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The Portuguese Government approved the Offshore Renewable Energy Zoning Plan (PAER) on January 9th, with the aim of identifying suitable areas for the development of offshore wind farms within the national maritime space. The plan also includes an assessment of the potential environmental impacts of these infrastructures, to ensure they reconcile activities, particularly commercial fishing and environmental conservation.

This plan is part of the National Energy and Climate Plan 2030 (PNEC 2030), which sets targets to decarbonize the economy and promote renewable energy, targeting a 47% share of renewable energy in gross final energy consumption by 2030. Initially, the Government set a target of 10 GW of offshore wind capacity by 2030. However, after reviewing the PNEC 2030, this target was adjusted to 2 GW only, by the end of the decade.

The PAER version submitted for public consultation in 2023 identified six potential areas for the installation and development of offshore wind farms: Viana do Castelo North and South, Leixões, Figueira da Foz, Ericeira, and Sines.

The offshore wind auction, initially scheduled for 2023, was postponed due to the technical complexity and the absence of necessary approvals for seabed use for offshore wind farms. Following the recent approval of the PAER, the first auction is anticipated to be launched in 2025, for 2 GW of capacity by 2030. The EU plans to expand offshore wind energy from 3% to 25% of its electricity consumption by 2050. Portugal is starting to align with this goal, with just 25 MW of capacity currently installed off the coast of Viana do Castelo.

The approval of the PAER enables the development of offshore wind energy in Portugal, as it will update and be automatically incorporated in the National Maritime Spatial Planning Plan (PSOEM), which designates the areas for the different maritime activities. According to the latest comments from the Portuguese Minister of Environment and Energy, the offshore wind energy auction will take place in two phases:

• First phase: Seabed rights will be granted for a defined duration enabling developers to conduct studies and assess the area, subject to the provision of a guarantee payment.
• Second phase: An auction will be held for Contracts for Difference (“CfD”), where a reference price will be set for the purchase of the energy produced. Under this model, when the market price falls below the reference price, the government compensates the energy producer for the difference. Conversely, when the market price exceeds the reference price, the producer must reimburse the difference.

The choice of a two-phase auction is justified by the limited maturity of floating offshore wind technology, which is not yet fully developed. The additional time allocated to study the areas will help accurately predict the project’s financial return, which is crucial for securing financing. A one-phase auction, on the other hand, would speed up the process but involve higher risks, such as inflating prices or having no participants in the auction if the CFD does not offset the risks.

According to estimates from APREN, the Portuguese Renewable Energy Association, the installation of 2 GW of wind capacity by 2030 represents an estimated investment of approximately 9 billion euros. It is also expected to contribute up to 1.7 billion euros to GDP and create between 5,000 and 13,561 new jobs.

For information on the licensing process for maritime space, you can consult our Offshore Wind Power Production Licensing in Portugal.

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On December 23, 2024, ANACOM, the Portuguese telecoms National Regulatory Authority (NRA), approved a Regulation on Number Portability. This regulation outlines the principles, rules, and processes that telecom operators must follow to ensure number portability in electronic communications networks.

This new regulation aligns with the updated Electronic Communications Law and the EU Directive 2018/1972. The directive mandates that prices for number portability services must be cost-based and prohibits direct charges to end users. It aims to strengthen consumer rights, making it easier to switch service providers and ensuring equal protection for consumers across the EU.

As Portugal was required to implement this directive, the regulation establishes a ban on charging direct portability fees to end-users with contracts linked to numbers. Other relevant features of this regulation are:

• The setting of compensation of €10 to customers for failure to comply with the scheduling of physical intervention network, which requires the rescheduling of the intervention for another day.
• The obligation of the Receiving Provider to ensure that portability and the subsequent activation of numbers take place on the date expressly agreed with the customer as soon as possible and no later than one working day after that date.
• In the event of termination of the contract, and unless they waive this right at the time of deactivation of the service, the end user retains the right to port PNN numbers to another company.
• The quarantine period for numbers is 90 days, during which users can still transfer their numbers to another company, unless they gave up this right when canceling the service. Additionally, companies cannot give these numbers to others for 180 days.
• The limitation on the wholesale cost that operators can pass on to competitors for the service. It now has a maximum value of €1.
• When a prepaid service number is ported, the original provider must refund the remaining credit to the user. However, the user may have to pay a fee for this refund if it's stated in the contract and is reasonable based on the company’s costs.

The new regulation will become effective on 23 November 2025.

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The Bank of Portugal ("BoP") has approved Notice no. 6/2024 ("Notice"), which outlines the disclosure requirements that credit institutions must follow for State-backed home loans offered to young individuals aged 35 or under.

The State-backed home loans framework was approved by Decree-Law n.º 44/2024, which defines the conditions under which the Portuguese State may provide personal guarantees to credit institutions to support financing for young individuals purchasing primary and permanent housing priced at up to €450,000.

This framework was further regulated by Ordinance No. 236-A/2024/1, which approved the form of a protocol to be signed between the Directorate-General of Treasury and Finance ("DGTF") and the credit institutions that express interest in participating.

Under this framework, the State guarantee, issued by the DGTF, is valid for up to 10 years from the contract’s signing date and is limited to a maximum of 15% of the loan amount.

The newly approved Notice differentiates between:

• Information intended for the general public; and
• Information intended for the loan applicants throughout the duration of the credit agreement.

With regards to information for the general public, credit institutions must:

• Identify the covered credit agreements;
• Outline the eligibility criteria;
• Clearly indicate that meeting the criteria does not override the institution's discretion in granting credit; and
• Provide details on the key features of the State guarantee.

This information should be accessible on credit institution's websites, online banking platforms, and mobile applications of credit institutions, as well as provided in durable format to clients who request it at branches or through remote communication channels. Credit institutions are encouraged to use the template provided in the annex to the Notice for this purpose.

During the term of the credit agreement, clients must be informed about the enforcement of the State guarantee by the credit institution, their liability for repayment to the State and the expiration of the guarantee.

The Notice came into effect on January 1st, 2025. and applies to all credit institutions that enter into a protocol with the DGTF.

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ERSE has launched a public consultation on the proposed Development and Investment Plan for the National Electricity Transmission Network covering the period of 2025 to 2034 (PDIRT-E 2024), developed by the National Electricity Grid (REN) in its role as an operator of the National Electricity Transmission Network (TSO).

The proposed PDIRT-E plan outlines a 10-year roadmap designed to meet the climate and energy goals/targets established in Portugal’s National Energy and Climate Plan 2030 (PNEC 2030), the Long-Term Carbon Neutrality Strategy 2050 (RNC 2050) , and the National Electricity System Security of Supply Monitoring Report (RMSA-E 2023). Key highlights of the plan include:

• An increase in installed capacity by by approximately 30 GW by 2034 bringing the total to nearly 45 GW, supported by renewable energy projects:

            – 23 GW of additional solar photovoltaic capacity (compared to 6.5 GW installed by 2024).
            – 6 GW of additional wind capacity (compared to 6.3 GW installed by 2024).
            – 1 to 2 GW in offshore wind capacity.

• the Tapada do Outeiro natural gas combined cycle power station is scheduled to cease operations in 2029 as part of the decommissioning process.
• As for the investment proposed for the Base Projects, initiated exclusively by the TSO, focus on ensuring the safety, operability and reliability of the National Electricity Transmission Network (RNT). Notable initiatives include:

            – Renovation of protection, automation and control systems at the substations of Alqueva, Bodiosa, Lavos, Trafaria, Paraimo and Batalha between 2025 and 2029.
            – The creation of a new 220 kV connection between the Rio Maior and Carvoeira substations in 2029.

• Complementary Projects, involve the expansion or reconfiguration of the national transportation grid ,driven by external factors and subject to the grantor’s assessment. The final investment decision is contingent upon the Portuguese Government assessment of its relevance and timing, and this proposal includes, among other aspects:

            – Reconfiguration of the Porto network by establishing new 220 kV underground circuit connections along the Vermoim-Custódias-Prelada corridor, including converting sections of existing 220 kV overhead lines to underground circuits.
            – Reconfiguration of the Lisbon network, by reinforcing it with new 220 kV underground connections between the western area of Loures and the Carriche substation, alongside the conversion of specific overhead lines to underground circuits.
            – Supporting the Power supply for the Porto – Lisbon high-speed rail line, with four connection points to the National Transmission Network , including three new substations in the Oliveira de Azeméis/Estarreja, Cantanhede, and Leiria, as well as the existing Rio Maior substation.

This ambitious plan underscores the commitment to modernizing Portugal’s electricity infrastructure and supporting the transition to renewable energy.

An investment of €1.6915 billion is planned until 2034, reflecting a substantial increase compared to the €831.2 million estimated in the PDIRT-E 2021.

The public consultation will close on 17th of February, 2025.

A public consultation has also been launched for the revision of the Manual of Procedures for Global System Management (MPGSM ) to incorporate markets for Frequency Restoration with Automatic Activation (aFRR) and new tools for system services , aligned with the amendments to the Electricity Sector Network Operating Regulation (ROR), July 2023.

The MPGGS establishes sthe operating rules for Global System Management (GSM) conducted by the transmission system operator (TSO), ensuring the security and operation efficiency of the National Electricity System (SEN) and the effective functioning of the ancillary service markets. The following measures stand out:

• The implementation of Automatic Frequency Restoration Reserves (aFRR) and the associated capacity market, along with the integration of the SEN into the European Picasso platform.
• Promoting non-discriminatory access to markets for aggregators by establishing clear contracting modalities for the representation of producers, autonomous storage solutions, and for the representation of renewable generation, consumption, or self-consumption.
• Introducing a mechanism to manage injection into the network by non-enabled physical units, ensuring the active participation of all physical units in frequency balancing.
• Establishing a standardized capacity product for the following day, linked to the Manual Frequency Restoration Reserves (mFRR) product, with contracts settled for each 15- minute period..

The public consultation will close on February 13, 2025.

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The Bank of Portugal ("BoP") has approved Notice no. 7/2024 ("Notice"), which establishes the countercyclical capital buffer percentage that credit institutions with head offices in Portugal must apply starting from 1 January 2026.

This buffer was introduced in the General Framework for Credit Institutions and Financial Companies in 2014 to comply with European requirements.
The buffer consists of Common Equity Tier 1 capital, assessed on both an individual and consolidated basis (as applicable), and is calculated by multiplying the total amount of risk exposures by the prevailing percentage. In practice, this buffer requires credit institutions to retain a portion of their profits and/or increase their capital.

The countercyclical buffer percentage is determined by the BoP within a range of 0% to 2,5%, in multiples of 0,25%, and is reviewed on a quarterly basis.

In determining the percentage and conducting its quarterly review, the BoP must consider, particularly:

• The intensity of cyclical systemic risk;
• The buffer guidance set by the BoP;
• The relevant guidelines issued by the European Systemic Risk Board; and
• Any additional factors deemed relevant by the BoP to address cyclical systemic risk.

The Notice sets a countercyclical buffer of 0,75% of the total risk exposures in Portugal, effective from 1st January 2026. Credit institutions may exclude certain exposures (e.g., regional and local governments, public sector entities) from the buffer calculation, provided specific conditions are fulfilled.

This buffer had already been implemented in other European Union countries, including Germany (0,75%), France (1%), Belgium (1%), the Netherlands (2%), Sweden (2%), Denmark (2,5%), and Norway (2,5%). However, some countries temporarily suspended it during the pandemic. Meanwhile, nations like Spain, Italy, Austria, Poland, and Finland, currently apply a 0% buffer, though several have announced plans to introduce it.
The BoP justified its decision to activate the countercyclical buffer at this stage citing a "neutral” period where systemic risk is not in an accumulation phase.
However, given certain risks related to asset overvaluation and the implementation of other buffers may overlap, questions regarding the appropriateness and proportionality of the measure may arise.

The State Budget for 2025 was approved by Law 45-A/2024 of December 31 (“2025 State Budget”) with small changes compared to the proposal presented by the Portuguese Government. In this newsletter we summarise the additional tax changes approved by the Portuguese Parliament.

PERSONAL INCOME TAX

Income eligible for the Youth PIT program will be exempt from withholding tax, corresponding to the portion of income exempt from taxation.

VAT

The following changes stand out:

• Clarification has been issued that the restrictions on VAT deductions do not apply to bicycles, whether motorized or non-motorized;
• Reduction of VAT rate applicable to bullfighting shows (item 2.32 of list I annexed to the VAT Code); and
• The reduced VAT rate will apply to food products designed for infants and young children, including transitional formulas, as well as medical-purpose foods and complete dietary substitutes for weight management (item 1.14 of list I annexed to the VAT Code).

REAL ESTATE TRANSFER TAX AND STAMP DUTY

The 2025 State Budget includes the following additional changes:

• An exemption is granted for registration fees and other associated costs for all acts and contracts required to facilitate land consolidation involving contiguous or adjoining rustic properties owned by the same individual, regardless of their economic use. This exemption also applies to the registration of rights and encumbrances associated with the consolidated rustic properties; and
• Exemption from RETT and Stamp Duty on transfers of rustic property required for the implementation of the above-mentioned land consolidation transactions.

TAX BENEFITS

Entities that are licensed to operate in the Madeira Free Trade Zone in the years 2025 and 2026 will benefit from the reduced Corporate Income Tax rate of 5% until 31 December 2028.

A summary of all tax measures approved by the 2025 State Budget can be found here .

The Portuguese Parliament approved the State Budget for 2025 (“2025 Stage Budget)”. In this newsletter, we summarise the main tax changes contemplated in the 2025 State Budget.

PERSONAL INCOME TAX

Regarding Personal Income Tax (PIT), the main changes introduced by the 2025 State Budget are as follows:

• PIT brackets update. The PIT brackets will be updated according to the following table (pdf above).
• Youth PIT. The Youth PIT rules, which partially exempt young people's employment income (dependent or self-employed), are amended as follows:

            - Young people up to the age of 35 will now be eligible.
            - The condition of completing a cycle of studies no longer applies.
            - The PIT exemptions extend to the first 10 years of income, with the following limits:
               o 100% in the first year;
               o 75% from the second to the fourth years;
               o 50% from the fifth to the seventh years; and
               o 25% from the eighth to the tenth years.
             - The exempted income cannot exceed 55 times the value of the Social Support Index (“SSI”) (i.e. €28.009,30). Taxpayers who (i) benefit or have benefited from the non-habitual resident regime, (ii) benefit or have benefited from the tax incentive for scientific research and innovation, (iii) have opted for the taxation applicable to former residents or (iv) do have tax debts will not be eligible.

• Withholding tax on income subject to Youth PIT. Income eligible for the Youth PIT program will be exempt from withholding tax, corresponding to the portion of income exempt from taxation. (*)
• Meal allowance. The increase in the value of the meal allowance that is not considered income from dependent work for IRS purposes, when it is given through meal vouchers, goes from €9.60 to €10.20.
• Withholding tax on supplementary work. Income from overtime work obtained in Portuguese territory by non-residents will be exempt from withholding tax in respect of the first 100 hours (instead of the 50 hours provided for in 2024), with the 25% withholding tax applying to the part that exceeds that limit or number of hours. It is also planned that withholding tax will apply to 50% (and not all) of the monthly remuneration for overtime work.
• Withholding tax on self-employment income. The PIT withholding tax rate applicable to income from professional activities is reduced from 25% to 23%.
• Autonomous taxation. The reference value of light vehicles acquisition cost for the calculation of the autonomous taxation will be increased, with the rate of 10% being applicable when the costs are less than €30,000 (instead of €20,000) and the 20% rate being applicable when the costs are higher. Vehicles powered exclusively by electricity are not subject to this taxation.
• Advance payments. The total amount of advance payments due by self-employed persons will now be 65% (instead of 76.5%) of the legal basis.
• Specific deductions from employment income and pensions. How the specific deductions from category A and H income are calculated has been changed from the fixed amount of €4,104 (updated annually in line with the Social Support Index (SSI)) to the amount corresponding to 8.54 times the SSI (currently €4,349.08).
• Minimum subsistence amount. The reference value for the minimum subsistence has been increased to the greater of €12,180 or 1.5 x 14 x SSI.

CORPORATE INCOME TAX

In terms of Corporate Income Tax (CIT), the following measures from the State Budget for 2025 are highlighted:

• Reduction of CIT rate. Reduction of the general CIT rate from 21% to 20% and, in the case of small and medium-sized companies and small and medium capitalization companies, from 17% to 16% on the first €50,000 of taxable income.
• Health or sickness insurance costs. Expenses associated with health or sickness insurance for employees and their families will be tax deductible at a rate of 120% when assessing the taxable net income.
• Autonomous taxation. The rates of autonomous taxation for light passenger and cargo vehicles, as well as motorcycles, will be reduced by 0.5% and the cost limits will be increased by €10,000, as follows:

           - For vehicles costing up to €37,500 (instead of €27,500) the rate will be 8% (instead of 8.5%);
           - For vehicles costing between €37,500 and €45,000 (instead of €27,500 to €35,000) the rate is 25% (instead of 25.5%); and
           - For vehicles costing €45,000 or more (instead of €35,000) the rate is 32% (instead of 32.5%).
It is also planned to exclude entertainment expenses related to shows from the scope of autonomous taxation.

VALUE ADDED TAX

Regarding Value Added Tax (VAT), the following changes are stand out:

• Extension, until December 31, 2025, of the VAT exemption (with the right to deduct the tax) applicable to transfers of certain goods, when normally used in the context of agricultural production activities, such as fertilizers and soil improvers.
• Legislative authorization for the Government to amend in 2025 item 2.18 of List I annexed to the VAT Code to apply a reduced rate to the construction or rehabilitation works on residential properties, to be defined according to criteria established by members of the Government. Properties with a value exceeding the established limit will be excluded from the scope of this rate.
• Clarification has been issued that the restrictions on VAT deductions do not apply to bicycles, whether motorized or non-motorized. (*)
• Reduction of VAT rate applicable to tauromachy performances (amendment to item 2.32 of list I annexed to the VAT Code). (*)
• The reduced VAT rate will apply to food products designed for infants and young children, including transitional formulas, as well as medical-purpose foods and complete dietary substitutes for weight management (item 1.14 of list I annexed to the VAT Code). (*)

SPECIAL CONSUMPTION TAXES

In terms of Special Consumption Taxes, the following changes are planned:

PETROLEUM AND ENERGY PRODUCTS DUTY (ISP)

Certain oil and energy products used in facilities subject to an energy consumption rationalization agreement will now be taxed at 100% instead of 65%.

TOBACCO TAX

• The total minimum reference tax to be applied to tobacco and in force each year will now correspond to the value of the national average tobacco tax.
• The tax on cigarillos will now be 50% of the minimum tax on cigarettes instead of 100%.

VEHICLE TAX (ISV)

• A rate of 25% will be applied to passenger cars registered in another EU Member State between 2015 and 2020 and with hybrid engines.
• When the taxpayer disagrees with the provisional assessment issued by customs, the fee for requesting a recalculation is waived.

REAL ESTATE TRANSFER TAX (RETT)

Regarding the Real Estate Transfer Tax, the 2025 State Budget establishes:

• Update of the brackets for calculating the IMT applicable to the transfer of urban properties or autonomous units of urban properties intended exclusively for residential use.
• An exemption is granted for registration fees and other associated costs for all acts and contracts required to facilitate land consolidation involving contiguous or adjoining rustic properties owned by the same individual, regardless of their economic use. This exemption also applies to the registration of rights and encumbrances associated with the consolidated rustic properties; and (*)
• Exemption from RETT on transfers of rustic property required for the implementation of the above-mentioned land consolidation transactions. (*)

STAMP DUTY

In terms of Stamp Duty, the following changes stand out:

• Extension until 2025 of the exemption applicable to certain housing credit restructuring operations, as well as to operations involving the temporary adjustment of payments and the capitalization of deferred amounts;
• Exemption from stamp duty on transfers of rural property required for the implementation of the above-mentioned land consolidation transactions. (*)

SPECIAL CONTRIBUTIONS

The 2025 State Budget extends the following special contributions to the year 2025:

• Audiovisual contribution;
• Banking sector contribution;
• Pharmaceutical industry contribution;
• Extraordinary contribution to suppliers of the National Health Service of medical devices; and
• Extraordinary contribution to the Energy Sector.

TAX BENEFITS

The 2025 State Budget includes the following changes to the Tax Benefits Statute:

• Incentives for salary increases. The costs related to salary increases for workers with a permanent employment agreement will be considered at 200% (instead of the 150% foreseen for 2024), provided that the following conditions are met:

           - The increase in the average annual base salary per employee is at least 4.7% (instead of 5%); and (*)
           - An average increase of at least 4.7% in the annual base salary of employees who are paid the company's average annual salary or less.
For this purpose, the expenses related to (i) workers covered by a Collective Bargaining Agreement signed or updated less than three years ago and (ii) amounts spent by the employer on the worker by way of base salary and social security contributions will be considered. The maximum deduction from taxable income per employee is increased to five times (instead of four times) the guaranteed minimum monthly salary.

• Incentives for the recapitalisation of companies. The 20% relief provided for capital contributions in cash to a company in which a shareholding is held, applied to the gross amount of profits or capital gains resulting from the sale of that shareholding, now covers any company and not only to companies with a loss of half their share capital. However, entities subject to supervision by the Bank of Portugal or the Insurance and Pension Funds Supervisory Authority, as well as branches in Portugal of credit institutions, other financial institutions or insurance companies, are excluded from this provision.
• Incentives for the capitalization of companies. An amount corresponding to the 12-month Euribor rate plus a spread of 2% (instead of 1.5%) can be deducted when determining taxable net income. This measure will now apply to any company, instead of being restricted to small or medium-sized enterprises or small-medium capitalization companies. The relief will be increased by 50% in 2025.
• PIT and social security exemption for performance rewards. If the employer complies, in 2025, with the conditions laid down for the application of the tax incentive for salary increase, there may be an exemption from PIT and social security contributions (SS) on the amounts paid in 2025 to employees as performance and productivity rewards, profit-sharing and balance-sheet bonuses, up to a limit of 6% of the annual base salary.
• Extension of the Madeira Free Trade Zone regime. Entities licensed to operate in the Madeira Free Trade Zone between 2025 and 2026 will benefit from the reduced Corporate Income Tax Rate of 5% until 31 December 2028. (*)

(*) Tax measures introduced in the final version of the 2025 State Budget.