The Portuguese Tax Authorities (“PTA”) have issued a new understanding – Circular no. 2/2021 of March 3, 2021 – regarding the controversial issue of Property Tax on wind and solar power stations, this way revoking the previous Circular no. 8/2013, of October 4 (which, despite only concerning wind power stations, has been being applied to solar power stations).
Under the previous Circular, the PTA considered that the isolated elements making up wind power stations – e.g., wind turbines; substations – should be classified as urban properties (other) subject to Property Tax.
In this new Circular, the PTA change their understanding by considering that it is the set of elements making up wind and solar power stations (including the fraction of the land in which they are installed, as long as the land is part of the estate of the owner of the respective power station) that qualifies as a property, which should be classified as an urban industrial property, also subject to Property Tax.
It should be noted that the previous understanding of the PTA has been consistently challenged before the Portuguese Courts – namely, the Supreme Administrative Court -, which have issued consistent case law in the sense that the elements making up the power stations cannot, on their own, be classified as properties for lacking "economic autonomy" and, consequently, they cannot be subject to Property Tax. Notwithstanding, the Courts leave open the possibility for the power stations themselves, as a whole, to be classified as properties (since they are the ones which create economic value).
In this context, the PTA have now issued the Circular no. 2/2021, by which it changed its position, sustaining that it is the set of elements making up the power stations (including in some cases the land) that should qualify as a property with economic autonomy, as "the thing (the power station as a whole) has an economic value that comes from the fact that, under normal circumstances, it supports the production of an economic good tradable on the market: electricity". Under the PTA’ new perspective that property should be classified as an urban industrial property, being evaluated accordingly (considering the whole set of elements making up the power station) and subject to Property Tax, as such.
Finally, it is important to point out that the taxpayer of the Property Tax on the urban industrial property (the power station) is the owner of the station, which may not coincide with the owner of the land.