Newsletter May 2020

Legal Updates

Greenhouse gas emissions and allocation of permits

Last April 6th, the Decree nº 12/2020 entered in force, establishing the legal framework for greenhouse gas emissions and allowance trading, transposing the EU Directive 2018/410 into Portuguese law.  

This Decree foresees several matters, including: the obligation of greenhouse gas emission Permits; the rules for free allocation of emission allowances; the sale of emission allowances by auction; and also, the possibility of optional exclusion of installations emitting less than 2500 tCO (index 2) for the fourth period of the ETS (European Emissions Trading Scheme).

Said legal regime will therefore apply to all installations carrying out activities involving the emission of gases, in particular those involving the combustion of fuels, the production of glass, the refining of mineral oils, the manufacture of cardboard or paper and the production of ammonia.

Thus, allowing for the expectation to achieve the objective of the Decree-Law, i.e. a 43% reduction in annual CO emissions in 2030 (index 2) compared to 2005 emissions, in the context of combating climate change.


ASF recommendations to insurance companies and insurance distributors

In the current Pandemic context, the Portuguese Insurance and Pension Funds Supervisory Authority (ASF) issued the Circular Letter No. 2/2020, of 30 March, addressed to Insurance Companies, and the Circular Letter No. 3/2020, of 1 April, addressed to Insurance Distributors containing recommendations to be adopted in light of this exceptional situation.

Regarding Insurance Companies, it is recommended that their financial position be kept under review in order to take timely decisions in case of unfavorable developments and to adopt measures in order to restrain actions that involve the decapitalization of the Companies. Extraordinary requests for information will be sent to Companies to assess the impact of the pandemic.

As far as Insurance Distributors are concerned, virtual communication with Clients should be prioritized. Information should be provided in a clear manner, namely the contractual terms of their products and changes resulting from the pandemic. The deadlines for replying to enquiries and for reporting mandatory information to insurance and reinsurance intermediaries should be made more flexible.

ASF alerts that Companies and Distributors should adopt a more flexible stance towards the situation of vulnerability that their clients are experiencing, without prejudice to the compliance with the applicable legislation.


Business Updates

2020 State Budget - Tax incentives for inland enhancement

Law no. 2/2020, of March 31st, which approves the State Budget for 2020, came into force on April 1st and brought novelties regarding the tax incentives applicable to business activity in the interior of our country.

It is noteworthy the increase from EUR 15,000 to EUR 25,000 in the amount of taxable income covered by the 12.5% reduced rate of corporate income tax (IRC) applicable to micro, small or medium-sized enterprises engaged directly and principally in an economic activity of an agricultural, commercial, industrial or service nature in the territories of the interior.

it is also noteworthy the granting of an authorization to the Government for the creation of a tax benefit regime within the scope of the Inland Revenue Valuation Program applicable to IRC taxpayers on the basis of expenses resulting from the creation of jobs in the inland. Within this scope, it will be possible to deduct from the taxable income 20% of the expenses incurred in the period that exceed the amount of the Guaranteed Minimum Monthly Retribution and up to the limit of the taxable income of the tax period.

As it is well known, the interior of the country suffers from depopulation, and measures to mitigate regional asymmetries and promote territorial cohesion must be applauded.


European investments in the Madrid-Lisbon rail link and the o Porto metro system

On March 17, 2020, the European Commission approved an investment of approximately EUR 265 million from the European Regional Development Fund to improve the Madrid-Lisbon rail link.

More than 178km of the 715km of the route connecting the Iberian capitals will be significantly improved. This investment will benefit long-distance transport of passengers and goods and will make the desired high-speed link effective.

The works are expected to start in December 2022, with a growth in services and industry in both countries: a “win-win” situation, where there will be several winners – infrastructure, people, environment, business, and employment.

Furthermore, the European Commission approved an investment of EUR 107 million for the modernization and extension of the Oporto Metro, namely through the extension of the yellow line in Vila Nova de Gaia and a new line in the city of Oporto. This investment will reduce traffic, pollution and increase connections between the various centers of interest in the cities of Porto and Vila Nova de Gaia.