.500 tCO2eq), without any equivalent measure. In addition, the amount of free emission permits is adjusted to the operators’ activity if its levels decrease or increase by 15% compared to the level used to establish the emissions.

Failure to obtain an emission permit, when mandatory, is an administrative offence and the owner of the relevant facility may be subject to the payment of a penalty up to the amount of 5 million euros if committed with intent, or 144 thousand euros if committed by negligence.

On the other hand, failure to comply with the threshold of the emission permit, entails the duty to financially compensate the Portuguese State, under the “polluter pays” principle, corresponding to the emission excess, and taking into account the possible costs that the owner would have incurred by buying more emission licenses in the auction.

The new regulation becomes effective on 7 April 2020.

On April 2nd, the declaration of a state of emergency was renewed by Decree of the President of the Republic, no. 17-A/2020, of April 2 (Portuguese only).

With regard to employees' rights, the law establishes the suspension of the exercise of the right to strike to the extent that it may compromise the functioning of critical infrastructure, health care units and essential public services, as well as in economic sectors vital to the production, supply and distribution of goods and services essential to the population.

This measure was already provided for in the previous decree of the President of the Republic that declared a state of emergency, now extending the suspension to essential public services.   

The same decree also defines the suspension of the right of trade union associations to participate in the drafting of labor legislation to the extent that the exercise of such right may represent a delay in the entry into force of urgent legislative measures for the purposes foreseen in the decree.

Following the continuity of the state of emergency, the Government approved a set of additional provisions in order to reduce the possibility of contamination and propagation of illness, through Decree no. 2-B/2020 of 2 April (Portuguese only).

In addition, other employment actions were taken, namely the reinforcement of the competencies of the Authority for Working Conditions (ACT), through the requisition of inspectors.

The ACT inspectors will now have the power to suspend any dismissal when they see evidence of illegality, without the need for recourse to the courts.

With this measure, the Government intends to prevent Employers, during the current state of emergency, from making abusive dismissals. 

The suspension of the right to strike and the possibility for the ACT to preventively suspend dismissals should disappear after the end of the state of emergency.

The Portuguese Government passed Decree-Law 10-F/2020, which approved new fiscal support measures to mitigate the social and economic impacts arising from COVID-19, which are in addition to the measures already approved by Order 104/2020-XXII and Resolution 71-A/2020. In this newsletter, we describe the main fiscal support measures approved sofar.

Extension of deadlines for annual tax returns and advance payments

Order 104/2020-XXII approved the following measures:

  • The annual tax returns (Model 22) for the year 2019 may be filed until 31 July 2020;
  • The special advance payment (pagamento especial por conta) may be delivered until 30 June 2020; and
  • The first advance payment (pagamento por conta) and the first additional advance payment (pagamento adicional por conta) may be delivered until 30 August 2020.

Deferral of delivery of VAT and withholding taxes

Decree-Law 10-F/2020 allowed the payment of VAT and CIT and PIT withholdings in three- or six-monthly instalments, interest free, for self-employed workers and companies with a turnover up to €10 million in 2018, which have begun their activity as of 1 January 2019 or that operate in closed sectors (Decree no. 2-A/2020).

The remaining companies and self-employed workers who do not meet the conditions set out above may apply for a fractionation of the payment when there has been a decrease in the turnover of at least 20% in the average of 3 months preceding the month in which this obligation exists, compared with the same period of the previous year.

Requests for payment in instalments should be submitted electronically by the deadline for voluntary payment and no guarantee is required.

Deferral of social security contributions

Social security contributions due between March and May 2020 can be paid as follows:

(i)     One third in the month in which it is due (in the month of March, exceptionally, by the 31st);

(ii)    The remaining amount will be paid in equal and successive instalments in July, August and September 2020 or in the six months between July and December 2020, interest free.

This measure applies automatically to self-employed workers and to employers with up to 50 employees.

Other employers can also access this mechanism if they have a decrease in the turnover of 20% or more in the months of March, April and May 2020, provided that:

  • They have up to 250 employees; or
  • They have 250 or more employees, when they are private social security institutions or similar, or operate in closed sectors (Decree 2-A/2020) or in the aviation and tourism sectors.

Measures to mitigate corporate crisis situations

Resolution 71-A/2020, subsequently amended by Resolution 76-B/2020, approved several support measures for companies that have their activity freazed, their establishments closed or a 40% reduction in their turnover:

(i)     Extraordinary support for employment contracts. This support consists of the payment by the State of 2/3 of the employee's gross remuneration, 70% of which is ensured by the Social Security and 30% by the employer. The support has a maximum amount of €1,905.

(ii)    Extraordinary training plan. This support will be granted to each employee, depending on the hours of training, up to a limit of 50% of the gross remuneration, with a maximum limit of €635.

(iii)   Exemption of employer social securiy contributions. Employers are exempted from paying social security contributions in respect of workers covered by measures (i) or (ii) above. Contributions in respect of the members of their statutory bodies will also be exempt. This exemption may also extend to self-employed workers who are employers benefiting from the measures above and their spouses and will be in force for the duration of the measures they benefit from.

(iv)   Incentive to support the normalization of the company's activity. Employers are entitled to receive €635 for each employee covered by the measures referred to in (i) or (ii) above.

Other support/incentives

Support for employees

An exceptional financial support in an amount equal to 66% of the basic remuneration (33% to be paid by the employer, 33% to be paid by the Social Security) will be granted to employees who need to be away from work due to unavoidable assistance to a minor under 12 years of age or a dependent, resulting from the closure of an educational establishment, early childhood support or disability, with a minimum limit of €635 and a maximum limit of €1.905, calculated according to the number of days of absence from work.

Portugal 2020 Program - Deductibility of expenses

Within the scope of the projects approved by the Portugal 2020 program, expenses incurred by beneficiaries in initiatives or actions cancelled or postponed for reasons related to COVID-19 will be deductible.

Suspension of tax and social security debt enforcement proceedings

The enforcement proceedings relating to tax and social security debts are suspended until 30 June 2020, as well as the installment plans, without prejudice to the possibility of their fulfillment.

On 26 March 2020, the Portuguese Government passed Decree-Law 10-J/2020, which approves exceptional measures to protect families, companies, private charitable institutions and social economy entities in connection with the Covid-19 crisis, including a moratorium on credits.

In this newsletter, we describe the main conditions for the application of the moratorium.

Protection measures:

  • Prohibition of the cancellation, in whole or in part, of credit facilities and loans;
  • In relation to bullet loans, extension of the maturity as well as of any ancillary obligations, including interest;
  • In relation to other loans, suspension of payment of instalments, rents and interest and automatic extension of the payments schedule.

Moratorium period:

Until 30 September 2020.

Eligible entities / persons:

  • Companies that:

(i)     have their head office and perform their economic activity in Portugal;

(ii)    are classified as micro, small or medium-sized enterprises;

(iii)   as of 18 March 2020, were not in default of cash payments towards financial institutions for more than 90 days or, if they were, did not meet the materiality threshold established in the Bank of Portugal Notice 2/2019 and Regulation (EU) 2018/1845 of the European Central Bank of 21 November 2018;

(iv)   as of 18 March 2020, were not in an insolvency, suspension or cessation of payments situation or subject to an enforcement proceeding; and

(v)    are not in default towards the Tax Authority and Social Security.

  • Other companies, regardless of their size, who meet conditions (i), (iii), (iv) and (v) above, excluding those of the finance sector;
    • Individual entrepreneurs, private charitable institutions, non-profit organisations and certain social economy entities who have their domicile or head office in Portugal and fulfil the conditions (iii), (iv) and (v) above;
  • Natural persons, in relation to primary residence mortgage loans only, who reside in Portugal, fulfil the conditions (iii), (iv) and (v) above and fall in one of the following circumstances:

(i)     prophylactic isolation or disease situation;

(ii)    assistance to children or grandchildren;

(iii)   reduction of normal working period or suspension of the employment agreement due to business crisis;

(iv)   unemployment situation registered with IEFP;

(v)    are eligible for the extraordinary support for the reduction of the economic activity of self-employed workers under Decree-Law 10-A/2020, of 13 March 2020;

(vi)   are employees of entities whose establishment or activity has been closed or suspended during the state of emergency period pursuant to Decree 2-A/2020, of March 2020.

Eligible transactions:

Credit transactions carried out by:

  • Credit institutions;
  • Financial credit companies;
  • Investment companies;
  • Leasing companies;
  • Factoring companies;
  • Mutual guarantee companies;
  • Branches of credit and financial institutions operating in Portugal.

Excluded transactions:

  • Credits or financing for the purchase of securities or the acquisition of stakes in other financial instruments;
  • Credits granted to beneficiaries of schemes, subsidies or benefits (e.g. tax benefits) to establish their head office or residence in Portugal, including for investment activities, with the exception of citizens covered by the Return Programme (Programa Regressar); and
  • Credits granted to companies for the individual use of credit cards by members of board, supervisory bodies, employees or other workers.

Interest capitalisation:

The extension of the payment of principal, rents, interest, fees and other charges (where applicable) will not prevent the accrual of interest which shall be capitalised in the value of the loan.

Moratorium application:

The moratorium must be requested before the relevant financial institution. The eligible entities and persons may request the suspension of the repayment of principal only (or a part thereof).

Today, the Portuguese Energy Secretary of State announced in an online session that the first 2020 solar auction will be, on the whole, similar to the 2019 solar auction. Despite the announcement, there is no date for the auction’s launch, due to the Covid-19 pandemic’s effects on the market.

The injection capacity to be auctioned will be of 700 MW, all in the Alentejo and Algarve areas.

The promoters may apply to the following remuneration schemes:

  • a market scheme without storage where the promoters bid for a contribution made to the National Electric System (“SEN”), in €/MWh. The Promoters available to pay larger contributions will be awarded with the capacity title;
  • a fixed guaranteed tariff structure, where the bids will express a discount to the reference feed, to be announced (in 2019, was 45€/MWh);
  • a market scheme for power plants incorporating a storage system. A value of an annual payment to be made to SEN, in MW, will be announced and the promoters interested in this new option offer a discount to this value.

The obligations for the awarded bids in the auction will be similar to those of the 2019 solar auction and they include a performance bond (60.000€/MWh) to guarantee the compliance with a tight schedule to connect the plant to the grid.

A few days ago the Portuguese government also enacted  Decree 80/2020, of 25 March initiating the simplified licensing for small production units (up to 1 MW). Through this proceeding, the Promoters may apply for a guaranteed remuneration for 15 years. On a monthly basis, until offering a total of 20 MW, the Portuguese Energy Authority (“DGEG”) will organize sessions where the Promoters bid among themselves. The Promoters will offer a discount to the reference feed (45 MW/h). The first session is scheduled to June of 2020, however due to the Covid-19 pandemic’ effects, there is some uncertainty regarding this date.

new law (Portuguese only) was enacted creating a fast track process for the Lay Off, which now includes cases of suspension of the employment contract and reduction of the normal work period provided for in the Labor Code. The new rules are as follows:

Who can access it: private sectoremployers, including employers in the social sector affected by the epidemic and who are in business crises.

Business crises: companies that find themselves in one of these situations:

  • total or partial closure of the company or the establishment as a result of the obligation to close installations and establishments,
  • total shutdown of the company's or establishment's activity resulting from the interruption of global supply chains, suspension or cancellation of orders; or
  • an abrupt and sharp break of at least 40% of the billing in the period of 30 days prior to the application with the social security, with reference to the monthly average of the two months prior to that period, or compared to the same period of the previous year.

Documents to apply:

  • Simple statement issued by the employer, announcing there’s a business crises,
  • Certificate from the company's certified accountant attesting to the crises situation,
  • The employer should have his tax and contribution situation up to date before the competent authorities.

Amount of salaries:

  • If the employment contract is suspended, the employee stays at home and receives 2/3 of the salary, up to a maximum of 3 RMMG (€1905,00), with the State paying up to 70% of this amount, up to a maximum of €1.333,5
  • If the normal working period is reduced to more than 66% of the normal period (for example, the worker works 80% of the normal working time), the worker receives the number of hours worked (80%), but the State only contributes up to 2/3 (66%) of the salary.

Prohibition of dismissal: the employer financially supported is prohibited to dismiss the employee covered by the State support through collective redundancy or dismissal based on the extinction of a job position, up to 60 days after the conclusion of the State support.

It is estimated that about one billion people are under voluntary confinement in their homes in order to halt the spread of the current pandemic, which explains the significant increase in the amount of data moving across fixed and mobile networks when combined with services like Netflix, HBO, Prime Video, Instagram, Facebook and Youtube and practices such as telecommuting and homeschooling.

Netflix was invited by the EU to reduce its streaming quality in Europe, a public call that Netflix attended to, but others such as YouTube, Apple TV+, Amazon Prime and Disney Plus are also committing to tone down the image quality of their streaming applications in order to free up bandwidth space.

The Portuguese government, in its turn, has set out temporary and exceptional measures regarding the telecommunications sector in order to prevent a network overload. According to Decree Law 10-D/2020, telcos must ensure the provision of the following services, which are deemed key telecommunications services:

  • Ininterrupt voice chat and text messaging under fixed and mobile networks;
  • Ininterrupt access to the emergency services, including geolocation and ininterrupt availability for public warnings to be sent to the population;
  • Sufficient data under fixed and mobile network that ensure access to a set of essenial services, such as email, search engines, news, homebanking, financial and insurance services, both in fixed and mobile broadband; and
  • Analog and digital television signal.

These services must be provided to prioritary clients such as healthcare providers included in the national health service, security forces and Home Affairs, both in continental territory and Madeira and Açores.

In view of ensuring these services, telcos may take exceptional measures regarding network and traffic management, prioritizing voice chat and text messaging traffic, while limiting video streaming, online gaming or other categories of data transfer, provided that limitations are only to ensure the integrity and safety of the networks.

Network repairing is also going to be a priority, since compliance with obligations usually applicable to the telecommunications sector will be simplified and/or suspended.

The new legal framework is already in force and will be until the measures for the prevention, containment, mitigation and treatment of the pandemic are waived by the national public health authority.

DGEG, the Portuguese energy authority, brought, at last, long expected news for solar energy promoters: Decision 27/2020 suspends the licensing deadlines for all electrical projects.

As we had alerted, the first measures announced by the Portuguese Government did not protect the Solar promoters from the Covid-19 pandemic’ effects. The promoters would be forced to continue complying with  their permitting obligations until DGEG would close to the public.

Following the Portuguese Government’s measures driven by Covid-19 pandemic emergency, DGEG  closed to the public on March 16. Despite DGEG continuing to operate online, this decision suspends all deadlines linked to licensing procedures with effects from that date.   

This suspension comprehends the deadlines for all actions and formalities regarding any administrative proceedings run by DGEG, including, but not limited to:

  • the deadline for obtaining the relevant operation license (both to promoters who obtained the production license prior to the approval of the Decree-law 76/2019 as well as promoters awarded on the first Portuguese solar auctions in June 2019); and
  • the deadline to complete the request for an agreement for the expansion of the public grid, with the corresponding Operator.

The suspension of the deadlines lasts until DGEG announces the end of the suspension, or, if it occurs first, on the date from which the Covid-19 exception situation is withdrawn by the Portuguese Government.

In addition, this decision establishes that new requests, including those to obtain a grid capacity reserve title through an agreement with the Grid Operator, will not be received until the end of April 2020.

Decree-Law 107/2019, of December 4, granting powers to the Council of Ministers to establish the main terms and conditions of the public-private partnerships (PPP), has been terminated with effect from 19 March 2020 by way of the Portuguese Parliament Resolution 16/2020.

The Portuguese Parliament decided to revoke the new PPP law and to restore the previous framework, returning the decision-making powers to the finance minister together with the minister with powers in each PPP project area.

Municipalities and autonomous regions lose again the freedom to set up their own PPPs without government supervision.

It is worth remembering that the PPP regime was enacted last December under great deal of criticism from left and right wing of the Parliament, because it was said to grant discretionary powers to the Council of Ministers to set up new PPPs and to modify the existing ones.

We cannot speculate that Covid-19 was the cause of this change: the Parliament did not want to make sure the Government and the municipalities focus their efforts on the Covid-19 pandemic economic contingency measures; or to avoid unnecessary Council of Ministers meetings. There were other reasons, certainly political ones, coming from the left wing of the Parliament (and in this case somehow strangely supported by the social democrats) where the animosity against the healthcare PPP model is growing, notwithstanding the good results of most healthcare concessions now being terminated.

In February 2020, ANACOM issued a draft regulation that would allow it the 5G auction to occur as of April.

The regulation, under public consultation, aims at providing Portuguese operators, both incumbents and new entrants access to 5G frequencies. The most interesting feature of the draft regulation is the attempt by ANACOM to level the playing field for new entrants by reserving to them certain lots in the 900MHz and 1800MHz frequency bands, instituting national roaming, limitations on the acquisition of certain frequency bands and discounts.

ANACOM’s intention is to ensure the commencement of 5G network roll out by the end of 2020 and achieve full coverage by the end of 2025.

According to the initial schedule, the consultation would be concluded in the end of March and the final allocation to occur in August 2020.

However, due to the outbreak of the COVID19 pandemic, for the first time in half a century, in 20th March 2020, the State of Emergency was decreed imposing severe restrictions on population movement and economic activity.

Following a series of requests by operators and considering the terms of the Presidential decree, ANACOM decided to suspend the consultation procedure while the State of Emergency is in force. In the same decision the Regulator also suspended the refarming of spectrum currently used by Terrestrial Digital Television (DVB-T standard), a measure designed to release further 5G frequencies.