The Portuguese Government published in Diário da República the bases of the new auction for a centralized purchase of biomethane and hydrogen produced by electrolysis of water using electricity from renewable energy sources. It will be composed of two parcels:
The Last Resort Supplier (LRS) shall buy the amounts auctioned through direct contracting with the producers. Contracts concluded with producers will last for 10 years and the base price, as the maximum price to be paid for by the LRS, is €62/MWh for biomethane and €127/MWh for hydrogen. The quantities to be purchased by the LRS from each producer and the price payable shall be defined in the contract and valid throughout the contractual period, with the respective guarantees of origin. The costs of network access tariffs, those for the injection of renewable gases, will be borne by the LRS. The Environmental Fund will compensate the LRS for the costs of acquiring biomethane and hydrogen from producers (and associated guarantees of origin). Where the result of the sale of the gases of renewable origin is higher than the respective acquisition cost, the positive difference will be returned by the LRS to the Environmental Fund. The contract is conditional on the qualification of producers to connect to the transport or gas distribution networks, as applicable. The auction documents will be prepared by the Directorate-General for Energy and Geology (DGEGE) in coordination with the LRS to be submitted for approval to the Energy Secretary of State no later than May 30, 2023. The auction is expected to be launched by June 30, 2023. |
The State Budget for 2023 was approved by Law 24-D/2022, of 30 December (OE 2023) with some changes compared to the proposal presented by the Government. In this newsletter, we review the main changes approved by the Portuguese Parliament. PIT Regarding Personal Income Tax (PIT), we highlight the following novelties compared to the Government's proposal:
Capital gains resulting from the sale of crypto assets. The change of residence will be assimilated to disposal for consideration. Capital gains will be calculated according to FIFO (First In, First Out) rules. The exclusion of taxation of capital gains and capital losses will apply not only in respect of disposals that relate to crypto-assets held for a period of 365 days or more but also those that are made against the delivery of new crypto-assets – in this case, the crypto-assets received will be attributed an acquisition value equal to the acquisition value of the crypto-assets delivered. The exclusions from taxation will not apply when the taxpayers or the debtors of the income are not resident in another Member State of the European Union or the European Economic Area or in another State or jurisdiction with which an international double taxation treaty, bilateral or multilateral agreement providing for the exchange of information for tax purposes is in force.
CIT With regard to Corporate Income Tax (CIT), we highlight the following changes:
VALUE ADDED TAX As to Value Added Tax (VAT), the following changes are highlighted:
REAL ESTATE TRANSFER TAX Regarding Real Estate Transfer Tax (RETT), the following measures stand out:
MUNICIPAL PROPERTY TAX With regards to Municipal Property Tax (MPT), the following changes were included:
- up to 100% in cases where the buildings are used for local accommodation. - up to 25% in cases of houses that are not rented or in use as the taxpayer's own permanent residence. A further 50% increase may apply whenever a taxpayer is a legal person or other equivalent entity.
- 25% whenever the urban building or autonomous fraction is destined to habitation and, in the year to which the tax relates, is not rented or allocated to the taxpayer's own and permanent residence. - 50% whenever a taxpayer is a legal person or other equivalent entity. STAMP DUTY In terms of stamp duty, we highlight these new rules:
TAX BENEFITS The State Budget includes the following changes:
For more information on the other tax changes introduced by the State Budget 2023, please click here. |
The Parliament approved the State Budget for 2023 (2023 State Budget). In this newsletter, we summarise the main tax changes set out in the 2023 State Budget. Personal income tax Regarding Personal Income Tax (PIT), the main changes are as follows:
- 50% with a limit of 12.5 times the value of the Social Support Index in the first year. - 40% with a limit of 10 times the value of the Social Support Index in the second year; - 30% with a limit of 7.5 times the value of the Social Support Index in the third and fourth years; and - 20% with a limit of 5 times the value of the Social Support Index in the fifth year.
- Relate to crypto assets held for a period of 365 days or more; or - Are made against the delivery of new crypto-assets – in this case, the crypto-assets received will be attributed an acquisition value equal to the acquisition value of the crypto-assets delivered. These exclusions from taxation will not apply when the taxpayers or the debtors of the income are not resident in another Member State of the European Union or the European Economic Area or in another State or jurisdiction with which an international double taxation treaty, bilateral or multilateral agreement providing for the exchange of information for tax purposes is in force.
Corporate income tax In terms of Corporate Income Tax (CIT), the following changes should be highlighted:
- Production, transport, distribution, and trade of electricity or gas; or - Manufacture of petroleum products refined or from waste, and of agglomerated fuels.
- Fertilisers, organic and mineral fertilizers, and correctives. - Flours, cereals, and seeds, including mixtures, residues, and waste from food industries, and any other products suitable for the feeding of livestock, poultry, and other animals, referred to in the Codex Alimentarius, irrespective of breed and living functionality, intended for human consumption. - Irrigation water; and - Glass bottles.
Value added tax With regard to Value Added Tax (VAT), the following changes should be highlighted:
Special taxes on consumption In terms of special taxes on consumption, the following amendments should be noted: Duty on petroleum and energy products (ISP)
- Products covered by CN codes 2710 19 62 to 2710 19 67 and CN codes 2710 20 32 and 2710 20 38, used in the production of electricity and cogeneration, or town gas on the mainland, are taxed at a rate corresponding to 100 % of the ISP rate and at a rate corresponding to 100 % of the addition on CO2 emissions. - Covered by CN codes 2710 19 43 to 2710 19 48, CN 2710 20 11 to 2710 20 19, CN 2710 19 62 to 2710 19 67, CN 2710 20 32 and 2710 20 38, consumed in the Autonomous Regions of Azores and Madeira and used for the production of electricity, electricity, and heat (cogeneration) or town gas, by entities which carry out such activities as their main activity, are taxed at a rate corresponding to 50% of the ISP rate and 50% of the rate of the CO2 emission surcharge. It is set to rise to 75 % and 100 % on 1 January 2024 and 2025 respectively. - Falling within CN code 2711, used in the production of electricity, of electricity and heat (cogeneration), or of town gas, by entities carrying out such activities as their main activity, apart from those used in the autonomous regions, are taxed at a rate corresponding to 40% of the ISP rate and at a rate corresponding to 40% of the rate of addition on CO2 emissions. It is set to rise to 50% as of 1 January 2024; - Falling within CN codes 2701, 2702, 2704, 2713, and 2711 12 11 which are used in installations subject to an agreement on the rationalization of energy consumption (ARCE), and fuel oil with a sulfur content not exceeding 0,5% falling within CN codes 2710 19 62 and 2710 19 66 will be taxed at a rate corresponding to 30% of the additional rate on CO2 emissions. It is set to increase to 65 % and 100 % on 1 January 2024 and 2025 respectively. Duty on Beverages
Duty on Tobacco
Carbon tax The carbon tax for consumers traveling by air, sea, and river remains in force in 2023. Vehicles tax Increase in the vehicles tax rates applicable to cars, motorbikes, tricycles, and quadricycles, regarding their cylinder capacity and environmental component. Single circulation tax A generalized increase in the single circulation tax rates is applicable to all vehicles. Real state transfer tax Regarding Real Estate Transfer Tax (RETT), the following measures stand out:
Municipal Property Tax With regard to Municipal Property Tax (MPT), the following measures are of particular importance:
- up to 100% in cases where the buildings are used for local accommodation. - up to 25% in cases of houses that are not rented or in use as the taxpayer's own permanent residence. A further 50% increase may apply whenever a taxpayer is a legal person or other equivalent entity.
- 25% whenever the urban building or unit is intended for habitation and, in the year to which the tax relates, is not rented or allocated to the taxpayer's own and permanent residence. - 50% whenever a taxpayer is a legal person or other equivalent entity. Stamp Duty In terms of stamp duty, we highlight these new rules:
Special Contributions The 2023 State Budget extends the following special contributions to 2023: - Special contribution to the conservation of forest resources. - Contribution to the banking sector. - Additional solidarity contribution to the banking sector. - Contribution to the Pharmaceutical Industry. - Extraordinary contribution to the energy sector. - Extraordinary contribution to the suppliers of medical devices industry of the National Health Service; and - Contribution to single-use plastic or aluminum packaging in prepared meals. Tax Benefits The State Budget includes the following changes:
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* New amendments or adjusted amendments during the discussions held in Parliament.
The European Regulation published yesterday, lays down temporary emergency rules to speed up the licensing procedure for renewable energy plants. Under this Regulation, the planning, construction, operation and grid connection of renewable energy plants and installations deemed to be of overriding public interest and Member States must ensure that they have priority in the licensing procedures. To speed up licensing procedures it establishes:
This temporary framework enters into force today, on 30 December 2022 and applies to licensing procedures starting until 30 June 2024. The European Commission will review this Regulation by the end of 2023, with a view to a possible extension of its period of validity. |
The Portuguese windfall profits’ tax law has finally been approved last week by the Portuguese Parliament, confirming that:
According to the Portuguese Government, this new tax will generate revenue between 50 and 100 hundred million euros. But GALP alone has already announced that its tax burden for 2022 and 2023 will exceed 100 hundred million euros. In any case, the impact on prices to consumer will be high and this new tax will contribute to extending the inflation pressure on oil and gas products in 2023. |
Portugal completes the implementation of Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources by establishing the new national goals for renewable energy consumption. Within those, stands out the establishment of a minimum quota of use of energy from renewable sources in 2030 of at least 49 % of renewable energy use in gross final consumption of energy. This represents a more ambitious goal compared to the previously 47 % forecast. In the transport sector, the target is lower: in 2030, the minimum share of renewable energies in the final consumption of energy should be of 29%. To guarantee the fulfilment of these goals, the Portuguese Government established that:
With a view to promoting the use of renewable energies, new incentives are created, of which we highlight the following:
Decree-Law No. 84/2022, of 9 December, where the above goals and measures are set, came into force on December 10, 2022. |
In 2023, rents under urban and rural leases will be reviewed in accordance with an index of 1.02, i.e., increasing rents will be limited to 2%, unless the parties agree otherwise. Pursuant to Law no. 19/2022, of 21 October 2022, the above index of 1.02 shall apply to urban and rural lease agreements that establish annual rent review to take place in accordance with the index established in the applicable law or the annual publication made by the National Statistics Institute in the Official Gazette (Diário da República). To compensate landlords for the above-mentioned limitation to rent review – which will be below inflation and consumer price index in 2022 – only a portion of their real estate income will be considered for purposes of income taxation. For individuals, real estate income subject to the tax rates established in article 68, section 1, or article 72, section 2, of the Individual Income Tax Code (IITC), shall be determined by applying a factor of 0.91. As to real estate income subject to the special tax rates established in sections 2 to 5 of article 72 of IITC. For companies, taxable income originating in rent subject to the tax rates established in article 87 of the Corporate Income Tax Code (ITC) shall be determined by applying a factor of 0.87. This form of support granted to landlords shall apply to rents (i) that become due and are paid in 2023, (ii) originated in lease agreements in force before 1 January 2022 and reported to the tax authorities as required by Portuguese law and (iii) that do not originate from lease agreements which rents are reviewed in accordance with an index exceeding the above-mentioned index of 1.02 established for 2023. |
A “Medium-Term Agreement on Improving Incomes, Wages and Competitiveness” (“The 2023-2026 Social Pact”) has recently been signed by the so-called Portuguese Social Partners (representatives of employers, unions, and the Government). It sets guidelines for employment collective bargaining on the increase of salaries for the years 2023 to 2026. The most relevant provisions of the Portuguese 2023-2026 Social Pact in this regard are: (i) The annual nominal appreciation of salaries per employee of 4.8% on average (appreciation of 5.1% in 2023; 4.8% in 2024; 4.7% in 2025 and 4.6% in 2026); (ii) An increase of the minimum monthly guaranteed remuneration up to at least €900.00 in 2026 (increase to €760.00 in 2023; €810.00 in 2024; €855.00 in 2025 and €900.00 in 2026). (iii) The increased remuneration for overtime work above 100 hours: (i) 50% for the first hour; (ii) 75% for each subsequent hour; (iii) 100% for each hour on weekly rest days or public holidays. (i) A tax exemption on the meal allowance of up to €5.20 per day. (ii) The increase to the severance compensation to 14 days’ salary per year of seniority in case of collective dismissal or job extinction. (iii) An increase of 50% to the employer’s tax deductions regarding an increase in salaries (wages and social contributions), for all companies that have at least complied with one of the following conditions: (i) they have signed or renewed their collective bargaining agreements less than three years ago; (ii) they have annually increased salaries above the values of the 2023-2026 Social Pact and of their application framework collective bargaining instruments; (iii) they have reduced the difference between the remuneration of the 10% of better remunerated and the 10% of less well remunerated. |
Employers must pay attention to the 2023-2026 Social Pact for the impact it will have on their labor costs, as the above guidelines can be construed as an instrument that, to some extent, allows anticipating the Portuguese companies’ labor costs in the forthcoming years.
The rules implementing the 2022 State Budget were recently approved.
We’re analyzing labor measures in this article. The main ones are:
Salary and bonuses
- State-owned companies must have instruments (e.g. collective labor agreements, legal or contractual instruments, or internal regulations approved under the State Business Sector Legal Framework) establishing mechanisms for: (i) performance assessment; (ii) performance awards; and (iii) general employee validation. The lawfulness of these acts depends on the prior existence of those instruments.
- Promotions not covered by mandatory changes in remuneration, general career progressions, as well as internal selection procedures for change of level or tier that can result in a pay raise, not explicitly mentioned in a specific rule of the 2022 State Budget Law (LOE 2022), depend on special Government approvals.
- Directors of the bodies and services can, in compliance with the legal requirements and budget sums, allow: (i) remuneration changes by management option; (ii) award performance bonuses.
New hirings
- Public Administration and Finance Government members can open hiring procedures, for open-ended contracts or fixed-term contracts and for general or special careers, as long as: (i) there is relevant public interest in recruitment; (ii) a budgetary responsibility statement is issued by the requesting body, service or entity; and (iii) the Government member leading the service or body carrying out the recruitment agrees.
- Legal persons under public law and public business sector companies can hire permanent workers.
Operating expenses of companies in the state's business sector
- The operating expenses ratio must be equal to or lower than in 2019 or 2021, depending on which is higher.
- In any case, operating expenses should be equal to or lower than in 2021 when it comes to: (i) staff; and (ii) travel, cost aid and accommodation, and the ones associated with contracting of studies, opinions, projects and consulting services.
Introduction
The new Portuguese Electronic Communications Law ("LCE"), published on August 16, 2022, transposes Directive (EU) 2018/1972, which informs the most recent recast of the sector's regulatory framework establishing the European Electronic Communications Code ("EECC").
In 2004, Portugal transposed the Review99’s Directives (of 2002) into a single act thus creating a national version of an electronic communications code, the transposition of EECC should have been an easy task. Interestingly, as the transposition deadline was practically expired before the pandemic outbreak, the cause of this delay seems to be mostly attributable to the sector's upheavals, such as the 5G auction technology implementation, rather than to COVID-19 lockdowns.
Although it broadly follows its predecessor, the newly enacted LCE is an entirely new piece of legislation, and, as such, some relevant changes were introduced, not only to accommodate all the new features of EECC, but also to reflect the new regulatory policy priorities.
Most of the relevant new features focus on issues regarding consumers vis-à-vis operators’ rights in general, privacy in electronic communications and a thorough overhaul of the sanctions’ framework. We highlight some of them below.
Consumer rights
Regarding consumer protection rules introduced by the new law:
- Retention period. According to the new paragraph 3 of article 131, the availability of installments with shorter retention periods (12 or 6 months) is no longer mandatory, however, there is a new maximum limit of 24 months.
- Unavailability of service. The law states that in case there are any reports of service unavailability lasting longer than 24 hours, the operator must credit the equivalent value. The return of this amount does not only apply when there are interruptions of more than 24 consecutive hours, but also to situations where the failures added together exceed this time, per billing period. However, for the consumer to be able to terminate the contract free of charge, a 15-day period of persistence of the problem is required (after the report).
Situations in which no early termination costs are charged. The new LCE defined a few situations where early termination costs cannot be charged, such as unemployment (for reasons not attributable to the consumer), incapacity to work for more than 60 days with a loss of income or a change of address to a place where the operator cannot provide an equivalent service.
Electronic Communications Privacy
- Amendment to the Law on Privacy in Electronic Communications. Regarding the Law on Privacy in Electronic Communications (Law no. 41/2004, of 18 August), Articles 7 and 10 are amended. Essentially, the amendments concern the increase of the number of organizations to which personal data regarding the location of emergency communications may be shared with, now covering not only the organizations legally entitled to receive such communications, but also those entitled to process them.
- Itemized billing. Article 122, paragraph 5, of the new LCE provides that itemized bills do not have to identify free of charge calls, including calls to helplines.
- Procurement avoidance. It is not clear in Article 126 whether, in the case of services provided to a company, the company that contracts the electronic communications services will be included in the database or if it will be the employees as actual users of the services.
Sanctioning framework
Article 176 and partially Article 164 of LCE outline a new and very broad sanctioning framework for electronic communications in Portugal.
Some more details...
- "Electronic communications service". The definition of "electronic communications service" was broadened and now includes a range of activities typically carried out by instant messaging applications, email, internet calls and personal messages through social media.
- General consent. A notifying duty is now imposed where companies intending to offer public electronic communications networks and publicly available electronic communications services must inform the National Regulatory Authority ("ARN") about the start of their activity.