PORTUGAL Law and Practice Contributed by: João Gonçalo Galvão, Carolina Cardoso Alves, Miguel Paquete and Mafalda Oliveira Cordeiro, CS’Associados
In addition to contractual mechanisms, the supervi - sory team may be crucial to delay correction by pro - posing alternative schedules to set the project back on track. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance Security to guarantee a contractor’s performance is also achieved by the requirement of contractors to provide suitable collateral. The most common are irrevocable first-demand bank guarantees for a per - centage of the project cost; these guarantees should remain in force until the provisional handover, after which the respective value is adjusted downwards until the definitive handover. Bank guarantees may also be coupled with retentions throughout the execution of the agreement, these rep - resenting deductions of predetermined percentages of the value of the monthly payments until a certain value is reached. 7.6 Liens or Encumbrances in the Event of Non-Payment Contractors are entitled to a lien over the relevant property in respect of the expenses made for the pur - poses of maintaining or improving it (it is debatable under case law and authorised legal doctrine whether the right of lien is also intended to safeguard pay - ment of the works’ cost). To circumvent this potential lien, it is not uncommon for construction agreements to contemplate the possibility of the owner providing suitable collateral (bank guarantee or other) regarding amounts claimed by the contractor, therefore avoiding the property being retained. Other encumbrances over the property to the ben - efit of entities involved in the construction are not typical, without prejudice to potential charges as a consequence of enforcement proceedings whose purpose is to obtain full payment of amounts owed by the owner. 7.7 Requirements Before Use or Inhabitation Until recently, a project could only be used or inhab - ited provided that its suitability for the intended pur - pose was evidenced by a use permit.
Pursuant to Decree-Law 10/2024 of 8 January, which seeks to streamline licensing procedures, after com - pletion of the works it is necessary to submit to the municipality certain documents to conclude the con - trol procedure (the documents vary according to the specifics thereof). However, it is no longer neces - sary to wait for a decision or confirmation from the municipality to use a property, since the delivery of the required documents and the payment of applicable fees constitute, for all legal purposes, the title that enables its use for the intended purpose. The sale and purchase of corporate real estate are generally VAT exempt. However, the seller may opt to waive this exemption under specific conditions, such as when both parties are VAT-registered and the prop - erty is used for taxable activities. In such cases, VAT is applied at the standard rate of 23% and the buyer is responsible for accounting for the VAT under the reverse charge mechanism. While VAT is generally exempt on property transac - tions, the option to waive this exemption allows for VAT recovery on associated costs, which can be ben - eficial depending on the specific circumstances of the transaction. 8.2 Mitigation of Tax Liability Share deals, acquisitions of companies holding real estate through SPVs and mergers, and corporate restructuring are very common ways of optimising the exposure to RETT, stamp duty and CIT. 8. Tax 8.1 VAT and Sales Tax More recently, an increase in activity by real estate investment funds/companies and SIGIs has been observed, these being particularly suitable for large
portfolio transactions. 8.3 Municipal Taxes
Municipal taxes are levied on the occupation of busi - ness premises. The main municipal tax related to busi - ness premises is the Municipal Property Tax (IMI), an annual tax levied on the taxable value of real estate. Rates vary between 0.3% and 0.45% for urban prop -
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