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109-E Buying, Selling & Cost 2018 : Buying & Selling
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118-E Building & Architects : Building
107-E Education in Portugal : Education
106-E Tax on Rental Income : Taxation & Succession
120-E Building restrictions in Portugal : Building
110-E SZA-Homecare : Health
124 E Other mortgages : Offshores
134-E Fiscal Representation : Taxation & Succession
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201-E Divorce in Portugal : General
Austerity and stabiliation package for Portugal : Taxation & Succession
195-E New austerity measures : Taxation & Succession
208-E Is it still worth it? : Offshores
202-E New Local Lodging Regulations : Rentals and Letting
233-E Earthquakes & Tsunami : General
238-E AIMI TAX : Taxation & Succession
: Offshores
133-E Capital Gains Tax on Rental properties : Taxation & Succession
244-E Income tax Spain 2019 : Taxation & Succession
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250-E Death & Taxes in the Netherlands : Inheritance
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115-E AFPOP : General
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119-E Project Management : Building
122-E Buying or Building : Building
123-E New property tax laws 2004 : Taxation & Succession
201-E Re Valuation of properties in 2012 : Taxation & Succession
246-E Income tax Spain on Rental Income : Taxation & Succession
200-E Evaluations of older properties : Taxation & Succession
211-E Portuguese Nominee Company Yes or No : Offshores
232-E I.M.T. - 2018 : Real Estate
Via CTT registration : From the Newpapers
237-E New law for independent workers : Social Security
239-E Capital Gains Tax : Taxation & Succession
245-E Non Habitual Residence : Taxation & Succession
248-E Golden Visa : Taxation & Succession
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144-E Letting your property in Portugal : Rentals and Letting
142-E Legalisation of illegal buildings : Building
146-E Newsletter March 2006 - 1 : News letters
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194-E Inspection Rental Licence : Rentals and Letting
112-E Taxation in Portugal 2009 : About Us
150-E Newsletter March 3 : News letters
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153-E Rentals license - the total picture : Rentals and Letting
100-E About Realestate Algarve 2017 : About Us
154-E Property Management : Property Management
198-E Commissions rate : Real Estate
206-E Compensation to staff : Labour contracts
Home : About Us
155-E Again about rentals. : News letters
156-E Rentals and no progress : News letters
157-E Fiscal Number : Taxation & Succession
158-E Possible change in off-shore taxation : Offshores
159-E New Residency Laws : General
235-E New AL Legislation July 2018 : Rentals and Letting
190-E Short term rentals : Rentals and Letting
215-E Law about Local Lodging (AL) : Rentals and Letting
216-E Health Insurance : Health
217-E Tax on Rental Income : Taxation & Succession
001-D Over Ons : General
219-E Social Security : Social Security
219-E Social Security : Social Security
227-E Bush fire prevention : From the Newpapers
228-E Last day for paying Rates : From the Newpapers
231-E New legislation offshore property companies : Offshores
242-E Register of Beneficial Owners : Offshores
197-E Environmental-friendly houses : Building
241-E Register Effective Beneficiary : Offshores
199-E Disclosure of assets in Belgium : Offshores
225-E Residencia : Moving to Portugal
254-E What to with with on offshore in 2020 : Offshores
192-E Energy Certificate : Licences
191-E Rental issues again : Rentals and Letting
249-E Central Registration Benficial Owners : Taxation & Succession
160-E Documents needed for title Deed (Escritura) : Buying & Selling
161-E Development control : Building
162-E Capital Gains again : Taxation & Succession
164-E Tax on Expatriates : Taxation & Succession
165-E Hunting : Miscellaneous
166-E Villa licensing and no progress : Rentals and Letting
167-E Algarve Resident Feb. 2007 : News letters
168-E ReAct Discretionary Trust : Taxation & Succession
169-E Off-Shores and Trusts : Offshores
170-E Reverse home schemes : Offshores
171-E April 2007 : Rentals and Letting
172-E Tax Amnersty for British off-shore accounth : Taxation & Succession
173-E Off-Shore Bank accounts : Taxation & Succession
174-E Short-term holiday letting : Rentals and Letting
175-E Property Management Agreement : Property Management
176-E Equity release schemes : Offshores
177-E Holiday let licening : Rentals and Letting
178-E English inheritance tax : Taxation & Succession
179-E Holiday lets and Rental Income : Rentals and Letting
180-E Buying off-plan : Buying & Selling
181-E Setting up a company : Business structures in Portugal
226-E Owning Spanish Property in a company : Offshores
234-E Stricter laws on local rentals : Rentals and Letting
230-E AL Licence explained : Rentals and Letting
182-E Calculation C.G.T. : Taxation & Succession
215-E Law about Local Lodging : Rentals and Letting
Registration ViaCTT : From the Newpapers
183-E Trusts : Offshores
117-E Application short term rentals : Rentals and Letting
196-E Importing a car : General
126-E What inheritance law applies in Portugal : Inheritance
210-E Car Issues : Motoring
094-E Taxation and Taxes in Spain : Taxation & Succession
213-E Demise of Offshore Property Companies. : From the Newpapers
214-E Delaware not included in black-list : From the Newpapers
240-E Rights of a sole trader : Social Security
184-E Tax retuns (IRS) 2007 : Taxation & Succession
185-E New Road Tax : Taxation & Succession
186-E Driving license renewal : General
187-E Valuations : General
218-E 15 countries from the black list : Offshores
188-E New Tourist Rental License : Rentals and Letting
189-E New Car tax system 2008 : Taxation & Succession
203-E Non Habitual Residence (10 years exemption) : Taxation & Succession
125-E Inhertiance Tax in Portugal : Inheritance
Algarve Events 2017 : From the Newpapers
212-E Bearer Shares : Offshores
193-E Registration of Hydric Resources : Licences
247-E Mortgage process Portugal : Mortgages
Electricity : Utilities
209-E Change in US Registered companies : Offshores
245-E Application Dutch AOW : Health
247-E Non-Habitual Resident : Taxation & Succession
222-E Conveyance : Real Estate

009-D Thuiszorg in de Algarve : Gezondheid & Soc.Verzekeringen
014-D Sociale Verzekeringen : Gezondheid & Soc.Verzekeringen
019-D Bouwbeperkingen in de Algarve : Bouwen
011-D AWBZ : Gezondheid & Soc.Verzekeringen
000-D Introductie : Home
004-D Makelaardij in Portugal : Algemeen
003-D Hypotheken in Portugal : Hypotheken
005-D Belastingen in Portugal 2005 : Belastingen & Erfrecht
008-D Veranderingen in offshore per 1/1/02 : Offshores
015-D Kwalitatief Marktonderzoek : Belastingen & Erfrecht
013-D Ziektekosten verzekering : Gezondheid & Soc.Verzekeringen
017-D Kopen en Wonen in Portugal : Algemeen
018-D Bouwbegeleiding : Bouwen
007-D A.F.P.O.P. : Diversen
009-D Kopen en verkopen & kosten : Algemeen
024-D Nieuw Nederlands belastingstelsel : Belastingen & Erfrecht
025-D Veranderingen in makelaardij : Algemeen
002-D Makelaars in Portugal : Algemeen
033-D I.M.I. - Onroerende zaak belasting : Belastingen & Erfrecht
037-D Uitwisseling gegevens rentetegoeden : Belastingen & Erfrecht
035-D Erfrecht procedure : Belastingen & Erfrecht
036-D Naheffing in SISA : Belastingen & Erfrecht
038-D Vermogenswinstbelasting 2014 : Belastingen & Erfrecht
078-D Sociale Verzekeringen 2010 : Gezondheid & Soc.Verzekeringen
080-D Omgekeerde hypotheek : Offshores
039-D Het Nieuwe Nederlandse Erfrecht : Belastingen & Erfrecht
041-D Sociale lasten onafhankelijke werkers : Gezondheid & Soc.Verzekeringen
081-D Nederlands onderwijs in de Algarve : Onderwijs
073-D Vergunningen voor waterbronnen. : Vergunningen
075-D Trouwen : Algemeen
076-D Versimpeling Europees erfrecht : Belastingen & Erfrecht
082-D Tweetraps Testamenten : Belastingen & Erfrecht
118-D A.I.M.I. - Aanvullende belasting : Belastingen & Erfrecht
142-D Aanvullende AL wetgeving : Huur en Verhuur
020-D Verbouwen van een boerderij : Bouwen
077-D Inrichting en Binnenhuis Architectuur : Bouwen
083-D Zorgtoeslag : Gezondheid & Soc.Verzekeringen
082-D Aanvaarding van een erfenis : Belastingen & Erfrecht
087-D Tolheffing in Portugal : Algemeen
084-D Hertaxatie van huizen in 2012 : Belastingen & Erfrecht
089-D Belastingveranderingen 2012-2013 : Belastingen & Erfrecht
090-D Belastingen in Spanje : Belastingen & Erfrecht
100-D Belastingheffing op huurinkomsten : Belastingen & Erfrecht
101-D Beneficiar aanvaarden van een erfenis. : Belastingen & Erfrecht
103-D Woonlandfactor : Gezondheid & Soc.Verzekeringen
107-D Executeur-Testamentair : Belastingen & Erfrecht
109-D Verhoging van de AOW leeftijd : Gezondheid & Soc.Verzekeringen
136-D Belastingvrij schenken : Belastingen & Erfrecht
151-D Erfenis uit het buitenland : Belastingen & Erfrecht
152-D Belastingschijven 2019 : Belastingen & Erfrecht
Electriciteitstarieven : Home
036-D December 2002 : Nieuws uit de kranten
108-D Nieuwe huwelijks recht per 01/01/2018 : Belastingen & Erfrecht
023-D Huren voor een langere termijn : Huur en Verhuur
012-D Belastingontduiking & Belastingplanning : Belastingen & Erfrecht
016-D Veranderingen in onr. goed bel. per 1-1 : Belastingen & Erfrecht
027-D Nieuwe belastingwetgeving 2004 Patrimonium : Belastingen & Erfrecht
003-D Hypotheek Info RABO : Hypotheken
028-D Buitenlandse spaartegoeden per 1-1-2005 : Belastingen & Erfrecht
029-D Inkomstenbelasting of I.R.S. : Belastingen & Erfrecht
030-D Belasting vertegenwoordiging : Belastingen & Erfrecht
031-D Nieuwe makelaardij wetgeving : Makelaardij
032-D Ficha Tecnica de Habitação : Bouwen
114-D Hoe nu verder met de off-shore - deel 1 : Offshores
Woonvergunning : Vergunningen
001-D Meer over Ons : Algemeen
130-D Wie erft zonder testament? : Belastingen & Erfrecht
135-D Hoeveel AOW per 01-07-2018 : Gezondheid & Soc.Verzekeringen
131-D Verhuur 2e woning in Spanje : Huur en Verhuur
134-D Belasting op verhuur Spanje : Belastingen & Erfrecht
120-D Belastingplichtig na vertrek? : Belastingen & Erfrecht
042-D Legalisatie illegale bouw : Bouwen
043-D Een eigen bedrijf in Portugal : Zakenlijk
044-D Verhuur van Uw huis in Portugal : Huur en Verhuur
045-D Aangifte inkomsten uit werkbetrekking : Belastingen & Erfrecht
046-D Belastingaangifte uit arbeid : Belastingen & Erfrecht
072-D CVZ en terugbetaling : Gezondheid & Soc.Verzekeringen
047-D Wie is belastingplichtig in Portugal : Belastingen & Erfrecht
095-D Over erfrechtzaken : Belastingen & Erfrecht
098-D Schenken tijdens het leven aan kinderen. : Belastingen & Erfrecht
048-D Nieuwe Huurwet 2006 : Huur en Verhuur
049-D Overlijdensakte : Gezondheid & Soc.Verzekeringen
051-D Is een off-shore nog de moeite waard? : Offshores
052-D Wat te doen indien U nog een off-shore heeft : Offshores
053-D Maken van testament en echtscheiding. : Belastingen & Erfrecht
062-D Vermogenswinstbelasting in Spanje : Belastingen & Erfrecht
063-D Medische behandeling in Nederland : Gezondheid & Soc.Verzekeringen
134-D Flitsscheiding : Belastingen & Erfrecht
140-D Nieuwe verhuurwetgeving (AL) juli 2018 : Huur en Verhuur
064-D Korte termijn verhuur : Huur en Verhuur
119-D Aandelen aan toonder : Offshores
129-D Zwart geld in het buitenland : Nieuws uit de kranten
126-D Wie heeft er recht op AOW : Gezondheid & Soc.Verzekeringen
123-D Belastingen over 2018 : Belastingen & Erfrecht
127-D DigiD : Belastingen & Erfrecht
139-D Aanmerkelijk belang : Belastingen & Erfrecht
065-D AOW in het buitenland : Gezondheid & Soc.Verzekeringen
066-D Wonen en werken buitenland : Algemeen
079-D Importeren van een Auto : Diversen
084-D Rechtzaak Zorgverzekering : Algemeen
093-D Belastingen in Spanje : Belastingen & Erfrecht
104-D Nieuwe wetgeving vakantieverhuur AL : Huur en Verhuur
067-D Energielabel : Vergunningen
068-D Franchise organisaties in Nederland : Algemeen
097-D Nieuwe registratie van Ont. Goed in Loulé : Juridisch-Legaal
094-D Energie label - Nieuwe aanvullende wetgeving : Juridisch-Legaal
069-D Tarieven AOW 2009 : Gezondheid & Soc.Verzekeringen
054-D Aftrekbare medische kosten voor IRS : Belastingen & Erfrecht
005-D Belasting en Erfrecht 2006 : Belastingen & Erfrecht
055-D Niet of te late betaling van belastingen : Belastingen & Erfrecht
056-D AOW & ANW uitkeringen & Min. Loon : Gezondheid & Soc.Verzekeringen
057-D Afhandeling erfenis in Portugal : Belastingen & Erfrecht
058-D Huishoudelijk Personeel : Personeel
: Belastingen & Erfrecht
099-D Formulieren sociale zekerheid in Europa : Gezondheid & Soc.Verzekeringen
102-D Verantwoordelijkheid Makelaar : Makelaardij
143-D Aanvragen AOW : Gezondheid & Soc.Verzekeringen
059-D Witwassen geld : Belastingen & Erfrecht
060-D Vermogenswinst belasting in EG : Belastingen & Erfrecht
061-D Schenken aan kinderen : Belastingen & Erfrecht
071-D Zorgtoeslag in het buitenland : Gezondheid & Soc.Verzekeringen
113-D Schenken in Spanje : Belastingen & Erfrecht
124-D Hoeveel bedraagt de AOW in 2018 : Gezondheid & Soc.Verzekeringen
122-D Erfenis uit het buitenland : Belastingen & Erfrecht
092-D Kopen in Spanje : Makelaardij
111-D Erfrecht in Europa : Belastingen & Erfrecht
117-D De Staatsbegroting = OE 2018 : Belastingen & Erfrecht
125-D Residentie kaart : Vestigen in Portugal
085-D Echtscheiding : Belastingen & Erfrecht
001-D Over Ons : Home
110-D Schenking O.G. Portugal aan kinderen : Belastingen & Erfrecht
116-D Hoe nu verder met de offshore - deel 2 : Offshores
121-D Belasting op vermogen in België & Nederland : Belastingen & Erfrecht
128-D Zo regelt U uw erfenis : Belastingen & Erfrecht
070-D Zorg in het buitenland : Gezondheid & Soc.Verzekeringen
074-D Verlaging successierechten : Belastingen & Erfrecht
133-D ERFRECHT : Belastingen & Erfrecht
115-D Belastingvrij schenken aan een kind. : Belastingen & Erfrecht
132-D Testament in Spanje : Belastingen & Erfrecht
086-D Uitschrijven uit Nederland : Belastingen & Erfrecht
106-D Aftrekosten I.R.S. 2015 : Belastingen & Erfrecht
088-D Nogmaals Tolwegen : Algemeen

print articleAusterity and stabiliation package for Portugal




3 May 2011, 13:40

[With regard to Council Regulation (EU) n° 407/2010 of 11 May 2010 establishing aEuropean Financial Stabilisation Mechanism, and in particular Article 3(5) thereof, thisMemorandum of Understanding details the general economic policy conditions as embedded in Council Implementing Decision […] of […] on granting Union financial assistance toPortugal. The quarterly disbursement of financial assistance from the European FinancialStabilisation Mechanism (EFSM)1 will be subject to quarterly reviews of conditionality forthe duration of the programme. The first review will be carried out in the third quarter of

2011, and the 12-th and last review in the second quarter of 2014. Release of the instalments will be based on observance of quantitative performance criteria, respect for EU Council

Decisions and Recommendations in the context of the excessive deficit procedure, and a positive evaluation of progress made with respect to policy criteria in the Memorandum of Economic and Financial Policies (MEFP) and in this Memorandum of Understanding on specific economic policy conditionality (MoU), which specifies the detailed criteria that will be assessed for the successive reviews up to the end of the programme. The review taking place in any given quarter will assess compliance with the conditions to be met by the end of the previous quarter.

If targets are missed or expected to be missed, additional action will be taken. The authorities commit to consult with the European Commission, the ECB and the IMF on the adoption of policies that are not consistent with this Memorandum. They will also provide the European Commission, the ECB and the IMF with all information requested that is available to monitor progress during programme implementation and to track the economic and financial situation. Prior to the release of the instalments, the authorities shall provide a compliance report on the fulfilment of the conditionality.]

1 On 8 April 2011, Eurogroup and ECOFIN Ministers issued a statement clarifying that EU (European Financial Stabilisation Mechanism) and euro-area (European Financial Stability Facility) financial support would be provided on the basis of a policy programme supported by strict conditionality and negotiated with the Portuguese authorities, duly involving the main political parties, by the Commission in liaison with the ECB, and the IMF.


1. Fiscal policy


Reduce the Government deficit to below EUR 10,068 million (equivalent to 5.9% of GDP based on current projections) in 2011, EUR 7,645 million (4.5% of GDP) in 2012 and EUR 5,224 million (3.0% of GDP) in 2013 by means of high-quality permanent measures and minimising the impact of consolidation on vulnerable groups; bring the government debt-to- GDP ratio on a downward path as of 2013; maintain fiscal consolidation over the medium term up to a balanced budgetary position, notably by containing expenditure growth; support competitiveness by means of a budget-neutral adjustment of the tax structure.

Fiscal policy in 2011

1.1. The Government achieves a general government deficit of no more than EUR 10,068 millions in 2011. [Q4-2011]

1.2. Over the remainder of the year, the government will rigorously implement the Budget Law for 2011 and the additional fiscal consolidation measures introduced before May 2011. Progress will be assessed against the (cumulative) quarterly deficit ceilings in the Memorandum of Economic and Financial Policies (MEFP), including the Technical Memorandum of Understanding (TMU). [Q3 and Q4-2011]

Fiscal policy in 2012

1.3.On the basis of a proposal developed by the time of the first review, the 2012 Budget will include a budget neutral recalibration of the tax system with a view to lower labour costs and boost competitiveness [October 2011].

1.4.The government will achieve a general government deficit of no more than EUR 7,645 millions in 2012. [Q4-2012]

1.5. Throughout the year, the government will rigorously implement the Budget Law for 2012. Progress will be assessed against the (cumulative) quarterly deficit ceilings in the

Memorandum of Economic and Financial Policies (MEFP), including the Technical Memorandum of Understanding (TMU). [Q1, Q2, Q3 and Q4-2012]

1.6. The following measures will be carried out with the 2012 Budget Law [Q4-2011], unless  otherwise specified:


1.7.Improve the working of the central administration by eliminating redundancies, increasing efficiency, reducing and eliminating services that do not represent a cost-effective use of public money. This should yield annual savings worth at least EUR 500 million. Detailed plans will be presented by the Portuguese authorities and will be assessed by Q1-2012; the budgetary impacts will spread to 2014. To this end, the government will:

i. reduce the number of services while maintaining quality of provision;

ii. create a single tax office and promoting services' sharing between different

parts of the general government;


iii. reorganise local governments and the provision of central administrationservices at local level;

iv. regularly assess the value for money of the various public services that are part

of the government sector as defined for national accounts purposes;

v. promote mobility of staff in central, regional and local administrations;

vi. reduce transfers from the State to public bodies and other entities;

vii. revise compensation schemes and fringe benefits in public bodies and entities

that independently set their own remuneration schemes;

viii. reduce subsidies to private producers of goods and services.

1.8.Reduce costs in the area of education, with the aim of saving EUR 195 million by

rationalising the school network by creating school clusters; lowering staff needs, centralising

procurement; and reducing and rationalising transfers to private schools in association


1.9. Ensure that the aggregate public sector wage bill as a share of GDP decreases in 2012 and

2013 [Q2-2012 for assessment; Q2-2013 to complete process].

· Limit staff admissions in public administration to achieve annual decreases in 2012-2014 of 1% per year in the staff of central administration and 2% in local and regional administration. [Q3-2011]

· Freeze wages in the government sector in nominal terms in 2012 and 2013 and constrain promotions.

· Reduce the overall budgetary cost of health benefits schemes for government employees schemes (ADSE, ADM and SAD) lowering the employer’s contribution and adjusting the scope of health benefits, with savings of EUR 100 million in 2012.

1.10. Control costs in health sector on the basis of detailed measures listed below under

'Health-care system', achieving savings worth EUR 550 million;

1.11. Reduce pensions above EUR 1,500 according to the progressive rates applied to the wages of the public sector as of January 2011, with the aim of yielding savings of at least

EUR 445 million;

1.12. Suspend application of pension indexation rules and freeze pensions, except for the lowest pensions, in 2012;

1.13. Reform unemployment insurance on the basis of detailed measures listed below under

'Labour market and education', yielding medium-term savings of around EUR 150 million;

1.14. Reduce transfers to local and regional authorities by at least EUR 175 million with a

view to having this subsector contributing to fiscal consolidation;

1.15. Reduce costs in other public bodies and entities by at least EUR 110 million;

1.16. Reduce costs in State-owned enterprises (SOEs) with the aim of saving at least EUR

515 million by means of:

i. sustaining an average permanent reduction in operating costs by at least 15%;

ii. tightening compensation schemes and fringe benefits;

iii. rationalisation of investment plans for the medium term;


iv. increase their revenues from market activities.

1.17. Permanently reduce capital expenditure by EUR 500 millions by prioritising investment

projects and making more intensive use of funding opportunities provided by EU structural



1.18. Introduction of a standstill rule to all tax expenditure, blocking the creation of new

items of tax expenditure and the enlargement of existing items. The rule will apply to all

kinds of tax expenditure, of a temporary or permanent nature, at the central, regional or local


1.19. Reduction of corporate tax deductions and special regimes, with a yield of at least EUR

150 million in 2012. Measures include:

i. abolishing all reduced corporate income tax rates;

ii. limiting the deductions of losses in previous years according to taxable matter and

reducing the carry-forward period to 3-year;

iii. reducing tax allowances and revoking subjective tax exemptions;

iv. curbing tax benefits, namely those subject to the sunset clause of the Tax Benefit

Code, and strengthening company car taxation rules;

v. proposing amendments to the regional finance law to limit the reduction of

corporate income tax in autonomous regions to a maximum of 20% vis-à-vis the

rates applicable in the mainland.

1.20. Reduction of personal income tax benefits and deductions, with a yield of at least EUR

150 million in 2012. Measures include:

i. capping the maximum deductible tax allowances according to tax bracket with

lower caps applied to higher incomes and a zero cap for the highest income


ii. applying separate caps on individual categories by (a) introducing a cap on health

expenses; (b) eliminating the deductibility of mortgage principal and phasing out

the deductibility of rents and of mortgage interest payments for owner-occupied

housing; eliminate interest income deductibility for new mortgages (c) reducing

the items eligible for tax deductions and revising the taxation of income in kind;

iii. proposing amendments to the regional finance law to limit the reduction of

personal income tax in autonomous regions to a maximum of 20% vis-à-vis the

rates applicable in the mainland.

1.21. Apply personal income taxes to all types of cash social transfers and ensure convergence

of personal income tax deductions applied to pensions and labour income with the aim of

raising at least EUR 150 million in 2012.

1.22. Changes in property taxation to raise revenue by at least EUR 250 million by reducing

substantially the temporary exemptions for owner-occupied dwellings. Transfers from the

central to local governments will be reviewed to ensure that the additional revenues are fully

used for fiscal consolidation.

1.23. Raise VAT revenues to achieve a yield of at least EUR 410 million for a full year by:

i. reducing VAT exemptions;


ii. moving categories of goods and services from the reduced and intermediate

VAT tax rates to higher ones;

iii. proposing amendments to the regional finance law to limit the reduction of

VAT in the autonomous regions to a maximum of 20% vis-à-vis the rates

applicable in the mainland.

1.24. Increase excise taxes to raise at least EUR 250 million in 2012. In particular by:

i. raising car sales tax and cutting car tax exemptions;

ii. raising taxes on tobacco products;

iii. indexing excise taxes to core inflation;

iv. introducing electricity excise taxes in compliance with EU Directive 2003/96.

1.25. Increase efforts to fight tax evasion, fraud and informality to raise revenue by at least

EUR 175 million in 2012.

Fiscal policy in 2013

1.26. The government achieves a general government deficit of no more than EUR 5,224

million in 2013. ). [Q4-2013]

1.27. Throughout the year, the government will rigorously implement the Budget Law for

2013. Progress will be assessed against the (cumulative) quarterly deficit ceilings in the

Memorandum of Economic and Financial Policies (MEFP), including the Technical

Memorandum of Understanding (TMU). [Q1, Q2, Q3 and Q4-2013]

1.28. The following measures will be carried out with the 2013 Budget Law [Q4-2012],

unless otherwise specified:


1.29. Further deepening of the measures introduced in the 2012 Budget Law with a view of

reducing expenditure in the area of:

i. central administration functioning: EUR 500 million. Detailed plans will be

presented and assessed before Q3-2012;

ii. education and school network rationalization: EUR 175 million;

iii. wage bill: annual decreases of 1% per year in headcounts of central

administration and 2% in local and regional administrations;

iv. health benefits schemes for government employees schemes: EUR 100 million.

v. health sector: EUR 375 million;

vi. transfers to local and regional authorities: EUR 175 million;

vii. reduce further costs in other public bodies and entities, and in SOEs: EUR 175


viii. capital expenditure: EUR 350 million;

ix. maintain the suspension of pension indexation rules except for the lowest

pensions in 2013.


1.30. In addition, the government will extend the use of means testing and better target social

support achieving a reduction in social benefits expenditure of at least EUR 350 million.


1.31. Further deepening of the measures introduced in 2012 Budget Law, leading to extra

revenue in the following areas:

i. corporate tax bases and reduce tax benefits and tax deductions: EUR 150


ii. personal income tax benefits and tax deductions: EUR 175 million;

iii. taxation of all types of cash social transfers and convergence of personal

income tax deductions for pensions and labour income: EUR 150 million;

iv. excise taxes: EUR 150 million.

1.32. Update the notional property value of real estate for tax purposes to raise revenue by at

least EUR 150 million in 2013. Transfers from the central to local governments will be

reviewed to ensure that the additional revenues are fully used for fiscal consolidation.

Fiscal policy in 2014

1.33. The government will aim at achieving a general government deficit of no more than

EUR 4,521 millions in 2014. The necessary measures will be defined in the 2014 Budget

Law. [Q4-2013]

1.34. Throughout the year, the Government will rigorously implement the Budget Law for

2014. Progress will be assessed against the (cumulative) quarterly deficit ceilings in the

Memorandum of Economic and Financial Policies (MEFP), including the Technical

Memorandum of Understanding (TMU). [Q1, Q2, Q3 and Q4-2013]

1.35. With the 2014 Budget Law, the Government will further deepen the measures

introduced in the 2012 and 2013 with a view in particular to broadening tax bases and

moderating primary expenditure to achieve a declining ratio of government expenditure over


2. Financial sector regulation and supervision


Preserve financial sector stability; maintain liquidity and support a balanced and orderly

deleveraging in the banking sector; strengthen banking regulation and supervision; bring to

closure the Banco Português de Negócios case and streamline state-owned Caixa Geral de

Depósitos; strengthen the bank resolution framework and reinforce the Deposit Guarantee

Fund; reinforce the corporate and household insolvency frameworks.

Maintaining liquidity in the banking sector

2.1. Subject to approval under EU competition rules, the authorities are committed to

facilitate the issuance of government guaranteed bank bonds for an amount of up to EUR 35

billion, including the existing package of support measures.


Deleveraging in the banking sector

2.2. Banco de Portugal (BdP) and the ECB, in consultation with the European Commission

(EC) and the IMF, will include clear periodic target leverage ratios and will ask banks to

devise by end-June 2011 institution-specific medium-term funding plans to achieve a stable

market-based funding position. Quarterly reviews will be conducted in consultation with the

EC and the IMF, and will examine the feasibility of individual banks’ plans and their

implications for leverage ratios, as well as the impact on credit aggregates and the economy as

a whole, and the BdP will then request adjustments in the plans as needed.

Capital buffers

2.3. BdP will direct all banking groups supervised by BdP to reach a core Tier 1 capital ratio

of 9 percent by end-2011 and 10 percent at the latest by end-2012 and maintain it thereafter.

If needed, using its Pillar 2 powers, the BdP will also require some banks, based on their

specific risk profile, to reach these higher capital levels on an accelerated schedule, taking

into account the indications of the solvency assessment framework described below. Banks

will be required to present plans to BdP by end of June 2011 on how they intend to reach the

new capital requirements through market solutions.

2.4. In the event that banks cannot reach the targets on time, ensuring higher capital

standards might temporarily require public provision of equity for the private banks. To that

effect, the authorities will augment the bank solvency support facility, in line with EU state

aid rules, with resources of up to EUR 12 billion provided under the programme, that takes

into account the importance of the new capital requirements and which will be designed in a

way that preserves the control of the management of the banks by their non-state owners

during an initial phase and allow them the option of buying back the government’s stake. The

banks benefitting from equity injections will be subjected to specific management rules and

restrictions, and to a restructuring process in line with EU competition and state aid

requirements, that will provide the incentive to give priority to market-based solutions.

Caixa Geral de Depósitos (CGD)

2.5. The state-owned CGD group will be streamlined to increase the capital base of its core

banking arm as needed. The CGD bank is expected to raise its capital to the new required

level from internal group resources, and improve the group's governance. This will include a

more ambitious schedule toward the already announced sale of the insurance arm of the

group, a program for the gradual disposal of all non-core subsidiaries, and, if needed a

reduction of activities abroad.

Monitoring of bank solvency and liquidity

2.6. The BdP is stepping up its solvency and deleveraging assessment framework for the

system as a whole and for each of the eight largest banks, and will seek an evaluation of the

enhanced assessment framework by end-September 2011 by a joint team of experts from the

EC, the ECB and the IMF.

2.7. By end-June 2011, the BdP will also design a program of special on-site inspections to

validate the data on assets that banks provide as inputs to the solvency assessment, This

program will be part of a capacity building technical cooperation project put in place with the

support of the EC, the ECB, and the IMF that will bring together Portuguese supervisors,

cooperating central banks and/or supervisory agencies, external auditors and other experts as



2.8. The BdP will provide quarterly updates of banks’ potential capital needs going forward

and check that their deleveraging process remains on track and properly balanced. Whenever

the assessment framework will indicate that a bank’s core Tier 1 ratio might fall under 6

percent under a stress scenario over the course of the program, the BdP, using its Pillar 2

powers, will ask it to take measures to strengthen its capital base.

Banking regulation and supervision

2.9. BdP will ensure by the end of September 2011 that the disclosure of non-performing

loans will be improved by adding a new ratio aligned with international practices to the

current ratio that covers only overdue loan payments. BdP will intensify on-site inspections

and verification of data accuracy with technical assistance from the IMF, in the context of the

data verification exercise for the new solvency assessment framework. BdP will allocate new

resources to the recruitment of additional specialist banking supervisors. Close coordination

will be maintained between home and host country supervisors within the EU framework for

cross-border banking supervision.

Banco Português de Negócios

2.10. The authorities are launching a process to sell Banco Português de Negócios (BPN) on

an accelerated schedule and without a minimum price. To this end, a new plan is submitted to

the EC for approval under competition rules. The target is to find a buyer by the end of July

2011 at the latest.

2.11. To facilitate the sale, the 3 existing special purpose vehicles holding its non-performing

and non-core assets have been separated from BPN, and more assets could be transferred into

these vehicles as part of the negotiations with prospective buyers. BPN is also launching

another program of more ambitious cost cutting measures with a view to increase its

attractiveness to investors

2.12. Once a solution has been found, CGD’s state guaranteed claims on BPN and all related

special purpose vehicles will be taken over by the state according to a timetable to be defined

at that time.

Bank resolution framework

2.13. The authorities will amend legislation concerning credit institutions in consultation with

the EC, the ECB and the IMF by end-November 2011 to, inter alia, impose early reporting

obligations based on clear triggers and penalties. BdP will be authorised to take remedial

measures to promote implementation of a recovery plan. Credit institutions with systemic

risks will be required to prepare contingency resolution plans) subject to regular review.

2.14. The amendments will introduce a regime for the resolution of distressed credit

institutions as a going concern under official control to promote financial stability and protect

depositors. The regime will set out clear triggers for its initiation, and restructuring tools for

the resolution authorities shall include recapitalization without shareholder pre-emptive rights,

transfer of assets and liabilities to other credit institutions and a bridge bank.

The Deposit Guarantee Fund

2.15. The authorities will strengthen the legislation on the Deposit Guarantee Fund (FGD)

and on the Guarantee Fund for Mutual Agricultural Credit Institutions (FGCAM), in

consultation with EC, the ECB and the IMF, by end-2011. These funds' functions will be re9

examined to strengthen protection of guaranteed depositors. These funds should however

retain the ability to fund the resolution of distressed credit institutions and in particular the

transfer of guaranteed deposits to another credit institution but not to recapitalise them. Such

financial assistance shall be capped at the amount of guaranteed deposits that would have to

be paid out in liquidation. This should be permissible only if it does not prejudice their ability

to perform their primary function.

2.16. The Insolvency Law will be amended by the end of November 2011 to provide that

guaranteed depositors and/or the funds (either directly or through subrogation) will be granted

a higher priority ranking over unsecured creditors in the insolvent state of a credit institution.

Corporate and household debt restructuring framework

2.17. To better facilitate effective rescue of viable firms, the Insolvency Law will be amended

by end November 2011 with technical assistance from the IMF, to, inter alia, introduce fast

track court approval procedures for restructuring plans.

2.18. General principles on voluntary out of court restructuring in line with international best

practices will be issued by end-September 2011.

2.19. The authorities will also take the necessary actions to authorise the tax and social

security administrations to use a wider range of restructuring tools based on clearly defined

criteria in cases where other creditors also agree to restructure their claims, and review the tax

law with a view to removing impediments to voluntary debt restructuring.

2.20. The personal insolvency procedures will be amended to better support rehabilitation of

financially responsible individuals, which will balance the interests of creditors and debtors.

2.21. The authorities will launch a campaign to raise public and stakeholder awareness of the

restructuring tools available for early rescue of viable firms through, e.g., training and new

information means.

Monitoring of corporate and household indebtedness

2.22. The authorities will prepare quarterly reports on corporate and household sectors

including an assessment of their funding pressures and debt refinancing activities. The

authorities will assess guarantee programmes currently in place and evaluate market-based

financing alternatives. A task force will be constituted to prepare contingency plans to

efficiently deal with the challenges posed by high corporate and household sectors

indebtedness. These enhanced monitoring actions will put be in place by end-September

2011 in consultation with the EC, the IMF and the ECB.

3. Fiscal-structural measures


Improve the efficiency of the public administration by eliminating redundancies, simplifying

procedures and reorganising services; regulate the creation and functioning of all public

entities (e.g. enterprises, foundations, associations); streamline the budgetary process through

the newly approved legal framework, including by adapting accordingly the local and

regional financial legal frameworks; strengthen risk management, accountability, reporting

and monitoring.


Date Inserted: 19 July 2011
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