The Impact of Regulation on International Investment in Portugal

Report

20 March 2023

2. Portugal’s domestic policy and regulatory setting for foreign investment

Abstract

This chapter provides an overview of the policy and regulatory setting for foreign direct investment in Portugal, benchmarking the domestic regulatory framework against those of a selected group of peer countries. It examines at-the border and behind-the border regulation applied horizontally across all sectors of the economy, with potential impacts on foreign investment decisions and Portugal’s general business environment. The chapter also assesses regulatory aspects that might affect investment in selected sectors providing strategic support to the economy: professional services, transport services, logistics services, and digital trade. In addition, it evaluates the degree of similarity of Portugal’s regulation to other OECD and EEA countries, analysing to what extent regulatory barriers are lower for intra-EEA investors due to Single Market harmonisation.

Key findings

Portugal has a relatively open regulatory environment for foreign direct investment and services trade with more competition-friendly regulation than the OECD average. Nonetheless, there is room to improve Portugal’s investment climate by narrowing the gap with peer economies that have more open regulatory settings, according to OECD metrics.
Foreign investors in Portugal, including non-EEA investors, benefit from relatively open market entry. Only certain non-EEA acquisitions of strategic assets are potentially subject to investment screening. Yet, transparency and flexibility in the implementation of the screening mechanism could be improved.
Portugal could further strengthen regulatory impact assessment and stakeholder engagement practices to ensure that the effects of new regulation on businesses are better understood and unnecessary administrative burden is minimised. Measures to further reduce the length of judicial proceedings could also improve confidence in the business environment.
In certain supporting services sectors, regulatory barriers to competition and investment are higher than in some benchmark countries. In particular, among professional services, engineering and accounting and auditing services continue to be relatively strictly regulated. Domestic regulatory barriers in transport and logistics services sectors could also be eased, and improving the efficiency of customs procedures would benefit firms in transport, logistics, courier and distribution services sectors.
Portugal has made the digital transition a strategic goal for business development. However, economy-wide restrictions to movement of people can hinder access to digital knowledge and information and communication technology professionals.
Regulatory harmonisation in the EU’s Single Market has reduced barriers for intra-EEA investors in Portugal in all sectors. However, intra-EEA investors in benchmark countries benefit, in most sectors, from more open regulatory environments.

2.1. Introduction

Foreign investment may be held back by domestic regulation affecting market entry and operation of foreign businesses. In addition to explicit restrictions to foreign direct investment (FDI), such as rules limiting equity participation of foreign investors in locally incorporated companies, a range of behind-the‑border factors shaping the general business environment may add costs and challenges for foreign companies in a host country. Where such regulatory barriers are overly strict, they may entail unnecessary economic costs, both in terms of foregone investment and associated benefits, such as additional tax revenues and potential business opportunities for domestic suppliers and business partners, as well as in terms of potential efficiency gains, which could derive from greater competition and market contestability associated with foreign investment.

The literature shows that addressing such regulatory barriers can have a positive impact on investment. Introducing liberalising reforms that even partially reduce FDI restrictions, such as investment screening or equity limits, could significantly increase a country’s stock of FDI.1 Moreover, countries with a more restrictive regulatory environment for services trade are significantly less likely to attract foreign investment in services than countries with a more liberal regulatory set-up.2 Additionally, divergence between the regulatory settings of the investor’s country of origin and the host country reduce cross-border investment.3 Striking the right balance in the regulatory framework is therefore key for an effective and enabling investment environment.

This chapter reviews several regulatory aspects that foreign investors face at the border and behind the border in Portugal, benchmarking the Portuguese regulatory framework against a group of peer economies consisting of the Czech Republic, Estonia, Lithuania, Poland, the Slovak Republic and Spain. Differences in regulation between Portugal and these peer countries are assessed mainly from the perspective of foreign investors from outside the European Economic Area (EEA), as the treatment of intra-EEA investors is subject to a degree of harmonisation across the European Union (EU)’s Single Market. A dedicated section explores to what extent regional integration has reduced barriers for intra-EEA investors. Nonetheless, many aspects of the regulatory environment are applicable to foreign investors regardless of their origin and affect also domestic firms. Additionally, although EU-level regulation limits Portugal and the benchmarked countries’ domestic policy making space in some areas, different approaches in areas not regulated at the EU level, as well as national differences in the transposition of EU directives into domestic law, result in some variation within the group of countries.

This chapter consists of four parts. First, it examines the main regulatory conditions applicable to foreign investors across all sectors of the economy and shaping the general business environment in Portugal. This horizontal analysis seeks to capture factors potentially holding back investment also in Portugal’s priority industrial sectors for investment (e.g. life sciences, aerospace, automotive, food industry, smart materials). A second part assesses regulatory factors that might have an impact on foreign investment decisions in specific services sectors of strategic importance, namely professional services, transport services and logistics services, which provide essential inputs into global supply chains and are strongly integrated in other parts of the economy. A third part analyses Portugal’s policy and regulatory environment affecting digital trade. Finally, a fourth part explores to what extent Portugal’s regulatory framework is similar to other economies, and to which extent regulatory harmonisation within the Single Market has resulted in a more open regulatory environment in Portugal for foreign investors from within the EEA, compared to investors from third countries.

2.2. General regulatory environment for foreign investment

Portugal is considered one of the most open economies to FDI according to the OECD FDI Regulatory Restrictiveness Index (FDI RRI), having only a few discriminatory statutory restrictions on foreign investment in place. On average, across 22 sectors of the economy, Portugal’s regulatory environment is the second most open to FDI among 84 countries covered in the FDI RRI (OECD, 2020[1]). The overall regulatory framework in Portugal is also more competition-friendly than the OECD average (see Section 2.2.3), and Portugal maintains fewer restrictions to services trade and foreign investment than the OECD average (Section 2.3). However, some barriers to competition and services trade remain present in Portugal, and the comparison to peer countries shows that there could be room for further improvements. The following sub-sections examine regulatory aspects that may affect investors across economic sectors and contribute to shaping Portugal’s general business environment, such as rules pertaining to company establishment and operation, recruitment of foreign talent, barriers to competition and dispute settlement.

2.2.1. Foreign investors face comparatively few barriers to enter the Portuguese market

Company incorporation has been simplified in recent years

Overall, the administrative burden that domestic and foreign-owned firms face to start their business, in terms of number of private and public bodies that need to be involved and of the costs of complying with such requirements, is lighter in Portugal than in most benchmarked countries (OECD, 2018[2]). For example, the regulatory environment in Portugal is particularly favourable compared to that of the Slovak Republic, where the administrative burden faced by new firms is almost twice as high as the OECD average.

Examples of the main steps to incorporate a business in Portugal include requesting permits such as the certificate of admissibility for the company name (certificado de admissibilidade), submitting the statement of beginning of activity (declaração de início de atividade) for tax purposes, as well as registering in the commercial registry and in the social security system.4

As part of wider efforts to alleviate administrative burden for business, Portugal has implemented simplified company incorporation procedures and electronic registration services as alternatives to traditional company incorporation process. The Empresa Online initiative, launched in 2006, allows limited liability companies to be incorporated via an online service.5 Recent legislation allows also branches of foreign companies to be registered online.6 The creation of an “e‑Residency” platform to allow foreign companies to incorporate in Portugal fully remotely, by using digital authentication, is also foreseen as part of the implementation of Portugal’s Recovery and Resilience Plan (Portugal Government, 2021[3]).7 Moreover, since the introduction of the Empresa na Hora programme in 2005, it is possible to create a limited liability company in less than 60 minutes at any of the one‑stop-shops across the country.8 Specific conditions apply to the Empresa Online and the Empresa na Hora regimes, including regarding the choice of company name and the company bylaws. These regimes increase options for investors regarding company incorporation procedures. Among the benchmark countries, Estonia has implemented tools for fast electronic incorporation of companies, including by foreign citizens.9

As part of a company incorporation process, shareholders (whether company or individual) must obtain a Portuguese tax identification number. This represents an additional administrative step for non-resident investors, who must appoint a tax representative that must be resident in the country. Foreign investors resident in another EU or EEA country are exempted from this obligation.10 Following a recent communication of the Portuguese Tax and Customs Authority, non-EU/EEA residents who do not have any tax obligations in Portugal are also exempted from the obligation to appoint a representative, under certain conditions.11

Several initiatives have simplified business licensing and permit procedures

Foreign investors can set up operations in Portugal on the same conditions as domestic-owned businesses.12 Obtaining the necessary licenses and permits for the planned economic activity, such as sector-specific operating licenses, environmental permits or construction permits, may however slow down investment projects if the related administrative procedures are complex and time‑consuming.

Portugal has introduced several reforms and developed online services aimed at streamlining licensing and permit procedures. For instance, the Licenciamento Zero (Zero Licensing) initiative provides for simplified access to a number of commercial activities, including services, food and beverage activities.13 New, consolidated legal frameworks for industrial licensing and environmental permits were approved in 2012 and 2015, respectively, and further simplification of the environmental licensing process is planned (Box 2.1). In line with the objectives of its 2020 Action Plan for Digital Transition,14 including the increased digitisation of public services, Portugal has already implemented digital business licensing applications. Companies can access information on licensing of all economic activities and initiate licensing procedures with the relevant government agencies through a digital single point of contact (Balcão do Empreendedor, Entrepreneur’s Desk).15

Nonetheless, there is room for Portugal to further develop online public services and increase their uptake. At 59%, the share of e‑government users in Portugal is slightly below the EU average (65%), and the scope of online public services for starting a business and conducting regular business operations aligns with the EU average, indicating that yet more could be done by Portugal to position itself as a European frontrunner in digital public services (EC, 2022[4]). In fact, further investment in online procedures to reduce the administrative steps, costs and time to obtain sectoral licenses are foreseen as part of Portugal’s Recovery and Resilience Plan (Portugal Government, 2021[3]).

Box 2.1. Industrial and environmental licensing have been simplified

To simplify industrial licensing in Portugal, several licensing or sectoral opinion issuing procedures related to the exercise of industrial activity were consolidated under a single legal act in 2012. A similar consolidation of various environmental permits under a single process was carried out in 2015.

Responsible Industry System for industrial licensing

Industrial licensing is regulated under the Responsible Industry System (Sistema da Indústria Responsável, SIR) framework.¹ The SIR applies to specified economic activities, such as extractive industries, manufacturing industries (including some of Portugal’s priority industrial sectors, such as aerospace, automotive and food), accommodation, catering and similar activities. The SIR identifies three categories of establishments according to the degree of potential risk inherent to their operations:

Category 1 establishments require an authorisation with prior inspection due to the high level of risk of the operations.
Category 2 establishments are subject to authorisation without prior inspection.
Category 3 establishments only require a prior communication to start the activity.

To diminish administrative hurdles in licensing procedure, the SIR includes a mechanism of institutional co‑ordination. A public entity is appointed as the sole interlocutor of the industrialist, being also responsible for monitoring and streamlining the procedure and providing technical support to the applicant. To increase predictability for applicants, the SIR has time limits for authorities to respond to the authorisation requests on which the installation or operation of the establishment depends.² Tacit approval exists in case there is no response from the relevant authority within the prescribed timeline.

Moreover, the SIR established a new framework of Responsible Business Areas (Zonas Empresariais Responsáveis, ZERs) for simplified installation of new industries in pre‑licensed areas. For instance, undergoing an environmental impact assessment is not necessary, if the environmental impact assessment of the ZER has included the relevant elements for the new installation.

Single environmental licensing

Under the Portuguese legal framework, multiple environmental licenses or authorisations may be required for a single installation, depending on the nature of activity. Under the new Single Environmental Licensing (Licenciamento Único de Ambiente) regime³, a single application is submitted via an electronic platform to initiate the different licensing procedures⁴, which are then advanced simultaneously under a framework of co‑ordination between administrative entities in charge of environmental matters. The processing of the application is subject to payment of a single fee. At the end of the process, a Single Environmental Title (Título Unico Ambiental), incorporating all relevant licensing and prior control acts issued to the applicant under the various environmental regimes and all information on the environmental requirements applicable to the activity, is issued.

Further simplification measures to the environmental licensing regime are underway. After an extensive stakeholder consultation, the Government of Portugal approved in December 2022 a legislative package simplifying environmental licenses and procedures (see Chapter 4 for further information).^5.

Notes: 1. Decree-Law No. 169/2012. 2. These time limits depend on the applicable legal regime; in the context of an environmental impact assessment, for instance, the maximum time limit is 80 days. 3. Decree-Law No. 75/2015. 4. The scope of Single Environmental Licensing extends to 12 environmental regimes, including, among others, the environmental impact assessment regime, the industrial emissions regime, the waste management regime, and the water resources use regime. 5. Ministerial Council communication, 7 December 2022; DL 169/XXIII/2022, 2 August 2022. At the time of writing, the final text had not yet been published.

Moreover, despite the above‑mentioned efforts to streamline licensing and permit procedures, investors across different sectors of the economy oftentimes still find them complex and excessively lengthy. Chapter 4 of this report discusses licensing and permits, as well as other administrative processes, from foreign companies’ perspective.

Certain investment projects can also benefit from additional institutional co‑ordination and monitoring in the licensing phase under special regulatory regimes for investment (Box 2.2). These regulatory incentives, but also initiatives like the Start-Up Visa programme (see Section 2.2.2), represent welcome support to FDI. Nonetheless, recent OECD analysis suggests that it will be important for Portugal to avoid inconsistencies and redundancies that may arise from operating too many regulatory incentives at too small a scale (OECD, 2022[5]). Portugal could thus potentially benefit from better differentiating support packages, including both financial support and technical assistance, to target specific types of FDI, e.g. large investors, start-ups or R&D.

Box 2.2. Examples of special regulatory regimes for investment

Projects benefiting from the personalised follow-up of the Permanent Commission for Investor Support (Comissão Permanente de Apoio ao Investidor; CPAI). Monitored projects are those that may be of relevant importance for the dynamism of the Portuguese economy, through job creation or maintenance and other positive impacts on the economy.1
Projects qualified as being of Potential National Interest (Potencial Interesse Nacional; PIN) or granted the Investment for the Interior (Projeto de Investimento para o Interior; PII) status. PIN projects are large‑scale projects, which represent an investment of at least EUR 25 million and create at least 50 jobs.2 PII status, in turn, can be granted to projects in the interior regions of Portugal, representing at least EUR 10 million in investment and creating at least 25 jobs.3 PIN and PII projects are entitled to simplified licensing procedures, through priority assessments, simultaneous processing of different authorisations, a single public consultation period, and tacit approval, among other measures.

As of July 2022, a total of 68 finished projects, representing EUR 9 998 million of investment and 20 800 jobs, had benefited from CPAI’s monitoring, PIN or PII status.4 At the same time, 39 more projects (EUR 9 131 million in investment and 17 197 jobs) benefitting from support under these regimes were ongoing.

1. Decree-Law No. 154/2013. In addition, other investment projects not fulfilling the eligibility criteria but that have already been waiting for a decision from the public administration for more than 12 months can benefit from monitoring.

2. Exceptionally, a project which does not meet the monetary value or job creation threshold may be recognised as a PIN project if it meets other requirements related to R&D activity, innovation, environmental interest, exports or production of tradeable goods and services. Decree-Law No. 154/2013.

3. Decree-Law No. 111/2018.

4. Figures were received in the context of consultations with Portuguese authorities in July 2022. The total number of 68 finished projects is comprised of three projects monitored by CPAI and 65 projects with PIN status.

Relatively high minimum capital requirement applies to public limited companies

Many countries have eliminated legal requirements for the minimum capital that must be deposited by shareholders before a new firm can commence business, as minimum capital requirements could act as barriers to entrepreneurship and have been shown to be inefficient in their intended purpose of protecting creditors.16 Since 2011, the capital of Portuguese private limited liability companies (sociedades por quotas) can be freely determined in the company bylaws.17 In this regard, the regulatory environment is less restrictive in Portugal than in many benchmark countries, where certain categories of private companies are subject to minimum capital requirements.

However, like all the peer countries, Portugal maintains a minimum capital requirement for public limited liability companies in line with an EU directive requiring all EU countries to impose on such firms a minimum capital of not less than EUR 25 000.18 Under Portuguese domestic legislation, public limited liability companies (sociedades anónimas) must have at least EUR 50 000 in share capital. This represents a stricter requirement than those found in some of the benchmarked countries. For instance, the minimum capital requirement is EUR 25 000 in Estonia and the SlovakRepublic.

Non-EEA acquisitions of strategic assets are subject to investment screening

As countries are increasingly concerned with balancing openness to FDI and managing risks that foreign investment may pose to their essential security interests, mechanisms that allow them to review specific transactions have become more common (OECD, 2020[6]). However, depending on how they are designed and implemented, investment screening mechanisms may have unintended consequences for prospective investment projects that present no potential security threat, in the form of increased transaction costs or legal uncertainty associated with the review process.

Portugal has a foreign investment screening mechanism since 2014 under Decree‑Law No. 138/2014.19 The legislation empowers the government to undertake, pursuant to a reasoned decision, an ex post review of any legal transaction where a non-EEA investor acquires any form of control over a strategic asset, to assess the risk of the operation for defence and national security or to the supply of essential services. Strategic assets are defined as the main infrastructures and assets assigned to defence and national security or to the supply of essential services in the areas of energy, transports and communications. In such cases, the government may block the transaction by means of a duly justified decision if it is determined that the transaction may jeopardise the interests of defence, national security or security of supply of services that the Decree‑Law aims to safeguard. For the government to oppose the acquisition of control of a strategic asset, the threat posed by the transaction must be “real and sufficiently serious” according to the evaluation criteria specified in the Decree‑Law.20

The review procedure under the Decree‑Law is ad hoc in nature, i.e. there is no permanent entity or body in charge of foreign investment screening. The review procedure is led by the respective ministry associated with the strategic asset. As of September 2022, no transactions had yet been opposed under the Decree‑Law.21

Scope of foreign investment screening in Portugal is narrower compared to peer countries

Many countries have adopted new review mechanisms or reformed their existing rules for investment screening in recent years.22 The benchmark economies have also expanded their existing investment screening regimes or introduced new mechanisms in the last few years, or are planning to adopt legislation to enable screening.23 In Portugal, there have been no amendments to the legal framework for FDI screening since its adoption in 2014, but an inter-ministerial working group has been established in 2020 to update the current legislation. Amendments could cover some technical aspects related to Regulation (EU) 2019/452, such as establishing a national contact point and aligning procedural deadlines between the domestic and EU mechanisms (EC, 2021[7]). Adopting rules that enable the compilation and sharing of information on the implementation of the domestic screening mechanism would also be important for Portugal’s effective participation in the EU-level co‑operation mechanism created by the EU Regulation (OECD, 2022[8]).

The Portuguese screening mechanism has a narrower scope than those currently in force in several other European countries, including some countries in the peer group.24 Due to the definition of strategic assets that the Decree‑Law safeguards, its sectoral scope of application is relatively limited. There is no systematic authorisation requirement, as acquisitions are only taken under scrutiny if the relevant ministry initiates a review procedure ex officio, within 30 days from the conclusion of the transaction or from the date when the transaction became public knowledge or following a voluntary notification by the foreign investor.25 Moreover, some peer countries review also certain domestic investment projects, whereas the Portuguese mechanism applies only to non-EEA acquisitions.26

Flexibility in the implementation of screening process could be improved

Predictability of both the screening process and its outcomes, although inherently limited to some extent, matters for foreign investors. Regulated timelines for the screening process, the existence of tacit approvals and the possibility to request advance confirmation27 are features of the Portuguese investment review mechanism that increase legal certainty for non-EEA investors looking to acquire assets in the Portuguese energy, transports and communications sectors. However, transparency and accountability in the implementation of the mechanism could be further improved by reporting (aggregated) information on screened transactions and outcomes (OECD, 2009[9]). Such information is currently not available to the public.

Moreover, under current rules, the only possible outcomes of a review process under the Decree‑Law are either non-opposition or opposition. The latter entails that all acts and legal transactions referring to the operation in question (including those concerning the economic operation or the exercise of rights over the assets) are considered null and void. In some cases, negotiating or imposing obligations or conditions for the transaction may be a sufficient measure to address security concerns without blocking investment completely. Such mitigation measures, if applied with proportionality and consistently across projects, can help to increase predictability and ease investors’ potential concerns with screening mechanisms.

The use of mitigation measures is not currently foreseen in the Portuguese legal framework for investment screening and may be a point to consider in the future. In the benchmark group, the review mechanisms in the Czech Republic and the Slovak Republic both enable the respective government to grant a conditional authorisation for investment.28 Under the Czech mechanism, conditions may include, for instance, an obligation for the investor to initiate new consultations with the relevant ministry in the event of further increase in shareholding in the target entity or a change or expansion of the investor or target’s business.

2.2.2. Entry of third-country nationals has been eased and special regimes put in place to attract foreign talent and investors

Maintaining firms’ access to a pool of skilled labour is important to ensure Portugal’s continued attractiveness to foreign investment. In Portugal, skill shortages are observed in certain fields, such as in information and communication technology (ICT) and science, technology, engineering and mathematics (OECD, 2021[10]). Fifty-one percent of jobs facing skill shortage are in high-skilled occupations and the remaining 49% in medium-skilled occupations (OECD, 2018[11]). In addition to boosting the domestic supply of qualified labour, attracting foreign skilled labour can contribute to mitigating skill shortages.

Measures that facilitate the entry of foreign workers improve firms’ access to a pool of qualified labour and their ability to expand operations in Portugal. Foreign investors may want to source managers or specialists from headquarters abroad in the form of intra-corporate transferees or simply recruit them from overseas. Regulatory bottlenecks in the access to visas and residence permits can also discourage entrepreneurs from setting up their business in Portugal.

International talent from within the EU’s Single Market enjoy freedom of movement in the area and their access to the Portuguese labour market is not restricted. In 2019, nationals of EU and EEA countries and Switzerland accounted for approximately 18% of Portugal’s foreign workforce.29 In comparison, investors, entrepreneurs and workers from third countries are generally required to obtain a visa to enter Portugal and, depending on the length of the stay, may also need to apply for a residence permit once in the country. The following sub-sections therefore focus on the regulatory framework for the entry of foreign talent from outside the Single Market. Foreign companies’ perceptions of the regulatory framework are discussed in Chapter 4.

General framework for the entry of non-EU/EEA foreign talent

The Portuguese legal framework for the entry and stay of third-country (non-EU/EEA) workers, entrepreneurs and investors is based on the Foreigners Act of 2007 and its subsequent revisions.30 Different categories of visas and residence permits exist for different purposes of entry and stay.31 Foreign third-country nationals intending to stay in Portugal on a long-term basis need to first apply for a residence visa (visto de residência) in a Portuguese representation abroad. The Foreigners Act provides that the deadline for decisions on residence visa applications is generally 60 days from the submission of an application; 30 days in the case of a visa for highly qualified activity. The residence visa enables its holder to enter Portugal and request a residence permit (autorização de residência) once in the national territory. A residence visa for the purpose of employment, for instance, entitles the foreign national to begin work upon arrival in Portugal and while the residence permit application is pending. A recent 2022 amendment to the Foreigners Act created a new job-seeker visa type, which enables third-country nationals to enter Portugal for a duration of 120 days to look for work.32

Entry of certain foreign workers has been subject to quotas until recently

Until recently, the entry of third-country nationals for employment in Portugal was subject to labour market testing coupled with a quota system. Generally, a third-country national would be granted a residence visa for taking up employment only if there were job opportunities in the Portuguese labour market which had not been taken up by Portuguese or EU/EEA nationals.33 An overall quota indicating the (presumed) availability of such employment opportunities for third-country nationals was fixed annually based on the estimated needs of the Portuguese labour market. However, the application of the quota system was suspended from 2020 to 2022,34 and a 2022 amendment to the Foreigners Act fully abolished the quota system as well as the labour market testing system to facilitate the recruitment of foreign workers from third countries.35 The amendments also facilitate the entry of nationals of Portuguese‑speaking countries by easing their entry requirements.36

Validity of initial residence permits, including for highly skilled workers, has been extended recently

Holders of a residence visa may apply for a residence permit once they have completed certain necessary steps depending on the purpose of stay, such as concluding an employment contract and completing social security registration in the case of employees. Until 2020, a first residence permit was valid for one year and renewable for two years at a time. The same duration applied to residence permits for highly qualified workers seeking residence in Portugal under any of the special regimes available for them, namely the residence permit for highly qualified activity, the EU Blue Card or the Tech Visa (see the following sub-section).

From 2020 to 2022, temporary residence permit durations were extended on a temporary basis to two years for the initial permit and three years for renewed permits.37 Following a 2022 amendment to the Foreigners Act, the extended residence permit durations have become a permanent rule.38

Extending the validity of the residence permit to two years contributes to reducing administrative burden and uncertainty associated with renewal processes. It also helps reduce the gap between Portugal and the benchmark countries, most of which already offered a duration of at least two years for highly qualified workers’ initial residence permits. In Lithuania, the maximum duration is three years.39 In Estonia, an EU Blue Card for a highly qualified employee can be granted for a maximum duration of two years and three months, renewable for a period of up to four years and three months, whereas residence permits for “top specialists” can be valid for up to five years, renewable for up to ten years.40 Intra-corporate transferees in Portugal benefit from a flexible regime due to rules harmonised at the EU level, whereby a temporary residence permit may be granted for the duration of the transfer, up to a limit of three years in the case of managers and specialists (one year for trainees).41

Special entry and tax regimes are in place to attract foreign talent and investors

Portugal has implemented various initiatives to strengthen the acquisition of international talent. Several special visa and residence permit regimes within the legal framework of the Foreigners Act have been introduced within the last decade to facilitate the entry of certain categories of foreign workers and attract foreign investors and innovation to the country. Additionally, Portugal offers special tax treatment for incoming talent in specific activities with high value‑added or bringing intellectual or industrial property or know-how into the country. Together these initiatives contribute to attracting foreign labour force to the Portuguese economy, including to its priority industrial sectors, such as aerospace and automotive industries, life sciences, smart materials and the food industry. Measures are in place to retain existing foreign talent in the country, such as international researchers or students after graduation, who can also contribute to increasing Portugal’s pool of skilled workers.

Employee certification system to expedite recruitment of high-skilled workers

Launched in January 2019, Portugal’s Tech Visa programme seeks to facilitate the recruitment of highly qualified and specialised staff from outside the EU/EEA by fast-tracking their visa and residence permit processes.42 Originally, the scope of companies eligible for certification was those in the area of technology and innovation, but this has been extended to other firms producing goods and services for international markets.43 To benefit from the scheme, a firm must have completed an employer pre‑certification process with the Portuguese Agency for Competitiveness and Innovation (IAPMEI), and Tech Visa employees may not constitute more than 50% of the firm’s workforce (80% in firms whose activity is mainly in inland territories). In early 2023, more than 400 companies had obtained certification.44

Start-up Visa to support Portugal’s innovation ecosystem

Many OECD countries, including Estonia, Lithuania, Poland and Spain in the benchmark group, have introduced special entry programmes to attract start-ups and high potential entrepreneurs (OECD, 2022[12]). Portugal has also launched a technology and knowledge focused Start-up Visa programme in 2018 to attract foreign investment and highly qualified professionals and boost the country’s innovation ecosystem.45 Under this special regime, third-country nationals may apply for an entrepreneur’s residence visa and permit based on launching a new innovative project in Portugal or relocating an already existing business to the country. Applicants must demonstrate that the project or business has potential to create employment and reach an annual turnover and/or asset value of more than EUR 325 000 within a five‑year period, among other criteria. All projects must be hosted by a certified Portuguese business incubator, which will provide an individualised incubation plan and support for the project. The residence permit granted under the special regime can be periodically renewed until the holder qualifies for another status.

Special residence permit for foreign investors

Foreign investors who have entered Portugal with a short-stay visa may apply for the right to live and work in Portugal under a special residence permit regime for investors.46 Investment projects that may entitle the foreign investor to reside in Portugal include, for instance, capital transfers of at least EUR 1.5 million, the creation of at least ten jobs and certain real estate acquisitions. The investment must be made for a period of at least five years. In addition, higher administrative fees are charged for the issue of the investor’s residence permit than for other residence permit types.47

From its introduction in 2012 until December 2021, most of the investment brought to Portugal under this residence permit scheme (over EUR 5.5 billion of the total EUR 6 billion of investment) related to real estate investment.48 Following a recent reform, in effect from 1 January 2022, the eligibility conditions are now more restrictive than under the original framework of 2012.49 Among the amendments, residential real estate acquisitions entitling the acquirer to an investor’s residence permit were limited to properties located in the Azores and Madeira and specified inland territories, thereby excluding real estate in the coastal mainland cities of Lisbon and Porto.

Special tax regime for international talent in priority sectors

Portugal has a special non-habitual resident tax regime to attract international talent to the country in activities providing high value‑added or intellectual or industrial property or know-how. Under the Personal Income Tax Code, a person who becomes a Portuguese tax resident after not having been a resident taxpayer in the country in the prior five years is considered a non-habitual resident who can benefit from the special tax regime for a duration of ten years.50 There is no nationality condition attached to the special tax treatment. Non-habitual residents enjoy the right to have their employment and business or professional income taxed at a flat rate of 20%, instead of the ordinary progressive personal income taxation, when said income derives from specified high value‑added activities of a scientific, technical or artistic nature in Portugal.

New programme to support the return of Portuguese nationals

In 2019, Portugal introduced a new programme to attract Portuguese emigrants and support their return to the country as part of efforts to fulfil labour market needs and respond to demographic challenges.51 Emigrants who left Portugal on or prior to 31 December 2015 can benefit from financial support and contribution to relocation expenses if they return to take up employment in mainland Portugal by the end of 2023.52 An additional fiscal incentive applies to emigrants who returned to Portugal in 2019‑23 after living abroad for at least three years.53 Moreover, new rules for the recognition of foreign qualifications simplify the return of emigrants who have obtained an education abroad, but they also facilitate the entry of other foreign talent into Portugal.

International students and researchers may stay one more year to look for work or set up a company

The Foreigners Act incorporates special rules facilitating the retention of international researchers and students who have already benefitted from a residence permit or temporary visa to complete a research project or higher education diploma in Portugal. Both categories are eligible to apply for a one‑year residence permit to look for work or start a business in Portugal after completing the diploma or research project in Portugal.54 The one‑year job-search extension applied in Portugal, Lithuania and Spain is longer than those observed in other countries of the benchmark group, but less favourable than conditions adopted in some other EU countries.55 Retention remains low relative to other OECD countries, and former students accounted for only 2.5% of work permits issued in 2019, the lowest share among OECD countries for which this data was available (OECD, 2022[13]).

2.2.3. Pro-competitive regulation and regulatory policy practices could be further improved

Pro-competitive regulation is necessary for well-functioning markets and contributes to a country’s business environment for both domestic and foreign investors. Overall, according to the OECD Product Market Regulation indicators, regulatory barriers to competition are slightly lower in Portugal than in the average OECD country, and the administrative burden that new businesses face is particularly light (see Section 2.2.1). Nonetheless, most benchmark countries have even more competition-friendly environments in several regulatory areas (Figure 2.1). The following sub-sections discuss certain policy areas in which the regulatory environment can cause distortions, including aspects where Portugal’s product market regulation and regulatory policy practices could be improved.

Figure 2.1. Portugal could benefit from more pro-competitive regulation in certain areas

Public ownership of major firms is less prominent than in peer countries

State involvement in the economy through public ownership is relatively limited in Portugal compared to peer countries. Moreover, state‑owned companies are subject to the same rules as private companies under Portuguese competition law,56 and the coverage of sectors of the economy where the government controls at least one firm is narrower than in the benchmark countries, except for Spain (OECD, 2018[2]). At the end of 2020, 143 state‑owned companies were active in Portugal in health, transport and storage, water management and financial sectors, among others (Conselho das Finanças Públicas, 2022[14]). In the case of Spain, limited public presence in network sectors (energy, transport and communications) contributes to the narrower scope of state‑owned enterprises in the economy as compared to Portugal.57

A number of enterprises previously under state ownership were privatised as part of Portugal’s privatisation programme, which was launched in 2011 following the financial crisis.58 However, 2020 marked some increases in state ownership following the provisional nationalisation of a majority stake in energy and engineering company Efacec, with a view to re‑privatise it in the shortest delay possible.59 The re‑privatisation process was concluded in February 2022.60 In 2020, the Portuguese Government also increased its stake in airline TAP to help the company through the economic repercussions of the COVID‑19 pandemic.61

Public procurement rules are relatively competition-friendly

Government procurement can represent an important source of revenues for both domestic and foreign-owned firms, particularly those engaged in sectors more exposed to government purchases, such as IT services and construction services. Consequently, shortcomings in public procurement can constitute behind-the‑border barriers to trade and investment and be, at times, detrimental to welfare if a level playing field among potential suppliers is not ensured.

Portugal’s Public Contracts Code and other domestic legislation for government purchasing follow the EU framework.62 Overall, Portugal has a more competition-friendly legal framework for public procurement than other countries in the benchmark group, except for Lithuania and Estonia (OECD, 2018[2]). Portuguese procurement legislation is aligned with OECD best practices; for instance, contracting authorities must make tender documents available online, free of charge, and allow online submission of bids in all tenders. Moreover, tenderers from states parties to the World Trade Organisation (WTO)’s Government Procurement Agreement (GPA) benefit from the same procurement conditions as domestic and EU suppliers in accordance with the conditions laid down in preferential agreements.63

Simplification of public procurement of information and communication goods and services is foreseen as part of Portugal’s 2020 Action Plan for Digital Transition, with a view to accelerate digital transition in the public sector and stimulate the market for small and medium-sized firms and start-ups.64

Regulatory impact assessment and stakeholder engagement could be strengthened

Regulatory policy plays a role in shaping a country’s general business environment. Further involving businesses in the regulation-making process and systematically assessing the effects of both proposed and existing rules on companies help to ensure that business regulation meets its objectives, and with the minimum necessary regulatory burden for companies.

In 2016, Portugal launched a simplification and modernisation programme entitled Simplex+ as the continuation of Simplex (2006), with the aim to continue simplifying legislation and administrative processes, among other objectives. Reports evaluating the impact of Simplex+ indicate that Portugal has already taken successful simplification measures, which have reduced administrative burden and costs for businesses (NOVA IMS, 2017[15]; Ernst & Young, 2019[16]). Nevertheless, investors still find certain areas of regulation and administrative processes, such as tax regulation and compliance, burdensome (see Chapter 4 for further information on the perspective of foreign investors in this respect).

Portugal has also implemented several good regulatory practices aligned with the OECD (2012[17]) Recommendation on Regulatory Policy and Governance, but it remains below the average OECD country and tools of good regulatory practice could be further enriched in certain areas (OECD, 2021[18]).

According to the OECD (2021[18]) Indicators of Regulatory Policy and Governance, there is a formal requirement for the executive to undertake impact assessments for new regulation in Portugal, and reforms in recent years have expanded the scope of regulatory impact assessment (RIA).65 Among these developments, a competition impact assessment for the evaluation of proposed regulation’s impact on barriers to market entry and expansion is now a mandatory part of the executive branch’s proposals for new regulation.66 The competition impact assessment was developed following a joint project of the OECD and the Portuguese Competition Authority (OECD, 2018[70]; 2018[71]) and is based on the OECD Competition Assessment Toolkit.67

However, RIA of proposals for primary laws initiated by the parliament is not mandatory (OECD, 2021[19]). Impact assessment is also not used in consultation with stakeholders, and unlike in most benchmarked countries, RIA documents are not made publicly available online in Portugal.68

A public consultation procedure on draft regulation proposed by the executive is open to all interested persons, including businesses, through the online consultation portal ConsultaLEX.69 In contrast, it is not mandatory to hold consultations with the general public regarding primary laws initiated by the parliament (OECD, 2021[19]). Systematically engaging with companies, and in earlier stages of drafting process, could improve the identification of alternative policy options and help ensure that business regulation works in practice. Moreover, Portugal could make more extensive use of ex post reviews to ensure that existing rules remain up to date and continue to deliver their policy objectives. Currently, ex post evaluations are not mandatory in Portugal (OECD, 2021[19]).

There is no requirement in Portugal to conduct stakeholder consultations at the negotiation stage of EU proposals, nor when transposing EU directives, and RIA is only required at the transposition stage (OECD, 2022[20]).70 Strengthening RIA and stakeholder consultation not only in domestic law-making but also with regard to the development and transposition of EU legislation can help Portugal reap the potential benefits of EU legislation while reducing unnecessary regulatory burdens.

Additionally, there is room to improve regulatory transparency and predictability for both domestic and foreign businesses by ensuring a reasonable time between the publication and entry into force of new regulation (so-called vacatio legis). Currently, laws in Portugal enter into force five days after publication, unless otherwise specified. This period is shorter than international best practice, which often entails a period of at least 14 days after publication.71 Most benchmarked countries have longer vacatio legis between the publication and entry into force of new legislation. In Spain, for instance, the minimum delay between publication and entry into force of laws is 20 days.72 However, Portuguese legislation frequently establishes a transitional period after the publication and entry into force of new legislation to allow its addressees to adapt to new obligations.73

2.2.4. The efficiency of Portuguese courts has improved, but some challenges remain

Well-functioning justice systems are essential for business activity and contribute to a country’s good investment climate. Alongside quality of justice and judicial independence, efficient court proceedings are part of an effective justice system. Although time efficiency is but one aspect of a well-performing judicial system, fast court proceedings help ensure effective contract enforcement and dispute resolution, while contributing to legal certainty for businesses. Moreover, effective appeal procedures against decisions made by regulatory authorities foster competition.

There have been improvements in the efficiency of Portuguese courts in recent years, but challenges remain in some areas. The estimated time to resolve litigious civil and commercial cases at first instance courts decreased from 369 days in 2012 to 200 days in 2019, but increased again to 280 days in 2020 (EC, 2022[21]). As such, the duration of proceedings is longer in Portugal than in most peer countries, with Lithuania being the best performer in the group at 117 days (Figure 2.2).74 Portuguese courts fare comparatively better in the area of EU trademark infringement procedures, in which the average length of cases has remained stable in the recent years and was shorter in 2020 than in the benchmarked countries, except in Poland (EC, 2022[21]).

Figure 2.2. Estimated time needed to resolve civil and commercial cases increased in 2020

The clearance rate75 decreased in civil and commercial cases from 109% in 2018 to 98% in 2020, but improved in administrative cases from 111% to 126% over the same period, indicating that civil and commercial courts were no longer able to resolve as many cases as the number of incoming cases, while administrative courts were increasingly able to cope with the caseload (EC, 2022[21]). Recent OECD analysis finds that enforcement cases (including contract enforcement and insolvency proceedings) still account for much of the backlog in courts, despite a declining number of cases. Although reforms in this area have already been implemented, it is recommended that Portugal continues improving the resolution of enforcement cases, which are particularly important for businesses (OECD, 2020[23]).

Moreover, administrative courts, particularly in first and second instances, continue to have long proceedings compared to benchmarked countries, as well as most other EU countries (EC, 2022[21]). Despite a decrease from 989 days in 2015 to 847 days in 2020, the estimated time to resolve a case in a first instance administrative court in Portugal remains more than seven times as long as in the group’s best performer Lithuania (112 days) (CEPEJ, 2022[22]).76 Lengthy proceedings in administrative courts can slow down investment if appeals against decisions regarding the necessary permits and licenses for new projects, such as environmental permits, take a long time to handle.

Reforms to increase the efficiency of the judicial system are planned as part of Portugal’s Recovery and Resilience Plan (Portugal Government, 2021[3]). They include speeding up insolvency processes, increasing digitalisation in courts and reforming administrative and tax courts. Additionally, strengthening human resources in support functions would help Portugal address backlogs and improve court efficiency (OECD, 2020[23]).

The use of out-of-court procedures can also help ease the workload of courts, while offering advantages to the parties in commercial disputes. Overall, Portugal has undertaken relatively extensive efforts compared to other EU countries in the promotion of and incentives for using alternative dispute resolution (ADR) methods (EC, 2022[21]). Several arbitration centres offer ADR solutions, some of these centres specialising in areas such as intellectual property matters or even administrative and tax arbitration.77 Mediation for civil and commercial disputes is also available.78

Yet, there is room for further efforts to encourage the use of out-of-court procedures and monitor their efficiency. For instance, in insolvency, increasing the take‑up of out-of-court firm restructuring and introducing financially attractive out-of-court procedures for firm liquidation could help alleviate the pressure on courts and speed up procedures (OECD, 2021[10]).79

2.3. Sector-specific regulation

This section complements the assessment of Portugal’s general regulatory and business environment by identifying regulatory aspects that might influence foreign investment decisions in some service sectors forming the backbone of well-functioning value chains and providing strategic support to Portugal’s priority sectors for investment. These services sectors also greatly contribute to supporting the rest of the Portuguese economy, including companies engaged in agriculture or manufacturing. The OECD Services Trade Restrictiveness Index (STRI) is used to pinpoint sector-specific barriers to investment and trade and compare sectoral regulation with the peer group (Box 2.3). This tool provides a benchmark on the openness of the regulatory framework in a country regarding foreign services providers and is not meant to prejudge the legitimacy of restrictions put in place to attain specific public policy objectives.

Box 2.3. The OECD Services Trade Restrictiveness Index

The OECD STRI provides information on regulation affecting trade and investment in 22 services sectors across 50 countries, including OECD member countries, 24 EU/EEA countries and several emerging-market economies.

The index covers market access and national treatment provisions on all four Modes of Supply¹, as well as domestic regulation applicable to both resident companies (whether national or foreign) and to non-resident companies engaging with a given country. The indices are composed of several measures organised under five policy areas:

Restrictions to foreign entry: foreign equity limits, nationality or residency requirements for the board of directors and managers, foreign investment screening, restrictions to cross-border mergers and acquisitions and other sector-specific measures
Restrictions on the movement of people: quotas, economic needs tests, limitations to the duration of stay of foreign providers and the recognition of foreign qualifications in regulated professions
Other discriminatory measures: discrimination of foreign providers with respect to taxes, subsidies and public procurement participation. Divergence between national and international standards is also covered
Barriers to competition: information on anti-trust policy, government ownership of major firms and whether these are exempt from competition law and price regulation. Sector-specific pro-competitive regulation is also considered for network industries
Regulatory transparency: consultation and publication of legislation prior to entry into force, administrative procedures to obtain a business visa.

The OECD STRI records laws and regulation in force in each country. It is compiled by qualified legal professionals according to a common and transparent methodology² and verified by each country’s regulators and relevant authorities. The OECD STRI does not consider preferential trade agreements.

Notes: 1. The General Agreement on Trade in Services defines four Modes of Supply for services: 1) cross-border trade, where a service is provided from one territory to another; 2) consumption abroad, where a service is provided in the territory of the supplier to a consumer who has moved abroad to consume the service; 3) commercial presence abroad, where a service is supplied by a provider from one territory established in another one; 4) movement of natural persons, where a provider from one territory provides a service in another territory. 2. See Geloso Grosso et al. (2015[24]), Services Trade Restrictiveness Index (STRI): Scoring and Weighting Methodology, https://doi.org/10.1787/5js7n8wbtk9r-en.

The analysis focuses on policies that Portugal and the peer countries apply toward investors from outside the EU and EEA, as the restrictive measures captured by the STRI are based on Most Favoured Nation regulation. Therefore, they do not prejudice investment and trade between Portugal and the benchmarked countries, nor do they consider intra-EEA preferences. The extent to which regulatory harmonisation within the Single Market has resulted in lower barriers to investment and trade for intra-EEA investors is discussed in Section 2.5.

Portugal has a relatively open market compared to the peer group in several services sectors (Figure 2.3). However, foreign investors as well as domestic firms could benefit from further reduction of regulatory barriers in selected key services sectors, as discussed further below.

Figure 2.3. Comparatively high regulatory barriers remain in certain key services sectors

2.3.1. Professional services

Professional services sectors provide essential inputs, namely knowledge and skills, to support other businesses. In the area of professional services, the OECD STRIs capture laws and regulation in legal, accounting and auditing, architecture and engineering services. These services are generally subject to licensing conditions, thus typical regulatory barriers include, among others, nationality or residency requirements to obtain a license to practice the profession, equity limits based on licensing and license requirements for executive bodies and management.

Specific regulation and licensing requirements are common in professional services across the EU. However, the regulatory regime for accounting and auditing services and engineering services is more restrictive in Portugal than the EU average and more restrictive than in most peer countries (Figure 2.4). The OECD has previously conducted a comprehensive assessment of the impact of regulatory barriers to competition in 13 self-regulated professions in Portugal, providing recommendations to mitigate or eliminate these barriers (OECD, 2018[26]). According to the 2021 OECD Economic Survey of Portugal, some steps have been taken towards adopting these recommendations (OECD, 2021[10]). Nonetheless, in accounting and auditing, legal, architecture and engineering services, several regulatory barriers described in the 2018 review and captured in the OECD STRI remained in force at the time of writing of this report, as described below.

However, the Portuguese Parliament adopted on 22 December 2022 amendments that will require professional associations which currently limit the ownership and management of professional firms by persons other than members of the profession to lift such requirements, among other changes.80 As of the moment of finalising this report, the amending Act had not yet been promulgated and hence not entered into force, and further amendments to the statutes of the relevant professional associations will be required to implement the changes. The Government of Portugal will have 120 days from the entry into force of the amending Act to present bills to amend the statutes and other relevant legislation. Nevertheless, the reform of the regulated professions is an important step towards addressing barriers in Portugal’s professional services sectors and implementing its Recovery and Resilience Plan (Portugal Government, 2021[3]).

Legal services

Contributing to the relative restrictiveness of Portugal’s regulatory set-up in the legal services sector are rules reserving equity participation in law firms and legal practice, understood as including the exercise of judicial mandate (exercício do mandato forense) and legal consultation (consulta jurídica), for lawyers (advogados) and solicitors (solicitadores) registered in the respective professional associations in Portugal. Although solicitors may also offer legal consultation and draft contracts, court representation is, in principle, reserved for lawyers who are members of the Portuguese Bar Association.81 Only lawyers and law firms registered with the Bar can hold shares in law firms, and multidisciplinary practice in the form of commercial association between lawyers and other professionals is prohibited.82 Additionally, directors and managers of law firms must be locally qualified lawyers.

Coupled with restrictive access to the profession of a lawyer, the above‑mentioned restrictions effectively limit market access for foreign investors as regards the reserved activity of court representation, as well as their ability to appoint leadership of their choice. In the case of foreign lawyers from outside the EU, registration as a member of the Portuguese Bar Association is subject to reciprocal treatment of Portuguese lawyers in the home country of the foreign legal practitioner.83 In comparison, the rules regulating access to the profession and/or ownership of law firms are more liberal in peer countries such as Spain, the Czech Republic and the Slovak Republic.84

Moreover, restrictions on advertising represent a barrier to competition in the Portuguese legal services sector. Neither individual lawyers nor law firms are entitled to engage in comparative advertising or mention the quality of the office in advertising.85 Limitations on advertising might be particularly harmful for new entrants, including foreign law firms, and consequently to competition, which can ultimately be detrimental to a broader access to quality legal services by individuals and firms.

Accounting and auditing

Equity restrictions coupled with restricted access to the accounting profession contribute to the relative restrictiveness of Portugal’s regulatory framework for accounting services. In Portugal, at least 51% of the capital of accounting firms must belong to locally certified accountants, and 51% of the board of directors must be certified accountants.86 Non-EU nationals may register as a certified accountant only if their home country law offers reciprocal rights to Portuguese nationals. By contrast, accounting is not a regulated profession in any of the peer countries, nor do they impose any limitations on ownership in accounting firms.

In auditing, the minimum conditions for the approval of statutory auditors and audit firms are harmonised at EU level by a directive87 and are therefore similar across the peer group. In compliance with the Directive, Portuguese domestic legislation provides that most of the capital and voting rights in audit firms must belong to Portuguese or EU-licensed auditors or other audit firms, and a majority of the board of directors of an audit firm must be composed of auditors or audit firms from EU countries.88

To become a licensed auditor, a professional must fulfil the conditions required by the Directive with regard to e.g. educational qualifications and practical training.89 In addition, third-country auditors must pass a local exam and have a domicile, permanent professional establishment or a representative in Portugal to obtain a local license.90 Until a recent liberalising reform, in effect from 30 January 2022, an additional barrier to access the profession applied, as third-country nationals were required to reside in Portugal for at least three years before a local license could be granted.91

Architecture and engineering

Portugal’s STRI scores in the architecture and engineering services sectors are driven by restrictions to the movement of professionals. In the field of architecture, foreign professionals from outside the EEA have to complete a 12‑month professional traineeship to become members of the professional association and hence obtain the right to practice the profession in Portugal.92 In engineering services, non-EEA nationals can be registered with the Portuguese professional bodies and practice the profession of engineer or technical engineer only on the basis of reciprocity.93

In contrast to the regulatory framework for legal, accounting and auditing services, ownership in architecture and engineering firms is not restricted. Therefore, investors from outside the profession, including foreign investors, are free to hold shares in architecture and engineering companies. In fact, there are fewer restrictions on foreign entry in the Portuguese architecture and engineering sectors than in peer countries. Nonetheless, the above‑mentioned limitations to the movement of professionals may impact both domestic and foreign-owned companies’ ability to source talent from abroad.

2.3.2. Transport services

In the transport sector, the OECD STRI measures the trade restrictiveness of regulation in air transport, maritime freight transport, rail freight transport and road freight transport services. Overall, Portugal’s regulatory framework for transport services is liberal compared to some peer countries, and the gap between Portugal and the best performers in the group is small (Figure 2.5). Many restrictive policy measures are also similar across the benchmark group due to EU-level harmonisation of sectoral regulation. To regulate the sector and promote competition in the Portuguese transport sector, the Mobility and Transport Authority (Autoridade da Mobilidade e dos Transportes), an independent regulatory authority, was created in 2014.94 Nonetheless, some barriers to services trade and investment remain in Portugal’s domestic legislation, which affect competition and foreign establishment in the sector.

Air transport

Regulation of air transport services is largely harmonised at EU level, leaving limited domestic policy making space for Portugal. Due to Single Market harmonisation, restrictive policy measures in this sector are also very similar across the benchmark group, consisting mainly of barriers to market entry and competition. For instance, under EU aviation regulation, foreign investment in EU-incorporated airlines is capped at 49% of share capital.95 Moreover, EU-wide rules for the administration of take‑off and landing slots at airports favour incumbent air carriers over new entrants.96

In Portugal, domestic rules impose a general prohibition of airport use between midnight and 6:00, except for reasons of force majeure.97 Night-time use may, however, be authorised by ordinance setting a maximum number of take‑offs and landings during the period between midnight and 6:00.98 Time limits for airport use may be imposed for a variety of reasons, including to reduce noise pollution, but lengthy curfew periods could significantly inhibit the complex time schedule of airlines, especially for all-cargo carriers and integrated express operators, which tend to travel at night and face tight delivery deadlines (e.g. due to the carriage of perishable goods). Among the benchmark group, Poland is the only other country to maintain schedules for airport use.99

Maritime freight transport

Portugal has a relatively liberal regulatory framework for maritime freight transport services compared to non-landlocked peer countries. Among the remaining regulatory barriers, foreign-flagged ships from outside the EU may be authorised to provide maritime cabotage services in Portugal only if no Portuguese or EU-flagged vessels are available.100 However, as part of a new, simplified registration process, ship registration under the Portuguese flag does not depend on the applicant’s nationality or headquarters, thereby allowing vessels under foreign ownership to be registered in Portugal and to provide cabotage services.101 In comparison, benchmarked countries maintain restrictions to the registration of foreign-owned vessels under the national flag, in addition to limiting the provision of cabotage services by foreign-flagged ships.102 However, several other EU countries (e.g. Denmark, Ireland, Latvia, the Netherlands and Norway) allow foreign-flagged vessels to provide maritime cabotage services (OECD, 2023[25]).

Pursuant to rules adopted at EU level, Member States may issue state aid to EU shipping companies, such as tax relief or subsidies for the manning costs of vessels, to increase the competitiveness of EU shipping companies with respect to non-EU companies.103 In Portugal, so-called tonnage tax and seafarer incentive schemes were introduced in 2018.104 Only shipping companies which have their head office or effective management in Portugal may opt for the tonnage tax regime. Income from activities carried out through non-EU/EEA-flagged vessels may be taxed under the special regime, on the condition that these vessels constitute no more than 40% of the net tonnage of the fleet and the management of all ships is carried out within the EEA. Additionally, at least half of the crew of all vessels benefitting from tonnage taxation must be EU/EEA nationals or nationals of a Portuguese‑speaking country. The special tax and social security benefits for crew members apply exclusively to the crew of EU/EEA-flagged ships.105 Similar support measures whereby foreign suppliers are treated less favourably than domestic ones are common among the non-landlocked peer group countries.106

Moreover, nationality requirements for ship crew and captain limit the ability of maritime transport service providers to recruit crew members from third countries. As a rule, the captain and at least 60% of the crew of a vessel flying the Portuguese flag must be EU/EEA nationals or nationals of a Portuguese‑speaking country.107 Additionally, both domestic and foreign maritime transport companies must hire a shipping agent to represent them in ports other than those where they are headquartered, or constitute themselves as shipping agents according to the respective administrative procedure, increasing operational costs.108

Finally, non-competitive market regulation regarding the provision of port services, such as cargo-handling, pilotage and towage services, can negatively affect both foreign and domestic providers in the sector. In the Competition Assessment of Portugal, the OECD identified various domestic legal provisions restricting competition in Portuguese ports and made recommendations to amend them (OECD, 2018[27]). For instance, the length of concession contracts is not systematically linked to the level of investment by the concessionaire, and concessions can be renewed without opening a new public tender (OECD, 2018[27]).109 Non-competitive rules for the award of concessions and unnecessary barriers to market entry can contribute to increased port tariffs for users and reduced quality of port services.

Rail freight transport

The regulatory framework for rail freight transport services is largely harmonised at EU level. EU legislation imposes certain regulatory barriers in the sector which are shared across the jurisdictions in the peer group.110 Due to the existence of comparatively few barriers arising from domestic legislation, the Portuguese legal framework for rail freight transport is more liberal than those of the benchmark countries.

Among the remaining relatively stricter requirements in Portuguese legislation, railway undertakings may not freely choose the legal form in which they are established in the country, as they are governed by the legal framework of public limited companies.111

Road freight transport

Sector-specific regulatory barriers captured by the OECD STRI for Portugal in the road freight transport sector respond to EU-wide rules. Regulation (EC) 1071/2009 lays down directly applicable rules regulating the licensing of road freight transport operators112 and imposes certain barriers to market entry in the sector. Under the Regulation, EU countries are required to demand that operators hold a minimum amount of capital and reserves per vehicle during the financial year.113 Each road transport firm must also designate a transport manager, who must be an EU resident. The transport manager may manage activities of up to four transport companies with a combined maximum total fleet of 50 vehicles.

The above‑mentioned rules of the EU Regulation are applied across the benchmark group. However, in some areas, Portuguese domestic legislation imposes some additional requirements. For instance, in addition to the requirement to hold a minimum amount of capital and reserves during the financial year, Portuguese legislation also requires a minimum capital of EUR 125 000 (or EUR 50 000 in case of operators using exclusively light vehicles) for starting a business as a condition for the issuance of a road transport operating license.114 Moreover, more stringent requirements apply to the activity of transport manager in mainland Portugal under domestic legislation, limiting transport managers to the management of one company or, in some conditions, up to three companies.115 Although the EU Regulation explicitly allows member states to impose a lower number of transport companies managed by a transport manager, the more stringent requirements applied in Portugal might prevent transport managers from expanding their business to a greater extent than in most other EU countries and rise costs for Portuguese transport companies (OECD, 2018[27]).

2.3.3. Logistics services

Logistics services play a crucial role in the development of global value chains, connecting production sites, manufacturers and consumers. In logistics, the OECD STRI records regulation in cargo-handling, freight forwarding, customs brokerage and storage and warehouse services. Additionally, it assesses whether countries have put in place certain customs simplification measures, affecting not only logistics service providers, but also operators in courier and distribution sectors (Box 2.4). Portugal’s regulatory framework for logistics services is more liberal than the EU average but not on par with the most liberal regulatory settings in the peer group (Figure 2.6), indicating that there is still room to improve sector-specific regulation and streamline border procedures.

In cargo-handling and storage and warehousing services, Portugal could reduce the gap with the best-performing peer country, the Czech Republic, by adopting more competition-friendly rules regarding the award of contracts for port services. The non-competitive aspects of the award procedure have been discussed above under maritime freight transport. Namely, the OECD has previously recommended for Portugal to amend domestic legislation so that cargo-handling concessions at ports cannot be renewed without opening a new public tender for the provision of the service, and to establish objective criteria to determine the length of concessions based on the level of investment by the concessionaire (OECD, 2018[27]).

Box 2.4. The efficiency of customs procedures could be improved

Border barriers related to customs procedures can impact both domestic and foreign firms operating in transport, logistics, distribution and courier sectors. The overall efficiency of customs procedures, measured by the speed, simplicity and predictability of formalities at the border, matter for providers engaged in the import or export of goods.

According to international surveys, Portugal’s customs regime is efficient compared to some countries in the benchmark group, but not on par with European best performers,1 indicating that border procedures could be further streamlined and simplified. Moreover, the OECD Trade Facilitation Indicators suggest that certain other aspects of border procedures could also be reformed for the benefit of courier service providers, cargo carriers, logistics firms and distributors in Portugal2. For instance, electronic payment is currently not available for all duties, taxes, fees and charges. There is also room to improve information availability by making a minimal set of information available on the national customs website in one of the official WTO languages, such as in English. For information on foreign investors’ perspectives on customs procedures in Portugal, see Chapter 4.

The OECD STRI captures several general customs procedure simplification principles via additional measures in logistics, courier and distribution sectors. These principles relate to the processing of shipment information ahead of shipment arrival at the border, the release of goods before determination and payment of duties, and the existence of a de minimis regime, where goods not exceeding a certain value or weight are exempted from import duties, internal taxes or full declaration procedures. Due to regulatory harmonisation in the EU, these principles are applied in Portugal and across the benchmark group, apart from a value added tax (VAT) de minimis regime3. Portugal also maintains an advance ruling system and a single window for customs procedures, which contribute to the transparency, predictability and efficiency of border procedures4.

Additionally, promoters of certain investment projects in Portugal may benefit from simplified customs procedures, such as an exemption from providing a guarantee of certain import duties and other taxes, under a special regime of contractual tax benefits.5 Eligibility conditions include that the investment project must be connected to one of the specified economic activities6 and its relevant investment must be equal to or higher than EUR 3 million.

1. Portuguese customs procedures were perceived by business executives as the second most efficient in the benchmark group, after Estonia. Other better performing EU countries include Finland, the Netherlands and Sweden. World Economic Forum (2017[28]), Global Competitiveness Report. Burden of Customs Procedure, https://tcdata360.worldbank.org/indicators/IQ.WEF.CUST.XQ. Portugal ranks 35^th globally as regards the efficiency of border clearance processes, falling behind Spain, Estonia, the Czech Republic and Poland, as well as several other EU countries. World Bank (2018[29]), International Logistics Performance Index, https://lpi.worldbank.org/international/global.

2. OECD (2019[30]), Trade Facilitation Indicators, https://www.oecd.org/trade/topics/trade-facilitation/. Currently, the Tax and Customs Authority only provides information related to taxation in English. Tax and Customs Authority, consulted on 29 April 2022.

3. Regulation (EU) 952/2013, Articles 171, 194 and 195. Due to the implementation of the EU’s new VAT e‑commerce rules, member countries have abolished any previously existing VAT de minimis rules (Directive (EU) 2017/2455). A de minimis regime with respect to import duties continues to apply under Regulation (EC) 1186/2009, Article 23, whereby goods valued up to EUR 150 are exempted.

4. Regulation (EU) 952/2013, Article 33. Decree-Law No. 158/2019.

5. Investment Tax Code (Decree-Law No. 162/2014), Article 12.

6. Investment projects connected to the following economic activities may be eligible: extractive industry and manufacturing industry; tourism, including activities of interest to tourism; IT and related activities and services; agricultural, aquaculture, fish, livestock and forestry activities; research and development and high technological intensity activities; information technologies and audio-visual and multimedia production; defence, environment, energy and telecommunications; shared service centre activities.

Additionally, individual licensing requirements are imposed on warehousing and freight forwarding, thereby limiting the ability of logistics services providers to integrate their activities.116 In the benchmark group, the Czech Republic and Estonia do not impose license requirements on either activity.117 As regards customs warehouses, EU-wide rules constitute an entry barrier by subjecting operating licenses to an economic needs test in all member countries.118

Unlike in most benchmarked countries, customs broker is a regulated profession in Portugal, and access by third-country nationals to the profession is restricted. Customs brokers from outside the EU/EEA may register with the Portuguese professional association only if Portugal has signed a reciprocity agreement with their country of origin.119 Coupled with a requirement that the majority of capital with voting rights in customs brokerage companies must be owned by licensed customs brokers, the reciprocity requirement limits the ability of foreign investors to own shares in customs brokerage firms incorporated in Portugal.120 Additionally, at least one member of the management or administrative entity in the firm must be a licensed professional.121

Moreover, provisions restricting how customs brokers can advertise their services represent a barrier to competition in the sector.122 A previous OECD assessment has also identified various other provisions in Portuguese legislation which may have competition-distorting effects in the customs brokerage sub-sector (OECD, 2018[26]). For instance, customs brokers’ exclusive right to certain professional activities, such as representing economic operators before tax and customs authorities, excludes other, potentially equally capable, professionals from the market.123 The financial requirements to register with the professional association, namely obligations to provide a financial guarantee and hold professional insurance, may also cause customs brokers to incur unnecessary costs, as the requirements address similar kinds of risks and the minimum values prescribed by law may not be appropriate for the level of risk.124

2.4. Digital trade

Digital trade involves digitally enabled or digitally ordered cross-border transactions in goods and services, which can be either digitally or physically delivered (López González and Jouanjean, 2017[31]). Declining costs of sharing information are powering a digital trade revolution that is changing traditional trade patterns. Access to cheaper, more sophisticated and diverse digital inputs – including productivity enhancing software, communications technology or e‑payment services – can help firms deliver their outputs to a wider customer base across different countries and overcome existing trade cost disadvantages.

Portugal has actively designed and implemented policies to embrace the digital transformation in recent years (Box 2.5). The regulatory framework for digital trade is an important leverage to facilitate and enhance the objectives defined in these policies and to fully benefit from the digital transformation. Portugal already has a comprehensive regulatory environment for digital trade, composed of general rules that apply irrespective of the use of electronic or analogic means (such as industrial property and intellectual property laws,125 competition law,126 consumer protection laws127 and data protection regulation128) and other provisions that specifically target interchanges that usually take place electronically (e.g. law regulating electronic communications,129 decree‑law regulating information society services, in particular e‑commerce,130 and decree‑law regulating distant sales contracts131).

The Portuguese regulatory framework for digital trade, as measured by the OECD’s Digital Services Trade Restrictiveness Index, is on par with the EU average but slightly more restrictive than most peer countries’ (Figure 2.7). This indicator measures cross-cutting barriers that affect trade in digitally enabled services.

Improvements could be introduced in some areas to better align Portugal’s regulatory environment for digital trade with more open peer countries. For instance, lifting the requirement for a permanent representative in Portugal for those foreign companies that exercise activities for more than one year in the country could help ease cross-border digital sales for firms established abroad. Among the benchmark group, only the Czech Republic maintains a similar requirement. The requirement in Portugal’s domestic regulation couples with the EU-wide requirement for digital services providers not established in the EU but offering digital services within the Union to designate a representative in the Union.132 Portugal could also deepen its participation in international efforts to facilitate the use of electronic communications in international trade by signing the United Nations (UN) Convention on the use of Electronic Communications in international contracts (2005). Portugal is not party either to the UN Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce (1996) or the UNCITRAL Model Law on Electronic Signatures (2001).

Figure 2.7. Economy-wide barriers to trade in digital services are relatively low in Portugal

In recent years, barriers to digital trade have been increasing worldwide with some slowdown identified in the aftermath of the COVID‑19 pandemic (OECD, 2023[25]). Compared to peer countries, Portugal has been the only country to lower economy-wide barriers to trade in digital services in the recent years (Figure 2.8). This results from a 2015 policy reform introduced by the National Telecommunications Authority (ANACOM) reducing the requirements on vertical separation in the mobile segment of the telecommunications sector.133

Figure 2.8. Portugal has lowered economy-wide barriers to trade in digital services in recent years

Other regulation, such as that restricting FDI and access to public procurement markets, can also importantly impact the development of the ICT sector. Furthermore, restrictions to the cross-border movement of computer professionals can hinder other efforts to develop an information knowledge society, as it could impact the transmission of knowledge. In this regard, the OECD STRI for computer services is a useful tool to analyse sector-specific barriers affecting ICT services.

In Portugal, the regulatory barriers for computer services appear slightly lower than in some peer countries and below EU average levels (Figure 2.9). Nonetheless, despite the 2022 amendments to the entry framework of third-country nationals, residence permits for contractual services suppliers and independent services suppliers remain shorter than those recommended by international best practice (see Section 2.2.2).134 This creates administrative obstacles for companies to benefit from the services of third-country computer professionals. Other remaining obstacles include long visa processing times and cumbersome number of documents required for business visitor visa applicants.

Box 2.5. Strategies and initiatives for Portugal’s digital transformation

Among the various policy instruments for Portugal’s digital transformation, the 2012 Portugal Digital Agenda¹ sets out priority areas of intervention to reinforce the competitiveness of the country’s ICT sector and to enhance the information and knowledge society: including, for instance, broadband access, investment in R&D and innovation, improving digital literacy and internationalisation of the ICT sector.

The 2020 Action Plan for Digital Transition² has three main pillars of action: digital empowerment of citizens, businesses’ digital transformation and digitisation of public services. A cross-cutting dimension encompasses various “catalysts” of digital transition, such as regulation and disruptive technologies³.

In public administration, Portugal plans to leverage digitalisation to provide simpler, more efficient and more transparent services through six strategic lines of action, defined in the recent Strategy for the Digital Transformation of Public Administration 2021‑26 and to be initiated according to the corresponding Action Plan for years 2021‑23.

Notes: 1. Ministerial Council Resolutions 112/2012 and 22/2015. 2. Ministerial Council Resolution 30/2020. The co‑ordination and monitoring of the Action Plan is entrusted to the Portugal Digital Mission Structure (Portugal Digital), created by Ministerial Council Resolution 31/2020. 3. Portugal has also developed technology-specific strategies supporting its digital transformation, such as the 2019 national strategy for artificial intelligence (AI). See Portugal INCoDe.2030 (2019), AI Portugal 2030, https://www.incode2030.gov.pt/en/ai-portugal-2030. 4. The strategic lines of action are digital public services, valorisation of data, reference architectures, ICT skills, ICT infrastructure and services, security and trust. Ministerial Council Resolution 131/2021.

Figure 2.9. Barriers to trade in computer services could be further lowered in Portugal

In terms of trends, Portugal has eased barriers on computer services in recent years (Figure 2.9). In particular, in 2017, Portugal extended the duration of stay for services suppliers from four months to 12 months.

Adequate regulatory frameworks can enhance the adoption of new technologies while ensuring the protection of other policy objectives. Trade policies are particularly important to allow access to and development of these new technologies (Ferencz, 2022[32]). Further efforts to strengthen the regulatory environment for trade in digitally enabled services could be a good complement to Portugal’s ongoing efforts to support the development and experimentation of technologies-based innovations, such as with its network of Digital Innovation Hubs and the recently established legal framework of Technology Free Zones (Box 2.6).

Box 2.6. Digital Innovation Hubs and Technology Free Zones support business innovation

Portugal has developed a network of 17 Digital Innovation Hubs as part of its Action Plan for Digital Transition (see Box 2.5). Digital Innovation Hubs allow SMEs to test digital solutions, provide assistance for obtaining funding and offer training for firms’ digital transition. The Hubs also support start-up incubation and promote SMEs and public administration’s relationships with partners in enterprises and entities from the research and innovation ecosystem.

Legislation adopted in 2021 establishes the regulatory framework for Technology Free Zones (Zonas Livres Tecnológicas; ZLTs) and defines the governance model for promoting technology-based innovation through the creation of these zones. As with “regulatory sandboxes”, ZLTs are expected to provide a structure for companies to test new technologies and business models in the market within a controlled environment, monitored by the competent authorities and with safeguards to contain the consequences of failures. A distinctive feature of Portugal’s ZLTs with respect to regulatory sandbox experiences of other countries is that Portuguese legislation provides for a cross-sector framework, while regimes in other countries tend to apply to a certain sector (e.g. fintech).

Coupled with Digital Innovation Hubs, the ZLTs are a welcome development to boost innovation and technological developments, as they should help to reduce regulatory uncertainties for new digitally enabled businesses that are not governed and monitored by current legislation and institutions.

Source: Portugal Digital, accessed on 6 January 2023; Decree-Law No. 67/2021.

2.5. Regulatory similarity to selected peer countries

High degrees of regulatory heterogeneity, i.e. large regulatory differences between jurisdictions, represent additional compliance costs for firms operating in several countries, who must adapt their business model to conform with varying local rules. Regulatory coherence between countries has been shown to benefit trade and investment: on average, even a very small reduction in regulatory heterogeneity between a country pair is associated with 2.5% higher services exports, with the impact of improved coherence being larger in relatively liberal markets (Nordås, 2016[33]). This section assesses which OECD and EEA countries share the most similar rulebooks with Portugal in the economic sectors covered in this chapter, and to which extent regulatory harmonisation within the Single Market has resulted in a more open regulatory environment in Portugal for foreign investors from within the EEA, compared to investors from third countries.

Of all OECD countries, Portugal’s regulatory framework for services trade and investment is most similar to that of the Czech Republic in the majority of economic sectors covered in this chapter (Table 2.1).135 In addition to similarities in sector-specific regulation, there are commonalities in the rules that apply to services providers and investors across all sectors of the economy in Portugal and the Czech Republic. For instance, both countries maintain mechanisms to screen certain foreign investment projects. Some similarities are due to absence of restrictions: for example, neither country imposes limitations on the acquisition of land or real estate by foreign buyers. The similarity of rules applicable economy-wide contributes to regulatory homogeneity between the country pair in each sector.

Sector	Most similar regulation (all OECD countries)	Most similar regulation (benchmark group)
Professional services
Architecture	Czech Republic	Czech Republic
Engineering	Lithuania	Lithuania
Legal	Netherlands	Czech Republic
Accounting & auditing	Czech Republic	Czech Republic
Transport services
Air	Slovenia	Czech Republic
Maritime	France	Lithuania
Rail	Czech Republic	Czech Republic
Road	Czech Republic	Czech Republic
Logistics services
Cargo-handling	Lithuania	Lithuania
Storage & warehousing	Czech Republic	Czech Republic
Freight forwarding	Czech Republic	Czech Republic
Customs brokerage	Czech Republic	Czech Republic
ICT services
Computer services	Czech Republic	Czech Republic
Digital services	Japan	Lithuania

Source: OECD (2023[25]), Services Trade Restrictiveness Index and Regulatory Heterogeneity databases, https://www.oecd.org/trade/topics/services-trade/.

Due to a high degree of regulatory harmonisation within the Single Market, services providers and investors within the EEA benefit from a substantially more open regulatory environment than under multilateral rules applicable to third countries. Yet, there is potential for further market integration within the Single Market, as obstacles to trade and investment have not been completely eliminated.

Figure 2.10 shows to what extent investors and trading companies from within and outside the EEA face regulatory barriers in Portugal. Regional integration has lowered barriers for EEA investors in all sectors, particularly in sectors such as air transport, professional services and construction.136 Yet, despite this harmonisation, air transport remains a relatively strictly regulated sector also for EEA carriers.137 Other sectors with relatively high barriers for EEA investors, but in which Portugal has more extensive domestic policy making space, include accounting services and legal services.

Moreover, Portugal’s regulatory set-up with respect to EEA investors is slightly tighter than the benchmark group average in 12 of the 22 sectors. This indicates that there is still room to further lower regulatory barriers for intra-EEA investment and align Portugal’s regulatory framework to peer countries’ more open regulatory landscapes.

Figure 2.10. Regional integration has reduced barriers for EEA investors in Portugal in all sectors

2.6. Conclusions

This chapter has highlighted regulatory factors that might influence foreign investment decisions in Portugal, benchmarking them to regulation in a group of peer countries. Some of these regulatory aspects have potential impacts on FDI and business operations across many sectors of the economy. For instance, there is room to strengthen business involvement in the regulation-making process and systematically assess the effects of proposed and existing rules on companies to ensure that business regulation economy-wide meets its objectives, while reducing unnecessary administrative burden for companies. The efficiency of judicial procedures, particularly in administrative courts, is another area impacting Portugal’s business environment and investment climate in which the benchmarking exercise indicates room for improvement. Finally, although the scope of transactions potentially scrutinised under Portugal’s foreign investment screening mechanism is more limited than in peer countries, flexibility in the implementation of the mechanism could be enhanced by enabling risk mitigation agreements.

This chapter has also identified areas that could benefit from targeted reforms in selected services sectors providing strategic support to the economy. Among professional services, engineering, accounting and auditing services remain relatively strictly regulated in Portugal and could be further assessed to verify whether alternative, less restrictive and non-discriminatory measures can address the regulator’s concerns in a more efficient manner. Rules regarding third-country professionals’ access to exercise the profession, coupled with restrictions on the ownership and management of professional firms by non-licensed professionals, act as a possible barrier to foreign investment in legal services and accounting and auditing services sectors.

In transport services, although some limitations arise from EU-wide regulation, there is still space for Portugal to ease certain rules. Examples of domestic regulatory barriers include the imposition of schedules for airport use, discriminatory conditions to receive state aid in the maritime transport sector, nationality conditions for ship crew and captain, non-competitive regulation in port services and additional minimum capital requirements for road transport undertakings.

In logistics services, individual licensing requirements are imposed on warehousing and freight forwarding, restricting the ability of providers to integrate their activities. Limited access by third-country nationals to the profession of customs broker is coupled with restrictions to ownership of customs brokerage firms by non-licensed professionals. Additionally, the efficiency of customs procedures could be improved for the benefit of both domestic and foreign firms operating in transport, logistics, distribution and courier sectors.

Trade is an essential vehicle to enable digital transformation, which relies heavily on access to digital networks and equipment, seamless transfer of data across borders and movement of skilled workers and knowledge. Portugal’s Digital Agenda, Action Plan for Digital Transition and AI strategy underline the importance of digitalisation for business environment in Portugal. A comprehensive regulatory environment is currently in place for digital trade; however, reduction of barriers, in particular to the movement of professionals, could improve Portugal’s development of an information and knowledge society.

This chapter has also shown that although Single Market harmonisation has reduced regulatory barriers for foreign investors from within the EEA in all sectors, they continue to face slightly higher barriers in Portugal than the peer country average in most services sectors. Further liberalisation of Portugal’s domestic regulatory environment to reduce gap with the benchmark group could attract more EEA and non-EEA investors to the country.

The following Chapter 3 assesses the impact of regulatory restrictions on FDI through an econometric analysis of cross-border mergers and acquisitions and greenfield investment projects, to estimate to what extent foreign investment projects respond to the removal of unnecessary regulatory obstacles. Chapter 4, in turn, discusses foreign investors’ perspectives on the various regulatory aspects analysed in the present chapter and certain additional regulatory areas, such as labour regulation and tax compliance.

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Notes

← 1. Mistura and Roulet (2019[34]) estimate that the introduction of reforms liberalising FDI restrictions by about 10% as measured by the OECD FDI Regulatory Restrictiveness Index could increase bilateral FDI inward stocks by around 2.1% on average.

← 2. Rouzet, Benz and Spinelli (2017[35]) also find that if multinational firms do set up establishments in countries with a more restrictive regulatory environment for services, as measured by the OECD Services Trade Restrictiveness Index (STRI), the foreign affiliates tend to realise lower sales than in host countries with a more liberal regulatory framework. The OECD STRI captures also behind-the‑border factors.

← 3. Fournier (2015[36]) finds that reforms reducing the divergence of product market regulation by one‑fifth could increase FDI by about 15%.

← 4. ePortugal.gov.pt, Guide to create a business, consulted on 15 June 2022.

← 5. Decree-Law No. 125/2006.

← 6. Decree-Law No. 109-D/2021.

← 7. The attribution of “e‑Residency” in Portugal would give the foreign national or company access to Portuguese online public services, company registration, opening a bank account, as well as assigning a tax identification number and social security number. According to information received in consultation with Portuguese authorities in April 2022, the launch of a first version of the e‑Residency platform is scheduled for the end of 2022, with all functionalities scheduled to be operational by the end of 2023.

← 8. Decree-Law No. 111/2005.

← 9. Estonia State Portal, Registering a company, consulted on 28 June 2022.

← 10. Decree-Law No. 398/98 and Decree-Law No. 14/2013. Portuguese Tax and Customs Authority, “Registo Contribuinte > Identific > Atrib/Alter NIF-Singulares”, consulted on 15 June 2022.

← 11. According to the Tax and Customs Authority’s ruling (Ofício Circulado No. 90054 of 6 June 2022), a person who, cumulatively, i) has no tax domicile in Portugal, the EU or the EEA, ii) does not meet the legal requirements to have the tax status of resident, iii) is not a taxable person in the sense of Article 18(3) of Decree-Law No. 398/98, iv) is not subject to the fulfilment of obligations nor intends to exercise any rights with the Tax Administration, is not required to designate a tax representative. The appointment of a representative becomes mandatory if the person owns a vehicle or property in Portugal, signs an employment contract in Portugal or carries out a self-employed activity in Portugal.

← 12. Foreign acquisitions of control of certain strategic assets constitute a notable exception, as they are subject to a specific investment screening regime to protect Portugal’s essential security interests.

← 13. Decree-Law No. 10/2015.

← 14. Plano de Ação para a Transição Digital (Ministerial Council Resolution No. 30/2020).

← 15. ePortugal.gov.pt, consulted on 15 June 2022.

← 16. Some of the shortcomings associated with minimum capital requirements are that fixed minimum amounts do not account for differences in business size, activity and risk; creditors typically rely more on other metrics to evaluate credit risk; and the funds used to meet minimum capital requirements could be put to other productive use (World Bank, 2013[37]; 2019[38]).

← 17. Commercial Companies Code (Decree-Law No. 262/86).

← 18. Directive EU 2017/1132.

← 19. The legal regime for investment screening, as enacted in the implementing Decree-Law No. 138/2014, is based on legislative authorisation granted by Law No. 9/2014. Unofficial English translations of both legal texts are annexed to Portugal’s notification to the OECD of its investment policy ([DAF/INV/RD(2019)7] of 22July 2019).

← 20. The Decree‑Law expressly provides the evaluation criteria for the real and sufficiently serious nature of the threat, namely: physical security and integrity of the assets; permanent availability and operability of the assets; continuity, regularity and quality of services of general interest; and preservation of the confidentiality of data and information obtained in the exercise of the activity and the technologic resources needed for the management of the assets. Additionally, a non-exhaustive list indicates situations that are susceptible of posing a threat, such as the existence of connections between the investor and third countries that do not recognise or respect democracy and the rule of law.

← 21. Information obtained in the context of consultations with Portuguese authorities in September 2022.

← 22. A growing number of transactions are potentially subject to review, as many mechanisms now cover a broader section of the economy or include lower trigger thresholds than before (OECD, 2020[6]). In the first half of 2020, the COVID‑19 pandemic further accelerated reforms by attracting attention to the protection of health-related industries and infrastructure in many countries (OECD, 2020[39]).

← 23. Lithuania, Poland and Spain have recently amended or expanded the scope of their review mechanisms, while the Czech Republic and the Slovak Republic have adopted completely new rulesets for investment screening (EC, 2021[7]). Estonia is in the process of legislating a foreign investment screening mechanism (Bill 639 SE of 13 June 2022).

← 24. Spain, for instance, broadened the scope of its investment screening as a response to the COVID‑19 pandemic and its economic impact through a number of amendments to Law 19/2003 in 2020 and 2021 (Royal Decree‑Laws 8/2020, 11/2020, 34/2020, 12/2021 and 27/2021).

← 25. In comparison, under a new regime for the screening of non-EU investment in the Czech Republic (Act No. 34/2021), investment in particularly sensitive areas, including critical infrastructure, are subject to mandatory prior approval. Investment in other sectors of the economy may be voluntarily notified by the investors, or a review can be initiated by the responsible ministry up to five years after completion.

← 26. Lithuania applies a review with regard to transactions in specified assets deemed important for essential security interests, irrespective of investor nationality, under its Act No. IX-1132 of 10October 2002.

Under Poland’s investment review mechanism (Act of 24July 2015), certain investment in a closed list of strategic companies may be reviewed regardless of the nationality of the investor, including those by domestic investors. In 2020, Poland made temporary amendments to the Act in connection with the COVID‑19 pandemic, adding mandatory reviews for certain investment from non-EU/EEA/OECD countries in specific categories of companies. The temporary mechanism was to cease to apply on 25 July 2022, but its validity has since been extended until 24 July 2025 (Act of 12May 2022).

In the Slovak Republic, a 2021 amendment to Act No. 45/2011 established a sector-specific investment screening mechanism to safeguard critical infrastructure elements in mining, electricity, gas, oil and petroleum products, pharmaceutical, metallurgical and chemical industries. The review mechanism applies irrespective of the nationality of the investor. Additional legislation for the screening of foreign investment in other sectors is under preparation.

Spain’s merger review regime under Law 15/2007 empowers the Council of Ministers to prohibit a merger based on reasons of general interest, including defence and national security. This review is not specific to foreign investment.

← 27. Reviews under Portugal’s investment screening framework are conducted ex post and can be initiated by the relevant ministry within 30 days of the conclusion of the transaction or from the day that it becomes publicly known. After the investor has provided the necessary information and documents related to the transaction, the Council of Ministers has 60 days to emit an opposing decision. It is also possible for the acquirer to voluntarily request confirmation that the government will not oppose the transaction. In the absence of an opposing decision by the Council of Ministers within the 60‑day time limit, or if no screening procedure has been triggered within 30 days of the investor’s request, a tacit decision of non-opposition is presumed to exist.

← 28. The Czech Republic’s Act No. 34/2021 and the SlovakRepublic’s Act No. 45/2011, as amended by Act No. 72/2021.

← 29. In 2019, the total share of foreign nationals in Portugal’s workforce was 6.7%, of which 17.8% were nationals of other countries participating in the EU’s Single Market. Statistics Portugal (INE), Quadros de Pessoal (2019). Data do not cover the financial sector.

← 30. Law No. 23/2007.

← 31. Business travellers, such as prospective investors, may apply for a short-stay visa according to rules harmonised under the Schengen framework to visit Portugal for a maximum of 90 days during any 180‑day period (Regulation (EC) No 810/2009). Temporary visas can be issued for stays of less than one year, for instance for the purpose of independent contractor work or scientific research, higher education teaching or other highly qualified activity.

← 32. Law No. 18/2022 (25 August 2022) introducing a new Article 57‑A to Law No. 23/2007.

← 33. However, several categories of workers, such as intra-corporate transferees and highly skilled workers were exempted from labour market testing.

← 34. Law No. 2/2020, Law No. 75-B/2020 and Law No. 12/2022.

← 35. Law No. 18/2022 (25 August 2022) amending Article 59 of Law No. 23/2007.

← 36. Law No. 18/2022 (25 August 2022) introducing a new Article 52‑A to Law No. 23/2007, according to which a specific framework applies to nationals of the Community of Portuguese Speaking Countries, whereby it is not mandatory for the Portuguese Immigration and Borders Service to produce a prior opinion concerning the attribution of a residence permit, reducing the associated time constraints.

← 37. Article 183 of Law No. 2/2020, Article 192 of Law No. 75-B/2020 and Article 153 of Law No. 12/2022.

← 38. Law No. 18/2022 (25 August 2022) amending Article 75 of Law No. 23/2007.

← 39. Lithuania’s Act No. IX-2206 of 29April 2004.

← 40. Estonia’s Aliens Act (9 December 2009). Top specialists must earn at least twice the annual average gross monthly salary in Estonia.

← 41. Directive 2014/66/EU.

← 42. Ordinance No. 328/2018.

← 43. Initially, only firms in high-technology and innovation areas could benefit from employer certification under the Tech Visa programme, but this eligibility requirement was removed already in April 2019 to allow also for other types of companies in need of highly-skilled workers to apply for certification. A further 2022 amendment eliminated the need for applicant firms to obtain a positive evaluation with regard to market potential and orientation towards foreign markets. Instead, it is required that the company produces goods or services in sectors that are exposed to international competition. Ordinances No. 99/2019 and No. 59-A/2022 amending Ordinance No. 328/2018.

← 44. IAPMEI, TechVisa Programme - List of certified companies, 6 February 2023.

← 45. Ordinance No. 344/2017 and Legislative Order No. 4/2018.

← 46. Article 90‑A of the Foreigners Act (Law No. 23/2007).

← 47. For instance, the administrative fee for issuing the initial residence permit for investment is EUR 5 325. The same rate applies to initial residence permits granted to the investor’s family members on the basis of family reunification. Ordinance No. 1 334‑E/2010, as amended by Ordinance No. 204/2020.

← 48. AICEP Portugal Global,”Investment from golden residence permits totalled EUR42.1M in December”, 14 January 2022.

← 49. Decree-Law No. 14/2021.

← 50. Law No. 82-E/2014.

← 51. Programa Regressar was introduced by Ministerial Council Resolution No. 60/2019.

← 52. Ordinance No. 214/2019, as last amended by Ordinance No. 23/2021.

← 53. Law No. 71/2018 and Law No. 12/2022.

← 54. Article 122 of the Foreigners Act (Law No. 23/2007).

← 55. Several EU countries have adopted a job-search extension policy or extended the stay period as part of national transposition of Directive (EU) 2016/801, which establishes a minimum period of nine months for the stay for the purpose of seeking employment or setting up a business after the completion of research or studies (OECD, 2022[13]). Finland recently extended the maximum stay period from one year to two years (Act 719/2018, as amended by Act 277/2022 from 15 April 2022).

← 56. The competition regime established by Law No. 19/2012 applies to all types of economic activities regardless of whether they are carried out by public or private undertakings.

← 57. The OECD Product Market Regulation (PMR) indicators capture the extent of state‑owned enterprises in the economy by measuring whether the government controls at least one firm in specified sectors. A higher weight is given to key network sectors consisting of electricity, natural gas, air transport, rail transport, road transport, water transport and fixed and mobile e‑communications. For more details regarding the OECD PMR indicators methodology, see Vitale, Moiso and Wanner (2020[40]). Although Portugal had no public presence in the energy sector at the end of 2020, the transport and storage sector had one of the highest concentrations of state‑owned enterprises (Conselho das Finanças Públicas, 2022[14]). The OECD PMR indicators also show that government involvement in network sectors was more extensive in Portugal than in Spain, as measured by the size of the government’s stake in the largest firm in key network sectors (OECD, 2018[2]).

← 58. The legal framework for privatisations is established in Law No. 11/90, as amended by Law No. 50/2011.

← 59. Decree-Law No. 33-A/2020 on the nationalisation of Winterfell 2 Limited’s shareholding in Efacec Power Solutions, SGPS, S. A.

← 60. República Portuguesa, XXII Governo, 24 February 2022.

← 61. The government increased its shareholding in TAP from 50% to 72.5%. República Portuguesa, XXII Governo, press release, 2 July 2020. TAP has since been subject to further aid measures due to the pandemic. See European Commission, press release, 22 December 2021.

← 62. The Public Contracts Code (Decree-Law No. 18/2008) and the Law regulating the access and use of electronic platforms for public procurement (Law No. 96/2015) implement Directive 2014/24/EU on public procurement, Directive 2014/23/EU on the award of concession contracts and Directive 2014/25/EU on procurement by entities operating in the water, energy, transport and postal services sectors.

← 63. Article 6 B of the Public Contracts Code (PCC) stipulates that in areas covered by Annexes 1, 2, 4 and 5 (central government entities, sub-central government entities, goods, services) of the EU’s schedule under the GPA and other international agreements to which the EU is bound, suppliers from states parties to those agreements are given the same treatment under the PCC as is accorded to EU suppliers.

← 64. Plano de Ação para a Transição Digital (Ministerial Council Resolution No. 30/2020).

← 65. A new model for systematic RIA was introduced by Ministerial Council Resolution No. 44/2017 and made permanent by Ministerial Council Resolution No. 74/2018, whereby it is mandatory for ministries in Portugal to undertake an assessment of the impacts of new primary laws and subordinate legislation on citizens and businesses. RIA was further reinforced by Decree‑Laws No. 169-B/2019 and No. 32/2022, establishing impact assessment as mandatory for all governmental norms as part of the legislative process. Other legal acts also foresee RIA, namely Law No. 4/2018, which establishes the framework for gender impact assessment of legal acts.

← 66. See Article 57 of Decree-Law No. 169-B/2019 and Article 55 of Decree-Law No. 32/2022.

← 67. See OECD, Competition Assessment Toolkit, consulted on 20 February 2023, and Recommendation of the Council on Competition Assessment (OECD/LEGAL/0455), adopted on 11 December 2019.

← 68. In Estonia, Poland, the Slovak Republic and Spain, it is systematically required to make regulatory impact assessment documents available for consultation with the general public with regard to both primary laws and subordinate regulation (OECD, 2021[19]).

← 69. Ministerial Council Resolution No. 77/2010. ConsultaLEX was launched in July 2019 (Portugal Government, Press release, 4 July 2019).

← 70. In contrast, among the peer group, Estonia and Poland (in the case of some EU directives/regulation), and the Slovak Republic (in the case of major EU directives/regulation) require stakeholder engagement at the negotiation stage of EU proposals. All benchmarked countries also require stakeholder engagement in the transposition stage (in the Czech Republic and Lithuania, only for some EU proposals). RIA is required at the negotiation stage of EU proposals in Estonia, Lithuania, Poland (for some EU proposals), and the Slovak Republic. (OECD, 2022[20]) Nonetheless, according to information obtained from Portuguese authorities in February 2023, the Technical Unit for Impact Assessment in Portugal has been involved in the RIA of EU proposals during the negotiation phase since the introduction of Decree‑Law No. 169‑B/2019.

← 71. Law No. 74/98. International best practice is to publish new regulation within a specified timeframe prior to its entry into force. In the context of the OECD Services Trade Restrictiveness Index, a period of 14 days is considered to be a reasonable time between publication and entry into force of regulation.

← 72. Spain‘s Civil Code (Royal Decree of 24July 1889). The minimum delay between publication and effective date of laws is 14 days in Poland (Act of 20July 2000) and 15 days in the Czech Republic (﷟Act No. 309/1999).

← 73. Moreover, Article 77 of Decree-Law No. 32/2022 provides that, as a general rule, normative acts that change the legal framework of legal persons can only enter into force every six months, on 1 January or 1 July each year.

← 74. Lithuania, Estonia, the Czech Republic and the Slovak Republic had faster proceedings than Portugal in civil and commercial cases in 2020 (EC, 2022[21]). In Portugal, the estimated time needed to resolve a litigious civil or commercial case was 280 days in the first instance, 99 days in the second instance and 126 days in the Supreme Court in 2020 (CEPEJ, 2022[22]).

← 75. Clearance rate refers to the ratio of the number of resolved cases over the number of incoming cases.

← 76. In 2020, the estimated time needed to resolve administrative cases in Portugal was 847 days in the first instance, 877 days in the second instance and 291 days in the Supreme Court (CEPEJ, 2022[22]). In comparison, in Lithuania (the best performer in the benchmark group), the lengths of proceedings were 112 days in first instance administrative courts and 282 days in the second instance.

← 77. Directorate‑General for Justice Policy, List of authorised arbitration centres, consulted on 15 March 2022. Arbitration in commercial matters is regulated by Law No. 63/2011 and Decree-Law No. 425/86. The Code of Procedure of Administrative Tribunals (Law No. 15/2002, Article 180) enables, among others, the use of arbitration to judge the validity of administrative acts, unless otherwise specified by law. The use of tax arbitration is regulated by Decree-Law No. 10/2011.

← 78. The commercial mediation regime is foreseen in Law No. 29/2013.

← 79. Portugal has already taken steps to improve the insolvency framework. An out-of-court regime for firm restructuring was established by Law No. 8/2018, and an early warning mechanism was introduced under Decree-Law No. 47/2019.

← 80. Draft law No. 108/XV/1 of 1 June 2022, approved on 22 December 2022.

← 81. Law No. 49/2004 and Law No. 145/2015. Parties may be represented by solicitors in cases where the appointment of a lawyer is not mandatory under the Code of Civil Procedure (Law No. 41/2013).

← 82. Law No. 145/2015. Law firms may not undertake their activity in association or integration with entities whose purpose is not exclusively the rendering of legal services. Similarly, professional societies of solicitors and enforcement agents may be formed by licensed solicitors and enforcement agents or other such professional societies registered with the Chamber (Law No. 154/2015).

← 83. Law No. 145/2015. By contrast, lawyers from other EU and EEA countries may exercise in Portugal under their home country title provided that they register with the Bar. EU/EEA lawyers may represent parties in court only in association with a Portuguese lawyer, unless they pass the Portuguese Bar exam in order to practice under the Portuguese title of lawyer.

← 84. For instance, Spain requires that in the area of domestic law, the majority of shares must be owned by locally licensed lawyers, the remaining equity participation being open to non-lawyers and foreign investors (Law 2/2007, Royal Decree 135/2021 and Law 34/2006). In the Czech Republic and the Slovak Republic, although ownership of law firms is fully reserved for licensed professionals in both domestic and international law, the recognition of foreign qualifications and hence obtaining a local license is not subject to a reciprocity condition (the Czech Republic’s Acts 85/1996 and 111/1998, and the Slovak Republic’s Acts 586/2003 and 422/2015).

← 85. Law No. 145/2015.

← 86. Decree-Law No. 425/99 with subsequent amendments.

← 87. Directive 2006/43/EC.

← 88. Law No. 140/2015.

← 89. For instance, due to requirements imposed by the EU Directive, auditors must have completed at least three years of practical training, of which at least two‑thirds shall be completed with a statutory auditor or an audit firm approved in any EU country. The requirement to complete training with an EU-approved auditor or audit firm represents a barrier for third-country professionals.

← 90. In addition, auditors registered with similar professional bodies in their home country may be admitted in the Portuguese Order of Chartered Accountants on a reciprocity basis.

← 91. The amendment was brought by Law No. 99-A/2021, in effect from 30 January 2022.

← 92. Decree‑Law No. 176/98, as amended by Law No. 113/2015, Articles 5 to 9. Regulation 350/2016, Article 4 and Annexes I and II. In theory, an applicant may be exempted of the traineeship requirement based on a reciprocity agreement between Portugal and the country of origin.

← 93. Decree‑Laws No. 119/92 and No. 349/99 with their respective subsequent amendments.

← 94. Decree-Law No. 78/2014.

← 95. The issuance of an operating license for an air carrier established in the EU is conditional on majority ownership and effective control of the air carrier by EU countries or nationals of EU countries. Regulation (EC) No 1008/2008.

← 96. Incumbent air carriers that operate at least 80% of their allocated take‑off and landing slots are allowed to retain the same slots from one season to another. New entrants only have access to the remaining slot pool. However, secondary trading of slots between air carriers is authorised. Council Regulation (EEC) No 95/93.

← 97. Decree-Law No. 9/2007.

← 98. At the Lisbon airport, for instance, the maximum number of night-time slots is 91 per week (Ordinance No. 259/2005). For information regarding other airports, see Portuguese Civil Aviation Authority, Operating Restrictions Related to Noise at Airports and Aerodromes.

← 99. In 2018, Warsaw airport introduced a prohibition of flights between 23:30 and 5:30. Warsaw Chopin Airport, consulted on 15 June 2022.

← 100. Decree-Law No. 7/2006.

← 101. Decree-Law No. 92/2018. The new provisions regulating ship registration, contained in chapter IV of the Decree‑Law, entered into force on 1 January 2019.

← 102. In Estonia and Poland, the registration of a ship under the national flag is conditional on it being majority-owned by nationals or legal persons of EU/EEA countries (Estonia’s Act of 11February 1998 and Poland’s Act No. 138/2001). Under Spanish law, individuals and legal entities residing or domiciled in an EEA country are entitled to register a vessel in the national registry (Royal Legislative Decree 2/2011). In Lithuania, ships owned by Lithuanian citizens and companies registered in Lithuania can register a ship under the national flag (Act No. I-1513 of 12September 1996). Under Estonia’s Act of 9December 1991 and Lithuania’s Act No. I‑1513, the provision of cabotage services is fully reserved for national or EU/EEA-flagged vessels, whereas Polish and Spanish legislation provide for the possibility to authorise foreign, non-EU/EEA flagged vessels to perform cabotage under specified, exceptional circumstances (Poland’s Act No. 138/2001 and Spain’s Royal Decree 1516/2007).

← 103. Commission communication C(2004) 43, Community guidelines on State aid to maritime transport.

← 104. Decree-Law No. 92/2018, Annex. Under the tonnage tax regime, taxable income is determined according to fixed rates based on the eligible ship’s net tonnage, instead of ordinary corporate income tax rules. The Decree‑Law also provides for an additional reduction of taxable income by 10%‑20% in the case of vessels with a tonnage exceeding 50 000 net tons that use mechanisms to preserve the marine environment and reduce the effects of climate change. The seafarer scheme refers to the special tax and social security benefits for crew members, introduced in the same Decree‑Law to reduce labour costs for eligible ships.

← 105. For instance, under Decree-Law No. 92/2018, the remuneration of crew members of ships considered for the purposes of the tonnage tax regime is exempt from personal income taxation. In the case of vessels carrying out regular passenger services between EEA ports, only crew members who are EU/EEA nationals can benefit from the tax exemption.

← 106. See C(2019) 8917 final (16 December 2019) on the Estonian tonnage tax scheme and seafarer scheme; C(2017) 2840 final (24 April 2017) on the Lithuanian tonnage tax scheme; C (2009) 10376 final (18 December 2009) on the Polish tonnage tax scheme; C (2019) 9217 final (16 December 2019) on the Polish seafarer scheme; C (2004) 1931 final (2 June 2004) on the Spanish tonnage tax scheme.

← 107. The share of crew members from other countries may exceed 40% in duly justified, exceptional cases. Decree-Law No. 166/2019, Article 68. The rules of the Decree‑Law do not apply to vessels registered in the International Ship Registry of Madeira.

← 108. Decree-Law No. 264/2012. See also OECD (2018[27]).

← 109. In addition, cumulative financial requirements imposed on private operators increase entry costs and may prevent particularly smaller providers from accessing the market (OECD, 2018[27]). Financial obligations imposed on service providers can consist of financial guarantees, minimum capital requirements and insurance requirements. See, for instance, Article 11 of Decree-Law No. 75/2001 regulating towing activity, and Articles 9 and 11 of Decree-Law No. 298/93 imposing financial requirements for cargo-handling operators.

← 110. Namely, once allocated, the transfer or trading of railway infrastructure capacity between operators is prohibited (Directive 2012/34/EU) and certain rail transportation agreements are exempted from the prohibitions on cartel agreements (Regulation (EC) No 169/2009).

← 111. Decree-Law No. 217/2015.

← 112. Regulation (EC) 1071/2009. Operators using solely vehicles with a laden mass not exceeding 2.5 tonnes, as well as operators engaging exclusively in national transport operation in their country of establishment by using solely vehicles with a laden mass not exceeding 3.5 tonnes, are exempted from the EU-level licensing requirement under the Regulation.

← 113. Regulation (EC) 1071/2009, Article 7. For each financial year, road transport operators must have at their disposal capital and reserves totalling at least EUR 9 000 for the first vehicle used, EUR 5 000 for each additional vehicle with a laden mass exceeding 3.5 tonnes and EUR 900 for each additional vehicle with a laden mass between 2.5 and 3.5 tonnes. Operators using exclusively light truck vehicles (between 2.5 and 3.5 tonnes) are subject to less stringent requirements: EUR 1 800 for the first vehicle and EUR 900 for each additional vehicle.

← 114. Decree-Law No. 257/2007, as amended by Decree‑Laws No. 137/2008 and 136/2009, Article 9.

← 115. Decree-Law No. 257/2007, as amended by Decree‑Laws No. 137/2008 and 136/2009, Article 6 provides that a transport manager may serve only one company, unless at least 50% of the share capital of each company belongs to the same shareholder. The scope of the criterion has been enlarged by Deliberation No. 1065/2012 of the Institute for Mobility and Transport, allowing operators to hire a transport manager in the capacity of owner, shareholder, manager, director or employee, in which case the transport manager can serve up to three companies; or hire an independent third party, in which case the third party transport manager can serve up to three companies with a combined maximum total fleet of 50 vehicles. Specific rules apply in the regions of Azores and Madeira by virtue of Regional Legislative Decrees No. 7/2010/A and 10/2009/M.

← 116. Decree-Law No. 255/99, as amended by Law No. 5/2013, Article 2 (freight forwarding). Decree-Law No. 152/2008, Article 16 (warehousing).

← 117. The Czech Republic’s Act No. 455/1991 Coll. Estonian Classification of Economic Activities database (consulted on 19 December 2022).

← 118. Under Regulation (EU) 952/2013, Article 211(2), the issuance of a license for the operation of storage facilities for customs warehousing is conditional on the existence of a proven economic need.

← 119. Law No. 112/2015, Article 102. Candidates from third countries may also be required to prove their knowledge of Portuguese language and take a local exam in order to register with the professional association, which is a prerequisite to practicing the profession.

← 120. Law No. 112/2015, Article 95.

← 121. Law No. 112/2015, Article 97.

← 122. Law No. 112/2015, Article 41. Customs brokers can advertise their professional activity, as long as advertising is carried out in an objective, truthful and dignified manner. The Law provides for a list of forms of advertising considered objective, truthful and dignified, such as contact information or areas of specialisation of the customs broker. Mentioning the quality of the custom’s broker’s services or promising certain results is considered illegal advertising.

← 123. Law No. 112/2015, Article 66.

← 124. Law No. 112/2015, Article 67. A security deposit, bank guarantee or insurance guarantee of EUR 49 879.79, and holding a professional civil liability insurance of at least EUR 50 000 is required. See OECD (2018[26]) for further details.

← 125. Decree-Law No. 110/2018 and Decree-Law No. 63/85.

← 126. Law No. 19/2012.

← 127. Law No. 24/96 and Decree-Law No. 84/2021.

← 128. Regulation (EU) 2016/679 and Law No. 58/2019.

← 129. Law No. 5/2004.

← 130. Decree-Law No. 7/2004.

← 131. Decree-Law No. 24/2014.

← 132. Article 18(2) of Directive (EU) 2016/1148, transposed by Article 2(3) of Law No. 46/2018.

← 133. ANACOM (2015) wholesale markets for voice call termination on individual mobile networks.

← 134. In the context of the OECD STRI, a duration of more than 36 months of the initial work or residence permit is considered international best practice.

← 135. The similarity of regulatory frameworks is assessed with the OECD STRI Regulatory Heterogeneity Indices, which measure the extent to which regulation, as recorded in the OECD STRI database, is similar in two countries. The lower these indices, the more similar are the rules in force in each country pair. The Regulatory Heterogeneity Indices do not indicate the level of openness to services trade and investment, but only the degree of similarity between the rulebooks of one country to those of another. For details, see Nordås (2016[33]).

← 136. The OECD Intra-EEA STRI Indices capture restrictions to trade and investment in services sectors within the Single Market. The indices illustrate the generalised level of homogeneity across EEA countries’ regulatory set-ups, arising from EU regulation. Differences in the indices across EEA countries are due to aspects regulated by domestic legislation, rather than at the EU level. The indices do not fully reflect differences in the degree to which EU countries transpose directives in their national legislation. For details regarding the methodology, see Benz and Gonzales (2019[41]).

← 137. The relative restrictiveness of the air transport sector for EEA air carriers might reflect the scope of the OECD STRI in air transport services. The STRI does not currently cover cross-border air transport, as the market segment is regulated via bilateral air transport agreements, which are not always publicly available. At the same time, cross-border air transport is the area where most liberalisation has focused.

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