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Newsletter May 2018

Legal Updates

Housing credit with best year starting since 2010

Housing credit continues to register a strong buoyant. According to the data from the Bank of Portugal, in the first two months of this year more than 1,300 million euros have been lent. This situation confirms a growth of 21% over the same period of the previous year, being the best start of year since 2010.

The diversification of Banking Institutions’ supply in this segment of credit, as well as the decrease in the spread, led to the growth observed. At the beginning of 2018, the spread was 1.47% and is currently 1.39%, the lowest since mid-2010. In February, more than half of the borrowed capital (57%) was destined to acquisition of real estate for housing purposes.

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New paradigm in the real estate industry regarding the vat

The CJEU was asked to rule on the compatibility of the Portuguese law with the Union law, concerning the regularization of VAT deductions in respect of immovable property. Real estate transfers and leases are, as a rule, VAT exempt transactions, in the Article 9 of the VAT Code, although it is permissible to waive that exemption.

In case of waiver of the exemption, and with the total or partial deduction of the tax, there will be a regularization of the deductions made, at one go, whenever the property is affected for purposes unrelated to the activity carried out by the taxable person or is not effectively used for business purposes for a period of more than two consecutive years, which is five consecutive years in the current version.

The Court concluded that the owners of properties unoccupied for more than two years, who have demonstrated that they have made all the necessary efforts to rent the property, will not have to proceed with the regularization of VAT, having also considered that the regime was in violation of fundamental principles.

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Business Updates

Tax me if you can - The taxation of digital enterprises

According to the OECD and the EU Commission, current international tax rules are inadequate to the new reality of the digital economy. Business models generate profits from the provision of digital services in a country without being physically present there. As a result, there is a disconnection between where value is created and where taxes are paid.

Accordingly, two proposals for Directives have been presented with the aim of establishing new EU-level rules to ensure a fair and efficient taxation of digital companies – thus avoiding unilateral responses.

The first proposal will allow Member States to tax the profits of digital companies holding there a “Virtual Stable Establishment”, determined by the level of digital presence that this business demonstrates i.e. “significant digital presence”.

The second proposal creates a provisional tax on company revenues, which covers the main digital activities that currently escape taxation in the EU.

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The portuguese agricultural sector grows beyond frontiers

According to the National Statistical Institute (INE), in February, Portuguese agri-food exportation increased by 10.1% compared to the same month of 2017. The agri-food sector has been the great revelation in recent years regarding export growth, boosted mainly due to the quality and variety of the national products, as well as the modernization of the sector.

The promotion of the best that Portugal has to offer demonstrates an increased competitive capacity and worthy of the trust of consumers at national and international level, and in the last five years the exportation of agri-food products registered an average annual growth of 5.4%, mainly in products such as wine, olive oil, meat, fish and preserves.

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