FINAL REPORT AUGUST 2002 Portugal
Contents Portugal Page 1. General remarks 1 1.1 History 1 1.2 Current situation 1 2. Key features of stock option plans 1 3. Taxation 2 3.1 Time of taxation 2 3.2 Taxable gain 2 3.3 Type of tax 2 3.4 Capital gains taxation 2 3.5 Tax consequences for the granting company 3 3.5.1 Social security contributions 3 3.5.2 Corporate tax deduction 4 3.5.3 Other 4 4. Issues for employees 4 4.1 Reporting obligations 4 4.2 Cashflow issues 5 4.3 Change in employee s residence status 5 5. Issues for employers 6 5.1 Reporting obligations 6 5.2 Withholding obligations 6
6. Legal issues 7 6.1 Process/timeframe 7 6.2 Employment law 7 6.3 Data protection 8 6.4 Stock exchange issues 9 6.5 Securities law 9 6.6 Financial assistance 10 6.7 Other 11 7. Sourcing shares for stock option plans 11 8. Role and influence of existing shareholders 12 9. Accounting 12 10. Miscellaneous 13 11. Special points of note 14 11.1 Mitigation of income tax 14 11.2 Mitigation of social security contributions 15 11.3 Mitigation of tax on sale of shares 15 11.4 Special provisions for SMEs 15
Portugal 1. General remarks 1.1 History 1.1.1 Stock options plans started to become more widely used in Portugal in around 1997, when a number of formerly State-owned companies were partially privatised. 1.1.2 Shares were offered to employees on attractive terms as part of the process. No specific tax law or regulatory conditions existed at that time. In the same period, employees of multinationals in Portugal also started to benefit from international stock plans. 1.1.3 Specific rules on the taxation of stock options were only introduced to the personal income tax legislation with the Budget Law for 2000. Up to 31 December 1999, there were no specific rules to determine the taxable amount 1 arising from stock options, but general rules were applied to any benefit provided by an employer to its employees as a result of the exercise of options. 1.1.4 There are no specific types of stock option plans approved by the tax authorities in Portugal. 1.2 Current situation 1.2.1 Stock option plans are increasingly being used by companies in Portugal (e.g. EDP, Portugal Telecom, Cimpor). Although no quantitative data is available. 1.2.2 We are not aware of any current discussions in academic, legal or political circles, on possible future changes to the taxation of share options in Portugal. 2. Key features of stock option plans 2.1 As there is no regulation regarding stock option plans, the features of a plan are at the total discretion of the grantor of the options except that regard must be had to the non-discrimination rules referred to in section 6. 2.2 There is no maximum term for which stock options must subsist. 1 Article 2 (3) c) 7), article 24 (4), article 119 (7) and (8), of the Personal income tax code. 4
2.3 There are no specific provisions setting out who may or may not be granted an option under a stock option plan, no specific provisions on treating employees equally and no restrictions on the nature of shares to be used under a plan. 5
2.4 A Portuguese company can be incorporated either as a corporation ("Sociedade Anónima" or SA) or as limited private company ("Sociedade por Quotas" or Lda. ). There are two other types of company, but they are rarely used. Only the statutory capital of an SA (minimum 50,000) is divided into shares. The statutory capital of an Lda is divided into quotas. Quotas are not securities and are not materialised in a document and they can only be transferred by a public deed, followed by commercial registration. 2.5 There are no restrictions on the value of shares over which options may be granted to employees. 3. Taxation 3.1 Time of taxation 3.1.1 There is no tax for an employee on the date of grant or vesting of an option 2. 3.1.2 There are no social security contributions liability for an employee on the grant, vesting or exercise of an option or on the sale of shares 3. 3.1.3 Tax will be charged on an employee at the date of exercise of an option 4. 3.2 Taxable gain 3.2.1 The difference between the Fair Market Value ( FMV ) of the shares at the date of exercise and the exercise price is taxable as employment income and subject to personal income tax 5. 3.2.2 There is no direct provision in Portuguese tax legislation for a situation where an employee has paid money for the grant of a share option, but does not then go on to exercise the option. However, in principle, the payment will be forfeited without any deduction being available. 3.3 Type of tax 3.3.1 Income tax is charged on the taxable benefit arising at exercise at progressive rates varying from 12% to 40% for tax resident individuals and 25% for non-resident individuals. No withholding income tax is due on this income. 3.4 Capital gains taxation 2 3 4 5 Article 2 (3) c) 7) and article 24 of the Personal income tax code. We have obtained a general ruling from the social security authorities Article 2 (3) c) 7) and article 24 of the Personal income tax code. Articles 24, 68, 71 (2) c) and 98 of the Personal income tax code 6
3.4.1 The gain will be the difference between the sale price and the share s FMV at exercise. 7
3.4.2 In 2001, a fiscal reform was introduced. The main aim of the reform, to take effect from 1 January 2003, is to reduce taxation on employment income by increasing taxation on capital gains. 3.4.3 For shares acquired up to 31 December 2002 and held for more than twelve months, the capital gain arising on sale is exempt from tax. 3.4.4 For shares acquired up to 31 December 2002 and held for less than twelve months, the capital gain arising on sale is subject to tax at a special rate of 10% 6. 3.4.5 For shares acquired from 1 January 2003, 50% of the capital gain arising on the subsequent sale of those shares will be subject to income tax at the progressive rates in force regardless of how long the shares were held. The first 2,500 of capital gain will be exempt from income tax, but should be disclosed on the annual tax return for the purpose of determining the tax rate applicable to the total taxable income. 3.4.6 As from 1 January 2003, if the disposal of shares is made through a financial institution in Portugal, any capital gains exceeding the above limit are liable to a withholding tax at a rate of 10%. 3.4.7 There is no social security contributions liability on sale. 3.4.8 If the shares are sold at a loss, the loss can be offset against other capital gains in the year. The balance between capital gains and losses on the disposal of shares will be liable to tax as described in 3.4.2 to 3.4.6 above 7. 3.4.9 The loss cannot be offset against other income in the year 8. 3.4.10 The loss can be carried forward for offset against future gains. Capital losses arising from the disposal of shares acquired up to 31 December 2002 can only be offset against capital gains for a period of two years. For shares acquired as from 1 January 2003, this period will be increased to five years 9. 3.4.11 There is no wealth tax in Portugal. 3.5 Tax consequences for the granting company 3.5.1 Social security contributions 6 4.1.1-4.1.3 Article 43(3) of the Personal Income tax code and Article 30(9) of the Portuguese Budget Law for 2002 7 Article 43 (1) of the Personal Income tax code 8 Article 55 (5) of the Personal Income tax code 9 Article 55 (5) of the Personal Income tax code 8
3.5.1.1 There will be no social security contributions liability for the employer on the grant of an option, when an option vests, on the exercise of an option or on the sale of shares 10. 10 We have obtained a general ruling from the social security authorities 9
3.5.2 Corporate tax deduction 3.5.2.1 The corporate tax code does not have specific provisions for costs arising from share option plans. The employing company will be entitled to claim a deduction against its profits for corporation tax for the costs of a stock option plan, provided it is duly documented for corporation tax purposes 11 and duly accounted for as staff costs 12. This applies equally to options satisfied by newly issued shares and by shares bought on the market. 3.5.2.2 Any costs properly documented and incurred by the company to generate its profits will be tax deductible against those profits 13. Both administration costs and the difference between the value of the shares at exercise and the exercise price should be deductible provided the conditions in 3.5.2.1 are satisfied. 3.5.2.3 Costs should be deducted against the company s profits of the year in which they are incurred. There are no deadlines for claiming the deduction or any special procedures for making a claim. 3.5.2.4 If costs are recharged to/from another group company, transfer pricing legislation, introduced in 2002, requires documentary support demonstrating the arms length basis of the inter-company transactions 14. There are no further conditions that must be satisfied in order for payments pursuant to a recharge agreement to be deductible. 3.5.3 Other 3.5.3.1 VAT and Stamp Duty have no impact on the operation of stock option plans in Portugal. 4. Issues for employees 4.1 Reporting obligations 4.1.1 Employees will have no reporting obligations in relation to the grant of an option or at the time an option vests 15. 4.1.2 The employee will have a reporting obligation in relation to the exercise of an option 16. 11 12 13 14 15 16 Article 42(1)(g) of the Corporate tax code Article 23 of the Corporate tax code Articles 23 and 42 (1) g) of the Corporate tax code Article 58 of the Personal income tax code and Decree 1446-C/2001 of 21 December Article 2 (3) c) 7) and article 24 of the Personal income tax code Articles 57 and 60 of the Personal income tax code 10
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4.1.3 At year end, any benefit arising from the exercise of a stock option, being the difference between the FMV of the shares at the date of exercise and the exercise price, should be reported. This is reported on the individual s annual income tax return together with other employment income. 4.1.4 Portuguese personal income tax returns are due to be filed by 15 March in the year following the tax year in question (a tax year is the year to 31 December), if only employment income or pensions is to be disclosed, or 30 April of the year following the tax year in question, in all other cases. 4.1.5 Employees will have reporting obligations in relation to the sale of the shares 17. Details of the acquisition date and price paid for the shares, as well as the sale date and price received will have to be disclosed. Regardless of whether the capital gain arising from the disposal of shares is within the 2,500 exemption or not, if available, the capital gain should be disclosed on the individual s annual tax return. 4.1.6 Any tax due on the capital gain will have to be paid within one month of a tax assessment being issued for a particular tax year. If the disposal of shares is made through a financial institution in Portugal, any capital gains exceeding the exemption limit will be liable to withholding tax at a rate of 10%, which will be considered as a payment on account. 4.2 Cashflow issues 4.2.1 As withholding does not apply to the tax arising on exercise of options (see section 5.2), cashflow issues for employees do not generally arise. 4.3 Change in employee s residence status 4.3.1 The income tax and social security contributions positions will not be different if the employee is tax resident at the exercise of the option but was not tax resident at the date the option was granted 18. 4.3.2 Non residents in Portugal are taxable only on their income from a Portuguese source, which includes employment income arising from an activity exercised or borne by a permanent establishment in Portugal. Therefore, if at exercise the individual is not resident in Portugal, the benefit arising from the exercise will only be subject to taxation if any costs are borne by the Portuguese entity. Non tax residents are only subject to taxation on the portion of income borne by the Portuguese entity. The tax legislation does not provide any methodology for apportioning this income and the tax authorities will therefore accept any justifiable methodology. 17 18 Article 57 of the Personal income tax code Article 2 (3) c) 7) and articles 15, 71 (2) c) of the Personal income tax code 12
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5. Issues for employers 5.1 Reporting obligations 5.1.1 The local employer will have no reporting obligations in relation to the grant of an option or at the time an option vests 19. 5.1.2 The local employer will have reporting obligations in relation to the exercise of an option 20. This involves filing a standard form (which is not yet published) detailing information on the benefits earned by each employee as a result of a stock option plan. This must be filed by 30 June of the year following the end of each tax year. 5.1.3 If the cost of the option is recharged to a Portuguese employing subsidiary, a record of the employees entitled to stock option benefits, their taxpayers numbers and benefit amounts should be kept. 5.1.4 The record must also contain information on the date of exercise of stock options, the date of sale or date of any waiver of the option by the employee or date of the reacquisition of the shares by the company, if applicable, and the exercise/waiver or reacquisition prices 21. The information should be reported using a standard form which is yet to be published. In practice, until this is done, many companies will not report. 5.1.5 A copy of each employee s individual information should be given to him or her by 20 January of the following year. 5.1.6 The local employer will have no reporting obligations in relation to the sale of the shares. 5.2 Withholding obligations 5.2.1 The local employer will have no withholding obligation in relation to the grant of an option or at the time an option vests 22. 5.2.2 The local employer will have no withholding obligation in relation to the exercise of an option. It is the employee s responsibility to pay the tax after he has received an assessment from the tax authorities. 19 20 21 22 Article 119 (8) of the Personal income tax code Article 119 (7) and (8) of the Personal income tax code Article 119 (7) and (8) of the Personal income tax code Article 2 (3) c) 7) and article 24 of the Personal income tax code 14
5.2.3 The local employer will have no withholding obligation in relation to the sale of the shares 23. 6. Legal issues 6.1 Process/timeframe 6.1.1 There are no specific legal requirements that may affect the award of share options in Portugal. The timescale of implementation varies depending on the documentation that needs to be prepared, translated and reviewed, and the scope of the necessary data protection filings. Taking these factors into consideration, a timescale of six months is likely. 6.1.2 Shareholders do not have to be consulted specifically in relation to stock option plans however some matters that may be incidental in the running of such a plan must be approved by a general shareholders meeting, such as a capital increase. 6.2 Employment law 6.2.1 The company s Works Council has the right to be informed of the main features of the plan. 6.2.2 There are no other regulatory or official bodies that require notification or consultation at any stage. 6.2.3 In Portugal, equality and sex non discrimination rules need to be considered in relation to the grant of options 24. 6.2.4 If an employee has been granted stock options and is subsequently dismissed, Portuguese legislation and case law are unclear. There is a risk that the employee may acquire rights to participate in the plan in future years and that benefits acquired under the plan will form part of the employee s remuneration. 6.2.5 In view of the comments above, it should be expressed clearly to the employee, in writing, that a stock option plan does not form part of his salary. It should also be made clear in writing that participation in a plan does not create any obligations on an employer to grant similar benefits in the future. Documentation should also state that the employee recognises the absolute right of the employer to amend, suspend, or terminate the plan without conferring any right to the employee to claim an indemnity. 6.2.6 No other labour law issues affect the operation of stock option plans in Portugal. 23 24 Article 99 (1) of the Personal income tax code Law n. 105/97, of 13 September Decree-Law n. 392/79, of 20 of September 15
6.3 Data protection 6.3.1 The treatment of personal data is subject to notification to, or authorisation from, the Portuguese Commission for the Protection of Data ( CNPD ) 25. 6.3.2 The non authorisation/notification of/to the CNPD when due may be sanctioned with fines ranging from 1,500 to 15,000; if the non compliance with the data protection rules is intentional, there is a potential penalty of one year s imprisonment. 6.3.3 Where a company is concerned, the person criminally liable will be a member of the company s corporate bodies, (i.e. the bodies that form, execute and control the company s decisions). 6.3.4 Besides the fine and potential imprisonment, accessory sanctions may be applied, e.g. definitive or temporary prohibition on the collection of data, publicity of the court sentence and the advertisement or public censure of the company. 6.3.5 There is no official information on how strictly the penalties are enforced. 6.3.6 Portugal s data protection legislation requires that the data subject (i.e., the employee) gives his or her unambiguous consent to the collection and transfer of personal data at the time of collection, except if processing is necessary: For the performance of a contract or contracts to which the data subject is a party, or to take steps at the request of the data subject prior to entering into a contract or a declaration of his willingness to negotiate. For compliance with a legal obligation to which the controller (i.e. the person in charge of the data processing) is subject. In order to protect the vital interests of the data subject if the latter is physically or legally incapable of giving his consent. For the performance of a task carried out in the public interest or in the exercise of official authority vested in the controller or in a third party to whom the data are disclosed. For pursuit of the legitimate interests of the controller or the third party to whom the data are disclosed, except where such interests should be 25 Law 67/98, of 26 of October, that transposes to the Portuguese law the Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995. 16
overridden in the interest of fundamental rights, freedoms and guarantees of the data subject. 17
6.3.7 At the time of collection, employees must be informed of: The nature of the data that are being collected. The purpose of its collection and processing. Whether this data will be transferred to any third party (including inter-group transfers, as the companies of the group are separate entities). Whether the data will be transferred outside the data subject s home jurisdiction. 6.3.8 In addition, the employee must be informed of the principal features and structure of the database and must authorise the transfer. 6.3.9 In case of transfer to a non-eu country, the express and unambiguous consent of the employee is required, which means that it should be obtained in writing. 6.4 Stock exchange issues 6.4.1 A company wishing to implement a stock option plan in Portugal does not require shareholder approval. However, with a stock option plan that involves a capital increase, a shareholder resolution is required. Details of the capital increase should be submitted to, and approved at, a shareholders general meeting. Shareholders have the right to be informed, on request, in a way that allows them to form an opinion regarding the matters subject to discussion 26. 6.4.2 There are no restrictions on employees holding foreign shares (or options over foreign shares) 27. 6.5 Securities law 6.5.1 There are no securities law restrictions on the number of individuals who can participate in a stock option plan. 6.5.2 Portuguese companies quoted on the Portuguese Stock Exchange must communicate to the Portuguese Securities Market Commission ( CMVM ) about all share plans and option plans for the benefit of their employees or to the members of their management bodies 28. 26 27 28 Portuguese Companies Code Article 85; Article 288 to 291 and Article 377 Portuguese Companies Code CMVM regulation n. 7/2001 18
6.5.3 The deadline for meeting this obligation is 15 days from the date of the approval of the plan by either the board of directors or the shareholders (depending on who, according to the company s articles, has the power to approve a plan) 29. 6.5.4 If a company fails to comply with the above requirement, a fine ranging between 12,500 and 1,250,000 may be applicable. 6.5.5 Portuguese securities law does not contain specific rules regarding stock options plans. 6.5.6 CMVM has recently issued an opinion stating that stock options plans are not considered to be an offer of securities until options are effectively exercisable. Therefore, compliance with securities regulations should take place when the options become exercisable by the employees. 6.5.7 Only when the options become exercisable does the issue of determining whether the offer is a public or a private offer of securities arise. Until then there are no securities law requirements to be met. 6.5.8 Stock option plans are deemed to be considered private offers, and not public offers, if they are addressed to a group of less than 200 employees either; Through a verbal presentation in which the terms and conditions are described; or The communication material setting out the terms of the offer is sent individually and separately to each employee in an individualised communication, such that no one else, apart from those employees, will have access to that material. If instead, the offer is addressed to the employees generally, for example, an announcement published in a newspaper, the rules of public offers will be applicable. 6.5.9 For private offers a subsequent communication to CMVM must be made within ten working days of the purchase of shares. 6.5.10 Public offer procedures with CMVM should be initiated three or four months before the date of the beginning of the subscription period. 6.6 Financial assistance 6.6.1 In Portugal, there are prohibitions on a company giving financial assistance for the purchase of its own shares. A company cannot give loans, or by other means, give funds or guarantees to a third person in order to allow him to subscribe, or by other 29 Portuguese Securities Code 19
means, acquire shares representing the company s share capital. There is an exemption if the operation relates to the acquisition of shares by or for the company s personnel or personnel of related companies. However, these operations cannot result in the net equity value becoming lower than the sum of the legal reserves plus the amount of the subscribed share capital 30. 6.6.2 Failure to comply means that the company directors or managers in breach of the rule are subject to a fine of up to 120 days. The fine will be decided by a judge who will also establish a value per day the person in question will have to pay. If the fine is not paid there may be up to 120 days imprisonment 31. 6.7 Other 6.7.1 There are no foreign exchange control issues to consider in Portugal. 6.7.2 Transfers of shares 6.7.2.1 To enable an employee transfer his shares, there may be an agreement made between the employee and the offeror which should set out the terms and conditions of the transfer of the shares, as well as the penalties for noncompliance 32. 6.7.2.2 Generally, there are no costs associated with the transfer of shares for OTC (over the counter) transactions. However, if shares admitted to negotiation on a regulated market are transferred over the counter, the seller and the buyer must pay a fee of 1 per mil (i.e., 1/1000 th ) of the value of the total operation. 6.7.3 Trusts 6.7.3.1 In Portugal, the use of trusts is only recognised in relation to the Madeira free zone. Trusts are not commonly used in conjunction with employee stock option plans. 6.7.3.2 The scope of activity of the trust cannot have a financial nature. The setting up and the operation of a trust in Madeira is subject to the authorisation of the autonomous government of Madeira. Trusts are subject to set up costs and annual operation fees. 7. Sourcing shares for stock option plans 7.1 A Portuguese company may source shares to satisfy the exercise of an option by either issuing new shares or using shares it has purchased on the market. 30 31 32 Portuguese Companies Code Article 322 Portuguese Companies Code Article 510 Portuguese Companies Code 20
7.2 A company may not subscribe for its own shares, however it may hold or acquire shares representing a maximum of 10% of its share capital; provided the company s Bylaws do not prohibit it 33. 7.3 However, Portuguese law allows the 10% limit to be exceeded in the following situations: The acquisition results from a legal requirement. The acquisition results from a capital reduction resolution. A no-consideration (free) acquisition. The acquisition results from an executive process in order to recover credits from third persons or by means of an agreement made in a law suit that was proposed for the same scope. The acquisition results from a process established by the law or by the company s Bylaws in case of non-liquidation of the shares by its subscribers 34. 7.4 Portuguese law prohibits a subsidiary under a dependent relationship from acquiring shares of its parent company (even if the parent is a foreign company), except for a no-consideration (free) acquisition, awarding of shares pursuant to a lawsuit proposed against debtors or if the acquisition results from the division of other companies in which the subsidiary was a partner. In these cases the shares acquired by the subsidiary are considered to be own shares of the parent company 35. 7.5 Under Portuguese law, two companies are in a dependent relationship when one (dominant) may exercise, directly or indirectly, on the other (dependent) a dominant influence. The law considers that a company depends on another when the latter holds in the former: The majority participation in its share capital; More than 50% of the voting rights; or The possibility to elect more than 50% of the board of directors or of the supervisory board. 33 34 35 Portuguese Companies Code Article 316 and Article 317 Portuguese Companies Code Portuguese Companies Code Article 486 and Article 487 21
8. Role and influence of existing shareholders 8.1 Shareholders have a minimal role stock option plans and their approval is only required if a capital increase is needed for the purposes of operating the plan. 9. Accounting 9.1 If a company has acquired its own shares and is holding them in treasury pending exercise, then if a loss is expected at exercise, a provision is made in the Profit & Loss account (or if the company chooses, against equity). On exercise, the difference between the purchase cost and the exercise price paid by the employee is recorded in equity. This is mandatory and at this stage any provision in the Profit & Loss account or equity is then reversed. 9.2 Since the ultimate result of the transaction is shown in equity, companies tend to view this favorably because these costs are not stated in the Profit & Loss account. Auditors may consider it more prudent to put the charge through the Profit & Loss account. 9.3 If shares are issued on option exercise, which is unusual in Portugal, then strictly under Portuguese standards, there would be no profit or loss. However, if IAS 32 is applied (IASs are applicable in Portugal if no specific accounting standard exists), then, generally, the position is the same for options satisfied by shares purchased in the market. 9.4 With regard to accounting for shares held by a trust, if the trustees are only the custodians and the ultimate risk and rewards are with the company, they are stated as own shares reducing the equity. 10. Miscellaneous 10.1 Tax revenues from employee share option plans are not used for a specific purpose. 10.2 When the options are exercised, employees obtain their shares by way of a book entry or certificate depending on whether they are represented by registrations in an account or by paper documents. Securities are nominative or bearer, depending on whether the issuer has the ability to be constantly informed of the identity of the respective holders. 10.3 Bearer securities are transferred by handing over the certificate to the transferee or to the depository indicated by the transferee. If the securities have already been 22
deposited with the depository indicated by the purchaser, the transfer takes place through registration in the latter s account, which is effective from the date of application for registration. 10.4 Nominative shares are transferred by a declaration of transfer, written on the security in favour of the transferee, followed by registration by the issuer or by the financial intermediary representing it. 10.5 The individual registration of book entry securities consists of: An account opened with a financial intermediary which is integrated in a centralized system. An account opened with a single financial intermediary indicated by the issuer. An account opened with the issuer or financial intermediary that represents it. 10.6 Book entry securities admitted to trade in regulated markets are necessarily integrated into the centralised system. When securities are not integrated in a centralised system, the following securities are compulsorily registered with a single financial intermediary: Bearer book entry securities. Securities distributed through public offer and other securities belonging to the same category. Securities issued jointly by more than one entity. 10.7 Nominative book entry securities not integrated in a centralised system, nor registered with a financial intermediary are registered with the issuer. 10.8 The deposit of certified securities is made: With an authorised financial intermediary on the initiative of the holder; or With a centralised system, in the cases required by law or at the issuer s initiative. 10.9 Certificated securities are necessarily deposited: With a centralised system, when they are admitted to trade in a regulated market. 23
With a financial intermediary or centralised system, when the entire issue or series is represented by a single certificated security. 10.10 The depositing entity must keep the registration accounts separated by holder. 11. Special points of note 11.1 Mitigation of income tax 11.1.1 There are no provisions under which income tax that accrues over a number of years may be mitigated. 11.1.2 However, given the favourable capital gains tax treatment available in Portugal, a plan that gives immediate share ownership to employees may prove advantageous. Such a plan could be structured so that the company guarantees to repurchase the shares from the employee at a later date. If such a repurchase is at FMV there is no gain subject to income tax for the employee, but the capital gains tax rules will apply. 11.2 Mitigation of social security contributions 11.2.1 Social tax mitigation is not relevant in Portugal. 11.3 Mitigation of tax on sale of shares 11.3.1 Mitigation is available if shares acquired up to 31 December 2002 are held for more than twelve months. Under these circumstances, no tax liability would arise 36. 11.4 Special provision for SMEs 11.4.1 There are no special stock option plan provisions for SMEs in Portugal. Note: Individual country reports have been prepared covering employee stock options in the EU and the USA. These individual reports are of a general nature and subject to change based on individual circumstances. PricewaterhouseCoopers has also provided the EU with an overview report. This overview report sets out the basis on which the individual reports were prepared and should be referred to as necessary. In particular, it should be noted that the information in the reports is current as at 1 January 2002, unless otherwise stated. In the case of certain known subsequent changes, 36 Article 30 (9) of the Portuguese Budget Law for 2002 24
reference may be made on occasion but a full update exercise has not been carried out. Further information can be obtained from PricewaterhouseCoopers. 25