COVID-19: Main legislative or regulatory initiatives that have been taken in Portugal

Several exceptional and temporary measures have been adopted in this area, of which, with reference to the respective legal regulations, we would highlight the following:

Decree-Law no. 10-A/2020, of 13 March

1. A declaration issued by a health authority attesting to the risk of contagion from COVID-19 constitutes grounds to allege justifiable reason preventing performance of legal proceedings or procedural acts which must take place in person within the scope of proceedings and procedures handled by the law courts and tribunals; administrative and taxation courts; arbitration courts; public prosecutors' offices; peace courts; alternative dispute resolution entities; notary public offices; registry offices; and governmental entities and services.

2. That declaration shall also constitute justified grounds for non-attendance or postponement of any procedural step in the proceedings and procedures referred to above in paragraph 1.

3. In the  event of suspension of the attendance in person or closure of the premises where the proceedings or procedural acts referred to above in paragraph 1 were to be performed by decision of a public authority, the relevant procedural time limits shall be considered suspended effective from the date of closure or suspension of attendance.     

4. For all legal purposes, public authorities shall accept the display of documents which should be renewed whose validity expires after March 9, 2020 or within 15 days immediately prior to the date of entry into force of this Decree-Law. In particular, the citizen's card, certifications and certificates issued by the civil identification and registration services, driving licences, as well as documents and visas related to the stay in national territory, whose validity expires after the date of entry into force of said Decree-Law or within the 15 days immediately preceding, shall be accepted, on equal terms, until 30 June 2020.

5. These measures shall take effect starting from 9 March 2020.

Law no. 1-A/2020, of March 19 (as amended by Lay no. 4-A/2020, of 6th April)

1. Determined the suspension of procedural deadlines until the cessation of the exceptional situation of prevention, containment, mitigation and treatment of the epidemic infection from the SARS-CoV-2 virus and the COVID-19 disease. 

2. Notwithstanding the following exceptions, this suspension regime applies to all the deadlines established for the performance of procedural acts required to be carried out within the scope of the proceedings and procedures before the courts, administrative and tax courts, Constitutional Court, Court of Auditors, arbitration courts, Public Prosecutor's Office, courts of peace, alternative dispute resolution entities and tax enforcement bodies.

3. The legal term for filing for the debtor's bankruptcy is also suspended, as are any acts required to be performed in connection with execution proceedings, in particular those relating to sales, arrangement with creditors, surrender of real estate properties to the legal authorities, and seizure proceedings, as well as their preparatory measures, with the exception of those that would cause serious harm to the debtor's livelihood or whose nonperformance would cause him irreparable harm, which depends on a prior court decision.

4. However, such suspension shall not preclude:

• The handling of processes and the practice of face-to-face and non-presential acts that are not urgent when all the parties agree that the conditions to ensure their practice through the computer platforms allowing them to be carried out electronically or through appropriate remote communication means, such as teleconferencing, video calling or other equivalent, are fulfilled;
• A final decision being rendered in those cases in which the court and other entities do not find necessary to take further steps.

5. Urgent proceedings shall continue to be conducted without suspension or interruption of time limits, acts or steps, and the following shall be observed with respect to these:

• In proceedings requiring the physical presence of the parties, their representatives or other procedural interveners, the performance of any procedural act shall be carried out by means of appropriate remote communication means such as teleconferencing, videoconferencing or similar; 
• Where the performance of the abovementioned proceedings requiring the physical presence of the parties, their representatives or other procedural interveners is not possible and the life, physical integrity, mental health, liberty or immediate subsistence of the interveners is at stake, the proceedings may be conducted in person, provided that this does not involve the presence of more persons than provided for in the recommendations from the health authorities and in accordance with the guidelines laid down by the competent Supreme Councils;
• In the event that it is neither possible nor advisable to ensure the performance of acts or steps under the terms of the preceding paragraphs, the suspension scheme referred to in paragraphs 1 and 2 shall also apply to such proceedings. 

6. Urgent steps will also include, for the purposes of § 5: 

• Proceedings and procedures seeking to safeguard rights, freedoms and guarantees impaired or threatened to be impaired by any unconstitutional or illegal measures referred to in Article 6 of Law no. 44/86 of 30 September 1986; 
• The urgent service provided for in Article 53(1) of Decree-Law no. 49/2014 of 27 March;
• The proceedings, procedures, acts and steps that prove to be necessary to avoid irreparable harm, in particular those relating to minors at risk or to educational guardianship proceedings of an urgent nature, or to trials of imprisoned defendants.

7. Prescription and limitation periods for all types of proceedings and procedures shall also be suspended.

8. The above shall also apply, mutatis mutandis, to cases including, without being limited to, the following:

• Procedures running in notary and registry offices;
• Administrative, sanctioning and disciplinary proceedings, including acts contesting final or interlocutory decisions, running under the terms of direct, indirect, regional and local administration services, and other administrative entities, such as independent administrative entities, including the Competition Authority, the Insurance and Pension Funds Supervisory Authority, Banco de Portugal and the Securities Market Commission, as well as those running under the terms of professional public associations.

9. These measures shall take effect on March 9, 2020, with the exception of those relating to urgent proceedings, which shall only take effect on April 7 and shall cease on the date on which the end of the exceptional situation is declared by Decree-Law.

10. Upon termination of said exceptional situation, the Assembly of the Republic shall, by means of its own statute, adapt the schedule of judicial vacations to be in force in 2020.

Under this scenario of pandemic and State of Emergency, The Supreme Judicial Council of the Judiciary has enacted a number of exceptional management measures in relation to the courts, whereby only those procedural acts and steps where fundamental rights  are at stake or which are intended to avoid irreparable damage should be carried out, without prejudice to the possibility  of carrying out the other services under the responsibility of the Judicial Magistrates that can be remotely ensured.

1.5. Decree-Law no. 16/2020 of April 15

1. Established that, to perform acts in the context of urgent proceedings running before Courts of Peace, remote communication means such as e-mail, telephone, teleconference or video conference may be used by the parties to the proceedings, by the Justice of the Peace and the court clerk's office.
2. This measure became effective on April 16 and is valid until June 30, 2020.

1.6. Other measures

Under this scenario of pandemic and State of Emergency, The Supreme Judicial Council of the Judiciary has enacted a number of exceptional management measures in relation to the courts, whereby only those procedural acts and steps where fundamental rights are at stake or which are intended to avoid irreparable damage should be carried out, without prejudice to the possibility of carrying out the other services under the responsibility of the Judicial Magistrates that can be remotely ensured.

4. Public procurement and oher administrative procedures

4.1. Public procurement and commitment of expenditure

Decree-Law no. 10-A/2020 establishes exceptional public procurement and public expenditure authorization regimes, which basically aim to reconcile the necessary procedural promptness with the defence of the State’s interests and the strict transparency of public spending. More specifically, the first regime (public procurement) allows for a great flexibility in the public contract formalization procedures; the second (public expenditure authorization) significantly reduces the bureaucratic burden of the public procurement process, in order to align it with the situation of need underlying the new exceptional public procurement regime.

Unsurprisingly, the target scope of the exceptional procurement regime is defined in Article 1(1) by reference to the fact that triggered it - the SARS-CoV-2 epidemic. Thus, the Decree-Law applies to the formalization of public procurement operations (public works contracts, rental or acquisition of personal property, and procurement of services) aimed at the prevention, containment, mitigation and treatment of epidemiological infection by COVID-19, as well as the restoration of normality following it.

The scope of this measure includes both corporate and governmental public sector entities, as well as, with the necessary adaptations, local authorities.

The essential feature of this scheme is the use of the direct adjustment procedure. As opposed to the standard European and national rules on the matter, it greatly facilitates the fulfilment of the material criteria that may justify and serve as a basis for this type of procedure.

In addition, the new law provides for, besides the aforementioned direct adjustment modality, the possibility for the contracting entities to resort to the simplified direct agreement scheme (a rather informal procedure) for the formalization of contracts involving the rental and acquisition of goods and services or the procurement of services (excluding works), as long as the operation does not exceed EUR 20,000.00 (in practice, four times the general limit that the Public Contracts Code (CCP) currently provides in Article 128(1)).

In an attempt to simplify public procurement, the decree also rules out the application of the usual impediments of the direct adjustment procurement method, such as that set out in Article 113(2) of the CCP (possibility of inviting an entity with a contract volume having already exceeded certain limit in the current economic year or in the two preceding years).

It also deviates from the relative preference which should normally be given, within closed procedures (with no public call for tenders), to the prior consultation scheme (which involves the need for the contracting authority to draft an invitation addressed to at least three entities).

It should also be highlighted, due to the major difference with respect to the direct adjustment procedure provided for in the CCP, the provision that the effectiveness of the contract does not depend on its publication in the Base Portal for public contracts.

Another particularity worth no be noted is the possibility for the contracting authority to make advance payments on account of the contractual price, if and when required in order to guarantee that the economic operator can make the relevant goods and services available to meet the public health interest objectives referred to in the legislation.

The Decree-Law also extends the scope of Article 45(2) of the Law on the Organisation and Functioning of the Court of Auditors to the contracts covered by it. Thus, regardless of their value, contracts covered by this Decree-Law may start to take effect before their prior approval or declaration of conformity; in particular, payments arising from such contracts may be made.

Last, with special emphasis on public procurement, Article 7 of the Decree-Law stands out for the exceptional regime that provides more flexibility regarding the level of authority required to authorize the signing of contracts for the acquisition of services by bodies, agencies, services and other entities, including the corporate public sector, the Ministry of Health, DGRSP, INMLCF, I. P., HFAR, LMPQF and IASFA, I. P.. In these cases, the authorisation is the responsibility of the top manager or senior management body, and subsequent communication of the same to the supervising Government members is considered sufficient.

With regard to the exceptional expense authorization regime, we may summarize the following rules, which apply, exceptionally, to the public procurement procedures carried out under the Decree Law:

1. Tacit approval of expenditure requests after 24 hours without reply (Article 3(1)(a));

2. Purchases made subject to the Decree-Law (Article 3(1)(b)) shall be deemed as justified expenditures for the purposes of these requests for authorisation;

3. Tacit approval of multi-annual expenses that are not expressly rejected, within three days, after submission of the request for authorisation for an extension of expenses ordinance to the member of the Government responsible for the area of finance (Article 3(1)(c));

4. Budgetary changes involving an increase in funds, in exchange for other actual expenditure items, shall be authorised by the member of the Government responsible for the respective sector area (Article 3(1)(d));

5. Tacit approval of the disengagement of funds, as soon as three days have elapsed after the submission of the respective request, in cases where this is duly justified in order to comply with the objectives set out in Article 1 of the Decree-Law (Article 3(1)(e));

The decision to contract the acquisition of services aimed at conducting studies, opinions, projects and consulting services, as well as any specialized work, does not require the administrative authorizations provided for in the general law, which will be a responsibility of the member of the Government in charge of the sector area in question (Article 4).

4.2. Administrative deadlines

The lack of clarity of Law no. 1-A/2020, of 19th March, both in its systematisation and in the expressions used (specially those related to administrative, procedural and tax deadlines), raised a number of questions regarding their interpretation, as well as on the soundness of the legislator’s decision to apply the special suspension arrangements resulting from the judicial holiday arrangements to most of deadlines.

Thus, whereas Law no. 1-A/2020 determined the suspension of all the administrative deadlines effective on the date on which Decree-Law no. 10-A/2020 of 13 March came into force, in any administrative procedure, namely in public procurement operations, Law No 4.A/2020, of 6th April, which is the first amendment to the latter, sets our a different regime.

Law 4-A/2020, regarding procedural deadlines in general, clarifies article 7, paragraph 9, in the sense of c) providing for the suspension of deadlines for the performance of acts by private individuals in administrative proceedings (the misleading expression "that run in favor of private individuals" having been removed).

Despite the clarification, the suspension of procedural deadlines should be examined on a case-by-case basis, as it does not necessarily hinder their processing and results from an adaptation of the procedural deadlines scheme to a different procedural reality.

In general, for non-urgent proceedings, Law 4-A/2020 determines that, (i) by agreement of the parties (when all of them consider to meet the conditions to do so), the proceedings and the performance of in-person and non-urgent acts by electronic means or, specifically, videoconference, shall continue, and also that (ii) if, according to the understanding of the court and other entities, there is no need to open new proceedings, a final decision for said proceedings may be rendered.

With regard to urgent proceedings (which include, without being limited to, in the administrative jurisdiction area, in addition to injunctive proceedings, class actions, summons for the provision of information, consultation of documents, or issuance of certificates), it is now established that they will continue to be processed, without suspension or interruption of time limits, acts or steps. 

The proceedings should be carried out via remote communication means or, if this is not possible, in person, with due regard for the recommendations from the health authorities and the guidelines from the competent superior councils regarding the number of people present in the premises. 

Only in cases where the telematic or in-person performance of acts or steps is not possible or advisable may the suspension arrangements for non-urgent procedures be applied.

Law no. 4-A/2020 also sets out a separate scheme of deadlines for public procurement operations. 

First of all, it removes the pre-contractual litigation procedure from the general regulations for urgent proceedings, withdrawing the suspension of time limits in these proceedings - thus apparently precluding the possibility, even if exceptional, of suspending the corresponding time limit due to alleged impossibility or inadequacy of carrying out proceedings by telematic or face-to-face means.

Then, it also determines the non-application to the time limits related to public procurement procedures, under the Public Procurement Code, of the suspension provided for administrative procedures with respect to the performance of acts by private individuals.

Finally, it provides that the procedural deadlines under the Public Procurement Code that had been suspended under the previous wording of Law no. 1-A/2020, will be restarted on the date the law comes into force (which will occur on April 7, 2020).

The pernicious impact of the pandemic on the health of the business fabric calls for measures enabling firms to remain operational wherever possible, preserving jobs and business continuity.

5.1. Measures related to employment contracts

The preservation of employment contracts being one of the main social concerns, the following measures addressed to businesses were also approved in the above-mentioned regulations.

1. Promotion of extraordinary aids for the maintenance of employment contracts in companies in a situation of business crisis, which is defined as (i) total stoppage of the company's or establishment's activity resulting from the interruption of global supply chains, the suspension or cancellation of orders, or (ii) abrupt and sharp drop of at least 40% in turnover, in the 60 days preceding the request to the Social Security, as compared to the same period in the preceding year, or, for those who started the activity less than 12 months ago, the average of that period.

2. The business crisis conditions described in paragraph 1 are evidenced by a declaration from the employer together with a certificate from the company's certified accountant, and businesses must prove the facts on which they base their use of this scheme by means of, for example, accounting balance sheets for the month of the support, as well as for the respective month in the preceding year, Value Added Tax return for the month of the support, among others.

3. Access to the supporting measures depends on the employer being current in all tax and social security obligations with the Tax and Customs Authority.

4. The extraordinary support in a situation of business crisis is conditional upon the employer communicating in writing to the workers the decision to apply for such support, indicating the foreseeable duration, after hearing the union representatives and the workers' committees when they exist, and immediately referring the application to the Social Security Institute, I.P. (ISS, I.P.), accompanied by the documents already referred to in §2, as well as the nominative list of the workers covered, with their social security numbers.

5. During the period of application of this measure, the Social Security ensures a payment covering 70% of two thirds of the gross monthly remuneration of the employee, capped to three guaranteed monthly minimum wages (EUR 1,905.00).

6. This support has a duration of one month and can exceptionally be extended on a monthly basis, up to a maximum of 6 months.

7. Companies that do not make use of the financial aid described may have access to an extraordinary aid for part-time vocational training, lasting one month and guaranteed by the Institute for Employment and Vocational Training (IEFP, I.P.), for up to 50% of the gross salary (with reference to each worker), capped to the amount of the minimum guaranteed monthly wage.

8. An extraordinary financial incentive is created to ensure the normalisation phase of the activity, help companies prevent the risk of unemployment and ensure the maintenance of jobs.

9. Promotion, in the taxation area, of an exceptional and temporary regime of exemption from payment of social security contributions.

5.2. Measures related to payment terms (Moratorium Regime)

Finally, on March 26, 2020, Decree-Law no. 10-J/2020 ("Moratorium Regime") was published, enacting exceptional measures aimed at protecting families, businesses and charities from the burden of their debt service obligations, creating in particular a moratorium that will apply until September 30, 2020. A special regime for the granting of guarantees by the Portuguese State was also created.

I. Scope of application:

A. The Moratorium Regime applies to all companies that:

• Have their head offices and conduct their business in Portugal;

• Are classified as micro, small or medium-sized enterprises in accordance with Recommendation 2003/361/EC of the European Commission of 6 May 2003;

• Are not, as of 18 March 2020, in arrears or breach of their payment obligations with financial institutions for more than 90 days, or do not meet the materiality criterion set out in Notice of Banco de Portugal No 2/2019 and in Regulation (EU) 2018/1845 of the European Central Bank of 21 November 2018;

• Are not in a situation of insolvency, suspension of payments of temporary receivership, or as of 18 March 2020 are already under foreclosure by any financial institution;

• Are current in their obligations before the Tax and Customs Authority and the Social Security, with the debts existing as of March 2020 not becoming due until April 30, 2020 for the purposes hereof.

The measures provided for under the Moratorium Regime will also benefit other companies, regardless of their size, that, as of the release date of the Regime, meet the conditions set in lines a), c), d) and e) above, excluding those belonging to the financial sector.

Under the Moratorium Scheme, the financial sector is considered to include (i) banks, (ii) other credit institutions, (iii) financial corporations, (iv) payment institutions, (v) electronic money institutions, (vi) financial intermediaries, (vii) investment firms, (viii) collective investment undertakings, (ix) pension funds, (x) securitisation funds, (xi) their trading companies, (xii) securitisation companies, (xiii) insurance and reinsurance undertakings and (xiv) public bodies that administer public debt at the national level, operating, according to the law, with the same status as credit institutions.

B. The Moratorium Scheme applies to credit operations granted by credit institutions, credit finance companies, investment firms, leasing and factoring companies, and mutual guarantee companies, as well as branches of credit and financial institutions operating in Portugal.

C. The Moratorium Scheme shall not apply to the following operations:

• Credit or financing operations intended for the purchase of securities or interest positions in other financial instruments, be they secured by such instruments or not;

• Loans granted to beneficiaries of special schemes, subsidies or benefits, such as tax benefits, aimed at promoting the establishment of their head office in Portugal, including for investment activities;  

• Loans granted to companies intended for personal use through credit cards of members of the management or supervisory bodies, staff or other workers.

A. The Government has approved the granting of moratoria with the following effects:

• Prohibition of revocation, in whole or in part, of credit facilities in effect and loans already granted, in the amounts contracted as of the date of entry into force of the Moratorium Scheme, during the period in which this measure is in force;

• Extension, for a term equal to the period of validity of this measure, of all loans having their capital payment at the end of the contract that are in effect on the date of entry into force of the Moratorium Regime, including, under the same terms, all their associated elements, such as interest or guarantees, for instance those provided through insurance or by way of credit securities;

• Suspension, for loans with instalment repayment of capital or other cash disbursements, during the period in which this measure is in force, of all services of capital, rents and interest planned to become due before the end of this period, automatically extending the schedule of payments for the same length as the suspension, so as to ensure that there are no charges other than those which may arise from the variability of the reference interest rate underlying the contract, extending as well all the elements associated with the contracts covered by the measure, such as guarantees. 

In order to be eligible for the above measures, undertakings shall submit to the lending institution, by physical or electronic means, a declaration of adherence to the application of the moratorium, signed by their legal representatives.

The declaration shall be accompanied by documentation demonstrating that the company is current with all its tax and social contribution obligations.

The institutions shall apply the protective measures referred to in paragraph A above not later than five working days after receipt of the declaration and the documents referred to, effective from the date on which the declaration is submitted.

Should they find that the undertaking do not meet the conditions laid down above, the lending institutions shall inform it within three working days.

Undertakings wishing to benefit from the measures provided for in items (b) and (c) of Section II(A) may, at any time, request that only repayments of principal, or part thereof, be suspended.

Extensions of the payment period referred to in paragraphs (b) and (c) of Section II(A) may under no circumstances result in:

• Breach of contract;

• Activation of early repayment clauses;

• Suspension of the maturity of interest due during the extension period, which shall be capitalised over the amount of the loan with effect on the time at which they become due, applying the contractually agreed interest rate; 

• Ineffectiveness or termination of guarantees granted by the entities benefiting from the measures or by third parties, in particular the effectiveness and duration of insurance policies, sureties and/or guarantees.

The application of the measures provided for in Section A above to loans backed by financial collateral shall cover the debtor's obligations to restore maintenance margins as well as the creditor's right to enforce “stop loss” clauses.

B. The Moratorium Scheme also implements a special system whereby the State provides personal guarantees, subject to the following terms:

• The State may provide personal guarantees, within the limits set forth in the State Budget Law for this kind of guarantees, to cover credit operations or other financial operations, in any form, to ensure liquidity or for any other purpose, to companies, private charitable institutions, non-profit associations and other entities of the social economy or any other entity headquartered in the European Union;

• The request shall be addressed to the member of the Government responsible for the finance area through the Directorate General of Treasury and Finance, detailing the essential elements of the operation to be guaranteed, in particular, the amount and time frame, without prejudice to other elements that may be requested in order to score the risk of the operation and define the conditions of the guarantee to be granted;

• The request provided for in the preceding paragraph shall be subject to the approval from the member of the Government in charge of the sector of activity of the entity benefiting from the guarantee, focusing on the relevance of the operation within the frame of the Government's policy of response to the national economic emergency situation due to the COVID-19 pandemic, the assessment of the relevance of the beneficiary entity for the national economy, as well as the prospect of economic viability of the company in question and the express need for a personal guarantee from the State.

5.3. Corporate reporting

Decree Law no. 10-A/2020 also approved an extraordinary measure to defer to June 30 the legal or statutory deadline for holding general meetings of companies, associations or cooperatives. Normally, the approval of the accounting documents and, when required, the non-financial statement of commercial companies must take place within three months from the closing date of each financial year, or five months from the same date for companies that must present consolidated accounts or that apply the equity method of accounting, under the terms of the Commercial Companies Code.

5.4. Constraints to the performance of the activity

The Government has also been approving other measures with direct impact on the life and functioning of businesses that condition their activity, such as:

• Forced closure of a wide range of facilities and establishments listed in Annex I to Decree no. 2-A/2020 of 20 March, including spaces holding recreational, leisure and entertainment activities, cultural and artistic activities, sports activities, activities in public spaces, gaming and betting spaces and restaurant activities (except restaurants that can and intend to remain in operation exclusively for take-away services) in bars every day at 9pm;

• Restrictions on access and allocation;

• Suspension of the activity of any other commercial premises or places where services are delivered to the public (with the exception of those linked to wholesale trade), including malls and large shopping centres, and in catering or beverage outlets, with the exception of those engaged in wholesale trade or providing essential goods or other items considered essential in the present scenario, as listed in Annex II to Decree no. 2-A/2020, of March 20. The latter may remain in business, but are not obliged to do so unless specifically determined by the Minister of Economy;

• Banning events, meetings or gatherings, regardless of the reason or nature, involving 100 or more persons;

• Suspending regular services, special regular and occasional international passenger transport services, with the exception of excursions by nationals or holders of residence permits in Portugal who have left the country and wish to return;

• Suspending driving instruction, face-to-face professional certification training and driving tests;

• Suspending any and all dental, stomatological and dental activities, with the exception of situations proven urgent and unavoidable;

• Reinstating documentary checks on people at borders.

5.5. Use of telematics at general meetings 

Even before the most recent legislative measures in the context of COVID-19, the Portuguese Commercial Companies Code already allowed holding general meetings of public limited liability companies via telematic means under the terms of article 377, no. 6, paragraph b). This regime allows meetings to be held entirely on a virtual basis, unless the articles of association provide otherwise. The company must guarantee the authenticity of the statements and the security of the communications, recording their content and the respective intervening parties.

This possibility was again addressed in Law no. 1-A/2020, which establishes, in Article 5, that the participation via telematic means, namely video or teleconference, of members of collective bodies of public or private entities in the respective meetings, does not hinder the regular functioning of the body, namely with regard to the quorum and resolutions, but the form of participation must be recorded in the respective minutes.

The Securities Market Commission (the "CMVM"), in its communication published on 20 March, also recommended the full use of telematic means to hold general meetings. If there are operational implications making full use of telematic means impossible, a combination of on-site and off-site resources is recommended.

5.6. Audit activity under COVID-19

Also on March 20, the CMVM issued some recommendations aimed at reducing the impact of the current pandemic on the audit procedures required in this reporting period. Using digital or other alternative means for the collection of evidence about the work done and documents required for the audit is recommended. When auditing the consolidated accounts of a group of entities, the procedures for evaluating the work done by the auditors of the components of the group should also be adapted accordingly.

The CMVM also seeks to stress the importance of cooperation between companies and auditors to facilitate the identification and description, in the most rigorous way possible, of the eventual impact of COVID-19 in the current performance of the company's activity and its continuity. The auditors' work should reflect a rethinking of the main aspects of their activity, in the light of the rapid changes and impacts stemming from OVID-19 - the possible consequences identified should be dealt with under the applicable national and international auditing standards.

However, no change has been introduced so far concerning the postponement of the legal deadline for submission of company accounts.

5.7. Profit distribution under a layoff situation

Decree-Law no. 10-G/2020, aimed ay defining and regulating the terms and conditions for the allocation of aids to workers and businesses affected by the COVID-19 pandemic, establishes, in its article 14 under the heading "non-fulfilment and refund of aids", the immediate cessation of the aids foreseen in the referred Decree-Law should any of the listed situations occur, including the distribution of profits, in any form, namely as withdrawals os account, while the obligations arising from the granting of the incentive remain in force. 

6. Real State and Construction Sector

The Assembly of the Republic, through Law no. 1-A/2020, of March 19 (as amended by Law no. 4-A/2020, of April 6), decreed the suspension, for as long as the measures to prevent, contain, mitigate and treat the epidemiological infection by the SARS-CoV-2 virus and the COVID-19 disease remain in force, as determined by the public health authority and up to 60 days after the cessation of such measures, of:

• The effect of the complaints made by landlords on housing and non-residential leases;

• The expiry of housing and non-housing leases, unless the tenant does not object to the termination;

• The effectiveness of the revocation or opposition to the renewal of residential and non-residential leases made by the landlord;

• The foreclosure of a mortgage on a property that is the foreclosed party's personal and permanent residence;

• Eviction proceedings, special eviction procedures and proceedings for delivery of leased property, when the tenant, by virtue of the final judicial decision to be rendered, could be placed in a situation of vulnerability due to lack of home ownership.

Also, the period indicated in Article 1053 of the Civil Code, for the return of the leased premises by the tenant after the expiry of the lease agreement is suspended if the end of that period occurs during the period of time in which said measures are in force.

For its part, through Decree no. 2-A/2020 of March 20, the Government determined that the closure of premises and establishments enforced by the said decree (see above) cannot be invoked as grounds for termination, resolution or any other form of cancellation of non-residential lease contracts or other real estate exploitation schemes, nor as grounds for the obligation to vacate premises in which they are installed.

Subsequently, following a Government bill, the Assembly of the Republic enacted, through Law no. 4-C/2020, of 6 April, an exceptional regime for situations of arrears in the payment of rent due under lease agreements.

The exceptional regime applies to urban housing and non-housing leases as well as, mutatis mutandis, to other types of real estate exploitation agreements (namely, as we understand it, contracts for the use of store spaces in shopping centres and other similar nonstandard contracts).

The law stipulates the following measures:

1 – Housing rentals:

Deferral of payment of rentals becoming due between April 1st, 2020 and the first month following the end of the state of emergency decreed in the country will be allowed, without being subject to the payment of the compensation for delay foreseen in the law (in paragraph 1 of Article 1041 of the Civil Code), nor to any other penalty of a contractual nature for this reason, to housing tenants who, cumulatively:

• have suffered a drop in their household's income exceeding 20% as compared to the income of the preceding month or the same period in the previous year; and cumulatively,

• have reached a household's effort rate, calculated as the percentage of the whole household members' income earmarked for rent payment, equal to or greater than 35%.

In the aforementioned cases, tenants who defer payment of the rent for the indicated period must make that payment in full within 12 months from the end of the first month following the end of the state of emergency, in monthly instalments of not less than one twelfth of the total amount, paid together with the rent for each month. In this case, the landlord will not have the right to terminate the lease on the grounds of non-payment of the rent due.

During the validity term of the law, tenants who meet the conditions and wish to benefit from this exceptional regime have the duty to inform the landlord that they are unable to pay the rent, and must do so in writing, up to 5 days before the due date of the first rental period in which they wish to benefit from the scheme, attaching the documentation proving the occurrence of a loss of income exceeding 20% and of an increase in their effort rate as described above. In the case of rentals due on 1 April 2020, the landlord may be notified up to 20 days after the date on which the law comes into force.

The proof of the tenant's income loss shall be made under the terms regulated by Ordinance n. nr. 91/2020, of April 14th, which also clarifies the cases in which the 20% decrease in income and the increase above 35% in the household's effort rate will be applicable for the purposes of the exceptional measures foreseen in Law nr. 4-C/2020, of April 6th: these are the cases of tenants of housing properties that constitute their permanent residence and of students with a lease contract for a housing property located more than 50 km aways from the permanent residence of their family household, for attendance at an educational establishment. The scope of application is also extended to guarantors of housing tenants who are students and do not receive any income from work.

Under the terms of the Ordinance, the loss of income is calculated by comparing the sum of household members' income in the month in which the cause leading to the loss in income occured with the income received by the same household members in the preceding month.

As a proof of income, pay slips or the employer's declaration must be submitted, in the case of employed workers, or, for business or professional income, the corresponding receipts or invoices, as applicable, and a sworn statement may also be submitted for these purposes; also, in the case of pension income, the corresponding proof will be specifically provided by means of the supporting document issued by Social Security.

The ordinance also establishes that those who deliver or sign documents meant to demonstrate the loss of income containing false statements will be liable for the damages that may occur and for the costs incurred in the application of the exceptional measures provided for in Law no. 4-C/2020, of April 6, without prejudice to the criminal liability generated by their conduct.

2 - Financial support in housing leases

Housing tenants, as well as, in the case of students not earning any income from work, their guarantors, who demonstrably have suffered a loss in their household income exceeding 20% and are unable to pay the rent of the dwellings that constitute their permanent residence, can apply to the Institute of Housing and Urban Rehabilitation, I.P. (IHRU), to be granted an interest-free loan to cover the difference between the monthly rent amount due and the amount they can afford according to their income level and that of their household, pursuant to the terms to be regulated by the IHRU. It should be noted that tenants who resort to these loans will not benefit from the right to defer the payment of the rents during the state of emergency and will therefore remain bound to timely honor the corresponding payment.

The Law provides that landlords who (i) have demonstrably suffered a loss of income exceeding 20% of their household's income in relation to the income of the preceding month or the same period of the previous year may also benefit from financial support from the IHRU, provided that (ii) such income loss percentage can be attributable to the non-payment of rents by tenants under the provisions of this Law. Unless the respective tenants have themselves resorted to a loan from the IHRU under the terms referred to above (in which case they will remain obliged to pay the rents on time), the landlords in that situation may resort to the IHRU to be granted an interest-free loan to offset the amount of the monthly rent, due and unpaid, whenever the remaining disposable income of their household falls, for such reason, below the amount of the Social Aid Index (IAS, currently 438.81). The proof of the loss of income suffered by landlords in this situation required for them to be eligible for the financial aid from the IHRU is also regulated in Ordinance no. 91/2020, of 14 April.

3 - Lease for non-residential purposes (and other contractual forms of real estate exploitation):

The deferral of rentals due between April 1st and the first month following the end of the state of emergency enacted in the country, without being subject to the payment of compensation for late payment or any other contractual penalty for this reason, will also be allowed to tenants holding:

a) Establishments open to the public for retail trade and service provision activities that are closed or have their activities suspended under Decree nr. 2-A/2020, of March 20th, or by legislative or administrative decision, under the terms of Decree-Law nr. 10-A/2020, of March 13th, or under the Basic Law of Civil Protection, approved by Law nr. 27/2006, of July 3, as well as the Basic Health Law, as approved by Law no. 95/2019, of September 4, as well as other provisions aimed at the implementation of the state of emergency, including those cases in which they keep on providing electronic commerce activities, or remotely delivered or online services; and

b) Catering and similar establishments, including those that continue to operate for the exclusive purpose of preparation of products intended for consumption outside the establishment or for home delivery, under the terms of Decree no. 2 A/2020, of March 20, or any other provision that so allows.

Tenants who defer the payment of rents in respect of the period indicated must pay such rents, in full, within 12 months from the end of the first month following the end of the state of emergency, in monthly instalments of not less than one twelfth of the total amount, paid together with the rent for each month.

The failure to pay rents due by the first month following the end of the state of emergency may not be invoked as a reason for cancellation, rescission or other form of termination of contracts, nor as a reason for the obligation to vacate buildings in which they are installed.

7. Taxes, Social Contributions and Tax Litigation

7.1. Taxes

The Government presented at the extraordinary meeting of the Permanent Commission for Social Dialogue (CPCS) a set of measures aimed at minimising the impact of COVID-19 on the Portuguese economy.

In tax matters, the following measures stand out:

1. Deferral of the first special advance payment (PEC) from March 31 to June 20;

2. Extension of the deadline for submitting the Model 22 declaration from 31 May to 31 July;

3. Extending the deadline for the first payment on account (PC) from July 31 to August 31;

4. Strengthening information through electronic services that can be used by taxpayers as an alternative to be attending in person to the finance services.

Decree-Law no. 10-F/2020 of 26 March added the following measures, which will remain in force until the end of June, in order to comply with the Government's aim of improving the liquidity conditions of employers.

These measures apply to the following taxpayers: taxpayers who obtained a turnover of up to (euro) 10,000,000.00 in 2018, or whose activity falls within the sectors listed in Article 7 of Decree no. 2-A/2020 of 20 March, as currently worded, or who started their activity on or after January 1, 2019.

1. Possibility of paying tax and corporate income tax withholdings to the State in three (3) or six (6) monthly instalments, with no interest, with the first one becoming due on the date on which the withholding obligation is fulfilled and the rest of instalments on the same day of the following months;

2. Taxpayer's right to deduct VAT under the same conditions as mentioned in the preceding paragraph;

3. The payments in instalments referred to in the preceding paragraphs must be applied for by electronic means, and will not require to be backed by a guarantee.

Taxpayers not covered by this scheme may still make use of it provided that they show, through a certification issued by a certified auditor or accountant, a reduction in the turnover communicated through the e-billing system of at least 20 % in average over the three months preceding the month in which this obligation exists, compared with the same period of the previous year.

As regards the tax benefits associated to taxes that constitute the municipalities' own revenue, Law no. 6/2020, of April 10, relaxed the regulatory rules governing the terms under which municipalities may recognize such benefits. In particular, the pre-existence of regulations approved by the municipal assembly, as a requisite for the recognition of those benefits, is waived, provided that the duration of the benefits does not extend beyond the current calendar year.

7.2. Social Contributions 

The aforementioned Decree-Law no. 10-F/2020 also enacted a set of measures aimed at deferring the payment of social contributions.

The scope of these measures includes employers in the private and social sectors who, as of February 2020, have (a) less than 50 employees, (b) more than 50 and less than 249 employees, having experienced a drop of at least 20% in turnover as reported through the e-billing system in March, April and May 2020, compared to the same period of the previous year or, for those who started their activity less than 12 months ago, to the average of the elapsed period of activity, (c) 250 or more workers as long as it is a private charity or similar institution, or if the activity of these employers falls within the sectors listed in Article 7 of the Directive. (d) 250 or more workers provided that the activity of these employers falls within the sectors listed in Article 7 of Decree no. 2-A/2020, of March 20, or in the aviation and tourism sectors, provided they suffered a drop of at least 20% in the turnover reported through the e-billing in the months of March, April and May 2020, compared to the same period of the preceding year or, for those who started the activity less than 12 months ago, to the average of the period of activity that has elapsed. Self-employed workers can also benefit from these measures.

The approved measures cover three major groups: (a) deferment of payment of social security contributions; (b) suspension of benefit plans and execution procedures; (c) extraordinary extension of social benefits.

(a) deferment of payment of contributions

In essence, employers are expected to pay social contributions due from March to September 2020 in instalments, with the first third of the amount being paid in the month in which it is due, and the remainder in 3 or 6 months, starting in July, with no interest applied.

No application needs to be filed to benefit from this extraordinary deferred payment scheme: entities using it will only need to indicate in July the number of instalments that will follow. Also in July, the entities whose access to this scheme depends on the drop in turnover must present the respective proof and certification from the certified accountant.

(b) Suspension of instalment plans and execution procedures

The suspension of instalment plans, both within and outside the scope of tax execution procedures, is maintained until June 30, regardless of the eventual termination of the exceptional regime on an earlier date.

(c) Extraordinary extension of social benefits

This measure provides for the extension until 30 June of unemployment benefits and all social security system benefits that guarantee minimum subsistence levels that expire or are renewed until that date.

7.3. Tax litigation

In the tax litigation area, measures similar to those sought by the Superior Council of the Magistracy are immediately adopted, and the Superior Council of Administrative and Tax Courts has also recommended that [Offcial Statement 2/2020]:

1. Judges should perform the procedural acts from their personal residences, via SITAF, and should not schedule non-urgent proceedings until the end of April;

2. Judges of the administrative and tax courts, until 31 March 2020, shall only carry out acts and procedural steps of a face-to-face nature in cases of an urgent nature in which rights, freedoms and guarantees are at stake, cancelling all others scheduled until that date, at which time a reassessment of the situation shall be made.

In the context of tax litigation, the provisions of the aforementioned Decree-Law no. 10-A/2020 also apply, namely with regard to the justifiable reasons criteria, justification of absences and postponement of procedural and procedural steps, as well as the suspension of the time limit for the performance of a proceeding or procedural act in the event of closure of premises.

Also in this matter, the time limits for the performance of the procedural steps required to be taken in proceedings before tax courts, arbitration courts and tax enforcement agencies are suspended, pursuant to the terms of Law no. 1-A/2020 of March 10, as amended by Law no. 4-A/2020 of April 6. Such terms shall remain suspended until the exceptional regime to which reference was made ends.

The rules approved in this law concerning the suspension of limitation and forfeiture periods, which extend to all types of proceedings and procedures, as well as the rules concerning urgent procedures, also apply in the area of tax litigation.

Under the terms of this Law, the administrative and tax deadlines were already suspended in the original drafting, and the wording now in force maintains such suspension, considering that the deadlines for procedural steps by private individuals relating to tax procedures are suspended. The breadth of scenarios covered by the regulation will be maintained, including judicial challenges, appeals for reversal, hierarchical recourses, or other procedures of the same nature, as well as, of course, requests for establishment of an arbitration tribunal, along with the subsequent proceedings and procedural steps.

According to Decree-Law Nº 10-F/2020 as described above, tax execution processes linked to debts associated to Social Security contributions are suspended until 30th June, in the event that the judicial vacations scheme provided for in clause 7 of Decree-Law º-A/2020, also mentioned above, expires before that date.

As regards the services of the Tax and Customs Authority, they are reachable through the Finance Portal (www.portaldasfinancas.gov.pt) or, in case of difficulty in using those electronic services, through the Call Centre of the Tax Authority, reachable via phone number +351 217 206 707.

For face-to-face service, the taxpayer must make a prior appointment and attend the services only on the day and time scheduled.

As another measure to prevent propagation of COVID-19, the Administrative Arbitration Centre has determined the closure of its facilities in compliance with the measures decreed under the State of Emergency, ensuring their full online operation. Thus, during this period, the call centre, the Procedural Management System, the Case Law Consultation, the Electronic Mail and the Platform for requests for the establishment of arbitration courts will continue to operate at full capacity.