On 14 May 2020, Laws no. 12/20 and 13/20 were published in the National Gazette, setting out the Local Tax and Financial Regime for Municipalities.

In view of the impact the relevant legislation may have on taxpayers – individuals and companies - we address below the most important aspects we understand should be highlighted.

Law no. 12/20 governs the relationship between taxpayers and the Municipalities in what concerns the obligation to pay local taxes, as well as the enactment of special contributions aimed at obtaining funds for the provision of services of general interest.

Said law clarifies the above local taxes are levied on services provided to taxpayers (companies and individuals), on any advantages generated by the activity of Municipalities, as well as on the removal of obstacles to the development of certain activities, namely:

• issuance of licenses, practice of administrative acts and other requests of a private nature;
• construction, maintenance and reinforcement of infrastructures;
• traffic and parking management; and
• management of public equipment for collective use.

Municipalities’ taxes are created by Regulation, which should set out its subjective and objective basis of incidence, the amount or the formula for assessing the local taxes to be charged, their economic and financial grounds and applicable exemptions, as well as the means of payments and other forms of extinction of the tax debt.

According to the Law, individuals and companies as well as other entities legally equivalent to them are deemed to be taxpayers, provided they are bounded to the payment of local taxes under the relevant law and the Regulations issued by the Municipalities.

The new legislation sets out the financial regime for Municipalities, establishing their financial and patrimonial independence.

According to Law no. 13/20, Real Estate Tax, Municipal Property Transfer Tax and the Circulation tax are some of the Municipalities’ revenues, among others.

Municipalities now have the authority to enact new local taxes and special contributions, being likewise entitled to enforce their collection under the Tax Seizure Code. 

The Tax Authorities shall provide to each Municipality the information regarding the settlement and collection of taxes respecting the same.