Portugal Golden Visa as a solid programme to economic recovery - Government update

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Portugal Golden Visa as a solid programme to economic recovery - Government update
Published on 25th September 2020

The government doesn’t want to create another disturbance to the foreign investment, looking at this as a way to recover from the economical consequences from Covid-19, so it decided to put on hold the alteration to the Golden Visa.

Portuguese Golden Visas, economic misdemeanours, VAT for drinks in restaurants, various tax benefits and a new tax on single-use plastics. 

These are some of the matters for which the Government has asked the Parliament for authorizations to legislate, within the scope of the State Budget for this year, 2020. Legislative authorizations were granted, but the matters, which the Executive should address, ended up not leaving the paper, with the only exception being the VAT on electricity.

Luís Leon, a tax specialist at Deloitte admits that In times of COVID-19, “it is more or less expected” that some legislative authorizations will not be used. “The Government has a difficult balance between the fall in GDP and the control of the pandemic”, so, “taking into account that an atomic bomb has fallen on the world economy, it is admissible that the priorities have been changed”, says Luís Leon.

The promised changes to the Portuguese Golden Visa, also known as Residency by Investment Programme, were the first to fall apart. As early as April, the Ministry of Foreign Affairs publicly said that changing the law envisaged on the State Budget was not “a priority at the moment” and would have no effect until the end of the year.

The change in the cause was to favour low-density regions as a residency by investment option, focusing on the territory of the Intermunicipal Communities of the Interior and the Autonomous Regions of the Azores and Madeira.

With the economy falling and the country in confinement, the Government did not want to create another disturbance to foreign investment at the same time the country is in economical recovery, hence these changes were put on hold.

Another measure that was kept on hold, was the one that predicted a decrease in the energy tax. The huge contribution on the energy sector (CESE) that is charged to companies such as EDP, REN and Galp, should have started reducing this year. The legislative authorization expected for this change lasted only 90 days and expired at the end of June. In September, the Ministry of Finance - to which the Minister for the Environment and Digital Transition had referred the matter - replied to the Public that “the [CESE] process is under evaluation”.

Taxes on standby

Most of the legislative authorizations granted to the Government are of fiscal nature and have implications on the revenue. And on a tax level, says Luís Leon, “there is already some tradition” of leaving one or the other request on hold, which is even more expected at this time of the pandemic. If the authorizations are not executed, they expire at the end of the year. If another period is not foreseen, they will last as long as the Stage Budget law is in force, i.e., for one year.

This time, the Government has proposed, in particular, to create a tax benefit scheme for companies within the scope of the Interior Enhancement Program; and also a benefits regime under the Forestry Savings Plans, or expand the list of beneficiaries and the relevant applications of the deduction scheme for retained and reinvested profits. The IRS was also expecting environmental deductions for those who purchased units for the production of renewable energy for self-consumption or heat pumps, however, the Ministry of Finances has not given an update on this change.

Despite these authorizations being on hold, there’s already one that is already active. The authorization referring to VAT on electricity was run already this September, and the Council of Ministers approved the reduction of the VAT rate on electricity to 13% for the lower levels of low voltage consumption. In terms of VAT, other promised changes are still on standby, such as the reduction to the intermediate rate of a set of measures, in order to increase the package that already exists for the restoration.

Still regarding taxes, but subject to the approval of the European Union, there was a promise to move forward with new incentives for the internationalization of companies, such as exemptions from Stamp Duty on prizes and commissions related to export credit insurance policies.

At the environmental level, the Government has also proposed to create a contribution on single-use packaging. In May, the Environment Minister guaranteed that, despite the “pause” caused by the pandemic, the measures planned for this year are secure, such as the ban on single-use plastic products (such as plates, cutlery, straws or cotton buds), or the contribution on ready-to-eat packaging, predicted on the Stage Budget.

Source: Jornal de Negócios

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