Portugal is a semi-presidential republic, with three branches of government:

• the executive, exercised by the government headed by a prime minister;
• the legislative, exercised by both the single-chambered Portuguese parliament and government; and
• the judiciary, exercised by independent courts of law, which is subject only to law and whose rulings are binding.

The judicial system is divided into civil and administrative courts.

Civil courts have general jurisdiction in civil and criminal matters and all matters not assigned to other courts, and are organised as follows:

• District Courts (Tribunais de Comarca) – first instance courts, divided into courts with general, specialised or specific jurisdiction, with the broadest authority to issue initial judgments, and subordinate to the Courts of Appeal;
• Courts of Appeal (Tribunais da Relação) – second instance courts, typically one per judicial district, which review judgments of the District Courts and are subordinate to the Supreme Court of Justice; and
• the Supreme Court of Justice (Supremo Tribunal de Justiça) – last instance appeal court with nationwide jurisdiction, which reviews judgments of the Courts of Appeal on rulings of law, and whose judgments are final and non-appealable.

Administrative courts settle disputes arising out of administrative and tax matters, and comprise:

• the Circuit Administrative Courts (Tribunais Administrativos de Círculo);
• the Tax Courts (Tribunais Tributários);
• the Central Administrative Courts (Tribunais Centrais Administrativos); and
• the Supreme Administrative Court (Supremo Tribunal Administrativo), which has nationwide jurisdiction.

Other courts include:

• the Constitutional Court (Tribunal Constitucional), which assesses the constitutionality or legality of laws and failure to legislate;
• the Court of Auditors (Tribunal de Contas), which scrutinises the legality of public expenditure and accounts; and
• Justices of the Peace (Julgados de Paz), which have competence in minor value civil proceedings.

Portugal has a code-based civil law justice system, under which case law is typically resorted to for interpretation purposes.

Decree-Law 138/2014 of 15 September sets forth certain restrictions and mechanisms aimed at preserving strategic assets in relation to foreign direct investments in strategic infrastructure and services, notably those related to energy, communications, transportation, national security and defence, whenever investments are made by entities from outside the European Union/European Economic Area. Foreign investment is only subject to control by the Portuguese government when it meets the following criteria:

• the investor is any individual, company or any other type of legal entity with domicile, a registered office or a de facto office in a jurisdiction that is not a member state of the EU or is outside the EEA;
• the investment/target involves the infrastructure and assets used for national security and defence, or assets used for the provision of vital services in the areas of energy, communications and transportation (strategic assets); or
• the transaction involves the acquisition of direct or indirect control of any “strategic asset”. The concept of control is similar to the concept used in competition law and refers to the acquisition of legal or de facto control over:
1. the majority of the share capital of a company;
2. the rights of ownership or use of all or part of an undertaking’s assets; or
3. rights or the signing of contracts that grant a decisive influence over the composition or decision-making of an undertaking’s corporate bodies.

If the investor/target and type of investment fall within these criteria, the Minister responsible for the sector related to the relevant strategic asset may propose to the Council of Ministers that the government opposes a transaction whenever the acquisition of control poses a real and substantial threat to national security or to the security of supply of basic services considered fundamental to the country.

The Minister responsible for the sector related to the relevant strategic asset has 30 days from the date of the transaction, or the date the transaction becomes known, to open an investigation to determine the risk that such acquisition may present to national security or to the security of supply of basic services considered fundamental to the country. If they determine that such a risk is present, the Minister must immediately notify the Minister of Foreign Affairs, the Minister of Defence and the Minister of Homeland Security.

During the investigation, the person/entity that acquired the strategic assets is obliged to provide all information and documentation requested by the Minister. The Minister may enact a ministerial order listing the documents and information that may be required in an investigation.

When all documents and information have been received by the Minister that determined the investigation, the government has 60 days to oppose the transaction based on a proposal of the Minister responsible for the sector related to the strategic asset. Opposition to a transaction needs to be substantiated and grounded.

If the government does not make a decision within 60 days, the transaction is deemed approved.

Foreign investors who intend to acquire a strategic asset may request prior confirmation from the Minister responsible for the sector related to the strategic asset that the transaction will not be opposed by the Portuguese government. This request must be accompanied by a description of the terms and conditions of the transaction.

Apart from the trigger, the process and review are relatively similar to an investigation initiated by the government. Any Minister responsible for a sector related to a strategic asset may enact a ministerial order listing the documents and information that may be required in the case of voluntary prior assessment.

The government has 30 days to decide; if it does not decide within this timeframe, the prospective transaction is deemed to be unopposed.

Transactions subject to opposition by the government are null and void.

In certain cases, the authorities may impose certain conditions or otherwise require assurance regarding the following:

• the physical integrity and safety of the strategic asset;
• the permanent availability and operational readiness of the strategic asset;
• the capability for punctual performance of the legal obligations of the person or legal entity that controls the strategic asset;
• the continuity, regularity and quality of services of general interest provided by the person or legal entity that controls the strategic asset;
• the preservation of the confidentiality of data accessed in the context of the activity pursued by the person or legal entity that controls the strategic asset; and
• the rights to the technology required for management of the strategic assets.

Any decision of opposition to a transaction is subject to appeal. If applicable, injunctions are available to the foreign investors or their counterparties under the law of administrative process.

Most companies in Portugal are limited liability companies, of which there are two main types:

• private limited liability companies (sociedades por quotas or Ldas), normally used for less complex investments and structures; and
• public companies (sociedades anónimas or SAs), which have more complex corporate structures and are therefore chosen for larger investments.

The choice between SAs and Ldas typically depends on the following aspects, amongst others:

• the size of the business to be pursued;
• the underlying capital and legal requirements;
• the intended ability and agility to raise capital;
• the transferability of the shareholdings; and
• flexibility.

Ldas can be incorporated by a single shareholder (under specific requirements) or by two or more shareholders, and the respective share capital is divided into “quotas”. Ldas are not subject to any minimum share capital requirements. All quotas require registration with the Portuguese Commercial Registry Office.

SAs can be incorporated either by a single shareholder (provided the shareholder is a corporate entity) or by a minimum of five shareholders, with the respective share capital being represented by shares. The minimum share capital of an SA is EUR50,000 and shares are subject to registration with the company itself. SAs require the appointment of a statutory auditor.

The quotas in an Lda and the shares in an SA are used as a measure to determine the current or potential rights (such as voting or dividends) and obligations of the shareholders.

In terms of liability, each shareholder is liable towards the company for the amount of subscribed share capital, whereas only the company’s assets are liable for the company’s debts.

In terms of the transferability of shareholdings, Ldas are typically less flexible than SAs. Other than transfers to spouses, ascendants and descendants (unless otherwise provided in the respective by-laws), all transfers of quotas require the company’s consent. Conversely, in SAs all share transfers are typically free, with restrictions on transferability only being admitted in specific cases under law. They must be included in the by-laws, respective share certificates and the company’s share ledger in order to be effective against third parties.

Typically, Ldas are more suitable for start-up companies or family companies, as they have reduced operational costs, while SAs are more commonly used for mid-sized/larger companies and joint ventures.

The first step consists of applying to the National Companies Registrar for an admissibility certificate authorising the company’s name (Certificado de Admissibilidade de Firma), which requires an indication of the registered office, share capital and corporate purpose for such effect. The company name may also be obtained from a pre-approved list of names, which circumvents the Registrar’s current stringent authorisation procedure but is subject to an online registration procedure.

After obtaining the certificate, the company’s incorporation deed needs to be provided in order to register the company with the Portuguese Commercial Registry, through a notarial deed or private contract executed by the shareholders or legal representatives, containing the following information:

• the shareholders’ identification;
• the amount subscribed by each shareholder;
• whether the share capital is fully subscribed and paid up or if payment is deferred;
• the articles of association; and
• the company’s beneficial owner, as per Law 89/2017 of 21 August.

Despite efforts to reduce the bureaucracy, the process remains time-consuming: investors should expect approximately ten days for the registration to be concluded.

Alternatively, investors may resort to an expedited 24-hour incorporation procedure, with pre-approved template documents, although these usually require subsequent time-consuming adjustments of the by-laws and registration thereof with the Portuguese Commercial Registry Office, due to insufficient content and inadequacy for the purpose or structure envisaged by the investors.

The following acts are subject to mandatory registration before the Commercial Registry Offices:

• amendments to the by-laws;
• appointment or resignation of corporate bodies;
• transfers of quotas (for Ldas); and
• approval of financial statements.

Companies are required to have at least one Annual General Meeting for approval of the annual accounts, to be held within three months of the accounts’ closing date of the previous year.

Companies are also required to register the respective ultimate beneficial owner(s).

Other reporting obligations may apply, depending on the shareholder structure of the company and its respective activity/corporate purpose.

The main governing body for Ldas is the shareholders' meeting (Assembleia Geral), aggregating all shareholders. The shareholders' meeting is responsible for appointing the management body, which may be comprised of one or more managers (gerentes), who undertake to pursue the company’s corporate interest and follow the resolutions of the shareholders. In Ldas, the appointment of a supervisory board/auditor is optional.

In SAs, the board of directors (Conselho de Administração) is the main corporate body, and is composed of directors appointed by the shareholders' meeting. SAs are mandatorily supervised by a statutory supervisory board or a sole auditor. SAs may have sole directors if the share capital does not exceed EUR200,000; otherwise the SA will require a minimum of two directors.

Despite being limited liability companies, shareholders therein may still be held liable for damages (under applicable law or if foreseen in the by-laws) whenever they do not pursue the company’s best interest. Moreover, certain resolutions focusing on promoting private benefits for certain shareholder(s) may be considered void.

Directors or managers may also be held liable for damages caused to the company, the shareholders and/or creditors due to failure to comply with their obligations to act with skill, care, diligence and loyalty in the pursuit of the company’s best interests.

Although it is not directly contained under Portuguese law, the concept of piercing the corporate veil has been raised before Portuguese courts, but the courts remain extremely cautious in the application of the concept due to its subsidiary nature.

The employment relationship is ruled by law, collective bargaining agreements, employment agreements and labour practices that are not contrary to the principle of good faith.

The most important sources of labour legislation are the Portuguese Labour Code, the Labour Code Regulation and the Legal Framework for the promotion of Safety and Health at Work.

Case law decisions are not legally binding but do play a relevant part within judicial procedures.

General Requirements Applicable to Employment Contracts

Generically, labour contracts in Portugal have no special requirements, except for specific categories of contracts, namely term contracts or employment contracts under telework schemes, which must be concluded in a written form.

There are two basic types of labour contracts:

• indefinite contracts (permanent), which are not subject to any form and are regulated by the general labour regulations; and
• term labour contracts, which are entered into to satisfy the transitory needs of a company.

Permanent employment agreements are not required to be in writing, although parties do typically enter into written agreements.

Fixed-term Employment Contracts

Fixed-term employment contracts can only be used to satisfy a company's temporary needs, and only for as long as necessary to meet those needs.

Fixed-term contracts may also be based on other limited reasons – eg, for the hiring of a person who has been unemployed for a very long time, for the launch of a new business activity or new establishment, or for a company employing fewer than 250 employees.

Duration of Employment Contracts

Fixed-term employment contracts cannot exceed two years. They can be renewed up to three times but the total duration of the renewals cannot exceed the initial duration of the employment contract.

Employment Contracts Under Telework Schemes

The implementation of a telework scheme also depends on a written agreement, which may be included in the initial employment contract or in a separate agreement.

Duty of Information

Regardless of the form of employment contract, the employer must inform the employee, in writing, of the material terms of the employment contract and the duties for which the employee has been hired, within 60 days of work beginning.

Maximum Working Time

Regular working hours may not exceed eight hours per day and 40 hours per week.

Maximum working hours may be determined on average within a reference period, as follows:

• the applicable collective bargaining agreement may increase the maximum by as much as four hours per day, provided that the weekly working period does not exceed 60 hours in total; and
• the employer and the employee may agree to an increase of up to a maximum of two hours per day, provided that the weekly work period does not exceed 50 hours.

Exemption From Work Schedule

The following groups of employees may be exempt from the working hour requirements by written agreement:

• employees in supervisory positions or positions of trust, or employees who provide support services for individuals in those positions;
• employees engaging in work that, by its nature, can only be performed outside of normal working hours; and
• employees who perform their work outside the premises and are not subject to the employer's direct control.

Exempt employees are not subject to the normal working hour limits and can agree any working hour schedule with the employer. Such exemption does not affect these employees' entitlement to daily rest, weekly rest days or public holidays.

Overtime Work

Overtime worked by non-exempt employees during normal working days entitles the employee to the following additional payments:

• 25% of the employee's regular rate of pay for the first hour of overtime; and
• 37.5% of the employee's regular rate of pay for any additional hours of overtime or fractions thereof.

Overtime worked during a weekly rest day or on a public holiday entitles the employee to an additional 50% of their regular rate of pay for each overtime hour or fraction thereof. Overtime rendered on mandatory weekly rest days entitles the employee to one day of paid compensatory rest, to be taken on one of the three business days following the day on which overtime was rendered.

Employment contracts can terminate due to the following reasons:

• expiration of the contract;
• termination of the agreement between the parties;
• dismissal with just cause;
• collective redundancy;
• dismissal due to extinction of the work position;
• dismissal due to unsuitability; or
• termination by the employee (with or without just cause).

Labour law prohibits employers from dismissing employees except for disciplinary "just cause", unsuitability, collective dismissal or, in some limited circumstances, extinction of the work position.

Employees may not be dismissed simply by giving the employee notice (or for discriminatory reasons, etc); termination may only occur through a mutual termination agreement between the parties.

Disciplinary "just cause" is defined as a wilful conduct by the employee which, owing to its gravity and the effect of such conduct, makes continuation of the employment relationship immediately and practically impossible.

Collective Redundancy – Grounds

A collective redundancy is understood as the termination of employment contracts by the employer, simultaneously or successively over a three-month period, affecting at least two or five employees, depending on whether the company has fewer or more than 50 employees, and whenever such termination is due to the closing of one or various sectors or equivalent structures or a reduction of personnel due to market, structural or technological reasons.

Collective Redundancy – Procedure

Collective redundancy is initiated with an announcement, in writing, to the Workers' Committee or, in its absence, the Inter-union or Union Committees or, in the absence of any organised structure of worker representation, to each of the employees affected by the dismissal. In this latter case, the employees may appoint a representative committee of no more than three or five members within five working days of receiving such communication, depending on whether the redundancy affects up to five or more employees.

On the date of the announcement, the employer must also send a copy to the relevant service of the Labour Ministry, along with all relevant documents.

Following the receipt of the above-mentioned announcement, the employer and the employees must enter the information and negotiation phase, with the purpose of reaching an agreement on the scale and effects of the measures being adopted and on other measures that reduce the number of workers being made redundant.

Having reached an agreement, or in the absence thereof, the employer must do the following, at least 15 days after the announcement of the dismissal:

• notify, in writing, each of the employees of its decision to dismiss them, with express reference to the motives and date of termination of their contracts, the amount of the severance pay and the method and place of its payment, and the labour credits due by the termination of the labour agreement; and
• send the minutes of the negotiation meetings and a list of each employee and their personal data to the Labour Ministry (and a copy to the workers' representative structure).

The final decision must be issued with a notice regarding the following anticipated dates of termination:

• 15 days for employees who have been employed for less than one year;
• 30 days for employees who have been employed for between one and five years;
• 60 days for employees who have been employed for between five and ten years; and
• 75 days for employees who have been employed for more than ten years.

Severance

The amount of severance pay depends on each employee's hiring date:

• for employees hired after 1 October 2013, it corresponds to 12 days of base salary and seniority payments for each year of service or fraction thereof; and
• an employee hired before 1 November 2011 would be entitled to severance of:
1. 30 days until 31 October 2012;
2. 20 days from thereon until 30 September 2013;
3. 18 days after 30 September 13 for the first three years (only applicable when the agreement has not reached three years by 1 October 2013); and
4. 12 days of severance from thereon.

In fixed-term employment contracts, severance amounts to 18 days of base salary and seniority payments for each year of service and fraction thereof.

Employees are guaranteed the right to:

• form trade union associations at all levels;
• join or refrain from joining a trade union;
• choose which trade union to join;
• organise and regulate trade unions; and
• engage in trade union activity at the company.

Employers are prohibited from:

• subjecting an employee to any agreement or act that includes as a condition that the employee becomes, or refrains from becoming, a member of a trade union (or that the employee resigns from a trade union); or
• dismissing, transferring or in any way adversely affecting an employee for exercising their right to join a trade union or due to an employee's membership or non-membership in a trade union.

Trade Unions

Trade unions have the right to do the following:

• enter into collective bargaining agreements;
• render economic and social services to their affiliates;
• participate in the preparation of labour legislation;
• initiate and intervene in judicial and administrative proceedings regarding their affiliates;
• participate in national and international organisations; and
• participate in restructure procedures.

Trade union representatives are covered by some protective rules concerning work hours, absences, relocation, suspension and dismissal for cause, to carry out their duties.

Works Councils

Employees also have the right to set up works councils, which are entitled to:

• provide information and consultation;
• monitor company management; and
• participate in restructuring procedures.

The protection provided to workers' representatives is the same as for trade union representatives.

An individual will be considered resident in Portugal if they spend more than 183 days in Portugal in any given 365-day period, or if they have their main and habitual residence in Portugal.

For Portuguese resident taxpayers, the Portuguese tax regime provides for a categorisation of the income sources, with employment income being taxed under the Category A rules at progressive rates, as follows:

• the rates progress up to 48%, which is applicable for income above EUR75,000; and
• an additional surcharge is added to this rate, of 2.5% for income over EUR80,000 and of 5% for income over EUR250,000. This means that a total tax rate of 53% may be applicable for income that exceeds EUR250,000.

Companies are required to withhold tax at source on employment income.

Portuguese-sourced employment income derived by non-residents will be taxed in Portugal at a flat rate of 25%, when this is permitted by the relevant treaties.

Employment Income Under the Non-habitual Resident Regime

Portugal has introduced a special tax regime for taxpayers that have not been resident in Portugal for the previous five years and become resident in Portugal. Once granted, the non-habitual resident (NHR) regime will last for ten years, and allows taxpayers to obtain a host of different tax benefits – namely exemptions on certain types of foreign income. The following applies to employment income:

• non-Portuguese-sourced employment income obtained by NHR taxpayers may be exempt for tax purposes in Portugal where it is effectively taxed in the country of source;
• employment income from foreign sources that was not effectively taxed at source, or Portuguese-sourced employment income, may be taxed at a flat 20% rate where it is derived from high-value activities, as set out in a list of activities published by the Portuguese tax authorities. This is a very prescriptive list, meaning that any activity listed will be taxed at 20%; and
• where the activity is not listed, the employment income will be taxed at the normal, progressive rates. It should be noted that the flat rate of 20% tax applicable to high-value activities also applies to some types of independent services.

Social Security Charges

Social security is payable on employment income at the following rates:

• 23.75% at the level of the employer; and
• 11% at the level of the employee.

Social security is levied on the base salary and a number of other regular payments. However, it should be noted that certain bonus payments, stock option plans and other forms of variable incentives for employees may not currently be subject to social security contributions, provided that all relevant conditions are met.

Portugal has enacted a typical corporate income tax system.

Resident companies and non-resident companies maintaining a permanent establishment (PE) in Portugal are subject to corporate income tax (IRC) and a state surcharge (derrama estadual). For resident companies, the IRC is levied on worldwide income, including capital gains. Municipalities may also levy a municipal surcharge (derrama municipal) on the annual taxable income of corporations.

A company is deemed resident in Portugal when its legal seat or place of effective management is in Portugal.

The standard IRC rate is 21%. As mentioned, a state surcharge may apply, at the following progressive tax rates:

• 3% on income over EUR1.5 million;
• 5% on income over EUR7.5 million; and
• 9% on income over EUR35 million.

IRC is charged on net taxable income, consisting of business/trading income, passive income and capital gains. Only realised income and capital gains and losses are relevant for the computation of taxable income, although there are certain exceptions to this rule.

A foreign tax credit for tax paid abroad is usually available.

The IRC Code also provides for a simplified tax regime for companies with taxable income of up to EUR200,000, whereby the taxable income is simply calculated using a percentage of the annual turnover.

Participation Exemption Regime

Dividends received from qualified resident and non-resident subsidiaries and capital gains realised from the transfer of a participation in qualified resident and non-resident subsidiaries are exempt from IRC. To claim the benefit, the following requirements must be met:

• a 10% direct or indirect minimum participation must be held for more than one year;
• the shareholder must not be a tax transparent company;
• the company effecting the distribution must be subject to income tax that is imposed at a nominal tax rate of at least 12.6%, and must not be in a tax-favoured jurisdiction; and
• the capital gain must not relate to the sale of shares in a Portuguese real estate company, defined as a company in which more than 50% of the asset value is attributable to real estate in Portugal acquired on or after 1 January 2014, other than real estate used for carrying on an agricultural, industrial or commercial activity.

Withholding Tax Rates

Portugal imposes withholding tax (WHT) on payments to non-Portuguese companies or individuals. The rates thereof are reduced when the beneficiary owner of the income is resident in a country or territory with which Portugal has entered into a double tax treaty.

The non-treaty rate on income paid to non-Portuguese beneficiaries is typically 25% or 35%.

However, the following special rules relating to WHT should be noted.

Dividends

Dividends paid by a Portuguese company to a non-resident holding company will not attract WHT, provided that all the following criteria are met:

• the holding company is resident in an EU member state, a qualifying state within the EEA, or a state that has entered into a double taxation agreement with Portugal providing for the exchange of information for tax purposes;
• the holding company holds a direct or indirect participation of at least 10% of the share capital or the voting rights of the Portuguese company;
• the participation in the Portuguese company has been held for at least one year prior to the distribution;
• the holding company is subject to income tax in its country of residence at a nominal rate of at least 12.6%; and
• an arrangement or series of arrangements are not deemed to have been put in place to obtain a tax advantage that defeats the object and purpose of the elimination of double taxation.

Capital gains

Capital gains on the sale of shares and qualifying securities of Portuguese entities are exempt from tax when derived by qualifying non-resident companies that do not hold the qualifying assets through a PE in Portugal. To qualify for the capital gains exemption, the non-resident company may not:

• have a PE in Portugal that is involved in selling the assets;
• be resident in a blacklisted jurisdiction; and
• be more than 25% owned by a Portuguese resident company or individual.

As with the exemption for dividends:

• the seller must be subject to corporate income tax at a nominal tax rate of at least 12.6%;
• the participation must be all or part of a direct or indirect holding of at least 10% of the company that issued the shares;
• the participation must have been held for an uninterrupted period of at least one year prior to the sale; and
• the sale must not be part of an arrangement put in place with the purpose of obtaining a tax advantage that defeats the object and purpose of the elimination of double taxation.

The regime does not apply to a sale of shares if, at any given time in the year prior to the sale, the company issuing the shares derives more than 50% of its value from real estate located in Portugal, unless the immovable property is used for carrying out an agricultural, industrial or commercial activity.

Interest and royalties

Following the transposition to Portuguese legislation of the Interest and Royalties Directive (IRD), interest or royalty payments to companies resident in an EU member state or Switzerland are exempt from tax on the receipt of interest or royalties if the requirements set forth in the IRD are fulfilled.

This exemption may be denied if the non-resident company does not have up-to-date beneficial ownership registration, or if it reflects an arrangement or series of arrangements that have been put in place for the purposes of obtaining a tax advantage that defeats the object and purpose of the elimination of double taxation.

Income tax treaties

At the time of writing, Portugal has 78 treaties to avoid double taxation in force and effect, with at least two new treaties currently being negotiated (Australia and Mauritius).

VAT

Being part of the EU, Portugal has transposed the EU VAT Directive and the various regulations relating to the EU’s common VAT system.

The Portuguese VAT rates are:

• 23% applicable to all sales of goods and services, unless otherwise provided;
• 13% applicable to certain foodstuffs, certain cultural events, restaurant food and certain beverages, etc; and
• 6% applicable to, inter alia, pharmaceutical and medical products, social housing, hotel accommodation, certain construction works, etc.

Non-Portuguese resident businesses with local operations that require a local VAT registration will have to comply with Portuguese rules on accounting, the issuance of invoices, rates, record keeping, filings, etc.

For many years but particularly from 2014 onwards, Portugal has been making significant attempts to introduce a very competitive system of tax credits and incentives. Whilst it is not possible to go into detail on these special tax regimes, the following should be highlighted:

• the participation exemption regime;
• the patent box;
• tax credits on R&D expenditure;
• tax credits on certain qualifying investment expenditure;
• the tax consolidation regime;
• tax deductions following certain capitalisations of companies;
• tax exemption or refunds for acquisitions of properties that are to be rehabilitated;
• a reduced income tax rate on income or gains from certain rehabilitated properties;
• a reduced VAT rate on property rehabilitations;
• special tax regimes applicable to certain investment vehicles, notably:
1. real estate investment vehicles;
2. collective investment vehicles in movable assets; and
3. venture capital funds; and
• for individuals, the Portuguese NHR regime, which is one of Europe’s most successful such regimes.

It is important to note that the Portuguese patent box regime will become even more attractive under proposed legislation that should be enacted from 1 January 2023. In simplified terms, the current regime foresees that only 50% of the profits on income related to the exploration or disposal of patents, industrial designs or software is subject to corporate income tax. If the proposed legislation is enacted, only 15% of the profit will be subject to tax.

The updated patent box, together with the tax incentive scheme for business R&D (SIFIDE) tax credits and the financial incentives regime relating to R&D investment, make Portugal one of the most attractive countries in the world from which to carry out R&D activities.

A group consolidation regime is available to affiliated companies when the parent company is a Portuguese tax resident or a tax resident in another EU member state. In order for group consolidation to apply, there must be a dominant company holding at least 75% of the share capital of the subsidiaries, directly or indirectly, and that holding must allow the dominant company to own at least 50% of the voting rights in the subsidiaries.

Once that threshold is met, certain additional criteria must be fulfilled, as follows:

• all group companies must be subject to tax and effectively managed in Portugal;
• the dominant company must hold the participation in the subsidiaries at least one year prior to the application of the regime;
• the dominant company cannot be controlled by another company that fulfils the criteria to be a dominant company; and
• the application of the regime must not have been waived by the dominant company in any of the three years prior to the (eventual new) application of the group consolidation.

Where group consolidation applies, the tax group is not a taxpayer. Rather, each of the companies within the group remains an autonomous taxpayer. Transactions between group companies are not disregarded for tax purposes. The taxable income of the group derives from the aggregation of the taxable income of all the group companies, allowing losses in one company to set-off the income of another company of the group.

Any tax losses incurred by a group member company prior to entering the group are ringfenced and are available to set-off the taxable income of that company only.

The group consolidation allows the interest expense limitation rules to be applied on a group-wide basis.

Portugal does not have thin capitalisation rules.

Portugal imposes an interest expense limitation rule, which was amended with the transposition of the Anti-Tax Avoidance Directive (ATAD).

Companies may only deduct net financing expenses up to the higher of:

• EUR1 million; or
• 30% of the earnings before depreciation, amortisation, taxes and net financing expenses.

This interest limitation rule applies to Portuguese tax resident companies and non-resident companies that maintain a PE in Portugal. Financing expenses that exceed the limit are not deductible, but may be carried forward and claimed as a deduction in the following five fiscal years if no limitation exists in any of the carry-forward years.

The law provides several exclusions from the interest deduction limitation rule, covering companies that are subject to the supervision of the Portuguese Central Bank or the Portuguese Insurance and Pension Fund Supervisory Authority, including securitisation vehicles. Portuguese branches of other EU financial companies or insurance companies that are resident in a member state of the EU are also covered.

Transfer pricing rules apply, with OECD Guidelines and Commentary being accepted as a source of interpretation and guidance. The Portuguese transfer pricing legislation does not significantly diverge from the OECD rules.

Portugal has several longstanding anti-avoidance rules, which have been modified over the years, more recently via the transposition of the ATAD. In this respect, Portugal is a traditional European country, with all the following anti-avoidance rules in place:

• a wide-ranging General Anti-Abuse Clause;
• controlled foreign company rules;
• hybrid mismatch rules;
• extended PE rules, transposing to Portuguese legislation many of the provisions on PEs introduced by the Multilateral Instrument; and
• DAC6, CRS, FATCA and other reporting obligations.

Similar to the European Merger Control Regulation, the Portuguese Competition Act (Law 19/2012 of 8 May 2012) considers the merger of previously independent undertakings and the acquisition of control of share capital or parts of the assets of other undertakings, including the creation of a joint venture that would perform on a lasting basis as an autonomous economic entity, to be concentration operations.

Such concentrations are subject to merger control review by the Portuguese Competition Authority (PCA) if any of the following conditions/thresholds are met:

• the combined aggregate turnover in Portugal of all the undertakings involved in the merger case exceeds EUR100 million, provided that the individual turnover in Portugal of each of at least two of the undertakings concerned exceeds EUR5 million;
• the concentration results in the acquisition, creation or increase of a market share in Portugal equal to or greater than 50%; or
• the concentration results in the acquisition, creation or increase of a market share in Portugal equal to or greater than 30% and less than 50%, provided that the individual turnover in Portugal of at least two of the undertakings concerned exceeds EUR5 million.

Further to the notification being presented by the filing parties, the PCA has 30 business days to issue its decision, or 90 business days for cases requiring an in-depth investigation. These time limits can be suspended by the PCA in several circumstances (eg, if additional information is requested from the parties or if commitments are offered).

Parties are obliged to suspend the implementation of the concentration until the PCA has issued a clearance decision. Breach of this standstill obligation entails a fine of no more than 10% of the turnover of the undertaking in breach, with the Portuguese Competition Act also establishing that any act or transaction implementing the concentration prior to clearance from the PCA is unenforceable.

However, public takeover bids can be implemented, provided that, in general, the acquirer does not exercise the voting rights in the target entity until clearance is obtained.

Identical to the Treaty on the Function of the European Union (TFEU), the Portuguese Competition Act prohibits agreements or concerted practices that restrict competition, including cartels – ie, agreements or concerted practices between competitors to co-ordinate in the market or to affect the relevant parameters of competition by, inter alia, fixing or co-ordinating the sale or purchase prices or any other transaction conditions, including intellectual property rights, by attributing production or sale quotas, market or client sharing (including bid rigging), by import or export restrictions and through anti-competitive actions against other competitors.

The Portuguese Competition Act is applicable to competition law enforcement, specifically in terms of prohibited practices on the Portuguese territory or whenever these practices have or may have an effect there.

In Portugal, cartels are administrative (not criminal) offences sanctioned with fines not exceeding 10% of the offending undertaking's turnover in Portugal in the year preceding the decision.

Individuals can also be liable in antitrust offences (ie, board members, as well as any individuals responsible for the management or supervision of the areas of activity where the breach occurred). The fine in question cannot exceed 10% of the individual's annual income deriving from the exercise of their functions in the undertaking concerned.

To the extent that the antitrust offence has occurred during or as a result of those processes, a ban of up to two years may be imposed on the right to take part in tendering processes for public works contracts, public service concessions, the leasing or acquisition of movable assets or the acquisition of services or procedures involving the award of licences or authorisations by public entities.

Undertakings or individuals connected to the cartel may apply for total immunity or a fine reduction if they provide valuable information about the cartel, with the Portuguese Competition Act also establishing the possibility of cases being settled prior to the final decision being issued by the PCA.

Mirroring the TFEU, the Portuguese Competition Act also prohibits undertakings in a position of dominance from abusing such position.

Abusive conduct includes:

• imposing unfair purchase or selling prices or other unfair trading conditions, directly or indirectly;
• limiting production, markets or technical development to the detriment of consumers;
• applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;
• making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations that, by their nature or according to commercial usage, have no connection with the subject of such contracts; or
• refusing access for another undertaking to a network or other essential facilities that it controls, despite appropriate payment being available, in a situation where the other undertaking cannot therefore, in fact or in law, act as a competitor of the undertaking in a dominant position in the market, upstream or downstream, unless the dominant undertaking can demonstrate that, for operational or other reasons, such access cannot reasonably be provided.

Differing from the TFEU, the Portuguese Competition Act also specifically prohibits the abuse of a situation of economic dependence. Such specific infringement may include any of the types of conduct previously mentioned as being potentially abusive under the abuse of dominance rules, as well as the full or partial rupture of an established commercial relationship, in view of past commercial or trade practices in the relevant market and contractual conditions.

Regarding anti-competitive agreements and concerted practices, the Portuguese Competition Act is applicable to competition law enforcement, including on breaches deriving from the above-mentioned unilateral conducts that might occur on the Portuguese territory or whenever these practices have or may have an effect there.

Definition

The patent is the industrial property right that protects inventions. An invention is a technical solution to solve a specific technical problem, including products, processes and new processes for obtaining already known products and substances.

The primary legislation governing patents in Portugal is the Industrial Property Code (IPC).

Length of Protection

The patent has a duration of 20 years from the date of application, subject to the payment of annuities.

Nevertheless, it is possible to request a Supplementary Protection Certificate (SPC), which can extend the term of a medicinal or plant protection patent by up to five years, with the possibility of a further six-month extension in some circumstances.

The protection granted by the National Registered Patent is limited to the Portuguese territory.

Registration Process

National applications are made (in person, via postal service or online) through the Portuguese Institute of Industrial Property (Instituto Nacional da Propriedade Industrial – INPI).

Applying for a patent takes at least 21 months.

To apply for the patent the following requirements should be considered:

• novelty – ie, it is not part of the state of the art before the date on which the patent application is filed, covering everything that, inside or outside the country, has been made available to the public or has been described in applications for other patents or utility models intended to produce effects in Portugal;
• inventive step – ie, the invention must not be obvious with regard to the state of the art to a person skilled in the area; and
• industrial application – ie, the object must be capable of being manufactured or used in any kind of industry or agriculture.

It is possible to submit a Definitive Patent Application or a Provisional Patent Application, which is often used to ensure the priority of a patent application for someone who does not yet have all the requisite elements to file a Definitive Application.

Steps

The steps of the application process are as follows:

• submission of the application for registration to the INPI;
• preliminary examination by the INPI, dealing with the formal aspects and the absolute requirements for patentability;
• after that (if the application was not refused), within ten months of the registration request, the INPI will conduct preliminary research on the state of the art and prepare a non-binding report, allowing the applicant to assess the feasibility of the patent protection; if the application conforms, the INPI publishes a notice in the Industrial Property Bulletin containing the summary of the application, no sooner than 18 months after the filing date;
• following this publication, a two-month opposition phase begins;
• once the opposition phase has come to an end, the substantive examination phase starts and, subsequently, the INPI will compile the respective report;
• if the INPI concludes that the patent should not be granted, the applicant has the right to respond to the INPI's observations within two months;
• the final decision (grant, refusal or partial grant) is notified to the applicant (and to the opponent, if applicable) and published in the Industrial Property Bulletin; and
• the INPI’s decisions may be appealed, within two months of the final decision, to the Intellectual Property Court or the ARBITRARE Arbitration Centre, provided that both parties agree to arbitration.

Enforcement

If granted, a patent gives its holder an exclusive right of exploitation of the invention in the Portuguese territory. In this way, the patent holder has the right to prevent third parties from manufacturing, offering, storing, marketing or using the patented product, or importing or possessing it, for any of the mentioned purposes, without the holder's consent.

In the case of patent infringement, the patent holders benefit from several enforcement proceedings, namely:

• civil proceedings;
• arbitration proceedings;
• criminal proceedings; and
• customs seizure.

Remedies

The remedies set out in the IPC are mostly in line with Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004, on the enforcement of intellectual property rights. The legal remedies available against patent infringement are:

• preliminary injunctions;
• penalty for non-compliance with a court order;
• administrative fines;
• orders for compensation for damages;
• legal costs incurred in the investigation of the infringement and the lawsuit;
• removal from the channels of commerce and distribution;
• recall from the channels of commerce;
• destruction of the infringing goods; and
• inhibitory measures – principally a temporary prohibition on performing certain professional activities, or participating in fairs or markets, and a temporary or definitive closure of the business.

Definition

A trade mark is a sign capable of identifying and distinguishing the goods or services of a company from those of another company. It may consist of a sign or a combination of signs capable of being represented by words (including personal names), designs, letters, numbers, sounds or the shape of a product or its packaging.

Trade mark protection is acquired through registration.

The primary legislation governing trade marks in Portugal is the IPC.

Length of Protection

Trade mark registration lasts for ten years from the application date and is indefinitely renewable for further ten-year periods, subject to the payment of fees. This renewal may be requested within the six months preceding the expiration date, or during a grace period of six months following it, upon the payment of late renewal fees. The registration of a trade mark becomes invalid if it is not renewed. However, the holder may request the revalidation within one year from the date of the publication of the notice of expiry in the Industrial Property Bulletin, subject to the payment of a fee.

Registration Process

Portugal has a first-to-file system, meaning that registration is granted to whomever files the application first.

On average, the registration of a trade mark in Portugal takes four months.

The application is filed (online or through the postal service) at the INPI.

Steps

The steps of the application process are as follows:

• once submitted, the INPI will proceed with an examination of the application, checking its formal elements;
• if everything is in conformity, the application is published in the Industrial Property Bulletin within two to four weeks, initiating a two-month opposition period (extendable by one month) in which any third party may file an opposition or submit observations to the application;
• after this period, the INPI initiates a substantive examination of the application, including the analysis of:
1. the absolute grounds of refusal;
2. the relative grounds of refusal; and
3. oppositions, replies and statements filed by the parties;
• if the examiner finds grounds for refusal, registration will be provisionally refused and, once notified, the applicant – within one month (extendable by one month) – may reply and/or request a modification of its application to remedy the objections raised;
• subsequently, the INPI issues a final refusal order or a concession order, depending on whether the objections to the registration are upheld or if, following the applicant’s reply, the refusal is considered to be unfounded or the objections raised are resolved;
• the final decision is published in the Industrial Property Bulletin;
• within two months of such publication, the applicant, the claimants and anyone who is directly and effectively harmed by the decision, even if they have not filed an opposition, can request a modification of the decision, filed at the INPI;
• the subsequent decision issued by the INPI may be appealed, within two months from the final decision, to the Intellectual Property Court; and
• it is also possible to appeal the INPI’s decisions to the ARBITRARE Arbitration Centre, provided that both parties agree to arbitration.

Enforcement

Registration gives holders the right to use the trade mark during trade. If a third party uses an identical or similar trade mark to designate identical or similar goods or services in the marketplace without authorisation, the trade mark holders benefits from several enforcement proceedings, including the following:

• civil proceedings;
• arbitration proceedings;
• criminal proceedings; and
• customs seizure.

Remedies

The remedies set out in the IPC are mostly in line with Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004, on the enforcement of intellectual property rights. The legal remedies available against trade mark infringement are:

• preliminary injunctions;
• a penalty for non-compliance with a court order;
• administrative fines;
• orders for compensation for damages;
• legal costs incurred in the investigation of the infringement and the lawsuit;
• removal from the channels of commerce and distribution;
• recall from the channels of commerce;
• destruction of the infringing goods; and
• inhibitory measures – principally a temporary prohibition on performing certain professional activities, or participating in fairs or markets, and a temporary or definitive closure of the business.

Definition

Designs are defined as the appearance of the whole or part of a product resulting from the features of the lines, contours, colours, shape, texture or materials of the product itself or its ornamentation. Its technical or functional characteristics are not considered.

Designs are eligible for protection if they fulfil these two requirements, among others:

• novelty – ie, no identical design has been made available to the public before the date of the beginning of its protection; and
• individual character – ie, the design has the ability to give the informed user an overall impression that is distinct from that which they may derive from the previous state of art.

A registered design is also eligible for protection under copyright law from the date on which the design was created, or defined, in any form.

The main legislation governing trade marks in Portugal is the IPC.

Length of Protection

The protection period is five years following the application date, and can be renewed for consecutive equal periods of time up to a maximum of 25 years.

The rights granted by the INPI are only valid in Portugal.

Registration Process

Steps

The steps of the application process are as follows;

• national applications are made (in person, via the postal service or online) through the INPI;
• if there is no opposition, the registration of a design takes three months on average;
• the registration process initiates with a request that gives rise to an examination, up to one month after the request, to verify the fulfilment of formal requirements;
• if the INPI finds any irregularity in any of these aspects, the applicant is notified to remedy or correct them within one month (extendable for one month);
• if the application is regular, or has been regularised by the applicant after notification, it is published in the Industrial Property Bulletin, initiating a two-month opposition period (extendable by one month) in which any third party may file an opposition or submit observations to the application;
• the opposition may be based on the lack of novelty or individual character, among other factors; under Portuguese law, the examination of the substantive requirements of the design only takes place if an opposition is submitted, and upon notification of the opposition or observations, applicants have the right to reply within two months (extendable by one month);
• if there are no oppositions, the application will be granted without any preventative control over the novelty and the individual character requirements, which may only later be challenged in invalidity and annulment proceedings;
• the final decision is published in the Industrial Property Bulletin;
• the INPI’s decisions may be appealed to the Intellectual Property Court, within two months from the final decision; and
• it is also possible to appeal the INPI’s decisions to the ARBITRARE Arbitration Centre, provided that both parties agree to arbitration.

Enforcement

Design registration entitles the holders to use the design and to prevent third parties from using it without consent. This includes, in particular, the manufacture, offer, placing on the market, import, export or use of a product in which the design has been incorporated, or to which it has been applied, as well as the storage of this product for the same purposes.

In cases of infringement, the design holders benefit from several enforcement proceedings, including:

• civil proceedings;
• arbitration proceedings;
• criminal proceedings; and
• customs seizure.

Remedies

The remedies set out in the IPC are mostly in line with Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004, on the enforcement of IP rights. The legal remedies available against design infringement are:

• preliminary injunctions;
• a penalty for non-compliance with a court order;
• administrative fines;
• orders for compensation for damages;
• legal costs incurred in the investigation of the infringement and the lawsuit;
• removal from the channels of commerce and distribution;
• recall from the channels of commerce;
• destruction of the infringing goods; and
• inhibitory measures – principally a temporary prohibition on performing certain professional activities, or participating in fairs or markets, and a temporary or definitive closure of the business.

Definition

According to Portuguese law, a work must be an original literary, artistic or scientific creation, expressed in any way or form, known at present or that may be created in the future in order to be protected by copyright.

Portuguese copyright law is governed by the Portuguese Copyright and Related Rights Code.

Length of Protection

As a rule, copyright lasts 70 years after the author’s death, even if the original work was published or came up after its author’s death.

When the validity of the copyright expires, the work enters the public domain and can be used freely.

Registration Process

Protection of copyright is automatic and acquired immediately after the work's completion. The registration of copyright is merely optional, having a declarative effect, leading to the presumption that the registered right-holder is entitled to the relevant right.

The registration can be made at the Inspeção-Geral das Atividades Culturais (IGAC).

Enforcement

The legal protection conferred by copyright includes:

• rights of a patrimonial nature, including the exclusive right of the author to use and benefit from the work and to authorise its exploitation, which may be assigned to third parties, in whole or in part; and
• rights of a personal nature – the so-called "moral rights", which are not subject to a time limit, cannot be assigned or waived under any circumstance, and include the right to claim the respective paternity and ensure its genuineness and integrity.

In cases of infringement, the copyright holders benefit from several enforcement proceedings, including the following:

• civil proceedings;
• criminal proceedings;
• administrative proceedings; and
• customs seizure.

Remedies

The remedies set out in the IPC are mostly in line with Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004, on the enforcement of intellectual property rights. The legal remedies available against copyright infringement are:

• preliminary injunctions;
• a penalty for non-compliance with a court order;
• administrative fines;
• orders for compensation for damages;
• legal costs incurred in the investigation of the infringement and the lawsuit;
• removal from the channels of commerce and distribution;
• recall from the channels of commerce;
• destruction of the infringing goods; and
• inhibitory measures – principally a temporary prohibition on performing certain professional activities, or participating in fairs or markets, and a temporary or definitive closure of the business.

Other diplomas contain specific remedies and supervision on the enforcement of copyrights, such as Law 82/2021 of 30 November, which establishes the procedures for the monitoring, control, removal and prevention of access in the digital environment to content protected by copyright and related rights, and the administrative procedure to be applied in the event of illegal disclosure of content protected by copyright and related rights.

Software

The national legislation governing software is Decree-Law 252/94 of 10 October, which transposed into national law Council Directive 91/250/EEC of 14 May 1991 on the legal protection of computer programs, repealed by Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs.

Computer programs (software) are protected as literary works as long as they fall within the legal criteria of being “creative”.

In Portugal, the legal protection of computer programs lasts for 70 years.

Software registration is not mandatory but it grants the registrant a presumption of ownership of the right over the work.

The registration of software may be carried out at the Associação Portuguesa de Software (ASSOFT) or at IGAC.

Databases

Databases are protected under Law 122/2000 of 4 July, which implemented Directive 96/9/EC on the legal protection of databases.

A database is defined as a collection of independent works, data or other materials that is arranged in a systematic or methodical way and is individually accessible by electronic or other means.

On the one hand, databases that constitute intellectual creations by the selection or arrangement of their contents are protected by copyright.

The right over the database granted to the intellectual creator expires 70 years after their death.

Database registration is not mandatory, but it grants the registrant a presumption of ownership of the right over the work. The registration of databases may be carried out at IGAC.

On the other hand, a sui generis legal protection is available to makers of databases, provided that there has been substantial financial, material or human investment in the obtaining, verification or presentation of the contents.

If the requirements for the sui generis protection are verified, a database is granted automatic protection for 15 years, starting either from the creation date or from when the database was first made publicly available.

Trade Secrets

Trade secrets are governed by the IPC, which transposed into the national legal system Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.

"Trade secrets" refers to information that meets the following cumulative three conditions:

• it is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among, or readily accessible to, persons within the circles that normally deal with the kind of information in question;
• it has commercial value because of its secrecy; and
• it has been subject to reasonable diligence by the person responsible for the information to keep it secret.

The protection extends to products whose design, characteristics, functioning, production process or commercialisation significantly benefit from trade secrets unlawfully obtained, used or disclosed.

Trade secrets are protected without registration.

They can be protected for an unlimited period of time, as long as the legal elements required for trade secret protection are fulfilled.

The legal framework for personal data protection in Portugal derives from the application of the following:

• Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (the "General Data Protection Regulation" – GDPR); the Regulation came into force on 24 May 2016 and has been directly applicable in all EU member states, including Portugal, since 25 May 2018; and
• Law 58/2019 of 8 August, which ensures the implementation of the GDPR in the Portuguese legal system. This Law revoked the previous data protection law, Law 67/98 of 26 October 1998.

Several other dispersed diplomas contain specific data protection rules, such as:

• Law 12/2005 of 26 January, which contains specific provisions regarding data protection for genetic and health information;
• Law 41/2004 of 18 August, which regulates the protection of personal data in the electronic communications sector and contains specific provisions for telecommunication service providers; and
• Law 68/2021 of 26 August, which approves the general principles on open data and transposes into national law Directive (EU) 2019/1024 of the European Parliament and of the Council, of 20 June 2019, on open data and the reuse of public sector information.

Portugal has also adopted international instruments relevant to data protection, including:

• the Charter of Fundamental Rights of the European Union;
• the Convention for the Protection of Human Rights and Fundamental Freedoms; and
• the Convention for the protection of individuals with regard to the processing of personal data (Convention 108).

The GDPR applies to the processing of personal data in the context of the activities of an establishment of a controller or a processor in the European Union, regardless of whether the processing takes place in the EU or not.

The GDPR applies to the processing of personal data of data subjects who are in the EU by a controller or processor that is not established in the EU, where the processing activities are related to:

• the offering of goods or services to such data subjects in the EU, regardless of whether or not there is payment of the data subject; or
• the monitoring of their behaviour as far as their behaviour takes place within the EU.

Portuguese Law 58/2019 of 8 August is also applicable to processing carried out outside Portugal when:

• that processing is part of an establishment situated in Portugal;
• it affects data subjects located in Portugal and the processing activities are related to the offering of goods or services (no payment is required) to such data subjects in the EU or the monitoring of their behaviour as far as their behaviour takes place within the EU (falling under GDPR article 3(2)); or
• it affects personal data on Portuguese residents held by Portuguese consular posts abroad.

However, on 3 September 2019, the Portuguese Data Protection Authority (Comissão Nacional de Proteção de Dados – CNPD) issued a Decision (494/2019) declaring several provisions of Law 58/2019 of 8 August unenforceable, namely Article 2(2), which established the territorial scope of the Law.

The CNPD considered that the rule provided by Portuguese law that national jurisdiction applies to data processing “carried out within the scope of an enterprise established in the national territory” jeopardised the application of procedural rules and the distribution of powers between supervisory authorities, where cross-border processing is concerned.

In fact, the GDPR introduced the so-called "one-stop shop" mechanism, which ensures the possibility of remaining in contact with a sole supervisory authority in cases of processing common personal data in several countries. The competent Data Protection Authority is the one of the EU member state in which the main establishment is located.

However, under Law 58/2019, the CNPD would have jurisdiction over the data processing that a processor carries out in Portugal, regardless of whether or not its main establishment is in another member state of the EU.

For similar reasons, the rule stated in subparagraph b) of article 2(2) also compromises the application of the one-stop shop mechanism provided for in Article 56 of the GDPR.

Therefore, to ensure the full effectiveness of EU law, particularly the provisions of Articles 56 and 3(3) of the GDPR, the CNPD disregarded Article 2(2) of Law 58/2019 as it considers it to be incompatible with the provisions therein (the courts have not yet ruled on this matter).

The agency in charge of enforcing data protection rules in Portugal is the CNPD, an independent administrative body with powers of authority throughout the national territory.

Law 58/2019 appoints the CNPD as the Portuguese supervisory authority, giving it the following powers (besides the provisions established in the GDPR):

• supervising compliance with the GDPR and Law 58/2019, as well as other legal and regulatory provisions regarding data protection and the rights, freedoms and guarantees of data subjects, and the ability to correct and sanction non-compliance;
• advising on legislative and regulatory measures concerning the protection of personal data as well as on legal instruments under preparation in European or international institutions concerning the same matter, by giving non-binding opinions;
• making available a list of personal data processing activities that must be subject to a Data Protection Impact Assessment, and defining the criteria to densify the notion of “high risk” contained in Article 35 paragraph 5 of the GDPR (under Regulation 1/2018, the CNPD has made a list available);
• developing and submitting to the European Data Protection Board, as provided for in the GDPR, draft criteria for the accreditation of codes of conduct monitoring bodies and of certification bodies, and ensuring subsequent publication of the criteria, if approved; and
• co-operating with the Instituto Português de Acreditação, I. P. (IPAC) in the accreditation and certification processes.

Tax

The following legal reforms are expected in the tax field.

• The change to the patent box regime whereby 85% (up from the current 50%) of the income from patents, industrial designs and registered software will not be subject to corporate tax (see 5.3 Available Tax Credits/Incentives).
• The introduction of a new way of taxing short-term capital gains on securities, whereby the progressive rates of tax will apply on gains exceedingEUR75,000 instead of the current flat rate of 28%. For the purposes of the proposed legislation, short-term capital gains (considered to be “speculative gains”) are defined as gains on assets acquired less than a year before the disposal thereof.
• The government has announced that it is considering the introduction of new rules of taxation on crypto, or digital assets. As is well known, gains on certain crypto-assets are currently outside the scope of Portuguese income tax, provided that a number of conditions are met. The government has announced that it will be looking to close the favourable treatment currently being granted to digital assets, although no details of the proposed solution have yet been announced.

Labour

Following the COVID-19 pandemic, a new telework regime and new rules on the duty to abstain from contact were recently approved by the Portuguese government and are already in force. Since the new legal framework for remote work has raised some doubts, some new regulation on this matter is expected.

Competition

A change to the Portuguese Competition Act is still expected, which would result from the anticipated incorporation into Portuguese law of Directive 1/2019 of the European Parliament and of the Council (known as the ECN+ Directive).

A reinforcement of the PCA’s powers is expected, not only at the level of its investigation tools (eg, enhanced access to evidence in digital format) and range of fines, but also derived from the increment of the co-operation level among all EU competition authorities (the European Commission and the competition authorities of the EU member states).

Data Protection and IP

The following reforms are expected:

• a national law transposing Directive (EU) 2018/1972 of the European Parliament and of the Council, of 11 December 2018, establishing the European Electronic Communications Code;
• the Regulation of the European Parliament and of the Council concerning the respect for private life and the protection of personal data in electronic communications and repealing Directive 2002/58/EC (Regulation on Privacy and Electronic Communications);
• the Regulation of the European Parliament and of the Council concerning laying down harmonised rules on Artificial Intelligence (Artificial Intelligence Act);
• a national law transposing Directive (EU) 2019/790 on copyright and related rights in the digital single market. On 19 May 2022, the Commission urged member states to fully transpose this EU legislation into national law (Portugal has also been notified); despite the entry into force of Law 82/2021 on 30 November, Portugal has not yet transposed all the rules set out in this Directive, such as the rules on exceptions and limitations to copyright and related rights, the rules on the facilitation of licences, and the rules to ensure a well-functioning marketplace for the exploitation of works and other subject matters;

• the Regulation of the European Parliament and of the Council on a Single Market for Digital Services (Digital Services Act) and amending Directive 2000/31/EC; and
• the Regulation of the European Parliament and of the Council on contestable and fair markets in the digital sector (Digital Markets Act).