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IS IT POSSIBLE TO DEMAND DEBTOR TO PAY INTERESTS AND COMPENSATION FOR DEBT COLLECTION COSTS?

 The first stage in any hard collection process is to issue a final notice to the debtor whereby the debtor is requested to pay the principal amount together with any statutory or agreed (a supplier and purchaser can make their own arrangements) penalty interest or compensation for collection costs. The final notice can be oral, but it is better to put it in writing as it makes it easier to prove that notice has been sent. Under Portuguese law, the creditor has the right to claim interest and compensation for debt collection costs.

Statutory right to interest
According to Decree-Law no. 62/2013, of 10 May (under the European Directive 2011/7/UE combating late payments in commercial transactions), creditors have the statutory right to claim interest for late payment at the European Central Bank base rate plus 7%. Interest is normally payable from the end of the agreed credit period. If no credit period was agreed, interest is payable 30 days from the later of:
- The date of supply, or;
- The date the buyer was told the amount due;
- The conclusion of any procedure for checking that the goods conform to the contract (and the procedure itself cannot take more than 30 days).
If concerns to a public authority, interest will be payable after 30 days, even if a longer payment date was agreed (except for health care providers, concerning these entities the period may be 60 days).

Compensation for debt collection costs
The creditor is also entitled to compensation for recovery costs for a minimum sum of  €40 without the need for a formal request. Notwithstanding, the creditor has the possibility of providing evidence that he incurred in a reasonable amount of higher costs (in particular lawyers’ and paralegals’ fees), and claiming for a higher compensation.

In brief, when is the case of a commercial supply of goods and services, for invoices that are not paid on time, the creditor can claim interests and debt collection costs.

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WHAT IS THE MOST COMMON FORM OF SECURITY TAKEN OVER REAL ESTATE IN PORTUGAL?

There is three standard security taken over real estate: voluntary mortgage, retention of title and seizure. Concerning mortgage, it should be formalised through public deed or by a certified private document. To produce its legal effects, a mortgage must be registered at the land registry office. As for the retention of title, it should be incorporated using a duly authenticated contract or public deed and is also subject to registration at the land registry office so it can be used against any third parties. Finally, a seizure is done through a lawsuit and is not subject to specific conditions. The mortgage is by far the most widely used security.

WHAT IS A PLEDGE?

A Pledge is a security for an obligation to ensure that payment will be made by selling some specific assets of the debtor. Under Portuguese law, a pledge (penhor) may be created over cash or fungible securities. To be valid, a pledge depends on delivery of the asset or assets to the creditor or the third party as a trustee or bailee. There are two types of pledge: civil and commercial. A commercial pledge is a pledge between entities or individuals subject to the regulations of the Commercial Code. These will be individuals with the capacity to carry out commercial acts or entities that engage in commercial activities. In general, the requirements for a civil pledge are somewhat stricter than those for a commercial pledge. A civil or commercial pledge may be used depending on the status of the parties. In practice, a civil pledge is more likely to be used.

I FOUND THAT THE PROPERTY I PURCHASED HAS DEFECTS, WHAT CAN I DO NOW?

Every consumer purchase is covered by a mandatory legal guarantee. As long as you are a consumer, no seller can claim otherwise. Legally, the property must not suffer from any defect which has a negative impact on its value or which renders its regular use impossible. If these warranties are breached, the consumer can choose between repair, replacement, refund or a price reduction. However, the buyer must notify the seller of defects within one year of their discovery. If the property is newly built, the purchaser will also benefit from a five-year warranty period. According to Art. 1225 of the Civil Code, the seller is liable for damages in respect of certain defects during five years, if he has also constructed, repaired or modified the building.

Corporate tax rate reduction

The State Budget for 2015 lowered the corporate income tax rate to 21% (it was 23%). Corporate tax is a tax levied on profits derived by both resident and non-resident entities. This decrease corresponds to a loss of tax revenue of around EUR 200 million. The aim is to create conditions to attract foreign investment. It is important to note however the adding of the state tax (between 3% and 5%, depending on the amount of taxable income) and the municipal surcharge (up to 1.5%) wich give a real tax rate of around 25%.

NUMBER OF NEW COMPANIES RISES

Business formation with new businesses having been started in Portugal went up in 2017. Over 3,687 new companies were registered in Lisbon (14.5% more than in 2016), while Porto registered 7,107 new firms (5% up on the previous year). On the other hand, business failures in Portugal fell 12.7% in 2017 compared with 2016 to 6,284, while the number of new companies being set up rose 9.1%, to 40,465. Lisbon and Porto saw the highest number of bankruptcies – 1,683 and 1,330 respectively, but these were still 2.4% and 15.4% lower than in 2016.