Doing business in Portugal

A legal and tax perspective 2017 Edition

A legal and tax perspective 2017 Edition

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Doing Business in Portugal 5

CONTENT

CONTACT INFORMATION

LIST OF ACRONYMS

1. Portugal at a glance 1.1. Unique geo-strategic position 1.2. Economic situation 1.3. Portuguese legal system

2. Ways of doing business 2.1. Setting up a business 2.2. Overview of limited liability companies 2.3. Incorporating new companies and acquiring "shelf companies" 2.4. Corporate governance of limited liability companies 2.5. Exchange control and foreign investment regulations

3. Taking security 3.1. Preliminary ideas 3.2. Overview of the most relevant types of security 3.3. Special regime for financial guarantees

4.Antitrust 4.1. Restrictive practices 4.2. Merger control 4.3. Unfair competition 4.4. Individual trade practices

5. State aid

6. Intellectual property rights and personal data protection 6.1.Copyright 6.2. Industrial property rights 6.3. Personal Data protection

7.Tax 7.1.Introduction 7.2. Main taxes

11 11 11 11

12 12 13 18 20 20

21 21 22 23

24 24 27 28 28

29 29 30 35

40 40 41

6 Doing Business in Portugal

7.3. Corporate income tax 7.4. Personal income tax 7.5. Value added tax 7.6. Real estate transfer tax 7.7. Municipal property tax 7.8. Stamp duty

8. Employment 8.1. Employment law framework 8.2. Employment contracts 8.3.Salary 8.4. Working time 8.5. Changes in employment conditions 8.6. Termination of employment 8.7. Transfer of undertaking 8.8. Collective representation and organisational rights 8.9. Social security issues 8.10. Health and safety at work 8.11. Fines and penalties

9. Securities regulation 9.1.Overview 9.2. Listed companies: obligations and recommendations 9.3. Offering of securities and admission to trading 9.4. Takeover bid regulation

10. Regulated sectors 10.1. Financial entities and investment companies 10.2.Insurance 10.3. Energy 10.4. Technology, media and telecommunications ("TMT")

11.Insolvency 11.1. Definition of insolvency 11.2. The insolvency procedure 11.3. Voluntary insolvency 11.4. Mandatory insolvency 11.5. Aggravated or culpable insolvency

41 48 50 51 51 52

53 53 54 55 55 56 57 60 61 62 62 63

63 63 66 69 71

73 73 74 75 89

90 90 90 91 91 92

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11.6. 11.7. 11.8. 11.9.

Effects on debtors Effects on creditors Clawback actions Key pre-insolvency instruments

12. 12.1. 12.2.

Dispute settlement Litigation: jurisdiction and civil procedure Commercial arbitration and mediation

13. Real Estate 13.1.Ownership 13.2. Real estate transactions 13.3. Urban lease agreements 13.4. Planning and licensing

14. Private equity 14.1.Introduction 14.2. Main innovations

15. 15.1.

Residence permit for investment activity program (ARI) Investment program associated with residence permits

92 93 94 94

98 98 100

102 102 103 104 105

107 107 108

110 110

Doing Business in Portugal 9

CONTACT INFORMATION

Lisbon

Praa Marqus de Pombal, 2 1250 - 160 Lisbon, Portugal Tel. +351 21 355 38 00 cuatrecasasportugal@cuatrecasas.com

Porto

Av. da Boavista, 3265 - 5.1 4100 - 137 Porto, Portugal Tel.: +351 22 616 69 20 cuatrecasasporto@cuatrecasas.com

This guide provides an overview of the key legal aspects for foreign investors interested in investing in Portugal. It is not intended to be comprehensive but rather to address practical issues to help those considering an investment project in Portugal.

Cuatrecasas is a law firm present in over ten countries, representing companies that are leaders in their sectors and advising them on their investments in the major markets.

The firm has almost 1000 lawyers, organized by business and industry-specific practice areas, providing the knowledge and experience of the business law speciality applicable in each case.

Cuatrecasas maintains close, long-standing relationships with leading companies in every sector. The firm has gained their trust, in-depth knowledge of their business and invaluable experience advising on the most complex aspects of every speciality area, both in recurring matters and transactions.

Different regions are connected through the firm's client-tailored model that offers the best team for each particular case depending on jurisdiction, speciality area and complexity.

Our 16 offices in the Iberian Peninsula coordinate with our teams in Beijing, Bogot, Brussels, Casablanca, London, Luanda, Maputo, Mexico City, New York, So Paulo and Shanghai, optimizing efficiency of resources and client proximity, and benefiting from the different time zones. The international desks (covering Latin America, Asia, France, Germanic countries and the Middle East) and over 20 country-specific groups guarantee the comprehensive approach of the legal advice from Spain and Portugal.

In continental Europe, Cuatrecasas has developed a non-exclusive network with three other leading law firms Chiomenti in Italy, Gide in France and Gleiss Lutz in Germany allowing it to offer integrated services in complex crossborder transactions.

www.cuatrecasas.com

10 Doing Business in Portugal

LIST OF ACRONYMS

AdC ANACOM CA CIT CMVM CNPD ERC EU IMI IMT Lda. NIPC OECD PIT SA PCA PSC SME TOB VAT

Portuguese Competition Authority National Communications Authority Competition Act Corporate Income Tax Portuguese Securities and Exchange Commission Portuguese Data Protection Agency Telecommunications Regulatory Agency European Union Municipal Property Tax Real Estate Transfer Tax Private Limited Liability Company Corporate Identification Number Organization for Economic Cooperation and Development Personal Income Tax Public Limited Liability Company Portuguese Companies Act Portuguese Securities Code Small and Medium-sized Company Takeover Bid Value Added Tax

Doing Business in Portugal 11

1. Portugal at a glance

1.1. Unique geo-strategic position

Portugal is attractive for foreign investment, not only because of its domestic market but also because of its privileged geo-strategic position. Portugal became a member of the European Union ("EU") in 1986. It has a population of approximately 10.3 million people and receives in average 17.5 million tourists per year. Its location provides an ideal gateway to Africa and a unique platform to channel investments to Latin America and China. With strong cultural, economic and historical ties with Brazil, China, India, East Timor and several Portuguesespeaking African countries, it is the perfect bridge to Latin America, Europe, Asia and Africa. Furthermore, Portuguese is a global language with over 260 million speakers worldwide.

1.2. Economic situation

After going through a recession, Portugal is currently showing signs of an economic upturn, with a consistent gross domestic product (GDP) increase since 2014. Moreover, despite a challenging macroeconomic environment, Portuguese exports have consistently increased year after year since 2009.

1.3. Portuguese legal system

Portugal is a semi-presidentialist republic with three independent branches of government: the executive, the legislative and the judiciary. The head of state is the president who, among other functions, represents the Portuguese State. Executive authority is exercised by the government headed by the Prime Minister. The legislative power is exercised by the Parliament, which has a single chamber, and the government.

Independent judges represent the judiciary power. The highest judicial court in Portugal is the Supreme Court. The Constitutional Court, which is not part of the judiciary system, has authority to interpret the Constitution.

12 Doing Business in Portugal

Portugal has a civil law system based on written law, while caselaw is used for interpretation purposes. EU membership has a decisive influence on Portugal's legal system, as a substantial part of its commercial law is based on EU Law.

2. Ways of doing business

2.1. Setting up a business

Limited liability companies When setting up a business in Portugal, foreign investors generally incorporate or acquire a limited liability company. The two main types of companies with limited liability in Portugal are public limited liability companies ("SAs") and private limited liability companies ("Ldas."). Both have legal personality separate and distinct from that of their shareholders, who are not personally liable for the company's debts.

Choosing between an SA or an Lda. is mainly determined by (i) the size of the business; (ii) the legal requirements (only SAs can be listed); (iii) the future ability to raise capital; (iv) the rules on transferability that shareholders wish to apply; and (v) the flexibility offered by Lda. regulations, as opposed to SA regulations (see Overview of limited liability companies).

Branch or representative office As an alternative, a foreign entity can establish a branch or open a representative office in Portugal. A branch is a secondary establishment operating permanently as a representative of its parent company. Although it has a certain degree of independence from its parent company and carries out all or part of that company's activities, it does not have a separate legal personality. Representative offices mostly carry out accessory and instrumental activities (including information gathering, market prospection and local support). Like branches, a representative office does not have a separate legal personality. This means that the parent company of a branch or a representative office will be liable for its obligations and debts.

Doing Business in Portugal 13

Other alternatives Another investment option is a joint venture with a business already established and operating in Portugal. Venture partners often create an equity joint venture by incorporating a limited liability company or acquiring a stake in an existing company. However, Portuguese law offers other joint venture alternatives:

Enterprises complementary group ("ACE"), with no separate legal personality besides that of its members, created to carry out specific projects or services, such as an engineering or construction project.

European groups of economic interest ("AEIE"), aimed at facilitating, improving or increasing the economic activity of their members, who are held jointly and severally liable, albeit subsidiarily to the AEIE. AEIEs are frequently created to provide centralized services for a group of companies. Entities of at least two different EU Member States must be involved.

Silent partnership agreements, under which investors hold an interest in a business they do not manage by making contributions in money or in kind. These are not considered capital contributions but entitle investors to participate in the positive or negative results of the business.

Finally, there is the option of selling or providing goods or services in Portugal without setting up a legal structure, for instance, by entering into a distribution, franchise or agency relationship with a third party established in Portugal.

2.2. Overview of limited liability companies

Main characteristics The most common types of limited liability companies operating in Portugal are SAs and Ldas., which are regulated by the Portuguese Companies Act ("PCA"). Limited liability of shareholders is common to these capital-based companies. In both cases, the assets belonging to the shareholders and the company are separate. Under specific requirements, these companies can be owned by a single shareholder.

14 Doing Business in Portugal

Traditionally, small and medium-sized companies ("SMEs") have chosen the Lda form because its characteristics are more suitable:

Lower capital requirements than an SA (1 per quota, as opposed to 50,000).

Statutory restrictions on the transfer of quotas are more stringent than for an SA.

More flexibility and greater autonomy to decide on the company's structure and organization. SA regulations establish more complex supervision structures aimed at protecting the company's interest, shareholders and creditors.

By contrast, SAs have traditionally met the needs of larger corporations. While their more complex legal framework and more limited ability of shareholders to structure the company clash with the needs of small businesses, they offer large corporations the following advantages:

Investing in the company is easier since its capital is divided into shares that can be listed on stock exchanges and are naturally transferable.

Wider access to financing sources. Unlike Ldas., SAs are able to quote on the stock exchange and can issue negotiable debentures to the public.

However, these characteristics of SAs and Ldas. can be interpreted in subtly different ways. We often find large companies incorporated as Ldas., tailoring the statutory model initially designed for SMEs to suit their goals and interests. In this context, shareholders and shareholder agreements play an important role.

Main features of SAs and Ldas. The following table identifies the most important, though not comprehensive, features of SAs and Ldas.

Doing Business in Portugal 15

Capital Minimum requirement Divided into

Disbursement

Voting rights

Contributions in kind

LDA SA

1 per quota

Quotas

As a rule, capital contributions must be paid on the date of incorporation or before the end of the first economic period. Parties can agree to defer payment up to five years. Non-capital contributions must be fully paid up on the date of incorporation.

50,000

Shares issued as bearer or nominative shares, and as certificate or book entry shares. Shares of listed companies can be negotiated on the stock market.

As a rule, capital contributions must be paid on the date of incorporation. Parties may agree to defer payment of 70% of the capital contributions up to five years. Non-capital contributions must be fully paid up on the date of incorporation.

As a rule, every cent of a quota's nominal value is granted one vote.

Bylaws can establish, as a special right, two votes per every cent of the nominal value of the quota or shareholders quotas that, in total, do not represent more than 20% of the share capital.

As a rule, every share is granted one vote.

No voting privileges are allowed. Bylaws can grant one vote to a certain number of shares or establish a cap on the number of votes that can be cast by each shareholder.

The value of the shareholders' investments in kind must be assessed by an independent expert.

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Transfers

LDA

Restrictions on transfers

Unless otherwise provided in the bylaws, quotas can be freely transferred between quotaholders or with quotaholders' spouses, ascendants and descendants. In all other cases, transfers are subject to the restrictions provided in the bylaws or, failing that, in the PCA.

Treasury stock and financial assistance

Derivative acquisition of treasury stock

Only allowed, with no set limit, in certain cases; when quotas are acquired (i) at no cost, (ii) under the scope of a judicial action against a quota holder, or (iii) when the company has legal reserves in an amount no less than double the price of the acquired quotas.

Financial assistance prohibition

Financing sources

Listing and issuing bonds or other negotiable instruments

Financial assistance is prohibited except for: (i) existing justified own interest of the company; and (ii) companies in a group or controlling relationship.

Some financing sources that cannot be listed are unattainable for Ldas.

Restrictions on transferability can only be applied to nominative shares and are only admitted in certain specific cases.

Allowed up to a maximum of 10% of the share capital. Subject to certain conditions, the 10% threshold can be exceeded, in particular, when (i) the acquisition is made at no cost; (ii) assets are acquired on a universal basis;(iii) the acquisition is made in the context of a shareholder's exit; (iv) the acquisition arises from a shareholder not paying capital con-tributions; (v) the acquisition is made within the context of an enforcement proceeding for the collection of third parties' debt; or (vi) the acquisition is designed to execute a shareholders' resolution of share capital reduction.

Financial assistance is prohibited except for: (i) existing justified own interest of the company; and (ii) companies in a group or controlling relationship.

SAs can raise funds through capital markets by issuing/selling shares or issuing bonds or other negotiable instruments.

Doing Business in Portugal 17

Capital decrease Capital decrease

LDA

Shareholders may opt for a share capital decrease to cover losses, free excess capital or for another special purpose. Shareholders must adopt measures when the company's equity capital is equal to or lower than half of its share capital. Share capital decreases may be one of these measures.

Publicity and opposition term

The capital decrease resolution must be registered, and creditors can judicially oppose it within one month.

Corporate governance

General meeting

There is no general quorum requirement. Resolutions can be passed by simple majority of the issued votes. Some resolutions require a reinforced majority (more than 3/4 of the voting rights for share capital increase or decrease, bylaw amendments, merger and spin off). Bylaws can increase the voting majorities. The shareholder's meeting can, as a rule, resolve on a large number of matters and, to a certain extent, adopt resolutions on acts necessary or adequate to execute the company's corporate purpose.

Shareholders may opt for a share capital decrease to cover losses, free excess capital or for another special purpose. Shareholders must adopt measures when the equity capital of the company is equal to or lower than half of its share capital. Share capital decreases may be one of these measures.

The capital decrease resolution must be registered and creditors can judicially oppose it within one month.

The shareholders meeting can make decisions in first call, regardless of the number of shareholders attending or represented at the meeting, with the exception of certain matters that can only be decided if the shareholders attending or represented at the meeting own shares corresponding to, at least, 1/3 of the share capital. In second call, the shareholders meeting can pass resolutions regardless of the number of shareholders attending or represented and the share capital that they represent.

Resolutions are passed when approved by a majority of issued votes, but 2/3 majorities are required in specific cases (e.g., share capital increase and decrease, amendment of bylaws, transformation, merger and spin-off).

Bylaws can increase the attendance quorum and voting majorities. The shareholders meeting can resolve management matters at the request of the board of directors.

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Administrative body

LDA

Except where the bylaws provide otherwise, where there are several directors, their respective powers are jointly exercised and resolutions approved with the votes of the majority. The PCA does not establish specific rights for minority quota holders such as those established for SAs.

The board of directors cannot approve resolutions without the majority of its members being present or represented at the meeting. Resolutions of the board of directors are approved by majority vote.

2.3. Incorporating new companies and acquiring "shelf companies"

When investing in Portugal, investors can either incorporate a new company ("NewCo") in 24 hours with publicly available, pre-approved template documents or specifically tailor the company's documents to their requirements. Alternatively, they can buy a company that has already been incorporated but has not yet started to operate ("shelf company"). However, this is more expensive and less common, since a new standard company can now be incorporated in 24 hours.

Requirements for incorporating a limited liability company (either a SA or a Lda.)

Powers of attorney. To be represented at the act of incorporation, investors have to grant powers of attorney, duly apostilled in accordance with the Hague Convention or legalized by a Portuguese consul.

Company name. It is necessary to obtain a certificate of clearance to use the NewCo's proposed name.

Tax identification numbers. All foreign shareholders and future nonresident directors of the NewCo will need to obtain a Portuguese taxpayer number. Non-EU citizens must also appoint a Portuguese tax representative.

Doing Business in Portugal 19

Company's share capital and cash contributions. The company's initial share capital and any contributions made in cash to the NewCo can be deposited or transferred to a bank account in Portugal, opened in the name of the NewCo under incorporation.

Private written document or public deed of incorporation. Investors or its duly authorized representatives must execute a private written document containing the company's articles of association, wherein the signatures of the company's founding shareholders or their representatives must be authenticated, unless a public deed is required (e.g., in cases where the shareholders transfer real estate assets to the company).

Such document also regulates the internal affairs of the NewCo including, among others, the corporate purpose, the registered office, the issue and transfer of quotas or shares, the administration and supervision structure, and the general meeting quorum and voting majorities.

Filing the deed of incorporation with the Commercial Registry Office for registration and subsequent online publication.

Registering before the tax, social security and labor authorities. The company or its directors, or both as the case may be, must register after the company's incorporation.

NewCo can operate from the date the deed of incorporation is filed, although it will only have full legal personality upon registration.

Recent legal reforms aim to simplify the procedure to set up companies in Portugal. Already, there are simplified procedures to incorporate of a company at one single office in one day (the Empresa na Hora) or online in two business days by accessing the official entrepreneur website (the Empresa Online).

Requirements for acquiring a shelf company As in the case of a NewCo, Investors must grant a power of attorney in case they intend to appoint a representative. Besides, all foreign shareholders and future non-resident directors must obtain a taxpayer number. (See the previous section for details on these two steps.)

20 Doing Business in Portugal

Sale and purchase deed. Potential investors and the seller must execute a private written document to formalize the sale and purchase deed. The purchase price is paid as agreed between the parties.

Foreign investment filings (please refer to section 2.5 on Exchange control and foreign investment regulations).

Other corporate actions. Once the acquisition process of the shelf company is completed, new directors will have to be appointed and the bylaws amended to tailor the company to Investors' needs (change of corporate name, purpose, registered office, transfer rules and administration and supervision structure). These corporate resolutions must be registered with the Commercial Registry Office.

2.4. Corporate governance of limited liability companies

There are mainly four alternatives to organize the managing body of a limited liability company: (i) one or more directors, in the case of Ldas.; (ii) a sole director in the case of SAs that do not exceed a share capital of 200,000; (iii) a board of directors in the case of SAs (which may include an audit committee, if so established); or (iv) an executive board of directors and a general and supervisory board in the case of SAs. The bylaws can include any of these options.

Directors of limited liability companies are under duties of care and loyalty and must act bona fide, in the best interest of the company. Directors (and de facto directors) are liable toward the company, its shareholders and the company's creditors for any damages they may cause due to any acts contrary to law or the bylaws, or carried out in breach of the duties associated with their position.

2.5. Exchange control and foreign investment regulations

Exchange control and foreign investments are liberalized in Portugal (except for specific sectors such as activities related to national defense). Although they are generally free from restrictions, notification to the relevant authority may be required. These reporting obligations are imposed for statistical and tax purposes and to prevent infringements of law. Failure to comply with these reporting obligations may result in fines.

Doing Business in Portugal 21

3. Taking security

3.1. Preliminary ideas

Types of guarantees There are two types of guarantees, depending on how the obligation is secured:

In rem guarantees, whereby an asset is granted as security for the fulfillment of obligations.

Personal guarantees, whereby a person guarantees the fulfillment of obligations as an additional obligor.

In case of insolvency, these guarantees rank differently and are enforced differently.

In addition, there is a special regime applicable to financial collateral arrangements in line with Directive 2002/47/EC of the European Parliament and of the Council of June 2002 on financial collateral arrangements (as amended).

Notarisation and registration Guarantee or security documents may, depending on the type of guarantee and the amount guaranteed, be executed before a notary or through a private document with the signatures duly authenticated by a notary to be considered enforceable titles. It is important to remember that all non-resident parties or beneficiaries must have a Portuguese tax identification number (NIF or NIPC).

Registration is required, and this increases the cost of some types of guarantees, e.g., real estate mortgages.

Principle of integrity Broadly speaking, a security interest can only secure one main obligation and its ancillary obligations. If two different main obligations need to be secured, two different guarantees must be created. As a rule, Portuguese law does not provide a so-called "universal guarantee" over all the debtor's assets or the creation of a "floating" or "adjustable" lien or encumbrance.

22 Doing Business in Portugal

Corporate benefit Under Portuguese law, the directors of a company must perform their duties at all times with the diligence of an orderly businessperson and must act as loyal representatives when defending corporate interest. Unlike other EU jurisdictions, there is no specific obligation for companies to justify that they are acting for corporate benefit when granting a guarantee or security concerning its own obligations, although it is advisable to do so according to the characteristics of a specific transaction and to uphold the effectiveness of the security or guarantee if the grantor becomes insolvent.

In case of a guarantee or security concerning an obligation of a third party, even within the group context or a controlling or affiliation relationship, companies should justify that they are acting for their own corporate benefit.

Blanket prohibition on financial assistance Portuguese limited liability companies cannot provide financial assistance to acquire their shares or quotas, or those of their parent companies.

This blanket prohibition includes indirect assistance, i.e., situations where the company does not provide consideration in the traditional sense but covers another party's obligation, e.g., if the company guarantees a bank loan in favor of an individual for purchasing shares in the company. The rules prohibiting financial assistance are particularly relevant in the context of acquisition finance.

3.2. Overview of the most relevant types of security

This description of some of the options available when taking security in Portugal is not comprehensive, and other types of security are available under Portuguese law.

Pledge over shares and credit rights Pledges over shares and credit rights (such as bank accounts, receivables and insurance policies) are the most common type of security granted.

These pledges entail a transfer of possession (or documentation that replaces it). In case of pledge over shares, such transfer takes place by means of endorsement

Doing Business in Portugal 23

or registration in the partners/shareholders book or book entry registry, as the case may be.

Real estate mortgage Real estate is frequently used as security by means of a mortgage. As an exception to the principle of integrity, a mortgage can secure several obligations as long as they are specified or specifiable, and the procedure for settling each obligation is established. Mortgage agreements must be filed with the competent real estate registry.

Unconditional guarantee payable on first demand This guarantee imposes an obligation on the guarantor to pay the beneficiary on first demand. This guarantee is independent from the underlying contract that it guarantees and operates strictly in accordance with its terms. Therefore, the guarantor's payment obligation becomes a principal obligation that is not affected by disputes over the underlying contract between the obligor and the beneficiary, who is usually entitled to payment simply on submitting a claim for payment.

3.3. Special regime for financial guarantees

Portuguese regulation on financial collateral agreements provides a simple, quick procedure for enforcing financial guarantees. These are some of the most relevant features of these guarantees:

They do not need to be formalized before a notary to be enforceable against third parties.

Security can be created by outright transfer of title to the asset or right concerned or by creating a pledge.

The creditor can negotiate a right of replacement and use of the financial collateral as if it were the owner without losing rank of privilege.

When expressly agreed, and provided certain requirements are met, enforcement of the collateral may be achieved through appropriation.

24 Doing Business in Portugal

These guarantees are not affected by the general insolvency regime.

Close-out netting agreements are not limited or affected by the start of insolvency proceedings or the appointment of receivers.

To grant a financial guarantee, the parties, the collateral and the secured obligations must fulfill several specific requirements.

4. Antitrust

Businesses in Portugal are subject to EU and Portuguese antitrust law. Portuguese antitrust law applies to anticompetitive agreements or conduct occurring or having effects in Portugal. EU Law also applies to those agreements or conducts which may affect trade between Member States.

The relevant Portuguese statute is the Competition Act ("CA"), Law 19/2012 of May 8.

The provisions of the CA are enforced by the Portuguese Competition Authority (Autoridade da Concorrncia, "AdC"). The new statutes of the Competition Authority (Decree-Law 125/2014, of August 18), which came into force in September 2014, reinforced the powers of the AdC regarding the enforcement of the competition rules. In 2016, the AdC adopted only one fining decision.

In addition, EU and Portuguese antitrust law can be applied in private litigation before Portuguese courts.

4.1. Restrictive practices

The CA prohibits collusive practices (anticompetitive agreements, concerted practices and decisions by associations of undertakings), abuse of dominant position and abuse of economic dependence that have as object or effect the prevention, restriction or distortion of competition in the Portuguese market.

Collusive practices In general terms, in Portugal, all agreements, collective decisions and recommendations, concerted practices or decisions by associations of

Doing Business in Portugal 25

undertakings that aim or achieve to prevent, restrict or distort competition are prohibited.

These practices include, inter alia, price fixing; limiting or controlling production, distribution, technical development or investment; sharing markets or sources of supply; applying dissimilar conditions to equivalent transactions; and entering contracts subject to the acceptance of supplementary obligations that have no connection with the object of these contracts.

Prohibited agreements and practices, subject to some exceptions, are null and void and may be punishable, depending on the severity of the restriction on competition, with fines of up to 10% of the infringer's total annual turnover in the year preceding the fining decision or, in the case of associations of undertakings, of up to 10% the aggregate turnover of the associated undertakings in the year preceding the fining decision.

Other ancillary sanctions that may be applied by the AdC include publishing, at the expense of the infringing company, the decision in the Official Gazette and, in case of bid rigging, a ban of up two years on the right to take part in the procedures for public works contracts.

Under article 10 of the CA, prohibited agreements and practices can be exempted if they contribute to improving the production or distribution of goods and services or to promoting technical or economic, progress provided the restrictive practices offer the users of goods or services a fair part of the benefit of these practices; do not impose any unnecessary restrictions on achieving the objectives and do not afford the undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. In addition, the AdC may impose on the undertaking(s) concerned behavioral or structural measures that are deemed indispensable to make the sanctioned practice and its effects come to an end.

Abuse of dominant position The CA prohibits abusive exploitation of dominance, whether by one or more undertakings. Such abuse may, inter alia, consist of applying unfair trading conditions, limiting production to the prejudice of consumers, refusing to deal, predatory pricing or discriminating so as to place one or more parties at a competitive disadvantage.

26 Doing Business in Portugal

Abuse of dominance is punishable with fines of up to 10% of the total annual turnover of the infractor in the year preceding the fining decision. Other ancillary sanctions that the AdC may apply include publishing, at the expense of the infringing company, the decision in the Official Gazette.

In addition, the AdC may impose on the undertaking(s) concerned behavioral or structural measures that are deemed indispensable to make the sanctioned practice and its effects come to an end.

Abuse of economic dependence The CA also prohibits the abuse of economic dependence by one or more undertakings, under which any of its supplier or customer may find itself as a result of the fact that any equivalent alternative is not available. Such abuses comprise, for instance, the refusal to deal or the unjustified termination of an existing commercial relationship between the undertakings involved, taking into account, inter alia, their previous commercial relationship, recognized practices in a particular economic activity and the contractual conditions that have been specifically set down.

Abuse of economic dependence is punishable with fines of up to 10% of the infractor's total annual turnover in the year preceding the fining decision. Other ancillary sanctions that may be applied by the AdC include the publication, at the expense of the infringing company, of the decision in the Official Gazette.

In addition, the AdC may impose on the undertaking(s) concerned behavioral or structural measures deemed indispensable to make the sanctioned practice and its effects come to an end.

Leniency regime Under the Portuguese leniency regime, companies or individuals subject to liability for restrictive agreements and concerted practices prohibited by the CA may benefit from immunity or reduction of up to 50% of the fine provided they

cooperate fully and continuously with the Competition Authority, providing all the information and evidence in their possession;

terminate their participation in the infringement; and

Doing Business in Portugal 27

did not coerce any of the other companies to participate in the infringement.

The leniency regime is becoming increasingly popular among companies doing business in Portugal.

4.2. Merger control

The CA requires prior notification and authorization for mergers and other concentrations, including acquisitions and full-function joint ventures, which are not notifiable to the European Commission under the EU Merger Regulation, but which satisfy any of the thresholds listed below.

A concentration must be notified to the AdC when:

A market share equal to or exceeding 50% of the Portuguese market (or of a substantial part of it) for a specific product or service is acquired, created or reinforced as a result of the transaction; or

A market share equal to or exceeding 30% but smaller than 50% of the Portuguese market (or of a substantial part of it) for a specific product or service is acquired, created or reinforced, and the individual turnover achieved in Portugal in the previous financial year of at least two undertakings involved in the transaction exceeds 5 million, net of taxes directly related to such a turnover; or

The aggregate turnover achieved in Portugal of all the undertakings involved in the transaction in the previous financial year exceeds 100 million net of taxes directly related to such a turnover, and the turnover in Portugal of at least two undertakings involved in the transaction exceeds 5 million.

The CA provides for fines of up to 10% of the parties' turnover if a transaction is not notified or if a transaction is completed without authorization. In 2014, the AdC fined three companies that had implemented a concentration without prior notification with over 100,000.

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4.3. Unfair competition

Portuguese unfair competition rules are based on the general principle that commercial conduct contrary to good faith is considered unfair. The relevant Portuguese statute is the Portuguese Industrial Property Code (Decree Law 36/2003, of March 5th, as amended), in particular, Articles 317 and 318.

The Portuguese Unfair Competition rules specifically address unfair commercial conducts, including: acts of confusion, misleading advertising, some kinds of gifts and discounts, acts of denigration, acts of comparison, acts of imitation and sales at a loss.

4.4. Individual trade practices

Undertakings active in the production and distribution of goods in Portugal should also take into consideration the legal regime on individual restrictive trade practices, set out in Decree-Law 166/2013, of December 27 (as amended). The legal regime on individual restrictive trade practices considers the application of discriminatory prices or sales conditions, the sale below the price of cost, the refusal of supply of goods or services and other abusive business practices restrictive trade practices. For large undertakings, the fines for restrictive trade practices can reach 2.5 million.

5. State aid

Under EU Law, state aid is subject to control by the European Commission to ensure that government interventions at any level (national, regional or local) do not distort competition and trade inside the EU. State aid is defined as an advantage in any form whatsoever (e.g., loans and guarantees), conferred on a selective basis to undertakings by national public authorities. Therefore, subsidies granted to individuals or general measures open to all enterprises are not covered by article 107 of the Treaty on the Functioning of the EU and do not constitute state aid.

EU Law establishes a general prohibition on state aid measures (which must be notified to and only implemented after approval by the European Commission),

Doing Business in Portugal 29

while making allowances for a number of areas in which state aid can be considered compatible under certain conditions.

6. Intellectual property rights and personal data protection

According to Portuguese law, intellectual, artistic and scientific creation is free and this freedom embraces the right to the invention, creation and disclosure of the scientific, literary or artistic work, including copyright legal protection.

The English term "intellectual property rights" includes two different concepts:

industrial property rights (including trademarks, designs, logos, patents and utility models).

6.1. Copyright

The original intellectual, artistic and scientific creation is the object of copyright legal protection, and rightholders can exercise their rights, under national regulations, in countries where they request protection for their rights. Unlike industrial property rights, copyright legal protection is acquired by virtue of the simple creation of a literary, artistic or scientific work. No registration or deposit is legally required, just making the work apprehensible by our senses in any way. Protection is automatic and exists from the moment the work is created. Nevertheless, it is advisable to register the work with the competent authorities, since it proves its existence and ownership and makes it possible to enforce these rights, namely regarding priority issues.

In Portugal, copyright and neighboring rights are regulated under the Copyright and Related Rights Act, enacted in compliance with several international treaties and EU Directives that regulate the rights of authors and other "neighboring rights" (including the rights of producers of phonograms and videograms, performers and broadcasting companies).

Software and databases are also protected by copyright in Portugal, but they are regulated in separate specific laws.

30 Doing Business in Portugal

For a work to be protected by copyright, it must be an original literary, artistic or scientific creation, (not a simple copy of a pre-existing work) expressed in any way or form, whether tangible or intangible, known at present or that may be created in the future. Works protected by copyright include, among others, books, magazines, newspapers, music, advertising slogans, cinematographic, television and radio works, sculptures and paintings, architectural works or works of engineering, and photographic works.

Copyright includes (i) personal or moral rights, which are not subject to a time limit, cannot be assigned or waived under any circumstance (including the right to claim authorship of the work and to react against any attempt on its integrity and authenticity), and (ii) rights of economic nature, based on the exclusive right that is recognized to the author to use and benefit from the work, to authorize its exploitation and which may be assigned to third parties.

In general terms, the exploitation rights last for the author's lifetime and 70 years after the author's actual or declared death. Neighboring or sui generis rights have different duration. When the term expires, the works enter the public domain, and the public may use them as long as they respect the moral rights, which have no term of duration, as previously stated.

If these rights are infringed (depending on the type of infringement, but in general terms, copyright breaches can be considered a crime or an administrative offense), the holder can apply for cessation of the unlawful activity against the infringer and claim reparation for the material and moral damages caused. The holder can also request a preliminary injunction to obtain immediate protection, if the applicable legal requirements are fulfilled. There are also other actions that can be applied regarding maintenance and obtaining of evidence.

A number of EU directives and international treaties aim to harmonize some features of IP rights.

6.2. Industrial property rights

In general terms, industrial property rights can be protected at different levels (national, EU and international). In all cases, rights over intangibles are subject to previous registration with the competent authorities.

Doing Business in Portugal 31

It is worth noting that several intellectual property rights can exist over the same object, i.e., a logo can be protected by copyright, design rights and trademark rights, as long as the necessary requirements are met.

Trademarks A trademark is any sign capable of being represented graphically, distinguishing different goods or services of one undertaking from others in the course of trading. These signs can be represented by words, images, shapes, letters, numbers, three-dimensional shapes, sounds or any combination of the above.

National trademarks In Portugal, trademark rights are regulated by the Portuguese Industrial Property Code. A national (Portuguese) trademark application must be filed before the Portuguese Industrial Property National Office (Instituto Nacional da Propriedade Industrial INPI), specifying the classes of products and services for which protection is sought, according to the Nice classification. Trademark legislation forbids registration of some signs if, for example, they lack distinctive character; are contrary to law, public policy or principles of morality; are identical to an earlier trademark and claim identical goods or services; or are likely to cause confusion or association with an earlier trademark.

Trademark registration is granted for a 10-year period starting on the application date and can be indefinitely renewed for subsequent 10-year periods. A trademark can be revoked if its holder has not used it, without proper reason, within five years from the date the notice of registration is published.

Registration gives holders the right to use the trademark in the course of trade. If a third party uses an identical or similar trademark to designate identical or similar goods or services in the marketplace without authorization, holders can request the cessation of the unlawful activity against the infringer and claim reparation for any material and moral damages caused. They can also request a preliminary injunction to obtain immediate protection, provided legal requirements are met.

European Union trademark The European Union Trademark Regulation applies within the EU. The European Union trademark application must be filed before the European

32 Doing Business in Portugal

Union Intellectual Property Office (EUIPO). Like national registration, EU registration is effective in all Member States for a 10 years and can be indefinitely renewed for additional ten-year periods. A European Union trademark can also be revoked if it is not used for an uninterrupted period of five years.

International protection The Madrid ArrangementandtheMadridProtocol(togetherknownasthe"Madrid System") establish a unified application procedure to obtain different national trademarks in the countries that are members of the Madrid System. The Madrid System, administered by the World Intellectual Property Organization (WIPO), allows an international trademark application to be filed directly before the WIPO, which will subsequently forward it to the competent national trademark offices in the countries designated in the application. Trademark holders will have a national title in each country designated in their application.

Designs Designs are defined as the appearance of the whole or part of a product resulting from the features of the lines, contours, colors, shape, texture or materials of the product itself or its ornamentation. Design registration entitles the holders to use the design and to prevent third parties from using it without consent.

The two requirements for registering a design are novelty and individual character, meaning that the overall impression it produces on informed users differs from the overall impression any previous design produced on these users.

In Portugal, design rights are also regulated by the Portuguese Industrial Property Code, and the entity responsible for the designs registration is INPI. The protection period is five years from the date the application is filed. The rightsholder may renew protection for equal periods, up to a maximum of 25 years from the filing date.

EU regulation on community designs is directly applicable in all Member States, including Portugal. At international level, there are many conventions providing design protection, including the Berne Convention, the Paris Convention, the Hague Agreement and the TRIPS Agreement.

Doing Business in Portugal 33

Patents

Portuguese patents Under the Portuguese Industrial Property Rights Code, an invention (either a product or procedure) is patentable if (i) it is novel, i.e., it is not part of the state of the art before the date on which the patent application is filed; (ii) it involves an inventive step, i.e., with regard to the state of the art, it is not obvious to a person skilled in the art; and (iii) it is susceptible of industrial application, i.e., it can be made or used in any kind of industry.

INPI grants patent rights for a non-renewable period of 20 years, beginning on the date the application was filed. This registration grants exclusive exploitation rights and also protection rights against third parties.

It is also possible to request a supplementary protection certificate (SPC), which is an industrial property right that extends the protection granted by a patent for a maximum period of five years. This can apply to a product, medicinal or plant protection, as long as the product is protected by the original patent. This industrial property right was created to meet the needs of the medical and phytopharmaceutical industries.

Patent claims will determine the extent of protection conferred by a patent. The rightsholder must exploit the invention or license an authorized third party to exploit it. The Portuguese Industrial Property Rights Code provides the circumstances in which a patent holder may have to grant a compulsory license, e.g., if the patent is not being used or if this is necessary due to public interest or export.

European patent issuance system The Munich Convention, of October 5, 1973, created a European patent issuance system whereby a single application must be filed with the European Patent Office. After registration, the European patent is converted into several national patents enforceable in each of the designated countries. Like the Portuguese national patent, the protection period is 20 years. A European patent is equivalent to several national patents, each of which is subject to the national rules of the countries listed on the application. Therefore, it is not valid throughout the entire EU territory.

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Single European patent issuance system In 2012, EU countries and the European Parliament agreed on the "patent package" a legislative initiative consisting of two regulations and an international agreement that lay the ground for the creation of unitary patent protection in the EU.

The package consists of:

Regulation creating a European patent with unitary effect ("unitary patent");

Regulation establishing a language regime applicable to the unitary patent; and

Agreement between EU countries to set up a single and specialized patent jurisdiction (the "Unified Patent Court").

The regulations implement enhanced cooperation in the creation of unitary patent protection. All EU countries will participate in this enhanced cooperation except for Spain and Croatia.

In September 2015, Italy joined the Unitary Patent and became the 26th member of the enhanced cooperation on Unitary Patent protection.

Following the adoption of the two regulations in December 2012, the contracting countries, except for Poland but with the addition of Italy, proceeded with the signature of the Agreement on a Unified Patent Court.

The process for ratification of the agreement is ongoing.

International patent issuance system The Patent Cooperation Treaty, signed on June 19, 1970, provides a unified procedure to protect inventions by filing patent applications with the WIPO. Examination and granting procedures are handled by the corresponding national authorities and do not result in an international patent.

Doing Business in Portugal 35

Utility models Utility models are defined as "minor" novel inventions with industrial applicability. Unlike patent rights, utility models are based on a limited nationwide assessment of the state of the art. They are subject to a less rigorous examination and only protect products (not procedures). The period of protection may not exceed 10 years from the date of registration. The regulation for patents applies by default to utility models in all aspects that are not contrary to the specific nature of utility models.

6.3. Personal Data protection

Portuguese Data Protection Act Privacy regarding personal data files is protected under the Portuguese Data Protection Act, which implements Directive 95/46/EC. This Act governs all processing of personal data if (i) processing is carried out as part of the activities of an establishment located in the Portuguese territory belonging to the data controller; (ii) the data controller is not established in Portugal but is subject to Portuguese law pursuant to public international law; or (iii) the data controller is not established in EU territory but uses means in Portugal for processing personal data (unless such means are only used for transit purposes).

The most important obligations concerning personal data protection relate to (i) registering personal data files in the Portuguese Data Protection Agency (Comisso Nacional de Proteco de DadosCNPD); (ii) complying with the right of information of the data subjects, informing the subjects about the data processing, purposes, destination, identification of the controller, and their rights of access, rectification, cancellation and opposition; (iii) complying with the data subjects' rights of access, rectification, cancellation and opposition; (v) implementing appropriate security measures; (vi) entering into adequate contractual clauses with processors, legally set forth in the Portuguese Data Protection Act, when transferring data to such third parties to enable rendering the relevant services to the data controller; (vi) disclosing data to third parties; and (vii) transferring data outside the EU.

The lawful processing of personal data can only begin after registration of the personal data files before the CNPD. Whenever the personal data files

36 Doing Business in Portugal

include sensitive data or the transferring of data occurs outside the EU, prior authorization of the CNPD is required.

EU legislation on data protection Besides the national legislation on data protection, it is crucial to take into consideration the reform of the EU legislation concerning personal data protection, which includes

Regulation (EU) 2016/679 of the 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 (General Data Protection Regulation); and

Directive (EU) 2016/680 of the Parliament and of the Council, of 27 April 2016, on the protection of natural persons with regard to the processing of personal data by competent authorities for the purposes of the prevention, investigation, detection and prosecution of criminal offenses or the execution of criminal penalties, and on the free movement of such data.

Entry into force The Regulation came into force on May 24, 2016, and it is directly applicable in all EU Member States, including Portugal, from May 25, 2018.

The Directive came into force on May 5, 2016, and it must be transposed to the different legal systems in all EU Member States by May 6, 2018.

Obligations of the controller The Regulation foresees several new obligations or, at least, stricter rules, for the entities that process personal data (i.e., controllers) and will force changes under the terms briefly described below.

(a) Records of personal data processing activities

The controller must maintain a record of all processing activities under its responsibility. That record will contain the following information: (i) name and contact of the controller, (ii) purposes of the processing, (iii) categories of data

Doing Business in Portugal 37

subjects and categories of personal data, (iv) categories of recipients to whom the personal data have been or will be disclosed, (v) transfers of personal data to countries outside the EU and, where applicable, documentation of suitable safeguards, (vi) time limits for erasing the different categories of data and (vii) general description of the technical and organizational security measures to ensure the appropriate level of protection in the processing of personal data.

(b) Codes of conduct and certification

The controller will be required to demonstrate compliance with the regulations on personal data processing and privacy, e.g., by adopting codes of conduct or certification systems (such as data protection seals).

The Regulation creates the data protection officer, designated by the controller, which will be in charge for ensuring that the controller complies with the Regulation. The data protection officer will be designated where (among others) the core activities of the controller consist of processing operations which, by their nature, scope and purposes, require regular and systematic monitoring of data subjects on a large scale.

(d) Procedures in case of personal data breach

The obligation to notify the supervisory authority and the data subjects in case of data breach is implemented.

(e) Consent of the data subject

The consent of the data subjects must be freely given, specific, informed and unambiguous (by a statement of a clear affirmative action) which means that the silence, pre-selected boxes, inactivity, lack of response or subsequent opposition will no longer be considered valid consent given by the data subjects.

(f) Right to be forgotten

The right to be forgotten is reinforced. The data subjects will have the right to obtain from the controller without undue delay the erasure of personal data concerning to him/her in the following main situations: (i) the personal data are no longer necessary in relation to the purpose for which they were collected/

38 Doing Business in Portugal

processed; (ii) the data subject withdraws consent on which the processing is based; (iii) the data subject objects to the processing of personal data and there are no overriding legitimate grounds for the processing; (iv) the processing have been unlawfully processed.

(g) Privacy impact assessment

The controller will be required to perform a privacy impact assessment ("PIA") of the personal data processing operations using new technologies that are likely to have impact in the rights of the data subjects. The PIA will contain, at least, (i) a description of the envisaged processing operations and the purposes of the processing; (ii) assessment of the necessity and proportionality of the processing operations in relation to the purposes; (iii) assessment of the risks to the rights and freedoms of the data subjects; and (iv) measures envisaged to address the risks, including safeguards, security measures and mechanisms to ensure the protection of personal data and to demonstrate compliance with the Regulation.

(h) International transfer of data

The transfer of data outside the UE will take place only in specific situations, for example, where (i) the EU Commission has decided that such country ensures an adequate level of protection to the personal data, (ii) there are standard data protection contractual clauses adopted by the EU Commission, (iii) intra-group agreements or binding corporate rules, (iv) with explicit consent of the data subject or (v) the transfer is necessary for the performance or conclusion of a contract.

(i) One-stop-shop principle

This principle is backed by the possibility to be in touch with a sole supervisory authority in cases of processing common personal data in several countries. The supervisory authority of the main establishment of the controller will be competent to act as lead supervisory authority for the crossborder processing carried by that controller. However, each supervisory authority will be competent to handle a complaint or an infringement of the Regulation if the subject matter relates only to an establishment in its Member State or that substantially affects data subjects only in its Member State.

Doing Business in Portugal 39

(j) Right to data portability

Whenever the processing is carried out by automated means, the data subject has the right to receive from the controller the personal data he or she has provided to the controller, in a structured, commonly used and machine-readable format and has the right to transfer those data to another controller without hindrance from the controller to which the personal data have been provided.

(k) Right to restriction of processing

The data subject will have the right to obtain from the controller restriction of personal data processing in four situations. Where the data subject has exercised his or her right to restriction with exception of storage, the personal data will only be processed with the data subject's consent or for (i) establishing, exercising or defending legal claims, (ii) protecting the rights of another natural or legal person or (iii) for reasons of important public interest of the UE or of a Member State.

(l) Profiling

Data subjects have the right not to be subject to a decision that produces legal effects on them or that significantly affect them, based solely on automated processing (including profiling) destined to evaluate certain aspects of their personality, or to analyze or predict their professional ability, financial situation, health, personal preferences, reliability or behavior.

(m) Data Protection by design and by default

The Controller will implement the appropriate technical and organizational measures necessary to ensure that the processing of personal data, both when determining the means for processing and at the time of the processing itself, meets the requirements of the Regulation and protects the rights of the data subjects. These measures must ensure, by default, that only the personal data necessary for each specific purpose of the processing are processed (either in terms of amount of personal data collected, extent of their processing and the period of their storage). In particular, these measures must ensure that, by default, personal data are not accessible without the data subject's intervention to an infinite number of natural persons.

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(n) Information to be provided to the data subjects

Besides the information that is currently mandatory under the Portuguese Data Protection Act, the Regulation requires the provision of the following information: (i) contact details of the data protection officer (where applicable); (ii) legal basis for the processing; (iii) legitimate interest pursued by the controller of by a third party (where applicable); (iv) the fact that the controller intends to transfer personal data to a third country or international organization and the existence or absence of an adequacy decision by the Commission or reference to the appropriate or suitable safeguards and the means to obtain a copy of them or where they have been made available (where applicable); (v) the period for which the personal data will be stored, or if that is not possible, the criteria used to determine that period; (vi) the existence and right to request from the controller restriction of data processing as well as the right to data portability; (vii) where applicable, the existence of the right to withdraw consent at any time, without affecting the lawfulness of processing based on consent before its withdrawal; (viii) the right to lodge a complaint with a supervisory authority.

(o) Administrative fines for non-compliance with the Regulation

The administrative fines for non-compliance with the Regulation may go up to 4% of the total worldwide annual turnover of the preceding financial year (or 20,000, 000, whichever is higher).

7. Tax

7.1. Introduction

Under the Portuguese tax system, tax liability is based on factors that determine the connection of income, acts and contracts or transactions to the Portuguese jurisdiction that differ according to the tax as follows:

Residence and source of income, for income taxes (both corporate and personal);

Location of the immovable property, for real estate transfer tax and municipal property tax;

Doing Business in Portugal 41

Place of execution of acts and contracts for stamp duty; and Place where the transaction is deemed to be carried out for value added

tax. These connection factors must be regarded as general principles aimed at giving the Portuguese State the right to tax. Accordingly, they should be analyzed in light of key concepts and definitions of the Portuguese tax system, e.g., residence and source. Furthermore, these general principles have some exceptions in the Portuguese tax system aimed at (i) broadening the scope of the taxable facts, acts and contracts (e.g., in the case of real estate transfer tax, municipal property tax and stamp duty), and (ii) considering the specific nature of the transactions (e.g., in the case of value added tax).

7.2. Main taxes

Below is a brief and general overview of the main Portuguese taxes: Corporate Income Tax ("CIT") Personal Income Tax ("PIT") Value Added Tax ("VAT") Real Estate Transfer Tax ("IMT") Municipal Property Tax ("IMI") Stamp Duty

7.3. Corporate income tax

7.3.1. Preliminary remark Portuguese-resident companies are liable for CIT on their worldwide income, while non-resident entities are liable for CIT on Portuguese-sourced income only,

42 Doing Business in Portugal

i.e., that obtained through a local permanent establishment ("PE") or any of the income types listed in the law.

A company is deemed to be tax resident if it has its legal seat or place of effective management in Portugal.

7.3.2. Resident companies and PE of non-resident companies Taxable base

The annual CIT taxable base for resident entities engaged in business results from the accounting profit or loss of the year added by certain positive and negative changes in equity not reflected in the P&L account, which is subject to certain adjustments required by the CIT law.

CIT adjustments to the accounting results include, for example, depreciation and amortization, inventory adjustments, impairment losses, losses arising from applying the fair market value, expenses for onerous acquisition on or after January 1, 2014, of certain intangible assets with no limited useful life period, and with goodwill acquired within the context of a corporate restructuring process (except if arising from shareholdings).

Adjustments may also result from non-deductible expenses, which include, notably, (i) CIT itself, including autonomous taxation, municipal and state surtaxes, and any taxes or charges that must be passed on to third parties; (ii) undocumented expenses and expenses supported by documents not complying with legal requirements; (iii) criminal or administrative fines and sanctions, including fines and penalty charges for tax infringements; (iv) payments to residents in low-tax jurisdictions, except if payer is able to demonstrate that they correspond to real transactions and do not have an abnormal nature or are excessive.

Net financial expenses are tax deductible only up to the higher of the following limits: (i) 1 million, or (ii) 30% of annual EBITDA (as adjusted for this purpose). This regime provides for carry-forward rules regarding certain non-deducted amounts, and for particular rules for companies taxed under the tax group regime. Entities subject to the supervision of the Portuguese Central Bank and of the Portuguese Insurance and Pension Fund Supervisory Authority, and

Doing Business in Portugal 43

Portuguese branches of credit institutions, other financial entities or insurance companies and credit securitization companies incorporated under Decree-Law No. 453/99 of 5 November are excluded from this regime.

A local PE of a non-resident company is liable for CIT on the income attributable to it, defined under domestic law as the income obtained through the PE and other income obtained in Portugal from activities identical or similar to those undertaken through the PE. Under treaties to avoid double taxation ("DTT") entered into by Portugal, this domestic regulation is overridden, and the PE's taxable income corresponds exclusively to that obtained through the PE itself. In general, CIT taxable profit of a PE is calculated in accordance with rules similar to those applicable to resident companies. There is no branch tax on income remitted from a branch to the foreign head office.

Tax losses

The carry-forward period for tax losses is five years (12 years for micro, small and medium companies1 engaged in agricultural, commercial or industrial activities) regarding tax losses incurred in the tax periods starting on or after January 1, 2017. The carry-forward period for tax losses incurred in previous tax periods may vary between 5 and 12 years. Since January 1, 2017, the requirement to use the oldest tax losses from prior years ("FIFO") first was revoked.

Offset of tax losses from prior years cannot, however, exceed 70% of each tax period's taxable profit.

The right to carry-forward tax losses may, in certain cases, be jeopardized when the ownership of more than 50% of the share capital or voting rights changes.

Tax rates

The standard CIT rate for resident companies and PE of non-resident companies is 21%.

Micro, small and medium companies1 (and PE of non-resident micro, small and medium companies) benefit from a reduced CIT rate of 17% on taxable income up to 15,000.00.

1 As defined under the provisions of Decree-Law no. 372/2007, of November 6.

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Taxable amount Up to 15,000.00 Above 15,000.00

Taxable amount 17% 21%

The standard CIT rate may be further increased by a municipal surcharge (Derrama Municipal) levied over the year's taxable profit at a rate of up to 1.5%, defined yearly by each municipality.

A state surcharge (Derrama Estadual) is also levied on the year's taxable profit exceeding 1,500,000.00 at the following progressive rates:

Year's Taxable Profit Up to 1.5 million

Tax rate Not applicable

Higher than 1.5 million up to 7.5 million Higher than 7.5 million up to 35 million Higher than 35 million

21% 3% 7%

Autonomous taxation CIT is also levied over certain expenses incurred by the company (1):

Expenses Undocumented expenses

Expenses with light passenger vehicles, light commercial vehicles and motorcycles (3)

Representation expenses

Rates (%) (2) 50/70 10/27.5/35 10

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Payments made to residents in a territory with a clearly more favorable tax regime or to accounts open in financial institutions 35/55 resident or domiciled there

35/55

Daily allowances and car mileage paid to employees, for using their own vehicle, not charged to clients

Profits distributed to entities wholly or partially exempt from Corporate Income Tax, arising from shares held for less than one year

Costs or expenses for indemnity and compensation upon managers and board members termination of functions

Costs or expenses for bonuses and other variable remuneration paid to managers and board members

(1) Autonomous taxation relief is available in certain situations and/or provided that certain requirements are

met. (2) Autonomous taxation rates are increased by 10 percentage points when taxpayers compute tax losses in

the relevant tax period.

(3) Exemption or reduced rates may apply to "environmental friendly vehicles".

Transfer pricing

Domestic transfer pricing rules, which follow the OECD guidelines, determine that terms and conditions of transactions between related parties should follow those that independent entities in a comparable transaction would establish (arm's length). Otherwise, the tax authorities may adjust the respective terms and conditions accordingly.

Regarding the personal scope, the regulations determine broadly that two entities are deemed as related whenever one can exercise, directly or indirectly, a significant influence over the management of the other, and then provide for an extensive list of situations under which the "related party test" is considered to be met.

The regulations further establish specific yet extensive documentation compliance requirements, which in certain cases require that a transfer pricing file is prepared and maintained. Furthermore, taxpayers are required to disclose in their annual tax and accounting return information on any transactions

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with related parties, their identity, amount and whether contemporaneous documentation was prepared.

These regulations include the possibility of taxpayers entering into advanced pricing agreements (APAs) with the tax authorities, which may apply for up to three years.

Special regimes Participation exemption on dividends and capital gains: A participation exemption regime was introduced from January 1, 2014, and generally applies to all CIT resident taxpayers that are not subject to the tax transparency regime, both for purposes of eliminating economic double taxation on distributed profits and reserves and capital gains arising from the sale of shares or other equity instruments.

For the participation exemption regime to apply, a minimum direct or indirect shareholding of 10% of the subsidiary's share capital or voting rights uninterruptedly held for a period of 12 months is required.

Tax group regime: A company (controlling company) that holds, directly or indirectly, at least 75% of the capital of other companies, granting it more than 50% of the voting rights, may, under certain conditions, opt for a special regime under which a group of companies may file a single tax return for the whole group. The group's taxable income, determined by the controlling company, corresponds to the algebraic sum of taxable profits and/or losses as assessed individually in the tax return of each company belonging to the group.

Timing requirements must be considered when acquiring a company, since applicable rules will normally imply a waiting period of more than one year before the regime can begin applying.

This regime includes particular rules on deduction of tax losses, which, for instance, may restrict the deductible amount in each year where the regime applies regarding tax losses assessed before the regime started applying.

Doing Business in Portugal 47

Business reorganization: CIT law provides for a tax-neutrality regime applicable to restructuring operations, which in general is in line with the so-called Mergers Directive.2

This regime provides for deferral of the CIT due, both for the companies involved and their shareholders, on mergers, divisions and partial divisions, transfers of assets and exchanges of shares.

This neutrality regime does not cover indirect taxes, although domestic tax law sets out the possibility of applying for an exemption from the Ministry of Finance regarding real estate transfer tax and stamp duty triggered upon transfer of real estate within restructuring operations, and from other costs also arising in restructurings such as registry costs.

7.3.3. Non-residents without a PE Non-resident entities without a PE are liable for Portuguese CIT on different types of Portuguese-sourced income listed in the CIT law, including, notably, that derived from local real estate, parts of capital or other securities issued by resident companies, positive variations in equity arising from certain gratuitous transfers, as well as investment income, royalties and certain service fees where paid by residents or attributable to a local PE.3 Dividends, interest and royalties obtained by non-residents without a PE are, in general, liable for withholding tax at a 25% rate.

If the requirements are met, the participation exemption regime may, however, apply to dividends distributed to residents in another EU Member State, in an EEA Member State bound to administrative cooperation in the tax area equivalent to that established in the EU, or in a state with which Portugal has signed a DTT.

2 Council Directive 2009/133/EC of October 19, 2009 on the common system of taxation applicable to

mergers, divisions, partial divisions, transfers of assets and exchanges of shares concerning companies of different Member States and to the transfer of the registered office of an SE or SCE between Member States. 3 As a rule, taxation is levied through final withholding taxation, though there are some exceptions, e.g., regarding real estate-related rental income or capital gains, which require non-residents to file a tax return, the periodicity and deadlines of which depend on the type of income.

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EU corporate investors may also benefit from withholding tax relief on interest and royalties pursuant to the regime of the so-called Interest & Royalties Directive.4

As a final remark, Portugal currently has more than 60 DTTs in force, which generally follow the OECD model tax convention despite a few reservations it has made on some of its articles, which are included in some DTTs. Regarding outward-bound payments, Portuguese DTTs normally provide for reduced withholding tax rates, as follows:

For dividends, the domestic rate is usually reduced to 5%, 10% or 15%

For interest, the domestic rate is usually reduced to 10%, 12% or 15%

For royalties, the domestic rate is usually reduced to 5%, 10% or 12%

7.4. Personal income tax

General rules applicable to resident individuals

Portuguese resident individuals are subject to PIT on their worldwide income, while non-resident individuals are only liable for PIT on Portuguese-sourced income as defined by the PIT Code. Under domestic law, an individual is considered a tax resident in Portugal if any of the following circumstances occurs:

The individual stays for more than 183 days (whether consecutive or not) in Portugal in any period of 12 months starting or ending in the year at stake; or

Though staying fewer than 183 days in Portugal, the individual has, in any day of the period referred to above, a house or abode in such conditions that make evident the intention to hold and occupy it as habitual place of residence; or

4 Council Directive 2003/49/EC, of June 3, 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States.

Doing Business in Portugal 49

An individual may also be deemed as having tax residence in Portugal in the following particular cases: (i) if, on December 31 of a given year, the individual is a crew member of a ship or aircraft at the service of an entity with residence, head office or effective management in Portugal, or (ii) if although living abroad, the individual is performing public functions or commissions at the service of the Portuguese State.

The tax period is the calendar year and, as a rule, PIT due by resident individuals is levied, on an annual basis, at general/progressive rates over the total income of the different categories subject to taxation, net from the corresponding deductions.

PIT is individually assessed for each taxpayer. The heads of a household (e.g., each member of a married couple or of a couple living under a civil union) may opt to be jointly taxed as a family unit, in which case an income-splitting mechanism applies.

There are six income categories, as follows:

Category A

Category B Category E Category F Category G Category H

Employment income, including fringe benefits and fees of members of corporate bodies (other than statutory auditors) Business income, including income from a business or independent profession Investment income Rental income from immovable property Net worth increases, including capital gains Pensions, including annuities and alimony payments

Currently, the highest rate of the progressive tax scale is 48%, applied to annual taxable income exceeding 80,640.00, which is further liable for an additional solidarity tax at a maximum 5% rate, for taxable income exceeding 250,000.00 (a 2.5% rate applies to the taxable income between 80,000.00 and 250,000.00).

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A progressive additional surtax ranging from 0.88% to 3.21% also applies to taxable income obtained in 2017 in excess of 20,261.00 (the maximum 3.21% rate applies to income exceeding 80,640.00)5.

Non-habitual resident's PIT regime A favorable PIT regime applicable to non-habitual residents ("NHTRR") aims at attracting skilled professionals for high value-added activities, as well as high net worth individuals wishing to move their tax residence to Portugal for retirement or long-term leisure purposes.

The non-habitual tax resident status is granted to individuals who (i) become resident for tax purposes in Portugal in a given year and (ii) have not had such status in the five preceding years. Eligible individuals can benefit from the NHTRR for a 10-year period, after which they will be subject to the standard PIT regime.

Amongst other beneficial taxation rules, the NHTRR may under certain conditions provide for full Portuguese PIT exemption on foreign sourced employment income, income from independent personal services, royalties, as well as foreign-sourced investment income, certain capital gains, property rental income or pension income.

Domestic sourced employment and independent personal income from listed high value-added activities obtained by non-habitual tax residents are subject to a flat PIT rate of 20%, instead of being subject to the progressive tax rate scale.

7.5. Value added tax

The Portuguese VAT regime is based on the Sixth VAT Directive and aims to tax the consumption of goods and services, falling on the different phases of the economic cycle, from production to sale. It includes transactions entered into in Portugal, but also intra-community acquisitions of goods and services, as well as the importation of goods into Portugal.

5 Exceptions to the progressive scale of tax rates however apply e.g. to capital gains upon disposal of shares or to real estate rental income, to which a flat rate of 28% applies. As a rule, investment income is liable to final withholding tax at a rate of 28%. Taxpayers may however opt to have these types of income included in their taxable basis together with other income, and taxation is then levied under the progressive scale of tax rates.

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There are three different VAT rates: 6% (reduced), 13% (intermediate) and 23% (standard).

In the Autonomous Region of Azores, VAT rates are currently reduced to 4%, 9% and 18%, respectively. Whereas in the Autonomous Region of Madeira which used to have identical rates to those applicable in Azores VAT rates are currently 5%, 12% and 22%, respectively.

7.6. Real estate transfer tax

IMT is a municipal tax levied on the acquisition of real estate located in Portugal for a consideration, on the higher of the property transfer value and its fiscal value. The acquisition of 75% or more of the equity of a LDA owning real estate is also liable for taxation (on the higher of the property's accounting value and its fiscal value).

IMT is borne by the acquirer, and the applicable rates are as follows:

Rural property: 5%

Urban property for residential purposes: progressive rates up to 6%

Other urban property and other acquisitions: 6.5%

Rural or urban property when the acquirer is domiciled in a blacklisted jurisdiction: 10%2

7.7. Municipal property tax

IMI is a municipal tax levied annually by virtue of ownership of real estate located in Portugal, over the fiscal value of the property, at the following rates:3

Rural property: 0.8%

Urban property: between 0.3% and 0.45%

Rural or urban property when the taxpayer is domiciled in a blacklisted jurisdiction: 7.5%6

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Rates applicable to urban properties are determined annually by the municipalities within the bracket provided by the IMI Code.

An IMI surtax (Adicional ao IMI, "AIMI") was introduced from January 1, 2017, and it is levied over urban property, excluding urban property classified for "commerce, industry or services" or "other" uses.

AIMI is due by individuals, corporate entities, structures or collective bodies without legal personality and undivided inheritances, and it is levied over the sum of the fiscal value of all the urban properties owned by a taxpayer as determined on January 1 each year.4,5

In case of individuals and undivided inheritance, the taxable base is reduced by 600,000.00.

Married couples or couples living under a civil union may opt for joint taxation, in which case the deduction amounts to 1,200,000.00.

Applicable rates are as follows:

Taxpayer Individuals and undivided inheritances Corporations Entities in blacklisted jurisdictions

Rate (%) 0.7/1 6 0.4/0.7/17 7.5

7.8. Stamp duty

Stamp duty is due on a list of specified taxable events, when deemed as occurring in Portugal, including a number of operations, contracts, acts and documents, as outlined in the Stamp duty table. The main taxable events to consider by foreign investors are as follows:

6 To the taxable amount exceeding 1,000,000.00 (2,000,000.00 for married couples or a couples living under a civil union opting for joint taxation) before the 600,000.00 or 1,200,000.00 deduction, a marginal rate of 1% applies in case of individuals.

7 In the case of properties owned by companies for the personal use of shareholders, members of the board or of any management or supervision bodies, a 0.7% rate applies. To the portion of the taxable amount exceeding 1,000,000.00, a marginal 1% rate applies.

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Acquisition of real estate: 0.8% Acquisition of a going concern: 5% Granting of credit: over principal amount at rates varying upon the term

during which funds are used as follows: Credit for less than one year: 0.04% per month or fraction Credit for between one and five years: 0.5% Credit for five or more years: 0.6% In case of credit granted by banks or other financial institutions, taxation is also levied over interest (4%) and commissions (3% or 4%). Under certain conditions, exemptions apply to intra-group funding operations. Guarantees deemed granted in Portugal are liable for taxation over the amounts guaranteed at rates varying upon the respective term similarly to that regarding credit taxation. No taxation is levied over guarantees if they are materially ancillary to contracts already taxed, and to the extent that they are granted simultaneously to the guaranteed obligation.

8. Employment

In this section we provide an overview of the main aspects of Portuguese employment law.

8.1. Employment law framework

The main mandatory employment and labor rules are provided in the Labor Code and the applicable collective bargaining agreement for each area of activity. Besides, there is a substantial body of laws regarding employment, health and safety at work and social security.

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8.2. Employment contracts

Types of employment contract Employment contracts are entered into on a permanent or fixed-term basis and can be full-time or part-time.

Term (fixed term or unfixed term) employment contracts are valid if their nature is justified by temporary business-related reasons, namely:

The company needs to carry out a specific task or service.

There is an extraordinary increase in the company's activity.

The company requires temporary replacement of an employee on leave entitled to return to work (i.e., sick leave or maternity leave).

Entering into an employment contract Apart from specific types of contract, such as term contracts, telework contracts, part-time contracts, service commission contracts (usually for topmanagement), employment contracts in general are not subject to written form.

However, employers are obliged to provide their employees with basic information in writing on the key terms, including employer identification (if the employer is a company, the information must include the company's group relations) and the employee, salary, category, working time, workplace, vacation period, accident at work insurance policy, applicable collective bargaining agreement, work compensation fund and work compensation guarantee fund,.

Probation period The parties may terminate the employment contract without prior notice or severance payment within the probation period.

The probation period cannot be longer than 240 days for managerial position, 180 days for qualified employees, and 90 days for the rest of employees. In case of term contracts probation period will be of 15 or 30 days depending on the length of the contract. By individual agreement, the legally defined periods may be reduced or eliminated but never extended.

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Temporary employment agencies

Temporary employment agencies can operate in Portugal, subject to some limitations. Besides providing all kinds of temporary employment, they also act as outplacement agencies.

8.3. Salary

Salary is defined in the employee's individual employment contract. Collective bargaining agreements usually set minimum salaries for different categories of employees. The annual salary is usually paid in 14 installments: every month plus the vacation and the Christmas allowances.

Salary is subject to general legal provisions on social security and income tax. The employer is responsible for making the corresponding withholdings on the employee's salary for these taxes and contributions.

The official minimum wage is established by law, and it is currently set at 557.00 per month.

8.4. Working time

The maximum number of working hours is 40 per week and 8 per day. Collective bargaining agreements may establish different maximum working hours, provided that they do not exceed the legal maximum. Special flexible working hours regimes may also be established in certain circumstances, allowing an extension up to 12 hours per day and 60 hours per week. It is the case of the adaptability regime (where the normal working time is defined on an average basis), time bank (where the employee has a time saving account) and concentrated working hours (where all working time is concentrated in 3 or 4 days per week).

Employees are entitled to daily breaks of one to two hours and are not allowed to work for longer than five consecutive hours. These limits can be modified with authorization from the Authority for Working Conditions (Autoridade para as Condies do Trabalho).

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Time worked (including starting and end hours and breaks) must be registered daily.

Every hour worked over the maximum working time is considered overtime and subject to a supplementary payment and, in some situations, it entitles the employee to a compensatory rest.

Collective bargaining agreements may establish a different payment and compensatory regime.

As a rule, and for a full-time contract, overtime must not exceed 150 or 175 hours per year, depending on the size of the company. By collective bargaining agreement the maximum overtime can be increased to 200 hours per year.

The ordinary minimum annual vacation period is 22 working days. Collective bargaining agreements may set forth a longer annual vacation period.

The employee is entitled to different types of leaves, paid by the employer or by the social security, including sick and parental leave.

8.5. Changes in employment conditions

The Labor Code sets forth several types of employee mobility enabling companies to adapt to market and economic circumstances.

Functional mobility Employers may freely use employees within the same professional group or career. Mobility between non-equivalent groups is allowed only when it is attributable to technical or organizational reasons and must end as soon as the circumstances are resolved. If, as a consequence of functional mobility, an employee is performing higher functions, he or she will be entitled to the corresponding salary and benefits.

Downgrading is only allowed in case of exceptional needs of the employer or the employee and if agreed by the parties; if downgrading implies a decrease in salary, prior consent of the Authority for Working Conditions is required.

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Geographical mobility A change in the employee's workplace is allowed (i) in case the company changes location, and (ii) when it is attributable to economic, technical, organizational or production reasons and does not cause serious damage to the employee.

Employees may be permanently or temporarily transferred. In the first case, and in the situation described in (i) above, the employee may choose between being transferred and having the increase in expenses reimbursed, or terminating the employment contract with the right to severance equal to termination on objective grounds as described below, if the employee can prove that the transfer causes serious damage.

In case of temporary transfer, the employee will have his or her expenses reimbursed. However, the duration of the temporary transfer cannot, under normal circumstances, exceed six months.

Employment contracts may include a transfer of workplace clause waiving the above limitation, but such clause will only be valid for a two-year period.

Other employment conditions modifications:

The employer can determine the employee's working timetable, unless it has been individually agreed with the employee.

Salary is protected under Portuguese law and can be only reduced in very exceptional situations. Reducing a salary by simple agreement between the parties is considered void.

Employers can temporarily suspend employment contracts or reduce working hours with partial reduction of salary (layoffs) in case of market, structural or technological reasons.

8.6. Termination of employment

Under the Portuguese Constitution, no one can be dismissed without just cause, including subjective (termination for cause) and objective (collective and individual redundancies) causes.

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In case of term contracts and service commission contracts, the employer can unilaterally terminate the contract by serving a prior notice.

Termination for cause Termination for cause may be triggered when the employee fails to comply with its legal and contractual obligations; it is then mandatory for the employer to initiate disciplinary proceedings to apply the most serious disciplinary measure, which is dismissal without indemnity or compensation.

Disciplinary proceedings are strictly ruled by law, and failure to comply with the legal procedure may lead to an unlawful dismissal. Employees may be suspended from work without losing their right to a salary during disciplinary proceedings.

Employees under parental protection cannot be dismissed without the prior consent from the relevant authority, the Commission for Equality in Work and Employment (Comisso para a Igualdade no Trabalho e Emprego).

Collective and individual redundancies Collective and individual redundancies may be grounded on market, structural or technological reasons. The applicable procedure will depend on the total number of employees and the number of employees affected by the redundancy.

The collective redundancy procedure implies written notification and information to the employees or their representatives, information and negotiation with participation of the Ministry for Employment, Solidarity and Social Security (Ministrio do Trabalho, Solidariedade e Segurana Social) and final notification of the decision to the affected employees and the relevant Ministry. Objective selection criteria related with the grounds of redundancy must be used to select the affected employees.

Notification of termination must be served with advanced notice from 15 to 75 days depending on the employee's seniority, and payment in lieu of notice is not permitted. Within the advanced notice period, the employee is entitled to two days of paid leave per week to look for a new job, and to terminate the contract with a three business day advanced notice, without losing the right to full severance.

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Employees under parental protection cannot be dismissed without prior consent from the Commission for Equality in Work and Employment.

Upon termination of employment under a collective redundancy, employees will be entitled to severance equivalent to 12 days to 1 month of base salary and seniority allowance for every year or fraction of seniority; depending on the starting date of the employment contract, there may be a minimum of three months and or a maximum of 12 months of severance.

Apart from objective grounds, individual redundancy is subject to additional requirements, including that (i) maintaining the employment relation must be practically impossible (this will occur when the company has no other job position for the employee or when the employee does not agree to such new position); (ii) the company cannot have or engage other employees under a term employment contract to perform the extinct functions. In an extinction of job position, the selection criteria is determined by law.

As in collective redundancy, all steps of the individual redundancy procedure are legally established. The procedure implies written notification and information to the employee and notification to the Authority for Working Conditions. The employee may also request the opinion of such Authority on certain aspects of the company's decision.

Advanced notice, severance and parental protection are the same as in collective redundancy.

In both, collective and individual redundancy, the employee's acceptance of severance will be deemed as acceptance of the termination.

Consequences of unlawful dismissal A dismissal may be considered unlawful, among others reasons, when (i) the grounds for dismissal have been declared unfounded; (ii) it has not been preceded by the respective procedure; (iii) or the procedure is invalid.

In case of unlawful dismissal, the employee is entitled to (i) all salaries between the date of the employment termination and the date when the final court decision becomes res judicata; (ii) compensation for any alleged and proved moral and patrimonial damages due to the unlawful dismissal; (iii) choosing

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between receiving an indemnification between 15 to 45 days of base salary and seniority allowance per year or fraction of seniority (or 30 to 60 days in case of protected employees, such as employees under parental protection) or to be reinstated to the previous job position.

The choice between receiving an indemnification and being reinstated is the employee's. The employer may oppose the reinstatement if it has up to nine employees, and in case the employee had managerial functions; if opposition is accepted, the indemnification will be equivalent to 30 to 60 days of base salary and seniority allowance per year or fraction of seniority.

In case of disciplinary dismissal, if there has been a mere violation of procedural rules, the employee will only be entitled to indemnification for half the amounts indicated above.

Termination agreement Termination agreement must be entered into by means of a written document. The employee may revoke the agreement within seven days from the date of entering into the agreement, unless both signatures (employer's and employee's) are certified in the presence of a public notary.

8.7. Transfer of undertaking

Under the Acquired Rights Directive, employees are automatically transferred to the transferee, preserving all their employment rights. Likewise, the transfer does not justify changes in the employees' working conditions. The new company assumes the position of employer, with the same obligations as the previous employer, becoming a party to the employment contracts.

A transfer of undertaking occurs when the transfer involves an autonomous economic entity, defined as an organized grouping of resources for the purpose of carrying out an economic activity, regardless of whether that activity is central or ancillary. The object of this kind of transfer may be an entire company, a work center or an autonomous production unit.

The transferor and transferee are jointly and severally liable, for a one-year period starting on the transfer date, for all employment obligations existing before the

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transfer and that have not yet been fulfilled. Employment obligations include social security obligations.

8.8. Collective representation and organisational rights

Trade union and workers council The initiative to create a workers council depends totally on the employees and the employer does not have any obligation to propose, organize or suggest its creation.

However, once the decision is taken by the employees, the employer is under obligation to provide the workers council certain benefits.

The role of a workers council is advisory, aiming to safeguard employees' interests by becoming involved in consultation on matters such as changes of workplace, plant closure and production changes.

Workers council may request information on several matters concerning the company, including, general plans of activity and budget, projects of alteration of the company's object, alteration of the share capital or reconversion of the company's activity; the workers council must be mandatorily consulted, amongst other matters, on any measure that results or may result in a significant reduction of the number of employees, employment conditions or significant changes to the working organization.

Employees and unions are free to develop union activity in the company.

In addition, the initiative to develop union activity depends totally on the employees and the employer does not have any obligation to propose, organize or suggest any action on this area. The number of union representatives entitled to specific rights and protection granted by law is limited and relates to the number of unionised employees. Union representatives may join in a union commission and union representatives from different unions will be part of an inter-unioncommission.

Union representatives are granted (i) right to hold meetings at the workplace,(ii) right to display information at the company's premises, and to distribute

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documentation directly to the employees, (iii) right to request information on matters and situations defined by law, (iv) and, under certain circumstances, right to permanent facilities.

Employees' representatives are entitled to special protection in case of transfer of workplace, disciplinary proceedings and termination of employment.

Collective bargaining agreements Trade union may negotiate and enter into collective bargaining agreements with employers or employers' association. As a rule, the collective bargaining agreement will only apply to its subscribers. However, the government may extend its application to employers developing the same activity or within a certain geographical area, by means of a ministerial order.

Employees that are not unionised may also, under certain circumstances, individually adhere to a collective bargaining agreement.

8.9. Social security issues

Social security contributions are compulsory for employers and employees. Employers must withhold their employees' contributions from their salaries and are liable for this withholding. The monthly social security contribution is determined by applying the rates provided by law to the employee's income.

As a rule, social security contributions on the employer's side amount to 23.75% of the monthly salary and to 11% on the employee's side.

8.10. Health and safety at work

Employers must ensure health and safety at work by (i) notifying the labour authorities that they are opening a workplace, (ii) drawing up a risk assessment and prevention plan, (iii) providing professional training to employees, and (iv) monitoring the employees' health.

Employers that fail to comply with these obligations may face severe penalties.

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8.11. Fines and penalties

Portuguese law establishes penalties for infractions committed by employers and employees alike in the context of a wide range of employment laws, including those relating to social security obligations, health and safety at work, employment relationships, subcontracting, and temporary employment. The fines depend on the employer's turnover.

The labor and social security inspectors are in charge of monitoring that companies and employees comply with their labor and social security obligations.

9. Securities regulation

9.1. Overview

There are two main markets operating in Portugal: (i) regulated markets and (ii) non-regulated markets.

Regulated markets:

Euronext Lisbon, the Official Trading Market managed by Euronext Lisbon Sociedade Gestora de Mercados Regulamentados, S.A. ("Euronext")

Euronext Lisbon Derivatives Market, managed by Euronext

OMIP Derivatives Market (Iberian Electricity Market), managed by OMIP Operador do Mercado Ibrico de Energia (Portuguese Division)

Non-regulated markets, including three multilateral trading facilities:

EasyNext Lisbon, managed by Euronext

Alternext Multilateral Trading Facility, managed by Euronext

Securities and financial instruments are mostly traded on secondary markets through electronic trading platforms. Admission to listing is subject to the requirements set forth by the relevant management entity.

Management entities are subject to supervision by the Portuguese Securities Commission ("CMVM").

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Interbolsa Sociedade Gestora de Sistemas de Liquidao e de Sistemas Centralizados de Valores Mobilirios, S.A. ("Interbolsa") is a joint-stock company responsible for managing securities settlement systems and central securities depository systems at a national level.

Interbolsa's main tasks are to provide infrastructure and services to all participants of the securities market and to render settlement services, issue registration deposits and safekeeping of securities.

To carry out its mission, Interbolsa is responsible for (i) organizing and managing the securities settlement systems to ensure the money transfers associated with the transfers of securities or inherent rights and with guarantees regarding operations over securities; (ii) managing, at the national level, the Centralized Securities System, also called Central Securities Depository or Central, and (iii) acting as the National Numbering Agency.

Regarding the settlement systems it manages, Interbolsa performs:

the settlement of operations in regulated or non-regulated markets;

the settlement of OTC (Over-The-Counter) operations between the participants in Interbolsa's Settlement System and directly instructed by the participants;

the settlement of operations resulting from securities lending operations through the Securities Lending Management System (SGE Sistema de Gesto de Emprstimo);

the settlement of FOP (Free-of-payment) transfers;

the financial settlement regarding the exercise of rights inherent to the securities registered or deposited in the Central Securities Depository;

and the calculation of the corresponding financial settlement and sending the payment instructions to the Bank of Portugal (TARGET2) or to Caixa Geral de Depsitos (SPME), depending on whether the payment is in euro or in non-euro currencies.

The participants of the settlement systems are the financial intermediaries affiliated to Interbolsa that ensure the physical and financial settlement of the

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operations carried out in a market, regulated or not, as well as the out-of-market operations.

The Centralized Securities System includes:

issuers,

financial intermediaries,

the Bank of Portugal and

Interbolsa itself as the controlling entity.

This system is an interconnected group of accounts through which the securities are created and transferred, and the quantity in circulation and rights over them are controlled.

The financial intermediaries are entirely responsible for maintaining and moving the securities in the individual registry accounts opened in their books, as well as in the global accounts opened in the Centralized System.

Finally, Interbolsa acts as the National Numbering Agency that is responsible for assigning ISIN (International Securities Identification Number) and CFI (Classification of Financial Instruments) codes.

The main act regulating the Portuguese Securities Market is the Portuguese Securities Code ("PSC"), and the most important market authorities are the following:

The Portuguese Securities Commission ("CMVM"). This agency is in charge of supervising and inspecting the Portuguese securities market and the activities of all the participants in those markets.

The Bank of Portugal. The national central bank and supervisor of the Portuguese banking system.

The relevant Regulated Markets and Multilateral Trading Facilities Management Authorities. These companies supervise and manage the relevant regulated markets and multilateral trading facilities.

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9.2. Listed companies: obligations and recommendations

This section outlines the main obligations and recommendations for listed companies regarding corporate governance, transparency and market abuse.

Corporate governance Two types of provisions apply to corporate governance: provisions of law and recommendations for good governance (soft law). In Portugal, recommendations for good governance are set out in the CMVM's Regulation 4/2013, which in addition to approving a Corporate Governance Code applicable to listed companies (the "CMVM Code"), it entitles companies to adopt a different governance code approved by competent entities (e.g., the Corporate Governance Code approved by the Portuguese Corporate Governance Institute).

The Portuguese Corporate Governance Codes are based on the principle of voluntary compliance, subject to the rule of "comply or explain," whereby a listed company can choose whether to apply, or not, a given recommendation, but is obliged to inform the market and explain the reasons for its decision. Listed companies must publish an annual corporate governance report to notify the market of their degree of compliance with good governance recommendations.

We outline some of the most noteworthy provisions of law and good governance recommendations that apply to the general meeting and board of a listed company:

Provisions of law

Listed companies must approve a specific set of regulations for the general meeting and for the board of directors, which must be filed with the Corporate Registry.

Signatories to a shareholders agreement must disclose to the market any clause that envisages the acquisition or maintenance of a qualified shareholding in a listed company or aimed at assuring or hindering the success of a public offer. Otherwise, deliberations approved in accordance with said provisions may be declared null.

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Voting caps can be included in a listed company's bylaws, although they will not apply when a takeover bid ("TOB") results in a bidder attaining 75% of the company's voting rights.

Listed companies must have an audit committee with a majority of independent members, one of them being appointed based on his/ her accounting or auditing knowledge and experience.

An annual report on the directors' remuneration (including a breakdown of each director's individual remuneration) must be submitted to the vote of the general meeting, but only for consultation purposes.

Good governance recommendations

The Corporate Governance Codes provide several recommendations aimed at strengthening the role of shareholders, including a detailed publication of board proposals prior to the meeting, separate voting on independent issues, and approval by the meeting of "extraordinary administration" acts.

Independent directors should be an "ample majority" on the board and independent director criteria should be clarified.

In addition to the mandatory audit committee, one or two separate committees should be created for appointments and remuneration.

The remuneration policy should be drafted by a remuneration committee and approved by the board of directors. The board must submit an annual report on the directors' remuneration policy to the general meeting for a vote of confidence.

Transparency

In this section we provide an overview of the continuing transparency obligations and disclosure rules applicable to listed companies. Please note that this description is not comprehensive and that listed companies are subject to additional transparency obligations.

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Financial information

Listed companies must submit annual, bi-annual and quarterly financial reports to the market following the standard forms published by the CMVM.

Privileged information

Listed companies must immediately publish and disclose to the market any privileged information, understood as any relevant information which, if disclosed, may reasonably induce an investor to acquire or transfer securities or financial instruments and materially affect their quotation on a secondary market.

Exceptionally, the company may postpone publishing a relevant fact, under its own responsibility, if it considers that the information would damage its interests, as long as this postponement is not likely to mislead the public, and the company can guarantee the confidentiality of the information.

Significant stakes

Shareholders of listed companies (and the equivalents) must report the acquisition or loss of a qualified shareholding, or its existence in the case of an initial listing, when it meets, exceeds or falls below the following thresholds: 2%, 5%, 10%, 15%, 20%, 25%, 1/3, 1/2, 2/3, and 90% of the company's voting rights.

Directors of listed companies must report their number of voting rights, whether directly or indirectly and regardless of the percentage of the stake, (i) on acquisition or transfer of shares, voting rights or financial instruments that confer the right to acquire shares with voting rights; (ii) on their appointment or removal; and (iii) when the company's shares are initially admitted to trading.

Treasury stock

A listed company must disclose the direct or indirect acquisition of its own shares when this represents at least 1% of the company's voting rights. The same obligation applies whenever the relevant threshold is reduced.

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Additionally, a disclosure obligation is triggered regarding all the acquisition and alienation transactions of its own shares executed on the same session of the relevant regulated market whenever they represent at least 5% of the total volume of shares negotiated in that session, regardless the net result.

Market abuse The Portuguese market abuse regulation, which implements EU regulations, distinguishes two categories of market abuse: insider trading and market manipulation.

Insider trading

Anyone holding privileged information must not misuse this information and must take the necessary measures to prevent the information from being used abusively or unfairly. For this purpose, privileged information is understood as any precise information that has not been made public and that could affect the quotation of the securities if it were made public.

It is worth noting that directors and executives of listed companies and persons closely linked to them are subject to relevant reporting obligations that enable the CMVM to monitor improper use of privileged information.

Regulations on disclosure of relevant facts do not extend to acts of examination, preparation or negotiation completed before important decisions are made, provided they meet specific requirements aimed at protecting confidential information.

Market manipulation

Rather than establishing a closed definition of market manipulation, the PSC includes a non-comprehensive list of conducts susceptible of being qualified as such.

9.3. Offering of securities and admission to trading

A prospectus must be published when (i) an offer of securities is made to the public, and when (ii) securities are admitted to trading on a regulated market. There is a single regime throughout the EU governing the content, format,

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approval and publication of the prospectus. This prospectus regulation is a major component of the EU's Financial Services Action Plan aimed at creating a single market in financial services in the EU. The automatic European passport is a major step toward this goal, as it allows companies from the EU and thirdparty countries to offer their securities or apply for admission to listing on any EU regulated market, on the condition that the authority of the home Member State has approved the prospectus. The supervisory authorities of the host Member States cannot impose further requirements.

Public offerings

Anyone making a public offering of securities in Portugal must obtain the approval from the CMVM and file and publish a prospectus to inform the public of the offering.

The EU prospectus regulation introduced a EU-wide definition of "public offering." This definition is very broad, encompassing any notification, regardless of its form and the means of disclosure, as long as it provides sufficient information on the terms of the offer (price or criteria to determine price) and the securities offered, enabling an investor to decide to purchase or subscribe those securities.

Given the characteristics of potential investors and the structure of the offer, certain offers are considered to be private placements and do not require approval from the CMVM or filing and publishing a prospectus. Private placements include, among others, offers addressed solely to qualified investors and offers addressed to fewer than 150 people (other than qualified investors) per Member State.

Moreover, a prospectus and CMVM approval are not required for offers of certain securities ("exempted public offerings"), including (i) shares offered, allotted or to be allotted, upon a merger, to at least 150 existing non-qualified shareholders, or shares resulting from converting or exchanging other securities or from exercising the rights conferred by other securities; (ii) securities offered, allotted or to be allotted to directors or employees by their employer or by a group company, provided the statutory or effective registered office of the issuer is within the EU; (iii) shares granted as payment of dividends, provided they are of the same category as the shares for which the dividends are paid.

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A document containing equivalent information must be made available in most cases as a condition for the exemption.

9.4. Takeover bid regulation

The EU Takeover Directive, implemented in Portugal in 2006, establishes a set of minimum rules for carrying out TOBs on securities in the EU and the European Economic Area, allowing countries to adopt additional and more stringent requirements. The Takeover Directive is the result of 14 years of negotiations that resulted in the optional implementation of some of its rules and, in the long term, in a failure to achieve a European-wide harmonization on some essential rules (including the passivity rule and breakthrough rule). On July 16, 2012, the EU Commission published a review on the application of the TOB Directive and concluded that the regime is satisfactory on the whole, despite some areas that could be clarified. The European Securities and Markets Authority (ESMA) has begun to clarify some of these aspects. One example is its statement of November 12, 2013, on shareholder cooperation issues relating to acting in concert and the appointment of board members.

Types of TOBs In Portugal, two types of TOB open up a range of possibilities when designing the strategy for acquiring control of a listed company:

Mandatory bids, a procedure aimed at accomplishing a change in control of a listed company to guarantee all shareholders access to the control premium.

Voluntary bids, a procedure to acquire shares of a listed company by means of a public offering.

When, because of a bid, a bidder acquires all the shares of a listed company, the company will be delisted and prevented from being admitted to listing for one year.

Definition of control For the purposes of the PSC, control of a listed company is gained when a shareholder:

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acquires the majority of the company's voting rights;

is entitled to exercise the majority of the company's voting rights; or

is entitled to appoint or dismiss the majority of the members of the board of directors or of the supervisory board.

The CMVM may waive the obligation to launch a TOB, provided the requirements set forth by law are met (e.g., whenever the relevant thresholds are reached as a consequence of a TOB over all the shares of the company, within a financial rescue plan or as a consequence of a merger). Additionally, the CMVM may suspend the obligation to launch a TOB, provided the shareholder who has reached the relevant triggers undertakes to reduce its shareholding within the immediately succeeding 120 days.

Control can be achieved not only by direct or indirect acquisition of securities conferring voting rights, but also by reaching agreements with other holders of securities that will lead to the acquisition of the voting rights reaching the relevant triggers.

Characteristics of mandatory bids Mandatory bids are an important mechanism allowing shareholders to exit after a change in control of a listed company. They must be addressed to all the holders of shares, subscription rights and convertible debentures, and must be launched at an equitable price, including the premium that the offeror has paid to the sellers of the controlling stake.

The equitable price is understood as the highest price that the offeror or the persons acting in concert with the offeror have paid for the same securities during the six months immediately prior to the bid announcement. If no shares have been acquired, this price will be the medium price at which the relevant securities have been traded in the regulated market. Should it not be possible to determine the prince in accordance with the above criteria, the price will be determined by an independent auditor appointed by the CMVM.

There are noteworthy exceptions to the mandatory bid regime. A mandatory bid will not be required, among others, when control is acquired:

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After a total voluntary bid.

Within a merger, provided the minutes of the general meeting approving the merger expressly refers that the merger would trigger the obligation to launch a TOB.

As a consequence of a financial recovery plan, provided it complies with the legal requirements set forth by law.

The above exemptions do not apply automatically. They must be declared by the CMVM.

Characteristics of voluntary bids Voluntary bids may be partial, freely priced and conditional, provided the CMVM considers that the condition complies with the law and that compliance can be verified prior to the expiry of the acceptance period. Voluntary bids are frequently subject to a minimum number of acceptances, removal of voting caps included in the target's bylaws, or approval of the bid by the bidder's general meeting.

Squeeze-out/sell-out In Portugal, squeeze-out and sell-out rights are only provided for listed companies when, following a total TOB, (i) the bidder holds at least 90% of the target's voting rights, and (ii) the TOB was accepted by holders representing at least 90% of the voting rights included in the bid.

The squeeze-out or sell-out rights must be exercised within three months following the expiry of the acceptance period and the price will be the same as the price offered in the TOB.

10.Regulated sectors

10.1. Financial entities and investment companies

Prior authorization from the Bank of Portugal is required to carry out banking activities in Portugal.

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Investment activities are developed by investment services companies: dealers, brokers, portfolio management companies and investment advisory firms. They can also be provided as ancillary activities by credit institutions and UCITS management companies. To incorporate any of these entities and develop their activities, prior authorization from the Bank of Portugal is also required, except for investment advisory companies, which must obtain authorization from the CMVM.

Credit institutions and investment services companies from other EU Member States are exempt from these authorizations if they operate through a branch in Portugal or under the free rendering of services regime. The latter only requires a formal notification to the competent supervising authorities (the Bank of Portugal or the CMVM, as applicable) by the corresponding supervisory authority of the home Member State, i.e. the State where the bank rendering the services has its corporate address.

All credit institutions and investment services companies must comply with specific rules regarding their assets, investments, accounting and reporting to the supervisory authority.

10.2. Insurance

Prior authorization from the Portuguese Insurance and Pension Funds Supervisory Authority (the "ASF") is required to carry out insurance activities in Portugal. EU insurance companies benefit from simplified procedures when setting up a branch or providing their services on a free rendering of services basis. In this case, notifications by the supervisory authority of the relevant home Member State are made to the ASF.

All entities participating in this sector must comply with specific rules regarding their assets, investments, accounting and reporting to the supervisory authority.

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10.3. Energy

10.3.1 Electricity market activities

Legal Overview The electricity market in Portugal has changed significantly in the past two decades. From centralized planning to unbundling and market liberalization. Currently, it is a highly deregulated market promoting energy from renewable sources.

This transformation is the result of the EU's regulations and policies but also of national policies. The National Strategy for the Energy Sector (Estratgia Nacional para o Setor Energtico) issued by Resolution of the Council of Ministers No. 169/2005 established the targets for the energy market: increase of competition, increasing role of renewable resources and sustainable energy consumption.

In 2006, the legal framework implementing Directive 2003/54/EC on common rules for the internal electricity market and establishing a new order for the electricity sector was adopted. Decree-Law No. 29/2006, of February 15, provided the rules for organization of the National Electricity System (Sistema Elctrico Nacional) and Decree-Law No. 172/2006, of August 23, the terms for the activities in the electricity sector.

In Portugal, the general principles of organization and functioning of the National Electric System, as well as production, transport, distribution and commercialization of electricity and the organization of the electricity markets are set forth in Decree-Law No. 29/2006 (as subsequently amended).

Under Decree-Law No. 29/2006, electricity production can operate under normal or special regimes. The production of electricity from renewable energy sources qualifies for the special regime and, as such, can benefit from incentives.

Decree-Law No. 172/2006 regulates the production, transportation, distribution and commercialization of electricity and the organization of the electricity market. It also regulates electricity production under the special regime, setting forth two different remuneration regimes: the general remuneration regime and the guaranteed remuneration regime (feed-in tariff).

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In Portugal, the process of liberalization of the electricity sector was carried out in a phased manner and, as in most European countries, started by including large consumers and clients with higher voltage levels. The market was progressively opened between 1995 and 2006. Since September 4, 2006, all consumers in mainland Portugal have been able to choose their electricity supplier.

For state-owned energy companies, (i) REN (Redes Energticas Nacionais) SPGS started the process of privatization after 2006 (currently fully privatized), while (ii) EDP (Energias de Portugal) started in 1997 and accelerated in 2000, 2004 and 2005 (currently partially privatized).

In June 2007, all of the power purchase agreements (PPAs) executed under the previous electricity legal framework were terminated under Decree-Law No. 240/2004, of December 27, and generators currently operate under market conditions, though certain regulations on stranded costs under the PPAs are still in force.

Decree-Law No. 77/2011, of June 20, for the natural gas sector and Decree-Law No. 78/2011, of June 20, for the electricity sector, implemented, respectively, EU Directives 2009/73/EC (natural gas) and 2009/72/EC (electricity) into the Portuguese legal framework. The new law aimed at unbundling generation and supply activities, and the operation of transmission networks, as well as extension of ERSE's obligations.

Decree-Law No. 215-A/2012, of October 8, and Decree-Law No. 215-B/2012, of October 8, completed the transposition of Directive 2009/72/EC and set out the common rules for the domestic electricity market. The Third Energy Package was fully transposed into Portuguese law.

These two regulations introduced a major change in the Portuguese electricity legal regime. In fact, their original wording was modified and published with changes several times, so it is now advisable to read them instead of the original ones.

In particular, Decree-Law No. 215-B/2012 reviewed the legal regime applicable to the SEN activities, as regard to the general bases established by Decree-Law No. 29/2006, in the version consolidated by Decree-Law No. 215-A/2012.

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With regard to electricity generation, Decree-Law No. 215-B/2012 establishes and unifies the legal regime applicable to the production of electricity in a special regime, in particular through renewable energy sources, by consolidating in a single decree the various rules that were dispersed.

This decree also changes the concept of production under the ordinary and special regimes, since the production under special regime also covers the production of electricity through endogenous resources under the market remuneration.

In this context, Decree-Law No. 215-B/2012, repeals a large number of regulations applicable to the licensing procedures for electricity production projects under the special regime that had not been repealed with the entry into force of Decree-Law No. 29/2006 and Decree-Law No. 172/2006, which had focused on ordinary production.

In 2014, the consolidation of the liberalized market continued. Regulated user tariffs were abolished (the transition ones were in place until the end of 2015), the regulated risk coverage mechanism for suppliers was implemented and suppliers changing rules were improved.

Associated to the liberalization and creation of the domestic electricity market, an increase in competition is to be expected, reflected in price levels and the improved quality of the service, which aims to lead to greater consumer satisfaction. Recent legislative measures, including Decree-Law No. 74/2013, of June 4, established a new regulatory mechanism to ensure competitiveness in the electricity wholesale market in Portugal, focusing on the economic general interest costs of the System Global Use Fee. There is still, however, a special contribution in the energy sector mostly regarding the fixed assets of the transmission and distribution grid.

Portugal has great potential as a renewable energy producer (solar, wind, hydro, thermal and wave energy). According to the DGEG's statistical information, the production of energy from renewable sources as of June 2015 was 11,455GWh. In recent years, the government has encouraged investment in renewable energy facilities. As a result, 63% of Portugal's consumer needs was supplied by renewable energy resources. In addition, the National Strategy Plan for Energy 2020 aims at reducing Portugal's energy dependence using at least 60% of renewable sources in energy production. Portugal has over 100 small hydro energy power plants under 10MW, which are considered renewable sources of energy.

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The production of electricity for self-consumption and the sale of electricity to the public grid by small production units using renewable energy are regulated by Decree-Law No. 153/2014 of October 20, and by Order No. 14/2015, of January 23, amended by Order No. 60-E/2015 of March 2, and Order No. 15/2015, of January 23.

They cover two types of electricity generation units: self-consumption and small production units, respectively designated by "UPAC" and "UPP."

UPACs should be dimensioned so that electric generation is close to the amount of electric power consumed by the use installation related to it. In other words, the principle is a non-existence, practically, of an energy surplus.

UPPs, on the other hand, are required to sell all of the electricity produced to the Public Service Electric Grid ("RESP"). Article 5, point 1 d) states that the electricity consumed by the use installation, acquired from the electricity supplier, must be equal or greater than 50% of the energy produced by the UPP.

More recently, Decree-Law No. 38/2017, of March 31, established the legal regime applicable to logistic operations for switching supplier activity regarding electricity and natural gas systems. This new activity is a well-known objective already provided in Decree-Law No. 29/2006 and Decree-Law No. 30/2006 and in Decree-Law No 140/2006 and Decree-Law No. 172/2006.

Through an ad hoc decision from ERSE, this activity has been temporarily carried out by the electricity distribution operator in medium and high voltage and by the national transportation grid operator.

The operation of this new activity will be performed by a single entity, which must comply with the principles of transparency, objectivity and non-discrimination, as well as to follow a simple, fast and effective procedure that is appealing and complies with the competition and consumer defense and promotion rules without colliding with the rights of the previous supplier derived from the law or from a valid agreement.

Activities In the electricity sector, the following activities are subject to regulation: (i) transportation; (ii) distribution; (iii) last-resort supplier; (iv) logistic operations

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for switching supplier; (v) management of organized markets and (vi) production. Tariffs are determined according to an add-in system and based on fixed assets rate of return, plus other allowed profits, and in some situations, other aspects such as recovery of the tariff deficit.

Here are the main players in the above activities:

Transportation REN - Redes Energticas Nacionais, SGPS, S.A. This company is the sole concessionaire of the National Transportation Grid, which operates in a very high voltage. The concession includes the planning, construction, operation and maintenance of the National Transportation Grid, also covering the planning and global technical management of the National Electricity System to ensure the harmonized operation of its infrastructures, as well as the continuity of service and security of electricity supply.

Distribution EDP Distribuio Energia, S.A. This activity is carried out through the national distribution grid, which operates in a medium and low voltage, and through the operation of the low voltage distribution grids. The operation of the national distribution grid is subject to a concession agreement for a period of 35 years. There are several other small players in this sector but with a very limited market share.

Last-resort supplier - EDP Servio Universal, S.A. is responsible for purchasing of all electricity generated under the special regime. It also supplies customers who are still buying electricity under regulated tariffs. There are several other small players in this sector but with a very limited market share.

Market-Oriented Suppliers - EDP Comercial - Comercializao de Energia, SA; Endesa Endesa Energia Sucursal Portugal; Galp Power S.A.; Iberdrola Clientes Portugal, Unipessoal, Lda.; Union Fenosa Comercial, S.L. Suc. Em Portugal.

Production In ordinary regime: EDP Gesto da Produo de Energia, SA; Elecgas; Tejo Energia, SA; Turbogs.

In special regime: According to DGEG's statistical information, the wind capacity grew to almost 4,900 MW as of June 2015. The main offshore wind farms are: (i) Alto Minho with capacity of 240MW, (ii) Ventominho of 240 MW, (iii) Arada Monetemuro of 112MW, (iv) Gardunha of 106MW, (v) Pinhal Interior of 144MW. The largest photovoltaic projects in Portugal are: (i) Serpa solar power plant with

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11MW capacity operated by Catavento, Produo de Energia Elica SA., and (ii) Moura solar power plant with 62MW capacity, operated by Acciona. Regarding sea waves energy, in 2010 the Aguaadoura Wave Farm (2.25MW) was re-opened by Pelamis. In addition, a pilot project in S. Pedro de Moel (area of Nazare) was initiated for generating renewable energy from sea waves and the license was granted to Enondas - Energia das Ondas. S.A. (REN's fully-owned subsidiary). Geothermal power is mainly produced in the Autonomic Region of Azores. The capacity of that renewable energy source reaches 235MW there.

There is an ordinary production regime, mostly subject to market regime, despite the fact there are still two thermoelectric long-term acquisition contracts (Pego and Outeiro). Previous hydroelectrical production long-term contracts (CAE) have ceased, but in return the producers have been granted compensation (CMEC), which is paid by the consumers in the final price, as it is included in the due tariff system (tariff for the transmission network).

Regarding renewable energy, the previous system was based on a feed-in tariff regime, but the new regime, safeguarding the previously licensed situations, foresees both a market regime and a feed-in tariff regime, in this latter case following a tender procedure.

Also relevant is the Iberian Electricity Market (MIBEL).

The MIBEL is a joint initiative of Portugal and Spain, which aims to create a regional electricity market. The idea is that consumers will be able to buy electricity in the competitive market from any producer or retailer in Portugal or Spain. The MIBEL initiative is focused on integrating the Portuguese and Spanish electricity systems to create a market with transparent, free competition, self-financing and self-organized, with a single reference price. The market players are granted free access to the market, with equal conditions, rights and obligations.

Integration of the Portuguese and Spanish electricity systems was initiated in November 2001 by a "Protocol for collaboration between the Portuguese and Spanish government administrations" to create the Iberian Electricity Market. In October 2002, the organizational model for MIBEL and its main goals were decided. Establishing MIBEL was perceived as an intermediary regional approach in the creation of the single integrated European market. It was achieved by (i) creating a support platform for the market and transmission infrastructure; (ii)

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harmonizing the regulatory framework; (iii) matching the economic conditions by defining the fees, competition costs and conditions for the interconnection.

OMIP Iberian Power Exchange Market is the MIBEL derivatives exchange market. It acts together with OMIClear, the clearinghouse and central counterparty for all transactions carried out on that market, and plays an important role in developing the MIBEL and promoting the Iberian reference price, supporting the market's liberalization. It offers OTC transactions and standardized contracts, which allows OMIP's participants to benefit from the liquidity, transparency, trading anonymity and the position of OMIClear as central counterparty (i.e., reducing the counterparty's credit risk). In order to trade in the exchange market, participants must be admitted by OMIP. All the operations are registered and settled by OMIClear. Recently OMIP extended its services to natural gas buy and sell auctions and wind power production license assignment auctions.

OMIE Iberian Power Exchange Operator is the electricity spot market, where transactions are carried out agents participating in the daily and intraday market aggregating the MIBEL Spanish and Portuguese zones. The financial settlement is made on a weekly basis, and guarantees are required. Producers, self-producers, external agents, retailers, representatives and qualified consumers can become spot market agents. Under the International

Agreement of October 2004, entities authorized in one country (Portugal or Spain) are automatically recognized in the other and are allowed to act on the spot market without any additional requirements.

Administrative authorities The Energy Services Regulatory Authority ("ERSE") is responsible for regulating the electricity sector. The ERSE's activities aim (i) to protect the interests of consumers, in particular vulnerable customers, with regard to prices, service quality and access to information; (ii) to ensure the existence economic and financial balance conditions in respect of the activities of the regulated sectors exercised in the public interest, when managed properly and efficiently; (iii) promoting competition in the energy markets as regulator and under applicable law; (iv) to encourage efficient energy use and protection of the environment; and (v) to arbitrate and resolve disputes, encouraging out-of-court settlement.

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The Directorate General for Energy and Geology ("DGEG") is the Portuguese public administration authority. Its mission is to contribute to planning, promoting and evaluating energy and geological resources policies in terms of sustainable development and ensuring security of supply. In addition, DGEG's mission includes raising awareness of the importance and implementation of such policies in economic and social development and distributing the results of their monitoring and enforcement.

Business Opportunities The main political intentions of the XXI Portuguese Government Program are to lead energy transition toward renewable energy sources, acknowledging Portugal's huge wind, solar and water potential, and aiming to export this energy. The following are some of its measures:

Ensuring that the corridors established for trans-European electrical connection allow for the flow of solar energy produced in Portuguese territory to Europe;

Strengthening the electrical interconnections with Europe to place Portugal as a privileged renewable energy exporter. In this regard, France, Spain and Portugal have issued the Madrid Statement, which includes that "(...) the European Commission, Spain, France and Portugal also stress the importance completing the electricity interconnection of Portugal and Spain, between Vila Fria-Vila do Conde-Recarei (PT) and BearizFontefra (ES) which will, upon completion, allow Portugal to attain 10% of interconnections";

Reassessing the National Dams Plan, with regard to dams whose works have not started. In this situation are the Endesa dams in the Mondego (Girabolhos), the EDP dam in Tmega (Frido) and three Iberdrola dams in Tmega (Daives, Gouves and Alto Tmega / Vidago);

Encouraging the construction of small dams (with little environmental impact), preferably with reversible pumping systems (for the storage of energy);

Launching, in partnership between the State and local authorities, a micro-generation program, in particular from solar energy, in public

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establishments (e.g., schools, health centers, sports equipment, barracks, markets). The solar energy market has undergone a major improvement with the creation of a small production system allowing the consumer to generate its own electricity and sell the excess to the grid. This is a great opportunity for marketing of solar panels and for a business model in which one owns the production unit and then sells electricity to consumers and the excess to the grid.

Evaluating and testing the potential of renewable energy production (in particular wind power) in offshore areas. We highlight the Wind Float project, in which EDP is the main partner, building an offshore wind farm off the coast of Viana do Castelo, in the northwest of Portugal.

10.3.2. Gas market activities

Legal Overview Portugal has no natural gas resources. The supply of natural gas to the Portuguese market is carried out through long term take-or-pay contracts entered into with GALP, where the main suppliers are Algeria and Nigeria.

In the 1990s, the Portuguese gas market consisted of four government- controlled companies: the oil company Petrogal, the electricity utility Electricidade de Portugal (EDP) and two gas companies Transgs (operating the natural gas pipeline) and Gas de Portugal (GdP).

In 1999, the government created a new state-controlled holding company, GALP - Petrleos e Gs de Portugal, SGPS, S.A (Galp) by merging Petrogal, Portugal's sole refiner and the main distributor of oil products, and Gs de Portugal, the company importing natural gas into Portugal and transporting and distributing it domestically. The process aimed at developing an energy group that would be able to actually compete in the market with larger Western European utility companies.

Until February 2006, the Portuguese natural gas market was organized in two large areas: (i) import, storage, transport and regasification of natural gas or LNG, where the only concession was issued to a subsidiary of Galp Energia (Transgs); and (ii) local and regional distribution under the license issued to the local or regional distribution companies. Natural gas consumers with an annual

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consumption below 2 million m were supplied by regional or local distribution companies, whereas those with an annual consumption equal to or higher than 2 million m were directly supplied by Transgs. For large customers, consuming over 50,000 Mm3, prices were at free-market rates, whereas for customers with an annual consumption below 50 billion m, prices were set up by the concession agreements. The current structure of the market was established by DecreeLaw No. 30/2006 and Decree-Law No. 140/2006, under which deregulation of the market was conducted by giving any company free access to the market, unbundling energy suppliers from the distribution network and strengthening the independent position of the ERSE. These new laws imposed the last-resort suppliers, whose gas price is regulated by the tariffs.

The construction of the European internal market for natural gas was initiated by Directive 90/377/EEC, which aimed at ensuring transparency in prices for industrial gas and electricity consumers, promoting the free choice of supplier by those consumers. In addition, Directive 91/296/EEC on transport of natural gas in large networks increased the role of trade in terms of quality and security of the supply.

Directive 98/30/EC on common rules for the natural gas market established that Portugal had benefited from a derogation to be recognized as an emerging market. As a result of that derogation, Decree-Law No. 14/2001 was implemented to regulate access to networks and storage and the eligibility of customers. In 2007, the refusal of access to the network or storage came into force when the domestic market was no longer considered as emerging.

The basic regulations governing the gas market in Portugal are set by Decree-Law No. 30/2006 of February 14, 2006, implementing the EU Gas Directive 2003/55/ EC and Decree-Laws No. 77/2011, 230/2012 and 231/2012, implementing EU Directive 2009/73/EC on the internal gas market. In addition, the Access to Networks, Infrastructures and Interconnections Code approved by ERSE's Regulation No. 139-C/2013 and the Tariff Regulation approved by ERSE's Dispatch No. 4878/2010 are also part of the legal regime regulating the gas market.

Decree-Law No. 30/2006, of February 15 (as subsequently amended) establishes the main rules applicable to this sector and the general basis for the organization and functioning of the National Natural Gas System Organization

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One of the main regulations in this sector is Decree-Law No. 140/2006, of July 26, which develops the general principles related to the organization and operation of the National Natural Gas System, approved by Decree-Law No. 30/2006, regulating the legal regime applicable to transportation, underground storage, reception, storage and regasification of liquefied natural gas, distribution and sale of natural gas and the organization of natural gas markets, and completing the transposition of Directive 2003/55/EC of the European Parliament and of the Council of June 26.

At EU level, the main regulation is Directive 2009/73/CE, of the European Parliament and of the Council, of July 13, 2009, which set forth the common rules for domestic natural gas market and repealed Directive 2003/55/EC, the former main EU regulation on natural gas.

Activities The organization of the Portuguese Natural Gas System (SNGN) is mostly based on exploiting the public network comprised by the National

Transmission Network, the Underground Storage Facilities, the LNG Terminal and the National Distribution Network, subject to concessions and local distribution units subject to licenses.

The following activities are regulated: (i) reception, storage and LNG regasification; (ii) underground storage; (iii) transmission, distribution and natural gas last resource supply; and (iv) logistic operations for the switch of supplier.

Tariffs are determined according to an add-in system and based on fixed assets rate of return, plus other allowed profits, and in some situations, other aspects as recovery of the tariff deficit. Commercialization is free, although subject to the commercial conditions regulation of ERSE.

There is a special contribution applicable over the fixed assets of the transmission and distribution network.

Here are the main players in each of the above activities:

Transport REN Gasodutos, S.A.

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Distribution Setgs Sociedade de Distribuio de Gs Natural, as; Lisboags GD Sociedade Distribuidora de Gs Natural de Lisboa, SA; Lusitaniags Companhia de Gs do Centro, SA; Tagusg - Empresa de Gs do Vale do Tejo, S.A.; Beirags Companhia de Gs das Beiras, S.A; Edp Gs Distribuio, S.A.

Commercializatio - Galp Gs Natural, S.A.; Edp G - Servio Universal, S.A.; Iberdrola Clientes Portugal, Unipessoal, Lda; Endesa Energia, S - Sucursal Em Portugal

Administrative authorities The reception, storage and regasification of LNG and the underground storage, distribution and supply of last resource, as well as the logistic operation of the change of supplier and of the management of organized markets are subject to ERSE's regulation.

However, DGEG still has various powers regarding the different activities of the natural gas sector.

Article 137 of the Portuguese State Budget Proposal for 2017 states that the LPG sector will come under supervision of the ERSE. However, the rule provided in article 137 of the Portuguese State Budget Proposal for 2017 is quite vague, as it does not set forward any specific regulation that can have direct impact on the LPG sector and only commands ERSE to proceed with an amendment to the bylaws to incorporate the newly arising powers.

Business Opportunities As to the political intentions stated in the XXI Portuguese Government Program, the following business opportunities should be considered:

The Portuguese government believes that, due to the recent geopolitics surrounding the Ukrainian conflict, the Sines LNG terminal (with a concession agreement with Galp) could act as a natural entry gate for natural gas to central Europe and a relevant alternative to Russia. For this purpose, it will be necessary to invest in gas pipelines connecting with Spain and with the center of Europe;

Encourage the implementation of natural gas corridors to improve the connection with Europe beyond the Pyrenees to reduce dependence on

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Eastern energy resources to about 20% of the current natural gas imports; and

Enhance the implementation of natural gas corridors to improve the connection with Europe beyond the Pyrenees to reduce dependence on Eastern energy resources to about 20% of the current natural gas imports.

10.3.3. Oil market activities

Legal overview As regards to operation and production activities, there are two coexistent applicable regulations: Decree-Law No. 109/94, of April 26, which applies to the activities that were licensed after its entry into force, and Decree-Law No. 141/90, of May 2, which applies to the activities that were licensed before the entry into force of Decree-Law No. 109/94.

The main law for downstream oil activities is Decree-Law No. 31/2006. Trading in oil and oil products is free, although it is subject to custom duties and taxes. In addition, the entities trading in oil and oil products are subject to registration at ENMC. Other requirements include (i) ensuring the regular supply; (ii) ensuring prices are published; (iii) providing relevant information to the authorities.

Directive 2013/30/EU of 12 June 2013 on safety of offshore oil and gas operations and amending Directive 2004/35/EC required legislative action prior to July 15, 2015, to introduce further operator requirements about providing information and adopting risk management and safety measures, currently not extensively dealt with in the law. The current Portuguese law regulating environmental impact assessment (Decree-Law No. 17/2014) established the national maritime space planning legal regime and defined two maritime plans: (i) situation plans showing current activities and (ii) allocation plan allocating areas or maritime space for the future activities. Furthermore, Decree-Law No. 38/2015 implements the maritime space planning regime under which the allocation plans require the environmental impact assessment. There are, however, flaws included in the environmental impact assessment: (i) insufficient content of the allocation plans and (ii) insufficient regulation in relation to assessment of environmental cumulative impact of investments.

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It is important to stress that a legislative reform is under way to review the oil sector legislation in Portugal.

Activities Portugal has no oil deposits and is almost fully dependent on imports. It has welldiversified crude oil supply sources. In 2012, Angola was its largest oil supplier (23% of total crude oil import), followed by Brazil and Kazakhstan (11%), Algeria (10%) and Saudi Arabia (9%).

The Portuguese oil sector comprises production, refinement, storage, transport, distribution and commercialization.

Administrative authorities The main administrative authority in the Portuguese oil sector is Entidade Nacional para os Mercados dos Combustveis ("ENMC"), which ensures compliance with the obligations entered into by Portugal within the framework of the European Union and the International Energy Agency as regards emergency reserves of petroleum and petroleum products as stipulated in national law.

ENMC, through its oil reserve unit, the Central Storage Entity (CSE), is responsible for ensuring a 30-day reserve for national security. Market operators are obliged to maintain security reserves of 90 days, 30 of which are secured by CSE. They are responsible for the remaining 60 days and for notifying ENMC of their location. These are the regulations applicable to the national security reserves: DecreeLaw No. 165/2013 (as amended), Order No. 126/2014, Order No. 6967/2014, Directive 2009/119/EC on Oil Reserves and Decree-Law No. 114/2001.

Business opportunities Galp Energia is the largest player in the oil market. It owns two refineries: one located in Sines holding 71% of the total country's capacity and one in Matosinhos. Recently, Galp Energia has upgraded the Sines and Matosinhos refineries, aiming to adjust their production profile to the needs of the whole Iberian market by maximizing annual diesel production and reducing the share of fuel oil production exceeding domestic demand. Galp Energia is the main shareholder of Companhia Logstica de Combustveis S.A. (CLC), the Portuguese logistics company that owns the only multiproduct pipeline in Portugal. The other CLC

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shareholders are BP Portugal, S.A. (15%), Repsol Portuguesa, S.A. (15%) and Rubis Energia Portugal, S.A. (5%). This multiproduct pipeline connects the Sines refinery and the tank farm at Aveiras. The Matosinhos facility is connected by pipeline to the storage facility in Boa Nova. There is also a 4 km jet fuel pipeline running from the Porto refinery to the international Porto airport of S Carneiro.

There are several oil prospection activities going on in the Algarve and Alentejo regions to assess whether there is a profitable oil well. Some companies may consider selling their positions.

The transport sector is dominated by three major players (CLC - Companhia Logstica de Combustveis, S.A, Petrleos de Portugal Petrogal, S.A. and CLT Companhia Logstica de Terminais Martimos, S.A.). Under certain circumstances, these companies may consider selling their positions.

10.4. Technology, media and telecommunications ("TMT")

Under Decree-Law 39/2015 of March 16, ANACOM ("Autoridade Nacional de Comunicaes") is the main regulator, supervisor and representative of the communications sector in Portugal. ANACOM is responsible for: (i) ensuring network access for communications operators under conditions of transparency and equality; (ii) promoting competition and development in communications markets, namely in the context of convergence of telecommunications, media and information technologies; (iii) ensuring the application and supervision of laws, regulations and technical requirements and compliance by communications operators with provisions of the respective licenses or concession contracts; (iv) ensuring the existence and availability of a universal communications service that fulfills the corresponding obligations; and (v) ensuring the correct use of spectrum resources and granted numbering.

Law 53/2005 of November 8t, created ERC ("Entidade Reguladora para a Comunicao Social"), the public agency responsible for regulation and supervision of all entities operating in the media sector in Portugal.

Entities that operate in the media sector must disclose to ERC any direct or indirect ownership in newspaper, TV and radio operator companies, as well as

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the identity of board members, officers with management duties and officers responsible for broadcast content and supervision.

ERC must ensure, in coordination with AdC, that no excessive concentration of ownership in the share capital of companies operating in the media sector occurs, with the aim to safeguard pluralism and diversity of the press, TV and radio markets.

In 2015, Law 78/2015 of July 29 was passed with the objective to adequately preserve the values of freedom of expression and editorial independence, and creating an additional obligation for entities that operate in the media sector to disclose their sources of financing to ERC.

11.Insolvency

Below are some of the key aspects of Portuguese insolvency law.

11.1. Definition of insolvency

Insolvency proceedings are only triggered in the case of a debtor's insolvency, defined, in general, as the inability of the debtor to fulfill its obligations as they fall due (cash flow test).

Aside from this criteria, and in the case of legal entities, the debtor is also considered to be in an insolvency situation when, according to accounting criteria, the liabilities of the debtor clearly exceed its assets (balance sheet test).

11.2. The insolvency procedure

In Portugal, there is only one insolvency procedure for all debtors, either companies or individuals.

According to the Insolvency and Restructuring Companies Code ("CIRE"), the insolvency procedure is an universal enforcement procedure with the goal of satisfying creditors' claims according to an insolvency plan aimed at the recovery of the company integrated in the insolvency estate, or, if such recovery is not possible, the liquidation of the insolvency assets and the distribution of the proceeds among the creditors.

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11.3. Voluntary insolvency

The debtor must file for insolvency within 30 days after it becomes aware, or should have become aware, of its situation of insolvency. If the debtor fails to fulfill this obligation, directors can become personally liable.

11.4. Mandatory insolvency

Creditors can file for mandatory insolvency against a debtor if any the following factors (which determine the existence of an insolvency situation) occur:

Generalized suspension of payments of matured obligations;

Default of one or more obligations which, given the amount or default circumstances, reveals that the debtor is unable to meet most of its obligations on time;

Abandonment by the owner or by the directors of the insolvent company or abandonment of the place where the company has its head office or performs its main activity as a result of the debtor's lack of solvability and provided that no reputable substitute is appointed;

Dissipation, abandonment, hasty or loss-making liquidation of assets and fictitious constitution of credits;

Insufficiency of assets that can be seized for payment of credits verified in an enforcement procedure filed against the debtor;

Default of obligations foreseen in an insolvency plan or payment plan approved by the creditors in a previous insolvency proceeding;

Generalized default during the last six months of the following obligations:

Tax and social security obligations;

Employment contracts or breach or termination of employment contracts obligations; and

Rents regarding any kind of lease, including financial lease,

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installments related with an acquisition price or a mortgage loan on the place where the debtor carries out his activity or has its residence or head office; and

In case of legal entities, the debtor's liabilities clearly exceed its assets according with the last approved financial statements, or more than ninemonth delay in the approval or deposit of the accounts.

11.5. Aggravated or culpable insolvency

Once a court declares insolvency, a procedure to classify the insolvency may be initiated. The insolvency may be deemed to be fortuitous or aggravated or culpable (where insolvency is a result of the debtor's willful or gross negligence or of its legal or de facto directors within the three years prior to the beginning of insolvency proceeding). The law provides for circumstances where (i) insolvency is automatically classified as aggravated or culpable; and (ii) where fraud or gross negligence is presumed.

11.6. Effects on debtors

A declaration of insolvency effectively transfers the power to run a company from its directors to an insolvency administrator, who becomes the debtor's representative for all purposes. A debtor's management bodies may continue to operate (when requested by the debtor, if the insolvency is voluntary, or with the agreement of the creditors), but any actions carried out by the debtor that breach the required supervision of the insolvency administrator may be declared null.

A declaration of insolvency implies that all debts become immediately due, provided that they are not subordinated to a condition precedent.

Any judicial proceedings involving patrimonial matters, where the final result may affect the value of the insolvent company's estate, are attached to the insolvency proceeding, provided that the insolvency administrator requests it. A declaration of insolvency stays (and may then terminate) any pending enforcement proceedings, and creditors cannot initiate new enforcement proceedings against the debtor.

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11.7. Effects on creditors

One of the keystones of the CIRE is that creditors must receive equal treatment. There are few exceptions to this rule, and those permitted by law abide by the rule that "ordinary credits" are considered equal.

On this basis, a distinction is made between guaranteed, privileged, ordinary and subordinated credits:

Guaranteed credits are those secured by a guarantee in rem including special statutory liens. (e.g., state credits over real estate property tax, mortgage, income assignment, pledge). They are paid out of the proceeds of the sale of the secured asset once sale expenses and any amount allocated to credits over the insolvency estate are deducted. If the secured assets are insufficient to pay all debts owed to guaranteed creditors, any remaining debt is included in the common credits.

Privileged credits are those benefiting from general creditor's privilege (e.g., credits arising from an employment contract) over assets comprised in the insolvent estate. Due to their nature, these credits are paid in a pro rata basis with the proceeds of the unsecured assets and according to their inner ranking. In fact, there are several types of privileged creditors that are ranked differently.

Common creditors can only be paid after creditors who rank in priority to them are paid in full. They are paid in a pro rata basis if the proceeds of the insolvency estate are insufficient to fully satisfy the debt.

Subordinated creditors rank below common creditors. They follow the same pro rata rules applicable to common creditors. Holders of such credits are not entitled to vote at the General Meeting of Creditors, except for approving an insolvency plan.

In addition, there is another special and prioritized category, known as "credits against the insolvency estate," which generally arise after the declaration of insolvency. These credits are not subject to ranking or acknowledgement and, in principle, must be paid by the insolvency administrator when they fall due.

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11.8. Clawback actions

The insolvency administrator is entitled to revoke any act and contract deemed detrimental to the insolvency estate, provided that such acts were performed or omitted within two years prior to the beginning of the insolvency proceeding.

Requirements of clawback actions Detrimental acts: acts that reduce, frustrate, prevent, jeopardize or potentially delay the payment of the insolvency creditors.

Bad faith: bad faith is presumed in acts performed or omitted within two years prior to the beginning of the insolvency procedure and in which a person with a special relationship with the insolvent participated or took advantage, even if no special relationship existed at the time. Acknowledgement of any of the following circumstances is considered bad faith:

that the debtor was in a insolvency situation;

the detrimental nature of the act and that the debtor was at the time in an imminent insolvency situation; or

the beginning of insolvency proceeding.

Clawback actions without requirements CIRE also foresees acts subject to clawback actions without fulfillment of any other requirement.Key pre-insolvency instruments

11.9. Key pre-insolvency instruments

In 2012, the Portuguese government launched the "Revitalize Program" (Programa Revitalizar) with the purpose of offering entrepreneurs more agile legal mechanisms enabling them to revitalize companies during a particularly hard period of the Portuguese economy.

Two of those mechanisms must be pointed out: SIREVE Sistema Extrajudicial de Recuperao de Empresas (Out-of-Court Recovery Proceeding) and PER Processo Especial de Revitalizao (Special Revitalization Proceeding).

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SIREVE SIREVE, which was approved by Decree-Law 178/2012 of August 3, is an extrajudicial voluntary mechanism conducted by IAPMEI5 aimed at companies' recovery through negotiation with creditors representing at least 1/3 of the total debt.

Any company facing economic difficulties or in an imminent insolvency situation may start its own SIREVE, as long as certain financial ratios are met.

A SIREVE application starts by submitting an electronic form6 to the IAPMEI containing a description of the grounds to request said proceeding and identifying the debtor and of the creditors representing at least 1/3 of the its debts, together with the agreement and the business plan.

After receiving the application form, IAPMEI initiates all the necessary contacts between the debtor and its creditors in order to reach a settlement agreement to ensure the debtor's recovery. These negotiations should be concluded within a period of three months, which may be extended for an additional one-month period. The settlement agreement must be signed by the debtor, the creditors that approved it and the IAPMEI's representative and, if necessary, must be executed in a public deed. If the settlement is accepted by creditors representing more than 2/3 of the total amount of the debts, the recovery plan may be submitted before the court. The court will then approve the plan and make it binding before all creditors, even those that did not accept the settlement agreement. The payment plan has the legal effects provided in CIRE.

PER PER was created by Law 16/2012, of April 20 (which approved the introduction of articles 17-A to 17-l to the CIRE). This procedure aims, prior to insolvency, to enable the debtor in financial difficulties or imminent insolvency, but whose recovery is still feasible, to enter into negotiations with creditors in order to reach an agreement, leading to its revitalization. By adopting the PER, the need to obtaining the debtor's prior declaration of insolvency is removed, as a

5 Apublic Institute that provides support to SME's.

6 That can be obtained in IAPMEI's website www.iapmei.pt

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situation of imminent insolvency or a difficult economic situation is enough to launch the proceeding, allowing debtors to be able to achieve their recovery or viability through negotiation, without first being subjected to the stigma of being declared insolvent, which by itself often prevents their viability. PER is an urgent proceeding that will run before the court with jurisdiction to declare the debtor's insolvency. In procedural terms, under the PER, there are two possible ways of reaching a restructuring agreement with creditors: after submitting the PER request (PER under article 17-A of CIRE) or before its submission (PER under article 17-I of CIRE).Only the debtor may submit in court the request for PER under article 17-A of CIRE. Said request must include a written statement of the debtor and at least one of its creditors, expressing the intention of engaging negotiations leading to the revitalisation, through the approval of a recovery plan.

Only the debtor may submit in court the request for PER under article 17-A of CIRE. This request must include a written statement jointly subscribed by the debtor and by creditors, although not related to the debtor company, holding at least 10% of non-subordinated credits. expressing the intention of engaging in negotiations leading to the revitalization, through the approval of a recovery plan.

The debtor will also certify and declare, in writing, that it meets the necessary conditions for revitalization. These statements are addressed to the court, which, after receiving these statements, immediately appoints an Interim Judicial Administrator (Administrador Judicial Provisrio, the "AJP").

The order appointing the AJP is published on the CITIUS platform (the court's official website) and the debtor must communicate to all its creditors (that did not sign the statement mentioned above) the beginning of negotiations and invite them to participate. The creditors must submit their credit claims to the AJP within 20 days from said publication so that the AJP may prepare a provisional list of credits, which will also be published on the CITIUS platform.

After the 20-day period and, specifically, after the deadline for submitting appeals from the provisional list of claims, the negotiations must be completed within two months (this deadline may be extended for another month, subject to previous agreement by the debtor and the AJP). Any creditor can participate

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in the negotiation process as long as negotiations last. The debtor can stop negotiations at any time.

The recovery plan will be approved if:

It is voted by creditors whose claims represent at least one third of the total claims with voting rights, as foreseen in the provisional claims list, receiving favorable votes from more than two thirds of all the votes cast and more than half of them correspond to non-subordinated claims; or

It receives favorable votes of creditors whose claims represent more than half of all the claims associated with voting rights, and more than half of these votes correspond to non-subordinated claims.

In either case, abstention is not counted.

The judge must decide to approve or reject the recovery plan within 10 days. This decision will be published in CITIUS and is binding for the debtor and for all its creditors (even if they did not vote in favor of the plan or they did not participate in the negotiations).

If it is not possible to reach an agreement for the approval of the PER, the proceeding is extinguished and will have no effect, as long as the debtor is not insolvent. Otherwise, the court will declare the debtor's insolvency within three business days and the special process of revitalization is attached to the insolvency proceedings.

If debtor and creditors fail to reach an agreement, or if the judge decides to reject the approved recovery plan, the debtor cannot submit a special process of revitalization for two years.

PER under article 17-I of CIRE PER can also be initiated by filing an extrajudicial recovery plan signed by the debtor and creditors representing at least a majority of votes needed to approve the recovery planin general terms. In this case, a simplified procedure will apply (which notably removes the need of negotiations).

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Protection against clawback actions With the aim of providing the debtor with the necessary funds for its recovery, the agreements executed in the context of the PER cannot be subject to clawback actions.

On the other hand, agreements executed during the PER with the aim of providing the debtor with the necessary funds to finance its activity will be maintained even if the PER ends and there is a declaration of insolvency within two years.

New money privilege Finally, creditors that finance the debtor's activity providing the necessary funds for its recovery benefit from special statutory liens over moveable assets, which rank prior to special statutory liens over moveable assets granted to employees.

12.Dispute settlement

12.1. Litigation: jurisdiction and civil procedure

Jurisdiction Jurisdiction is determined by different criteria, namely (i) subject matter (mainly civil and commercial, criminal, administrative, labor, tax, intellectual property, competition and family), (ii) instance (first instance court, second instance court, Supreme Court), and (iii) territory.

In civil jurisdiction, courts of first instance are competent to hear all civil cases not expressly attributed to other courts by legal provision. Some courts of first instance are specialized in specific commercial issues, such as insolvency. Appeals are usually heard by second instance courts.

The general territorial rule is that the claimant must initiate the litigation in the place where the defendant resides, even though other special rules may apply, depending on the grounds of the claim. For instance, claims based in tort law have to be brought before the court where tort has occurred.

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Civil and commercial procedures Regardless of different procedures that govern tax and administrative matters, civil and commercial declaratory procedures are common under the Civil Procedure Code.

These procedures consist, essentially, of (i) a statement of claim accompanied by documentary evidence and producing witnesses and expert evidence that will be presented later during the procedure; (ii) an answer to the statement of claim made by the respondent, together with the documents, witnesses and expert evidence that support the plead; (iii) a preliminary hearing primarily aimed at an attempt to conciliate the parties, to solve procedural issues, to determine the object of the dispute and the controversial issues and to propose additional evidence; and (iv) a trial, in which witnesses and experts are heard.

The Civil Procedure Code is also residual to other procedures, including administrative procedures, meaning that it will apply whenever there is no specific provision regulating administrative procedures.

Appeals Most first instance decisions can be appealed before a second instance court, frequently with a three-judge panel, usually depending on the value of the proceeding (for instance, proceedings below 5,000.00 cannot be appealed). In these courts, there is usually no hearing, although one can be held if necessary.

In some cases, the second instance decision can be challenged before the Supreme Court, provided that (i) the value of the proceeding is higher than 30,000.00, and (ii) the second instance court has not confirmed the decision issued by the first instance court. There are some exceptions to this rule, though: when there is a general reverse interest that justifies a decision of the Supreme Court in that particular case, or when there are contradictory rulings concerning a matter of law that must be clarified.

Enforcement procedures The Civil Procedure Code also establishes enforcement procedures. Public instruments (documents issued before a notary public or equivalent) are directly enforceable, provided that they contain a debt confession, which means that a prior declaration proceeding will not be necessary to enforce them.

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Most decisions issued in first and second instance are provisionally enforceable but subject to appeal if the counter party does not request the court suspend the decision for which payment of a retainer is required.

In addition, the European order for payment simplifies collection in some cases of crossborder debts. It is recognized and enforced in almost all EU countries without requiring a declaration of enforceability.

12.2. Commercial arbitration and mediation

Commercial arbitration in Portugal is governed by Law 63/2011, of December 14, 2011 (the Arbitration Law), which is based on the UNCITRAL Model Law of June 21, 1985 (amended in 2006). The Arbitration Law regulates both domestic and international commercial arbitration, and it applies to all arbitration procedures that take place in Portugal and to recognition and enforcement in Portugal of arbitral awards made in arbitrations seated abroad.

Under the Arbitration Law, the parties can submit any economic dispute to arbitration, unless exclusively submitted under special law to state courts or to compulsory arbitration. If the dispute does not involve such kind of interests but the parties can reach a settlement on the issue under dispute, the arbitration agreement is also valid.

The Arbitration Law contains a number of provisions to ensure that the arbitration jurisdiction is respected by state courts and to prevent parties not interested in having the dispute decided by arbitrators from sabotaging the arbitration. Such is the case of the provision that establishes that a state court before which a lawsuit is submitted in a matter subject to an arbitration agreement must dismiss the case, unless the arbitration agreement is clearly null, is or becomes inoperative or is impossible to be executed.

Different from the former arbitration law (from 1986), the current Arbitration Law regulates interim measures and preliminary orders, multiple parties and third party joinder.

The parties can agree on the rules of the arbitral proceeding, as long as these fundamental principles are observed: the respondent must be summoned to submit its defense; the parties must be treated equally and given a reasonable

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opportunity to present their case before the final award is granted; in all phases of the procedure, the principle of adversarial process will be guaranteed, with the exceptions foreseen in the law.

Unless otherwise agreed by the parties, the arbitral award cannot be appealed and may only be set aside in very limited cases, e.g., when the subject matter of the dispute cannot be decided by arbitration under Portuguese law, or the content of the award is in conflict with the principles of international public policy of the State of Portugal.

Portugal is a privileged seat for arbitration involving Portuguese-speaking countries, and Portuguese State courts have a practice of respecting the arbitral jurisdiction.

Both ad hoc and institutionalized arbitrations take place in Portugal. There are many arbitrations centers in Portugal, the most important being Centro de Arbitragem da Cmara de Comrcio e Indstria Portuguesa. Portugal has also been a seat of international arbitration proceedings under the International Chamber of Commerce Rules of Arbitration.

Portugal is a party to the NY Convention on the Recognition and Enforcement of Foreign Arbitral Awards ("NY Convention"), which entered into force in Portugal on January 16, 1995. Portugal declared that it would apply the NY Convention only to recognition and enforcement of awards made in the territory of another contracting State.

Portugal is also a party to the 1965 Washington Convention on the Settlement of Investment Disputes ("ICSID Convention"), which entered into force in Portugal on August 1,1984. To the extent of our knowledge, no ICSID award regarding the Portuguese State has ever been rendered, nor has any ICSID award ever been enforced in Portuguese courts.

Although Portugal approved the legal regime on civil and commercial mediation in 2013 Law 29/2013, of April 19, most mediation experiences are still taking place in Julgados de Paz, a special type of courts that can rule on cases whose value does not exceed 15,000.00, and as procedures promoted by the Portuguese Securities Market Commission and consumer protection entities.

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13.Real Estate

Below is an overview of the key legal aspects regarding real estate matters in Portugal.

13.1. Ownership

The Ownership right (direito de propriedade) is governed by the Portuguese Civil Code and is the highest in rem right over real estate in Portugal. According to the legal definition, the owner of a property fully and exclusively enjoys the rights of use, fruition and disposal of real estate, within the legal limits. The Portuguese legal concept is similar to the French proprit, the British freehold and the German voll eigentum.

Under Portuguese law, there are no restrictions on ownership of real estate by non-residents or foreign investors, although certain formalities may be required, including previously obtaining a Portuguese taxpayer number.

A property may be owned individually by a single person or jointly by two or more persons, designated as co-owners, under a co-ownership regime (compropriedade). Under this regime, the "co-owners" simultaneously hold the ownership right over the same asset, exercising their rights and obligations in proportion of their respective quotas.

Under the Portuguese legal framework, it is also possible to divide a building into several independent units, under the horizontal property regime (propriedade horizontal). Under this regime, also established in the Civil Code, the units are subject to separate ownership and may belong to different owners. The common areas of a building divided under the horizontal property regime, such as the stairs, lifts and hallways are co-owned by all owners of the units. It should be noted that the division under the horizontal regime may also be applicable to separate buildings or complexes if certain legal requirements are met.

There are other lawfully established in rem property rights within the Portuguese legal framework, of which we highlight the surface right ("direito de superfcie"). This right, which does not include ownership of the land, consists of the legal right of building or keeping, permanently or temporarily, a construction on a land owned by a third party, or to plant in it. At the end of the term of the surface right,

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when temporary, the building erected on the land will revert to the landowner.

Finally, it should be noted that any facts that create, recognize, acquire or modify any real estate right are subject to mandatory registration before the land registry office ("conservatria do registo predial"), which also records the description of a property. The effects of such facts against third parties depend on this registration. Moreover, according to the principle of priority of registration, a right registered in first place prevails over any subsequent registered conflicting rights or acts.

13.2. Real estate transactions

The transfer of rights over real estate can be direct, i.e., through direct acquisition of an asset (asset deal), or indirect (share deal) through the transfer of shares of the company or any other vehicle that owns a property.

The direct or indirect investment in real estate may occur through an investment vehicle. Although the most common property investment vehicles in Portugal are commercial companies, notably public limited liability companies ("SAs") and private limited liability companies ("Lda."),7 there are other investment vehicles such as property investment funds and property investment companies.

Asset deals The purchase and sale of real estate is done by means of a public deed, executed and signed before a notary public, or by a private document certified by a person or entity legally qualified for such procedure, e.g., a notary public, a lawyer or a registry officer, among others. Apart from compliance with the tax obligations resulting from the acquisition of real estate,8 several documents may be required for the transfer of property ownership, including the property's energy performance certificate, the residential technical document (ficha tcnica de habitao), when applicable, or the use permit (autorizao de utilizao) issued by the municipal authorities (although this document may not be required if the construction dates before August 7, 1951).

7 Please refer to section 2 "Ways of doing business".

8 Please refer to section 7 "Tax".

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Although the transfer of in rem rights over an asset occurs with the execution of an agreement, the transfer must be registered in order to ensure a public disclosure of the legal condition of the assets and guarantee the lawfulness of property transactions. Registration must occur within two months from the transaction.

Share deals Share deals are usually formalized through private agreements that do not need to be notarized. Under these agreements, the parties agree on the terms and conditions for the transfer of shares, which generally include specific provisions on the real estate owned by the seller (e.g., representations and warranties, conditions precedent, etc.).

There is no restriction on the acquisition of shares in Portuguese companies by non-residents or foreign investors, although certain formalities may be required, such as previously obtaining a Portuguese taxpayer number.

The legal requirements for the transfer of shares depend on the type of investment vehicle.

13.3. Urban lease agreements

The legal regime of urban lease agreements is essentially set out in the Portuguese Civil Code and in Law 6/2006, of February 27, as last amended by Law 31/2012, of August 14, and Law 79/2014, of December 19, which completed a thorough reform of this regime.

Under a lease agreement, one of the parties (the landlord) grants the other (the tenant) the temporary use of a real estate property with the maximum mandatory limit of 30 years, although a lease may survive longer, in exchange for payment of the rent.

The lease agreement must be formalized in a written document and leases with an initial term above six years must be registered with the land registry to produce effects against third parties.

Unless otherwise established by both parties, the tenant may not assign its position in the lease agreement to a third party without prior consent of the

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landlord, except in case of transfer of business ("trespasse"), which also includes the lease.

If a leased property is sold, the lease agreement is transferred to the new owner in the same terms and conditions, and the new owner assumes the position of the landlord without further requirements.

Under Decree-Law 160/2006, of August 8, lease agreements for purposes different from those authorized by the respective use permit of the building or unit intended for lease, are null Urban lease agreements can be divided into urban leases for housing or for commercial purposes.

The main aspects of urban leases for housing purposes, including early termination, opposition to the renewal and expiry of the agreements, are provided by law.

As for commercial lease agreements, their main characteristic is the contractual freedom enjoyed by the parties to establish the provisions regarding duration, termination and opposition to renewal. In the absence of provisions by the parties regarding these matters, the legal provisions of housing agreements apply.

13.4. Planning and licensing

The most relevant urban planning and property project licensing laws are (i) the Basic Law on Territorial and Urban Planning Policies (Lei de Bases da Poltica dos Solos, Ordenamento do Territrio e Urbanismo), (ii) the Territorial Planning Instruments Regulations (Regime Jurdico dos Instrumentos de Gesto Territorial) and (iii) the Legal Regime of Urban Planning and Building (Regime Jurdico da Urbanizao e da Edificao RJUE).

According to the planning legal framework, both national and local public authorities (state and the municipal) are empowered to approve the rules of use, occupation and transformation of the land, defining goals and principles to which land use should conform. These rules are contained in plans, the main territorial management instruments, and all urban operations must comply with their regulations.

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The existing territorial management instruments are of different nature, notably sectorial or special planning instruments, including Natura 2000 or the special plan for the coastal area (POOC), and different scope (national, regional or municipal plans).

However, the most recent amendment to the planning legal framework aims to simplify access by any interested party to all the regulations applicable to a certain urban project, and it establishes that they must all be concentrated in a single plan (the municipal or inter-municipal plan).

RJUE foresees the rules of execution of real estate projects, urbanization, building and allotment operations, among others.

Municipalities are responsible for assessing whether the execution of a certain urban project is in accordance with the applicable laws and territorial management instruments. This assessment is within the powers of approval and supervision granted by law to the municipalities in the execution of urban projects.

However, although municipalities play an important role in the execution of urban projects, other entities may be asked to give their opinion (e.g., the Public Heritage Department [Direco-Geral do Patrimnio Cultural] or the Tourism Authority [Turismo de Portugal]). In some cases, their opinion can be binding, meaning that in order to proceed with a specific urban project, the developer may need to seek the approval of such entities. The execution of urban projects may be subject to different procedures. Nevertheless, before filing for one of such procedures, any interested party can obtain information on its viability and its legal or regulatory constraints with a prior information request (pedido de informao prvia).

In the scope of this procedure, municipalities have a set term to decide on the request, and their decisions are binding on the competent bodies. The effects of such decisions remain in force for a one-year period.

Depending on the type of project, it may be subject to one out of the following procedures: licensing (licenciamento), advance notice (comunicao prvia) or use permit (autorizao de utilizao). Additionally, some projects do not have a relevant urban impact (in general, maintenance works) and, for that reason,

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do not depend of any of these procedures, although they may be subject to municipal supervision.

RJUE sets forth the list of projects that are subject to each of these procedures. In general, those that require a license are more relevant from an urban planning point of view than those subject to an advance notice procedure, which tends to be simpler and faster.

Finally, once the project is completed, and provided that the construction complies with the project that was submitted and approved (or, in case of advance notice procedures, not rejected by the municipality) a use permit will be issued. Thus, the use permit is the legal document that attests (i) completion of the construction works; (ii) conformity of the works with the building permit (licena de construo) and (iii) authorized use that may be given to the building.

14.Private equity

14.1. Introduction

Private equity activity in Portugal is regulated by Law 18/2015, of March 4 and is subject to supervision by the Portuguese Securities Market Commission ("CMVM").

There is no true distinction in Portugal between private equity and venture capital, and these terms are used interchangeably. Therefore, the term "private equity" is used in its broadest sense, comprising private equity activities in all their forms, including venture capital.

In 2015, there was a regulatory change regarding the legal framework of private equity activities, with the enactment of Law 18/2015, transposing into the Portuguese legal system the EU Directive 2011/61/EU, of the European Parliament and Council, on alternative investment fund managers ("AIFMD"), and the EU Directive 2013/14/EU, of the European Parliament and Council, on alternative investment funds' excessive dependence on credit ratings. Further, Law 18/2015 ensures the application of Regulation (EU) 345/2013, of the European Parliament and Council, on European private equity funds.

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14.2. Main innovations

Simplified framework and qualified framework The most significant change put in place by Law 18/2015 was the creation of two distinct regulatory frameworks of private equity investment depending on the global amount of the assets under management. Formerly, there was a single regulatory framework, applicable regardless of that amount.

Qualified framework

A more demanding and qualified regulatory framework applies to entities managing assets exceeding (i) 100,000,000.00, when their portfolios include assets acquired with leverage; or (ii) 500,000,000.00, when their portfolios do not include assets acquired through leverage and when there are no reimbursement rights for a five- year period from the date of the investment.

Entities that fall within these thresholds are subject to tighter requirements, namely regarding (i) authorization and registration procedure; (ii) internal organization; (iii) conflict of interest policies; (iv) risk management policies; (v) valuation rules; (vi) remuneration policies; (viii) reporting obligations and (ix) delegation and sub-delegation of functions to third parties.

These entities are able to sell units of private equity funds in other European countries and third countries under the EU Passport rules, as established in Law 16 /2015, of February 24.

Simplified framework

The main changes regarding the simplified regulatory framework, i.e., the framework applicable to private equity companies whose assets under management do not exceed (i) 100,000,000.00, when their portfolios include assets acquired with leverage; or (ii) 500,000,000.00, when their portfolios do not include assets acquired through leverage and with no reimbursement rights for a five-year period from the date of the investment, are as follows:

Doing Business in Portugal 109

Management companies must now have capital for at least 125,000.00 (formerly, at least 750,000.00 for companies whose management included both their own and external assets, and 250,000.00 for companies whose activity was exclusively the management of private equity funds);

When the global net value of the assets under management by private equity companies exceeds 250,000,000.00, they must have their own funds corresponding to 0.02% of the global net value exceeding this limit; and

Private equity companies must report to the CMVM, on an annual basis, their main investments, main risk positions and main concentrations of the private equity funds under management.

These private equity companies may opt to request authorization to carry out their activities as a managing entity falling above the AIFMD thresholds (optin procedure) subject to tighter legal framework to be able to benefit from the rights granted under the AIFMD (e.g., applicability of the EU marketing and management passport).

Other innovations Other innovations worth highlighting include the possibility to create subfunds. Notably, each subfund is represented by one or more unit categories and is subject to property autonomy ruling.

The new legal framework also establishes a new penalty system, whereby infractions are punishable with fines up to five million euro.

Other legal aspects The Portuguese legal framework leaves room for contractual freedom, since it enables fund investors and management companies to enter into an agreement to set forth the rules governing equity the rules of procedure of private equity funds regarding the type of assets in which it can invest, portfolio composition, definition of investment policy and the fund's borrowing limits. There are some laws and regulatory provisions that should also be taken into account,

110 Doing Business in Portugal

namely regarding (i) assets investment diversification thresholds, (ii) permitted or prohibited transactions, (iii) conflict of interest, and (iv) winding-up and dissolution.

Conclusion The new legal regime of private equity investment brought key changes, especially for private equity players whose assets under management represent a relevant position in the financial system. These innovations are a stronger protection for the investor, since they create more demanding and stricter rules in areas as diverse as supervision and sanctioning, activity access, information disclosure, risk and liquidity management and remuneration, among others.

It should be stressed, however, that this legal framework introduced changes aiming to provide greater flexibility, simplify and, consequently, promote the increase of private equity activity.

Finally, this new legal framework improved Portugal's competitiveness in this sector, since the legal framework is harmonized with similar EU regulations.

15.Residence permit for investment activity program (ARI)

15.1. Investment program associated with residence permits

Under Portuguese law, non-EU citizens carrying out investment activities in Portugal may be granted a residence permit, provided they meet certain requirements.

Initially enacted by the Portuguese Republic's Assembly through Act 23/2007, of July 4, approving the legal regime for the entry, permanence, exit and removal of foreigners from Portuguese territory, as amended by Act 29/2012, of August 9, by Act 56/2015, of June 23, and by Act 63/2015, of June 30, this investment program associated with residence permits has subsequently been developed by Act 84/2007 of November 5, as amended by Act 2/2013 of March 18, by DecreeLaw 31/2014 of February 27 , by Act 15-A/2015 of September 2 and finally by Act 102/2017 of August 28.

Doing Business in Portugal 111

Residence permits are granted for a one-year initial period and can be renewed for successive periods of two years, and provide holders with:

residence visa waiver for entering Portugal;

residence permit in Portugal;

free access to the Schengen Area;

possibility of family reunification;

access to a profession or to carry out a business in Portugal;

access to the health and education systems under the same conditions of Portuguese citizens;

access to justice; and

possibility to apply for (i) Portuguese permanent residence after holding the temporary permit for at least five years, or to (ii) apply for citizenship after six years if the requirements are met.

15.1.1. Investment activity

Under Act 23/2007, of July 4, as subsequently amended, an investment activity is any activity that is carried out by an individual or through a company (in case a limited liability company with a sole quota holder) that generally leads to at least one of the following situations in Portuguese territory and for a minimum of five years:

Capital transfer with a value of at least 1 million:

This type of investment includes the acquisition or investment in Portuguese listed and unlisted companies, and covers the cases where the companies operate in Portugal and have investments in other countries. The rule is that the companies are based in Portugal, even though they can invest abroad.

Furthermore, it is possible to invest in the Portuguese state's public debt instruments, including treasury bonds, savings certificates and treasury certificates.

112 Doing Business in Portugal

Creating at least 10 jobs:

Investors can either incorporate a company or invest in companies already incorporated in Portugal. However, it should be noted that the 10 jobs legally required must be created after the ARI regulations were enacted, i.e., August 9, 2012.

Investors are also granted the possibility of creating the 10 mandatory jobs individually, i.e., without incorporating a company in Portugal.

Acquiring real estate with a purchase price of at least 500,000.00:

The ARI rules determine that either rural or urban real estate can be acquired, and that real estate properties can be acquired for leasing, commercial, agricultural and tourism purposes.

The acquisition of real estate can be (i) through joint ownership, provided that the applicant is a joint owner and invests at least 500,000.00; or (ii) through a purchase and sale commitment agreement, if the down payment is at least 500,000.00.; or (iii) through a limited liability company with the applicant as the sole quota holder,

The procedure for purchasing real estate in Portugal involves: (i) carrying out a due diligence on legal and tax matters, (ii) signing a purchase commitment agreement to secure the property purchase and later a purchase contract, or directly entering into a purchase contract, (iii) paying the price or the down payment (in the case of a purchase commitment agreement), and (iv) registering the property with the land registry and inform the tax authorities about the real estate purchase.

Acquiring real estate whose built has been concluded, for at least 30 years ago or located in urban rehabilitation areas for rehabilitation purposes for in the amount of at least 3 350,000.00;

Capital transfers for at least 350,000.00 to be applied to research activities carried out by public or private scientific research institutions that are part of the Portuguese scientific and technological system;

Doing Business in Portugal 113

Capital transfers for at least 250,000.00 to be applied to investment or support of the artistic output recovery or maintenance of the Portuguese cultural heritage.

The investment may be carried out through central and peripheral direct administration services, public institutes, entities forming part of the business public sector, public foundations, private foundations with a public utility statute, inter-municipal entities, entities forming part of the local business sector, municipal associative entities and cultural public associations pursuing attributions in the area of artistic production, recovery or maintenance of the Portuguese cultural heritage.

Capital transfers for at least 350,000.00 to be applied to the acquisition of participation units in investment funds or in venture capital funds incorporated in Portugal, focused on the capitalization of companies

The maturity of the Funds must be, at the time of the investment, at least 5 years and atleast 60% of the invested capital must be carried out in companies based in the national territory.

Capital transfer for at least 350,000.00 to be applied to the incorporation of companies with its head office in national territory, combined with the creation of five permanent jobs. This value may also be applied to invest in the increase of share capital of a company already incorporated, combined with the creation or maintenance of jobs, with a minimum of five permanent employees, and for a minimum period of three years.

As from July 1, 2015, according to the changes introduced by Law 23/2007 of July 4, provided that the investment is carried out in low density territories, the minimum amount requirement for the investment activities mentioned in subparagraphs b), c), d), e) and f) may 20% lower. For these purposes, low density territories are the level III territories of the Nomenclature of Territorial Unities for Statistical Purposes (NUTS III) with less than 100 inhabitants/km2 or with a GDP per capita below 75% of the national average.

114 Doing Business in Portugal

15.1.2. Family reunification The law allows those with Portuguese residence permit or those who are applying to ARI for Portuguese residence permit to also apply for their family dependents, which include:

the spouse;

children, disabled adult sons and daughters;

adopted children;

single adult sons and daughters studying at a school or educational institute in Portugal or abroad and financially dependent on their parents;

Siblings who are minors under custody of the investor as granted by the competent authority of their country of origin and recognized in Portugal;

Financially dependent parents of the investor and of the spouse.

15.1.3. Permanent residence permit The residence permit granted under the investment program offers respective holders the possibility of applying for Portuguese permanent residence, provided applicants:

hold a temporary residence permit for at least five years;

have not been sentenced, individually or cumulatively, with over one year of imprisonment in the past five years of residence in Portuguese territory;

have means of ensure their livelihood;

have accommodation; and

have basic knowledge of the Portuguese language.

15.1.4. Portuguese citizenship Non-EU citizens investing in Portugal can apply for Portuguese citizenship, provided that they:

Doing Business in Portugal 115

are of legal age or emancipated under Portuguese law; have been legal residents in Portuguese territory for at least six years; have sufficient knowledge of the Portuguese language; and have not been convicted of a crime punishable with more than three years

of imprisonment under Portuguese law.

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