45890 Country Profile for Portugal © 2008 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org e-mail feedback@worldbank.org All rights reserved. 1 2 3 4 08 07 06 05 A copublication of the World Bank and the International Finance Corporation. This volume is a product of the staff of the World Bank Group. The findings, interpretations and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. 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For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank 1818 H Street NW Washington, DC 20433, USA fax: 202-522-2422 e-mail: pubrights@worldbank.org Additional copies of Doing Business 2009, Doing Business 2008, Doing Business 2007 : How to Reform, Doing Business in 2006 : Creating Jobs, Doing Business in 2005 : Removing Obstacles to Growth and Doing Business in 2004 : Understanding Regulations may be purchased at www.doingbusiness.org ISBN: 978-0-8213-7609-6 E-ISBN: 978-0-8213-7610-2 DOI: 10.1596/978-0-8213-7609-6 Current features News on the Doing Business project www.doingbusiness.org Rankings How economies rank-from 1 to 181 www.doingbusiness.org/economyrankings Reformers Contents Short summaries of DB2009 reforms, lists of reformers since DB2004 and a ranking simulation tool www.doingbusiness.org/reformers Introduction 1 and Aggregate Rankings Data time series Customized data sets since DB2004 Starting a Business 5 www.doingbusiness.org/customquery Dealing with 10 Methodology and research Construction Permits The methodologies and research papers underlying Doing Business www.doingbusiness.org/MethodologySurveys Employing Workers 15 Blog Registering Property 19 Online journal focusing on business regulation reform http://blog.doingbusiness.org Getting Credit 24 Downloads Doing Business reports as well as subnational, country and regional Protecting Investors 28 reports and case studies www.doingbusiness.org/downloads Paying Taxes 32 Subnational projects Trading across Borders 36 Differences in business regulations at the subnational level www.doingbusiness.org/subnational Enforcing Contracts 40 Law library Closing a Business 44 Online collection of business laws and regulations www.doingbusiness.org/lawlibrary DB2009 Reforms 48 Local partners More than 6,700 specialists in 181 economies who participate www.doingbusiness.org/LocalPartners Reformers' Club Celebrating the top 10 Doing Business reformers www.reformersclub.org Business Planet Interactive map on the ease of doing business http://www.doingbusiness.org/map Doing Business 2009 is the sixth in a series of annual reports investigating regulations that enhance business activity and those that constrain it. Doing Business presents quantitative indicators on business regulations and the protection of property rights that can be compared across 181 economies, from Afghanistan to Zimbabwe, over time. A set of regulations affecting 10 stages of a business's life are measured : starting a business, dealing with construction permits, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing a business. Data in Doing Business 2009 are current as of June 1, 2008*. The indicators are used to analyze economic outcomes and identify what reforms have worked, where, and why. The Doing Business methodology has limitations. Other areas important to business such as an economy's proximity to large markets, the quality of its infrastructure services (other than those related to trading across borders), the security of property from theft and looting, the transparency of government procurement, macroeconomic conditions or the underlying strength of institutions, are not studied directly by Doing Business. To make the data comparable across economies, the indicators refer to a specific type of business, generally a local limited liability company operating in the largest business city. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. The data not only highlight the extent of obstacles to doing business; they also help identify the source of those obstacles, supporting policymakers in designing reform. The data set covers 181 economies: 46 in Sub-Saharan Africa, 32 in Latin America and The Caribbean, 25 in Eastern Europe and Central Asia, 24 in East Asia and Pacific, 19 in the Middle East and North Africa and 8 in South Asia, as well as 27 OECD high-income economies as benchmarks. The following pages present the summary Doing Business indicators for Portugal. The data used for this country profile come from the Doing Business database and are summarized in graphs. These graphs allow a comparison of the economies in each region not only with one another but also with the "good practice" economy for each indicator. The good-practice economies are identified by their position in each indicator as well as their overall ranking and by their capacity to provide good examples of business regulation to other countries. These good-practice economies do not necessarily rank number 1 in the topic or indicator, but they are in the top 10. More information is available in the full report. Doing Business 2009 presents the indicators, analyzes their relationship with economic outcomes and recommends reforms. The data, along with information on ordering the report, are available on the Doing Business website (www.doingbusiness.org). * Except for the Paying Taxes indicator that refers to the period January to December of 2007. 1 Economy Rankings - Ease of Doing Business Portugal is ranked 48 out of 181 economies. Singapore is the top ranked economy in the Ease of Doing Business. Portugal - Compared to global good practice economy as well as selected economies: Portugal's ranking in Doing Business 2009 Rank Doing Business 2009 Ease of Doing Business 48 Starting a Business 34 Dealing with Construction Permits 128 Employing Workers 164 Registering Property 79 Getting Credit 109 Protecting Investors 38 Paying Taxes 73 Trading Across Borders 33 Enforcing Contracts 34 2 Closing a Business 21 Summary of Indicators - Portugal Starting a Business Procedures (number) 6 Duration (days) 6 Cost (% GNI per capita) 2.9 Paid in Min. Capital (% of GNI per capita) 34.3 Dealing with Construction Permits Procedures (number) 21 Duration (days) 328 Cost (% of income per capita) 53.5 Employing Workers Difficulty of Hiring Index 33 Rigidity of Hours Index 60 Difficulty of Firing Index 50 Rigidity of Employment Index 48 Firing costs (weeks of salary) 95 Registering Property Procedures (number) 5 Duration (days) 42 Cost (% of property value) 7.4 Getting Credit Legal Rights Index 3 Credit Information Index 4 Public registry coverage (% adults) 76.4 Private bureau coverage (% adults) 11.3 Protecting Investors Disclosure Index 6 3 Protecting Investors Director Liability Index 5 Shareholder Suits Index 7 Investor Protection Index 6.0 Paying Taxes Payments (number) 8 Time (hours) 328 Profit tax (%) 14.1 Labor tax and contributions (%) 26.8 Other taxes (%) 2.7 Total tax rate (% profit) 43.6 Trading Across Borders Documents for export (number) 6 Time for export (days) 16 Cost to export (US$ per container) 685 Documents for import (number) 7 Time for import (days) 16 Cost to import (US$ per container) 999 Enforcing Contracts Procedures (number) 34 Duration (days) 577 Cost (% of claim) 14.2 Closing a Business Time (years) 2.0 Cost (% of estate) 9 Recovery rate (cents on the dollar) 69.4 When entrepreneurs draw up a business plan and try to get under way, the first hurdles they face are the procedures required to incorporate and register the new firm before they can legally operate. Economies differ greatly in how they regulate the entry of new businesses. In some the process is straightforward and affordable. In others the procedures are so burdensome that entrepreneurs may have to bribe officials to speed the process or may decide to run their business informally. The data on starting a business is based on a survey and research investigating the procedures that a standard small to medium-size company needs to complete to start operations legally. These include obtaining all necessary permits and licenses and completing all required inscriptions, verifications and notifications with authorities to enable the company to formally operate. The time and cost required to complete each procedure under normal circumstances are calculated, as well as the minimum capital that must be paid in. It is assumed that all information is readily available to the entrepreneur, that there has been no prior contact with officials and that all government and nongovernment entities involved in the process function without corruption. To make the data comparable across economies, detailed assumptions about the type of business are used. Among these assumptions are the following: the business is a limited liability company conducting general commercial activities in the largest business city; it is 100% domestically owned, with a start-up capital of 10 times income per capita, a turnover of at least 100 times income per capita and between 10 and 50 employees; and it does not qualify for any special benefits, nor does it own real estate. Procedures are recorded only where interaction is required with an external party. It is assumed that the founders complete all procedures themselves unless professional services (such as by a notary or lawyer) are required by law. Voluntary procedures are not counted, nor are industry-specific requirements and utility hook-ups. Lawful shortcuts are counted. Cumbersome entry procedures are associated with more corruption, particularly in developing economies. Each procedure is a point of contact, a potential opportunity to extract a bribe. Analysis shows that burdensome entry regulations do not increase the quality of products, make work safer or reduce pollution. Instead, they constrain private investment; push more people into the informal economy; increase consumer prices and fuel corruption. 5 1. Historical data: Starting a Business in Portugal Starting a Business data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 40 34 Procedures (number) 8 7 6 Duration (days) 8 7 6 Cost (% GNI per capita) 4.3 3.4 2.9 Paid in Min. Capital (% of GNI per capita) 38.7 34.7 34.3 2. The following graphs illustrates the Starting a Business indicators in Portugal over the past 3 years: 6 3. Steps to Starting a Business in Portugal It requires 6 procedures, takes 6 days, and costs 2.87 % GNI per capita to start a business in Portugal. List of Procedures: 1. Choose a pre-approved company name 2. Register at the one-stop shop 3. Register with the Social Security Regional Center 4. Deposit initial capital 5. Report to the Labor Inspectorate 6. Register the compulsory workmen's accident compensation insurance at a private insurer More detail is included in the appendix. 7 4. Benchmarking Starting a Business Regulations: Portugal is ranked 34 overall for Starting a Business. Ranking of Portugal in Starting a Business - Compared to good practice and selected economies: 8 The following table shows Starting a Business data for Portugal compared to good practice and comparator economies: Good Practice Procedures Duration Cost (% GNI Paid in Min. Economies (number) (days) per capita) Capital (% of GNI per capita) Denmark 0.0 New Zealand* 1 1 0.0 Selected Economy Portugal 6 6 2.9 34.3 Comparator Economies Austria 8 28 5.1 52.8 Belgium 3 4 5.2 19.9 France 5 7 1.0 0.0 Germany 9 18 5.6 42.2 Greece 15 19 10.2 19.6 Italy 6 10 18.5 9.7 * The following economies are also good practice economies for : Procedures (number): Canada 9 Once entrepreneurs have registered a business, what regulations do they face in operating it? To measure such regulation, Doing Business focuses on the construction sector. Construction companies are under constant pressure; from government to comply with inspections and with licensing and safety regulations and from customers to be quick and cost-effective. These conflicting pressures point to the tradeoff in building regulation; the tradeoff between protecting people (construction workers, tenants, passersby) and keeping the cost of building affordable. Striking the right balance is a challenge when it comes to construction regulations. Good regulations ensure safety standards that protect the public while making the permitting process efficient, transparent and affordable for both building authorities and the private professionals who use it. If procedures are overly complicated or costly, builders build without a permit, leading to hazardous construction. The indicators on dealing with construction permits record all procedures officially required for an entrepreneur in the construction industry to build a warehouse. These include submitting project documents (building plans, site maps) to the authorities, obtaining all necessary licenses and permits, completing all required notifications and receiving all necessary inspections. They also include procedures for obtaining utility connections, such as electricity, telephone, water and sewerage. The time and cost to complete each procedure under normal circumstances are calculated. All official fees associated with legally completing the procedures are included (bribes not included). Time is recorded in calendar days. The survey assumes that the entrepreneur is aware of all existing regulations and does not use an intermediary to complete the procedures unless required to do so by law. To make the data comparable across economies, several assumptions about the business and its operations are used. The business is a small to medium-size limited liability company, located in the most populous city, domestically owned and operated, in the construction business, with 60 qualified employees. The warehouse to be built: · Is a new construction (there was no previous construction on the land). · Has 2 stories, both above ground, with a total surface of approximately 1,300.6 square meters (14,000 square feet). Each floor is 3 meters (9 feet, 10 inches) high · Has complete architectural and technical plans prepared by a licensed architect. · Will be connected to electricity, water, sewerage (sewage system, septic tank or their equivalent) and one land phone line. The connection to each utility network will be 32 feet, 10 inches (10 meters) long. · Will be used for general storage, such as of books or stationery. The warehouse will not be used for any goods requiring special conditions, such as food, chemicals or pharmaceuticals. · Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). Where the regulatory burden is large, entrepreneurs move their activity into the informal economy. There they operate with less concern for safety, leaving everyone worse off. 10 1. Historical data: Dealing with Construction Permits in Portugal Dealing with Construction Permits data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 115 128 Procedures (number) 20 20 21 Duration (days) 327 327 328 Cost (% of income per capita) 60.3 54.0 53.5 2. The following graphs illustrates the Dealing with Construction Permits indicators in Portugal over the past 3 years: 11 3. Steps to Building a Warehouse in Portugal It requires 21 procedures, takes 328 days, and costs 53.47 % GNI per capita to build a warehouse in Portugal. List of Procedures: 1. Obtain approval in principle of project design 11. Submit application for an electricity connection at the power authority 2. Obtain approval of project designs from City Hall and other relevant entities 12. Submit application for a telephone line at the telecommunications authority 3. Obtain building permit (Alvará) and pay fee 13. Receive inspection by water and sewerage authority 4. Inform the labor inspection agency about the new construction site 14. Receive inspection by power authority 5. Notify City Hall when reaching plinth level in the 15. Receive inspection by telecommunications authority construction and receive site inspection 16. Receive inspection by fire department 6. Notify City Hall before proceeding with concrete work and receive inspection 17. Obtain water and sewerage connection 7. Receive inspection from Labor authority 18. Obtain electricity connection 8. Apply for occupancy permit and pay fees 19. Obtain phone connection 9. Request inspection by fire department 20. Receive inspection and obtain occupancy permit 10. Submit application for a water and sewage connection Register the building with the real estate registry at the water and sewage authority 21. 12 More detail is included in the appendix. 4. Benchmarking Dealing with Construction Permits Regulations: Portugal is ranked 128 overall for Dealing with Construction Permits. Ranking of Portugal in Dealing with Construction Permits - Compared to good practice and selected economies: * The following economies are also good practice economies for Building a Warehouse: Belize, New Zealand, St. Vincent and the Grenadines 13 The following table shows Dealing with Construction Permits data for Portugal compared to good practice and comparator economies: Good Practice Procedures Duration Cost (% of Economies (number) (days) income per capita) Denmark 6 Korea 34 Malaysia* 7.9 Selected Economy Portugal 21 328 53.5 Comparator Economies Austria 13 194 70.4 Belgium 14 169 65.2 France 13 137 23.8 Germany 12 100 62.2 Greece 15 169 46.4 Italy 14 257 136.4 * The following economies are also good practice economies for : Cost (% of income per capita): Brunei, Palau, Qatar, St. Kitts and Nevis, Trinidad and Tobago, United Arab Emirates 14 Economies worldwide have established a system of laws and institutions intended to protect workers and guarantee a minimum standard of living for its population. This system generally encompasses four bodies of law: employment, industrial relations, social security and occupational health and safety laws. Doing Business examines government regulation in the area of employment. Two measures are presented: a rigidity of employment index and a firing cost measure. The rigidity of employment index is the average of three subindices: difficulty of hiring, rigidity of hours and difficulty of firing. Each index takes values between 0 and 100, with higher values indicating more rigid regulation. The difficulty of hiring index measures the flexibility of contracts and the ratio of the minimum wage to the value added per worker. The rigidity of hours index covers restrictions on weekend and night work, requirements relating to working time and the workweek, and mandated days of annual leave with pay. The difficulty of firing index covers workers' legal protections against dismissal, including the grounds permitted for dismissal and procedures for dismissal (individual and collective): notification and approval requirements, retraining or reassignment obligations and priority rules for dismissals and reemployment. The firing cost indicator measures the cost of advance notice requirements, severance payments and penalties due when terminating a redundant worker, expressed in weeks of salary. To make the data comparable across economies, a range of assumptions about the worker and the company are used. The company is assumed to be a limited liability manufacturing corporation that operates in the economy's most populous city, is 100% domestically owned and has 201 employees. The company is also assumed to be subject to collective bargaining agreements in economies where such agreements cover more than half the manufacturing sector and apply even to firms not party to them. Employment regulations are needed to allow efficient contracting between employers and workers and to protect workers from discriminatory or unfair treatment by employers. In its indicators on employing workers, Doing Business measures flexibility in the regulation of hiring, working hours and dismissal in a manner consistent with the conventions of the International Labour Organization (ILO). An economy can have the most flexible labor regulations as measured by Doing Business while ratifying and complying with all conventions directly relevant to the factors measured by Doing Business and with the ILO core labor standards. No economy can achieve a better score by failing to comply with these conventions. Governments all over the world face the challenge of finding the right balance between worker protection and labor market flexibility. But in developing countries especially, regulators often err to one extreme, pushing employers and workers into the informal sector. Analysis across economies shows that while employment regulation generally increases the tenure and wages of incumbent workers, overly rigid regulations may have undesirable side effects. These include less job creation, smaller company size, less investment in research and development, and longer spells of unemployment and thus the obsolescence of skills, all of which may reduce productivity growth. When economies err on the side of excessive rigidity, it is to the detriment of businesses and workers alike. 15 1. Historical data: Employing Workers in Portugal Employing Workers data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 164 164 Rigidity of Employment Index 48 48 48 Firing costs (weeks of salary) 95 95 95 2. The following graphs illustrates the Employing Workers indicators in Portugal over the past 3 years: 16 3. Benchmarking Employing Workers Regulations: Portugal is ranked 164 overall for Employing Workers. Ranking of Portugal in Employing Workers - Compared to good practice and selected economies: * The following economies are also good practice economies for Employing Workers: Marshall Islands, Singapore 17 The following table shows Employing Workers data for Portugal compared to good practice and comparator economies: Good Practice Rigidity of Firing costs Economies Employment (weeks of Index salary) Hong Kong, China* 0 New Zealand* 0 Selected Economy Portugal 48 95 Comparator Economies Austria 33 2 Belgium 20 16 France 56 32 Germany 44 69 Greece 51 24 Italy 38 11 * The following economies are also good practice economies for : Rigidity of Employment Index: Maldives, Marshall Islands, Singapore, United States Firing costs (weeks of salary): Afghanistan, Denmark, Iraq, Marshall Islands, Micronesia, Palau, Puerto Rico, Tonga, United States 18 Formal property titles help promote the transfer of land, encourage investment and give entrepreneurs access to formal credit markets. But a large share of property in developing economies is not formally registered. Informal titles cannot be used as security in obtaining loans, which limits financing opportunities for businesses. Many governments have recognized this and started extensive property titling programs. But bringing assets into the formal sector is only part of the story. The more difficult and costly it is to formally transfer property, the greater the chances that formalized titles will quickly become informal again. Eliminating unnecessary obstacles to registering and transferring property is therefore important for economic development. Doing Business records the full sequence of procedures necessary for a business (buyer) to purchase a property from another business (seller) and to transfer the property title to the buyer's name. The property of land and building will be transferred in its entirety. The transaction is considered complete when the buyer can use the property as collateral for a bank loan. Local property lawyers and officials in property registries provide information on required procedures as well as the time and cost to complete each one. For most economies the data are based on responses from both. Based on the responses, three indicators are constructed. · Number of procedures to register property. · Time to register property (in calendar days). · Official costs to register property (as a percentage of the property value). Many titling programs in Africa were futile because people bought and sold property informally, neglecting to update the title records in the property registry. Why? Doing Business shows that completing a simple formal property transfer in the largest business city of an African economy cost 10% of the value of the property and takes on average 90 days. Worse, the property registries are so poorly organized that they provide little security of ownership. Efficient property registration reduces transaction costs and helps to formalize property titles. Simple procedures to register property are also associated with greater perceived security of property rights and less corruption. That benefits all entrepreneurs, especially women, the young and the poor. The rich have few problems protecting their property rights. They can afford to invest in security systems and other measures to defend their property. But small entrepreneurs cannot. Reform can change this. Twenty-four economies made it easier to register property in 2007/08. The most popular reform: lowering the cost of registration by reducing the property transfer tax, registration fees or stamp duty. 19 1. Historical data: Registering Property in Portugal Registering Property data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 71 79 Procedures (number) 5 5 5 Duration (days) 81 42 42 Cost (% of property value) 7.4 7.4 7.4 2. The following graphs illustrates the Registering Property indicators in Portugal over the past 3 years: 20 3. Steps to Registering Property in Portugal It requires 5 procedures, takes 42 days, and costs 7.39 % of property value to register the property in Portugal. List of Procedures: 1. Request an information certificate on the property at the Registry 2. Request a tax clearance certificate on the property 3. Payment of the real property transfer tax 4. Formalize the sale and purchase public deed 5. Register the property at the Real Property Registry More detail is included in the appendix. 21 4. Benchmarking Registering Property Regulations: Portugal is ranked 79 overall for Registering Property. Ranking of Portugal in Registering Property - Compared to good practice and selected economies: * The following economies are also good practice economies for Registering Property: Georgia, Saudi Arabia 22 The following table shows Registering Property data for Portugal compared to good practice and comparator economies: Good Practice Procedures Duration Cost (% of Economies (number) (days) property value) New Zealand* 2 Norway* 1 Saudi Arabia 0.0 Selected Economy Portugal 5 42 7.4 Comparator Economies Austria 3 32 4.5 Belgium 7 132 12.7 France 9 113 6.3 Germany 4 40 5.2 Greece 11 22 3.8 Italy 8 27 0.6 * The following economies are also good practice economies for : Procedures (number): Sweden Duration (days): Saudi Arabia, Sweden, Thailand 23 Firms consistently rate access to credit as among the greatest barriers to their operation and growth. Doing Business constructs two sets of indicators of how well credit markets function: one on credit registries and the other on legal rights of borrowers and lenders. Credit registries, institutions that collect and distribute credit information on borrowers, can greatly expand access to credit. By sharing credit information, they help lenders assess risk and allocate credit more efficiently. And they free entrepreneurs from having to rely on personal connections alone when trying to obtain credit. Three indicators are constructed to measure the sharing of credit information: · Depth of credit information index, which measures the extent to which the rules of a credit information system facilitate lending based on the scope of information distributed, the ease of access to information and the quality of information. · Public registry coverage, which reports the number of individuals and firms covered by a public credit registry as a percentage of the adult population. · Private bureau coverage, which reports the number of individuals and firms, covered by a private credit bureau as a percentage of the adult population. The strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. This year, three main changes were made; first, a standardized case scenario with specific assumptions was introduced to bring this indicator into line with other Doing Business indicators. Second, the indicator now focuses not on tangible movable collateral, such as equipment, but on revolving movable collateral, such as accounts receivable and inventory. Third, the indicator no longer considers whether management remains in place during a reorganization procedure, better accommodating economies that adopt reorganization procedures. The strength of legal rights index includes 8 aspects related to legal rights in collateral law and 2 aspects in bankruptcy law: · Any business may use movable assets as collateral while keeping possession of the assets, and any financial institution may accept such assets as collateral. · The law allows a business to grant a non possessory security right in a single category of revolving movable assets, without requiring a specific description of the secured assets. · The law allows a business to grant a non possessory security right in substantially all of its assets, without requiring a specific description of the secured assets. · A security right may extend to future or after-acquired assets and may extend automatically to the products, proceeds or replacements of the original assets. · General description of debts and obligations is permitted in collateral agreements and in registration documents, so that all types of obligations and debts can be secured by stating a maximum rather than a specific amount between the parties. · A collateral registry is in operation that is unified geographically and by asset type and that is indexed by the name of the grantor of a security right. · Secured creditors are paid first when a debtor defaults outside an insolvency procedure or when a business is liquidated. · Secured creditors are not subject to an automatic stay or moratorium on enforcement procedures when a debtor enters a court-supervised reorganization procedure. · The law allows parties to agree in a collateral agreement that the lender may enforce its security right out of court. 24 1. Historical data: Getting Credit in Portugal Getting Credit data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 102 109 Legal Rights Index 3 3 3 Credit Information Index 4 4 4 Public registry coverage (% adults) 72.0 67.1 76.4 Private bureau coverage (% adults) 9.1 11.3 11.3 2. The following graphs illustrates the Getting Credit indicators in Portugal over the past 3 years: 25 3. Benchmarking Getting Credit Regulations: Portugal is ranked 109 overall for Getting Credit. Ranking of Portugal in Getting Credit - Compared to good practice and selected economies: 26 The following table shows Getting Credit data for Portugal compared to good practice and comparator economies: Good Practice Legal Rights Credit Public Private Economies Index Information registry bureau Index coverage (% coverage (% adults) adults) Malaysia* 10 New Zealand* 100.0 Portugal 76.4 United Kingdom 6 Selected Economy Portugal 3 4 76.4 11.3 Comparator Economies Austria 7 6 1.3 40.9 Belgium 7 4 57.7 0.0 France 7 4 28.3 0.0 Germany 7 6 0.7 98.4 Greece 3 4 0.0 39.0 Italy 3 5 11.8 74.9 * The following economies are also good practice economies for : Legal Rights Index: Hong Kong, China, Kenya, Singapore Private bureau coverage (% adults): Argentina, Australia, Canada, Iceland, Ireland, Nicaragua, Norway, Sweden, United Kingdom, United States 24 countries have the highest credit information index. 27 Companies grow by raising capital, either through a bank loan or by attracting equity investors. Selling shares allows companies to expand without the need to provide collateral and repay bank loans. But investors worry about their money, and look for laws that protect them. A study finds that the presence of legal and regulatory protections for investors explains up to 73% of the decision to invest. In contrast, company characteristics explain only between 4% and 22%*. Good protections for minority shareholders are associated with larger and more active stock markets. Thus both governments and businesses have an interest in reforms strengthening investor protections. To document some of the protections investors have, Doing Business measures how economies regulate a standard case of self-dealing, use of corporate assets for personal gain. The case facts are straightforward. Mr. James, a director and the majority shareholder of a public company, proposes that the company purchase used trucks from another company he owns. The price is higher than the going price for used trucks. The transaction goes forward. All required approvals are obtained, and all required disclosures made, though the transaction is prejudicial to the purchasing company. Shareholders sue the interested parties and the members of the board of directors. Several questions arise. Who approves the transaction? What information must be disclosed? What company documents can investors access? What do minority shareholders have to prove to get the transaction stopped or to receive compensation from Mr. James? Three indices of investor protection are constructed based on the answers to these and other questions. All indices range from 0 to 10, with higher values indicating more protections or greater disclosure. · The extent of disclosure index covers approval procedures, requirements for immediate disclosure to the public and shareholders of proposed transactions, requirements for disclosure in periodic filings and reports and the availability of external review of transactions before they take place. · The extent of director liability index covers the ability of investors to hold Mr. James and the board of directors liable for damages, the ability to rescind the transaction, the availability of fines and jail time associated with self-dealing, the availability of direct or derivative suits and the ability to require Mr. James to pay back his personal profits from the transaction. · The ease of shareholder suits index covers the availability of documents that can be used during trial, the ability of the investor to examine the defendant and other witnesses, shareholders' access to internal documents of the company, the appointment of an inspector to investigate the transaction and the standard of proof applicable to a civil suit against the directors. These three indices are averaged to create the strength of investor protection index. This index ranges from 0 to 10, with higher values indicating better investor protection. *Doidge, Kardyi and Stulz (2007) 28 1. Historical data: Protecting Investors in Portugal Protecting Investors data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 33 38 Investor Protection Index 6.0 6.0 6.0 2. The following graph illustrates the Protecting Investors index in Portugal compared to best practice and selected Economies: 7.9 0.7 0.6 7.5 3.5 0.5 0.4 3.3 d ce e w Zealan um Italy eec Belgi Portugal Fran rmany Ge Austria Gr Ne Note: The higher the score, the greater the investor protection. 29 3. Benchmarking Protecting Investors Regulations: Portugal is ranked 38 overall for Protecting Investors. Ranking of Portugal in Protecting Investors - Compared to good practice and selected economies: 30 The following table shows Protecting Investors data for Portugal compared to good practice and comparator economies: Good Practice Investor Economies Protection Index New Zealand 9.7 Selected Economy Portugal 6.0 Comparator Economies Austria 4.0 Belgium 7.0 France 5.3 Germany 5.0 Greece 3.3 Italy 5.7 31 Taxes are essential. Without them there would be no money to provide public amenities, infrastructure and services which are crucial for a properly functioning economy. But particularly for small and medium size companies, they may opt out and choose to operate in the informal sector. One way to enhance tax compliance is to ease and simplify the process of paying taxes for such businesses. The Doing Business tax survey records the effective tax that a small and medium company must pay and the administrative costs of doing so. Imagine a medium-size business, TaxpayerCo, that started operations last year. Doing Business asks tax practitioners in 181 economies to review TaxpayerCo's financial statements and a standard list of transactions that the company completed during the year. Respondents are asked how much in taxes and mandatory contributions the business must pay and what the process is for doing so. The business starts from the same financial position in each economy. All the taxes and mandatory contributions paid during the second year of operation are recorded. Taxes and mandatory contributions are measured at all levels of government and include corporate income tax, turnover tax, all labor taxes and contributions paid by the company (including mandatory contributions paid to private pension or insurance funds), property tax, property transfer tax, dividend tax, capital gains tax, financial transactions tax, vehicle tax, sales tax and other small taxes (such as fuel tax, stamp duty and local taxes). A range of standard deductions and exemptions are also recorded. Three indicators are constructed: · Number of tax payments, which takes into account the method of payment, the frequency of payments and the number of agencies involved in our standardized case study. · Time, which measures the number of hours per year necessary to prepare and file tax returns and to pay the corporate income tax, value added tax, sales tax or goods and service tax and labor taxes and mandatory contributions. · Total tax rate, which measures the amount of taxes and mandatory contributions payable by the company during the second year of operation. This amount, expressed as a percentage of commercial profit, is the sum of all the different taxes payable after accounting for various deductions and exemptions. Businesses care about what they get for their taxes and contributions, such as the quality of infrastructure and social services. Efficient tax systems tend to have less complex tax arrangements, comprising of straightforward compliance procedures and clear laws. Taxpayers in such economies often get more from their taxes. Simple, moderate taxes and fast, cheap administration mean less hassle for businesses, and also more revenue collected and better public services. More burdensome tax regimes create an incentive to evade taxes. 32 1. Historical data: Paying Taxes in Portugal Paying Taxes data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 70 73 Time (hours) 328 328 328 Total tax rate (% profit) 45.2 44.8 43.6 Payments (number) 8 8 8 2. The following graphs illustrates the Paying Taxes indicators in Portugal over the past 3 years: 33 3. Benchmarking Paying Taxes Regulations: Portugal is ranked 73 overall for Paying Taxes. Ranking of Portugal in Paying Taxes - Compared to good practice and selected economies: * The following economies are also good practice economies for Paying Taxes: Maldives, Qatar 34 The following table shows Paying Taxes data for Portugal compared to good practice and comparator economies: Good Practice Payments Time (hours) Total tax rate Economies (number) (% profit) Luxembourg* 59 Sweden* 2 Vanuatu 8.4 Selected Economy Portugal 8 328 43.6 Comparator Economies Austria 22 170 54.5 Belgium 11 156 58.1 France 11 132 65.4 Germany 16 196 50.5 Greece 10 224 47.4 Italy 15 334 73.3 * The following economies are also good practice economies for : Payments (number): Maldives, Qatar Time (hours): Bahamas, Bahrain, Maldives, Qatar, United Arab Emirates 35 The benefits of trade are well documented; as are the obstacles to trade. Tariffs, quotas and distance from large markets greatly increase the cost of goods or prevent trading altogether. But with bigger ships and faster planes, the world is shrinking. Global and regional trade agreements have reduced trade barriers. Yet Africa's share of global trade is smaller today than it was 25 years ago. So is the Middle East's, excluding oil exports. Many entrepreneurs face numerous hurdles to exporting or importing goods, including delays at the border. They often give up. Others never try. In fact, the potential gains from trade facilitation may be greater than those arising from only tariff reductions. Doing Business compiles procedural requirements for trading a standard shipment of goods by ocean transport. Every procedure and the associated documents, time and cost, for importing and exporting the goods is recorded, starting with the contractual agreement between the two parties and ending with delivery of the goods. For importing the goods, the procedures measured range from the vessel's arrival at the port of entry to the shipment's delivery at the importer's warehouse. For exporting the goods, the procedures measured range from the packing of the goods at the factory to their departure from the port of exit. Payment is by letter of credit and the time and cost for issuing or securing a letter of credit is taken into account. To make the data comparable across countries, several assumptions about the business and the traded goods are used. The business is of medium size, employs 60 people, and is located in the periurban area of the economy's most populous city. It is a private, limited liability company, domestically owned, formally registered and operating under commercial laws and regulations of the economy. The traded goods are ordinary, legally manufactured products transported in a dry-cargo, 20-foot FCL (full container load) container. Documents recorded include port filing documents, customs declaration and clearance documents, as well as official documents exchanged between the parties to the transaction. Time is recorded in calendar days, from the beginning to the end of each procedure. Cost includes the fees levied on a 20-foot container in U.S. dollars. All the fees associated with completing the procedures to export or import the goods are included, such as costs for documents, administrative fees for customs clearance and technical control, terminal handling charges and inland transport. The cost measure does not include tariffs or duties. Economies that have efficient customs, good transport networks and fewer document requirements, making compliance with export and import procedures faster and cheaper, are more competitive globally. That can lead to more exports; and exports are associated with faster growth and more jobs. Conversely, a need to file many documents is associated with more corruption in customs. Faced with long delays and frequent demands for bribes, many traders may avoid customs altogether. Instead, they smuggle goods across the border. This defeats the very purpose in having border control of trade to levy taxes and ensure high quality of goods. 36 1. Historical data: Trading Across Borders in Portugal Trading Across Borders data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 32 33 Documents for export (number) 6 6 6 Time for export (days) 16 16 16 Cost to export (US$ per container) 580 580 685 Documents for import (number) 7 7 7 Time for import (days) 16 16 16 Cost to import (US$ per container) 994 994 999 2. The following graphs illustrates the Trading Across Borders indicators in Portugal over the past 3 years: 37 3. Benchmarking Trading Across Borders Regulations: Portugal is ranked 33 overall for Trading Across Borders. Ranking of Portugal in Trading Across Borders - Compared to good practice and selected economies: 38 The following table shows Trading Across Borders data for Portugal compared to good practice and comparator economies: Good Practice Documents Time for Cost to Documents Time for Cost to Economies for export export (days) export (US$ for import import (days) import (US$ (number) per (number) per container) container) Denmark* 5 France 2 2 Malaysia 450 Singapore 3 439 Selected Economy Portugal 6 16 685 7 16 999 Comparator Economies Austria 4 7 1125 5 8 1125 Belgium 4 8 1619 5 9 1600 France 2 9 1078 2 11 1248 Germany 4 7 822 5 7 887 Greece 5 20 1153 6 25 1265 Italy 5 20 1305 5 18 1305 * The following economies are also good practice economies for : Time for export (days): Estonia, Singapore 39 Where contract enforcement is efficient, businesses are more likely to engage with new borrowers or customers. Doing Business tracks the efficiency of the judicial system in resolving a commercial dispute, following the step-by-step evolution of a commercial sale dispute before local courts. The data is collected through study of the codes of civil procedure and other court regulations as well as through surveys completed by local litigation lawyers (and, in a quarter of the countries, by judges as well). The dispute concerns a contract for the sale of goods between two businesses (the Seller and the Buyer) both located in the economy's largest business city. The Seller sells and delivers goods, worth 200% of the economy's income per capita, to the Buyer. The Buyer refuses to pay on the grounds that they were not of adequate quality. The Seller sues the Buyer to recover the amount under the sales agreement (200% of the economy's income per capita). The claim is filed before a court in the economy's largest business city with jurisdiction over commercial cases worth 200% of the income per capita and is disputed on the merits. Judgment is 100% in favor of the Seller and is not appealed. Seller enforces the judgment and the money is successfully collected through a public sale of Buyer's assets. Rankings on enforcing contracts are based on 3 sub-indicators: · Number of procedures, which are defined as any interaction between the parties or between them and the judge or court officer. This includes steps to file the case, steps for trial and judgment and steps necessary to enforce the judgment. · Time, which counts the number of calendar days from the moment the Seller files the lawsuit in court until payment is received. This includes both the days on which actions take place and the waiting periods in between. · Cost, which is recorded as a percentage of the claim (assumed to be equivalent to 200% of income per capita). Three types of costs are recorded: court costs (including expert fees), enforcement costs (including costs for a public sale of Buyer's assets) and attorney fees. Justice delayed is often justice denied. And in many economies only the rich can afford to go to court. For the rest, justice is out of reach. In the absence of efficient courts, firms undertake fewer investments or business transactions. And they prefer to involve only a small group of people who know each other from previous dealings. 40 1. Historical data: Enforcing Contracts in Portugal Enforcing Contracts data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 37 34 Procedures (number) 35 35 34 Duration (days) 577 577 577 Cost (% of claim) 14.2 14.2 14.2 2. The following graphs illustrates the Enforcing Contracts indicators in Portugal over the past 3 years: 41 3. Benchmarking Enforcing Contracts Regulations: Portugal is ranked 34 overall for Enforcing Contracts. Ranking of Portugal in Enforcing Contracts - Compared to good practice and selected economies: 42 The following table shows Enforcing Contracts data for Portugal compared to good practice and comparator economies: Good Practice Procedures Duration Cost (% of Economies (number) (days) claim) Iceland* 6.2 Ireland 20 Singapore 150 Selected Economy Portugal 34 577 14.2 Comparator Economies Austria 25 397 18.0 Belgium 25 505 16.6 France 30 331 17.4 Germany 30 394 14.4 Greece 39 819 14.4 Italy 41 1210 29.9 * The following economies are also good practice economies for : Cost (% of claim): Bhutan 43 The economic crises of the 1990s in emerging markets--from East Asia to Latin America, from Russia to Mexico--raised concerns about the design of bankruptcy systems and the ability of such systems to help reorganize viable companies and close down unviable ones. In countries where bankruptcy is inefficient, unviable businesses linger for years, keeping assets and human capital from being reallocated to more productive uses. The Doing Business indicators identify weaknesses in the bankruptcy law as well as the main procedural and administrative bottlenecks in the bankruptcy process. In many developing countries bankruptcy is so inefficient that the parties hardly ever use it. In countries such as these, reform would best focus on improving contract enforcement outside bankruptcy. The data on closing a business are developed using a standard set of case assumptions to track a company going through the step-by-step procedures of the bankruptcy process. It is assumed that the company is a domestically owned, limited liability corporation operating a hotel in the country's most populous city. The company has 201 employees, 1 main secured creditor and 50 unsecured creditors. Assumptions are also made about the debt structure and future cash flows. The case is designed so that the company has a higher value as a going concern--that is, the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. The data are derived from questionnaires answered by attorneys at private law firms. Three measures are constructed from the survey responses: the time to go through the insolvency process, the cost to go through the process and the recovery rate--how much of the insolvency estate is recovered by stakeholders, taking into account the time, cost, depreciation of assets and the outcome of the insolvency proceeding. Bottlenecks in bankruptcy cut into the amount claimants can recover. In countries where bankruptcy laws are inefficient, this is a strong deterrent to investment. Access to credit shrinks, and nonperforming loans and financial risk grow because creditors cannot recover overdue loans. Conversely, efficient bankruptcy laws can encourage entrepreneurs. The freedom to fail, and to do so through an efficient process, puts people and capital to their most effective use. The result is more productive businesses and more jobs. 44 1. Historical data: Closing Business in Portugal Closing a Business data Doing Business 2007 Doing Business 2008 Doing Business 2009 Rank 20 21 Time (years) 2.0 2.0 2.0 Cost (% of estate) 9 9 9 Recovery rate (cents on the dollar) 75.0 74.0 69.4 2. The following graphs illustrates the Closing Business indicators in Portugal over the past 3 years: 45 3. Benchmarking Closing Business Regulations: Portugal is ranked 21 overall for Closing a Business. Ranking of Portugal in Closing Business - Compared to good practice and selected economies: 46 The following table shows Closing Business data for Portugal compared to good practice and comparator economies: Good Practice Recovery rate Time (years) Cost (% of Economies (cents on the estate) dollar) Ireland 0.4 Japan 92.5 Singapore* 1 Selected Economy Portugal 69.4 2.0 9 Comparator Economies Austria 71.5 1.1 18 Belgium 86.3 0.9 4 France 44.7 1.9 9 Germany 52.2 1.2 8 Greece 44.2 2.0 9 Italy 56.6 1.8 22 * The following economies are also good practice economies for : Cost (% of estate): Colombia, Kuwait, Norway 47 Number of reforms in Doing Business 2009 Positive Reform Borders Negative Reform Construction Total Businessa Workers Property Investors number with Credit Across Contracts Taxes Businessa of reforms Rank Economy Starting Dealing Permits Employing Registering Getting Protecting Paying Trading Enforcing Closing 1 Azerbaijan 7 2 Albania 4 3 Kyrgyz Republic 3 4 Belarus 6 5 Senegal 3 6 Burkina Faso 4 7 Botswana 3 8 Colombia 5 9 Dominican Republic 4 10 Egypt 6 Portugal 3 Austria 1 Belgium 1 France 2 Germany 2 Italy 2 Greece 4 Note: Economies are ranked on the number and impact of reforms, Doing Business selects the economies that reformed in 3 or more of the Doing Business topics. Second, it ranks these economies on the increase in rank in Ease of Doing Business from the previous year. The larger the improvement, the higher the ranking as a reformer. 48 Albania Albania, a top reformer globally and regionally, established a public credit registry allowing financial institutions to share credit information and covering 8.3 percent of the adult population. This reform allows banks to better evaluate the creditworthiness of potential borrowers, facilitating access to credit for firms and individuals. Albania also strengthened investor protections. A new company law requires that disinterested shareholders approve transactions between interested parties and obligates those parties to disclose all information on the transaction to the public. The law also reinforces directors' duties and requires directors, when found liable, to pay damages and return profits to the company. Starting a business became easier with online publication, reduction of the registration cost, and the consolidation of tax, health insurance, and labor registration into a single application. The corporate income tax rate was reduced from 20 percent to 10 percent effective January 1, 2008. Austria Austria sped-up contract enforcement by introducing comprehensive electronic filing of court claims and correspondence between lawyers and the court in civil matters. Azerbaijan Azerbaijan, the top reformer globally and regionally, eliminated the minimum threshold for reporting loans to the public credit registry in September 2007. The public registry now records information on all loans made by the financial system, more than doubling the coverage of borrowers with a credit history. Substantial amendments to the labor code in May 2007 made hiring workers easier by allowing employers to use fixed-term contracts for permanent tasks, easing restrictions on night work, and reducing requirements for redundancy dismissals. Azerbaijan created a second commercial court in Baku, increasing the number of judges dealing with commercial cases from five to nine. The average time to enforce a contract through the courts fell from 267 days to 237. A new law strengthens investor protections by requiring that transactions between interested parties be approved by shareholders. Interested parties are allowed to vote on the matter. Other provisions protect investors because directors who are held liable must pay damages and disgorge profits. Azerbaijan introduced a new unified property registry, reducing the number of procedures required to register property from seven to four. In addition, the State Register Service introduced the option of expediting two of the four procedures, making it possible to register property in 11 days. Similarly, the country created a one-stop shop for company registration, cutting the number of procedures from 13 to six and reducing the time required by half. Azerbaijan reduced the tax burden by introducing an online filing and payment system with advanced accounting software for calculating taxes due. This saves more than 500 hours a year on average in dealing with paperwork. Belarus In Belarus, a top reformer globally and regionally, the public credit registry expanded credit information by eliminating the minimum threshold for loans recorded in its database. It also guaranteed the right of borrowers to review their data, improving accuracy. Starting a business became easier: a unified registry database was created, a time limit was introduced for registration, and the minimum capital requirement was cut by half. Belarus created a one-stop shop for property registration and introduced a broad administrative simplification program that set strict time limits at the registry and computerized its records. As a result, the time required to register property in Minsk fell from 231 days to 21. The time required for dealing with construction permits fell by 140 days, thanks to new statutory time limits for preapproval clearances and building permits. Belarus eased the tax burden by abolishing the "Chernobyl tax" (3 percent) and unemployment tax (1 percent) and amending the simplified tax system for small businesses. A new customs code and new banking regulations reduced the time to export Belgium Belgium simplified contract enforcement by establishing fixed procedural calendars for written pleadings and introducing tighter deadlines for the delivery of expert opinions. Botswana Botswana improved its business environment by speeding the start-up process through computerization. A similar effort, which included training customs officers in using an electronic data interchange system, sped the processing of trade documents and reduced the time to export by two days and the time to import by a day. A new Company Act has come into force, requiring that shareholders approve related-party transactions and that directors repay damages and surrender profits if held liable. Finally, since January 2008, companies have been required to pay 0.2 percent of turnover for the training of workers. 49 Burkina Faso Burkina Faso eliminated random inspections during construction. It also introduced a new one-stop shop for construction permits, which reduced approval fees and combined five separate payments into a single one. A new labor code, approved in May 2008, makes hiring workers easier by allowing employers to use fixed-term contracts for permanent tasks, removing the 48-month limit on the duration of such contracts, and easing restrictions on determining the weekly rest day. Requirements for redundancy dismissals were also eased: third-party notification and consent are no longer required for dismissal of a single worker, and priority rules for dismissals were abolished. Burkina Faso made it easier to transfer property by eliminating the requirement for authorization from the municipality, merging two taxes at the Land Registry (Conservation Foncière), and reducing the transfer tax. The changes reduced the time required by 46 days and the cost by 2 percent of the property value. Finally, Burkina Faso reduced the corporate income tax rate from 35 percent to 30 percent (effective January 1, 2008), and the tax on dividends from 15 percent to 12.5 percent. Colombia Colombia, a top global and regional reformer, improved in five of the 10 Doing Business indicators. It reduced the time and cost to start a business by simplifying registration formalities, including speeding up processes at the registry and eliminating the need to obtain a certificate of compliance with zoning regulations. A silence-is-consent principle for building permits is now applied, reducing the total time for dealing with construction permits by 32 days. A new unified application form was introduced. Colombia made electronic social security contributions mandatory for companies with more than 30 employees and created unified electronic forms for filing taxes. Trading across borders was expedited: better banking services and the implementation of e-payments, electronic data interchange, and coordinated inspections in customs reduced the time to export by 10 days and the time to import by five. Authorities also introduced two new insolvency proceedings: a reorganization procedure to restructure insolvent companies and a mandatory liquidation procedure. Its new insolvency law tightens time limits for negotiating reorganization agreements. Before, the term allowed was six months, with a possible extension of eight months. The new law limits the term to four months, and the extension to two. Dominican Republic The Dominican Republic, a top global and regional reformer, sped up formalities in several areas by making them electronic. An online system for filing and paying taxes, piloted in 2006, is now fully operational. And entrepreneurs can complete several start-up formalities online, including name verification, and commercial and tax registration. The Dominican Republic also reduced the corporate income tax rate from 29% to 25%, and abolished several taxes, including the stamp duty. The cost of property registration fell, thanks to a reduction in the transfer tax from 4.3% to 3%. Transferring property now costs 3.8% of the property value, down from 5.1%. In addition, authorities reduced the time to export by three days by improving the online portal for customs documentation and payment. Egypt Egypt was once again among the top 10 global reformers--the third time in 4 years--and top regional reformer this year. Egypt made starting a business easier by reducing the paid-in minimum capital requirement by more than 80%, abolishing bar association fees, and automating tax registration. A new building code introduced in 2008 is aimed at reducing the procedures and time required to deal with construction permits by establishing a single window for processing construction-related approvals. Simplified administrative procedures for registering property and new time limits have reduced the time to transfer property in Cairo from 193 days to 72. The port of Alexandria continued to upgrade its facilities and sped customs clearance, reducing the time to export by 1 day and the time to import by 3. New listing rules for the Cairo Stock Exchange strengthened protections for minority shareholders: now an independent body must assess transactions between interested parties before they are approved. And thanks to new regulations issued by the Central Bank of Egypt, borrowers have the right to inspect their data in the private credit bureau. France France made electronic filing mandatory for social security contributions above 800,000. It also made customs clearance easier by introducing electronic filing and eliminating certain documents. Germany Germany made it easier for companies in distress to restructure by allowing the court to suspend enforcement against assets essential to the continuation of the business with the aim of keeping the company working as a going concern. It also reduced the corporate income tax from 25% to 15%, introduced straight-line depreciation for fixed assets and reduced trade tax while no longer allowing a deduction of the tax for corporate income tax. Greece Greece cut the minimum capital requirement to start a business by 80%, reduced capital tax and made publication of company statutes quicker. It also introduced electronic payment of social security tax, and passed a new bankruptcy law that is expected to allow more companies in distress to emerge as going concerns. Finally, Greece strengthened director accountability by making it easier for shareholders to sue directors for damages caused by related-party transactions. 50 Italy Italy simplified business registration and reduced the corporate income tax rate from 33% to 27.5% in addition to reducing the social security tax rates. A business can now be started through a single electronic filing. Italy made dismissing workers more difficult, increasing the mandatory notice period from 2 weeks to 2.5 months. Kyrgyz Republic The Kyrgyz Republic, a top reformer globally and regionally, strengthened investor protections through legal amendments allowing minority investors to take legal actions as shareholders. The amendments also require an independent assessment of a related-party transaction before it is approved. Moreover, directors can be held liable for negligence if they harm minority shareholders and will be forced to pay damages and disgorge profits. A new one-stop shop made it easier to start a business by streamlining and simplifying business registration processes and eliminating certain requirements such as proof of residence. Obtaining a company seal became optional. Dealing with construction permits also became easier, thanks to a one-stop shop making it possible to obtain a designing permit, construction license, and occupancy permit at a single place. This reform eliminated nine steps, reduced the time required by almost 6 months, and lowered the cost from 759 percent of income per capita to 406 percent. Portugal Portugal reformed its bankruptcy laws, eliminating the need to publish insolvency notices in newspapers, introducing fast-track procedures for small debtors and limiting procedural appeals. It also introduced an on-line application for construction permits, and facilitated debt collection for contract enforcement by extending the use summary proceedings for lower amounts. Senegal Senegal's one-stop shop for business start-up became fully operational, merging more than half the procedures and speeding the process as a result. Similarly, the introduction of time limits at the Land Registry and the Directorate of Taxes and Property sped property registration. The top reformer globally in easing trade, Senegal introduced a single window for customs clearance, cutting document requirements in half. It also set up an electronic data interchange system, implemented risk-based inspections, extended the operating hours of customs, and improved port and road infrastructure. 51 APPENDICES Starting a Business in Portugal This table summarizes the procedures and costs associated with setting up a business in Portugal. STANDARDIZED COMPANY Legal Form: Sociedade por Quotas Minimum Capital Requirement: City: Lisbon Registration Requirements: No: Procedure Time to complete Cost to complete 1 Choose a pre-approved company name 1 day included in procedure 2 2 Register at the one-stop shop 1 day 360 or 300 (depending on whether the company's object is IT or IT related or not), including mandatory publications but excluding a 0.4% Stamp Tax rate, levied on the amount of the company's share capital subscriptions. 3 Register with the Social Security Regional Center 1 day (simultaneous no charge with procedure 2) 4 Deposit initial capital 1 day (simultaneous no charge with procedure 2) 5 Report to the Labor Inspectorate 1 day no charge 6 Register the compulsory workmen's accident compensation insurance 1 day no charge at a private insurer 52 Procedure 1 Choose a pre-approved company name Time to complete: 1 day Cost to complete: included in procedure 2 Comment: Before requesting the corporate name, the company promoter can search the National Registry of Collective Entities (Registro Nacional de Pessoas Colectivas, RNPC) database (also via the Internet) for the availability of the requested name. The promoter can reserve a company name for 48 hours at a fee of EUR 31. (For information on c o m p a n y n a m e s o r o n n o t a r y a n d r e g i s t r a r i s s u e s , v i s i t www.dgrn.mj.pt/impres/imprnpc.asp.) The RNPC issues a certificate of approval of the promoter's company name or of the promoter's choice of one of the preapproved names provided by the Portuguese authorities (the list is on the Internet). If the company decides not to use one of the preapproved company names, the company must obtain from the RNPC a certificate of approval and a provisional taxpayer card. A new search engine has expedited this procedure, which now takes about 4 days. The certificate is valid for 90 days and may be renewed only once. The fee for company name approval is EUR 70: - Certification of company name approval: EUR 56. - Provisional identity card (for collective person): EUR 14. An additional fee of EUR 31 applies if a name reservation is requested. Under Decree-Law No. 111/2005 (effective July 13, 2005), the certificate of approval is valid for 3 months and may be renewed only once. The provisional identification card is valid for 3 months and can be renewed if the incorporation process has not been completed. The provisional taxpayer card can be requested at the same time as the corporate certificate. If the parties decide to incorporate the company outside the Centros de Formalidades das Empresas, (CFE), they can request the certificate of approval and the taxpayer card via the Internet, mail, or at a local RNPC office. The forms should be signed by one of the future shareholders (or by a proxy). Procedure 2 Register at the one-stop shop Time to complete: 1 day Cost to complete: 360 or 300 (depending on whether the company's object is IT or IT related or not), including mandatory publications but excluding a 0.4% Stamp Tax rate, levied on the amount of the company's share capital subscriptions. Comment: If the company does not select one of the preapproved company names, the promoter must submit the documents cited in Procedure 1. Shareholders who opt to incorporate the company within 24 hours must choose one of the standard articles of association without adding other clauses. The company commercial registration is immediate, and a certificate is issued. Shareholders can also acquire a registered trademark at the same time. For tax purposes, shareholders may also file at this time a declaration of commencement of activities. If this option is not exercised, this declaration should be submitted within 15 days of company incorporation. Through this fast-track procedure, the following are handled on a single visit to the one-stop shop (a) the company corporate tax number; (b) the company's Social Security number; (c) the commercial register of the company 53 incorporation; and (d) the declaration of start of business operations. Employee registration must be done at least 24 hours before the start of employment. Promoters must file taxpayer identification documents, deeds, collective person's card, minutes of company inaugural meeting, a copy of statutory members' tax cards, and documents proving the declaration of commencement of activity. Companies that have interaction with the public must have the company's work schedule approved at the Ministry of Employment and Social Security (Ministério do Emprego e da Segurança Social; the homepage is http://www.seg-social.pt) The mandatory publications are made on a website of the Ministry of Justice (http://publicacoes.mj.pt/Index.asp) More information on the new system, "company one hour," can be found at http://www.empresanahora.pt/empresa. Decree-Law 125/2006 and Administrative Rule 657-C/2006 No. 657-C/2006 (dated June 29, 2006) provided for a special regime for setting up companies via the Internet. This new regime allows for online incorporation of civil and commercial companies. Incorporators can complete all incorporation procedures online, including the search for a unique company name. To search a company name, incorporators may elect between three options a) submit a preapproved, registered name (as in the company one hour system); b) apply for a company name online; or c) file a certificate of name approval, obtained nonelectronically . When preparing to file company bylaws, the incorporators may elect to either draft the bylaws or file standard, boilerplate bylaws (The required documents and information must be filed by electronic authentication or electronic signature. The application is deemed valid only after an electronic confirmation of the date and time the application was filed. The registry shall be made immediately or within 2 working days of the filing of the application. The online company registration system is accessible to lawyers, solicitors and notaries who own a digital certification that proves the user's profession. Administrative Rule 1416-A/2006 sets out two other stipulations: (1) The applicant's option of applying for commercial registration online is contingent on appropriate electronic certification. (2) The availability of information online must always be updated. Upon request, a password is sent that allows the applicant company or any other public or private entity (to whom the password is disclosed) to see the certificate online. The password is disclosed upon delivery of a hard copy certificate. As of June 30, 2006, shareholders that choose to incorporate and register the company at the one-stop shop (using the new expedited system) can also acquire a registered trademark at the same time. Procedure 3 Register with the Social Security Regional Center Time to complete: 1 day (simultaneous with procedure 2) Cost to complete: no charge Comment: Employers must register employees for social security insurance in 10 working days after the tax declaration on start of business activities and at least 24 hours before employees start employment. This procedure can be conducted at the at the Centros de Formalidades das Empresas (CFE). The employer must file the following documents: the taxpayer identification card, 54 deeds, collective person's card, minutes of company inaugural meeting, a copy of the statutory members' tax cards, and a document proving the declaration of commencement of activity. Companies that have interaction with the public must have the company's work schedule approved at the Ministry of Employment and Social Security (Ministerio do Emprego e da Segurança Social). Under Decree-Law 14/2007, as of March 2007 employees may be registered online via www.seg-social.pt/. Procedure 4 Deposit initial capital Time to complete: 1 day (simultaneous with procedure 2) Cost to complete: no charge Comment: Initial capital may be deposited by online banking or in person at the one-stop shop (Caixa Geral de Depósitos), where a bank attendant is available to handle the transaction. Procedure 5 Report to the Labor Inspectorate Time to complete: 1 day Cost to complete: no charge Comment: Before starting its activity, the incorporated company must submit the following information to the Labour General Inspection: the company name and its tax number, its corporate activity, its registered office and other company locations, and the number of workers and managers. The company must also provide a copy of the published announcement of the incorporation deed. Procedure 6 Register the compulsory workmen's accident compensation insurance at a private insurer Time to complete: 1 day Cost to complete: no charge Comment: Compulsory workers' compensation insurance covers all workers and managers who receive a salary. The insurance must be underwritten by a private insurer carrier before the company starts business activities. Note that social security insurance does not cover occupational accident or injury. According to Decree-Law 14/2007, as of March 2007 an employee can be registered online on the social security site. 55 Dealing with Construction Permits in Portugal The table below summarizes the procedures, time, and costs to build a warehouse in Portugal. BUILDING A WAREHOUSE Date as of: January 2,008 Estimated Warehouse Value: City: Lisbon Registration Requirements: No: Procedure Time to complete Cost to complete 1 Obtain preliminary approval of project design 70 days EUR 162 2 Obtain approval of project designs from the municipality and other 110 days EUR 136 relevant entities 3 Obtain a building permit (alvará) and pay fee 42 days EUR 2,860 4 Inform the labor inspection agency about the new construction site 1 day no charge 5 Notify municipality when reaching plinth level in the construction and 1 day no charge receive site inspection 6 Notify municipality before proceeding with concrete work and receive 1 day no charge inspection 7 Receive inspection from Labor authority 1 day no charge 8 Apply for occupancy permit and pay fees 1 day EUR 1,405 9 * Request inspection by the Fire Department 1 day no charge 10 * Submit application for a water and sewerage connection at the water and 1 day no charge sewerage authority 11 * Submit application for an electricity connection at the power authority 1 day no charge 12 * Submit application for a telephone line at the telecommunications 1 day no charge authority 13 * Receive inspection by the water and sewerage authority 1 day EUR 31 14 * Receive inspection by the power authority 1 day no charge 56 15 * Receive inspection by the telecommunications authority 1 day no charge 16 * Receive inspection by the Fire Department 1 day no charge 17 * Obtain water and sewerage connection 31 days EUR 70 18 * Obtain electricity connection 8 days EUR 399 19 * Obtain phone connection 14 days EUR 100 20 Receive inspection and obtain occupancy permit 39 days no charge 21 Register the building with the real estate registry 51 days EUR 2,625 * Takes place simultaneously with another procedure. 57 Procedure 1 Obtain preliminary approval of project design Time to complete: 70 days Cost to complete: EUR 162 Comment: Granted by the municipality, the approval indicates BuildCo's possibility to execute a certain project. This approval binds the authorities involved in the issuing process but does not authorize construction. Valid for a year, this approval is not a prerequisite for the other procedures. Even so, this procedure cannot be performed simultaneously with any other procedure. The required documents are identified in the Ministerial Order No. 1110 September 19, 2001, and include the following: - Title to the property, or proof of ownership or lease agreement. - Architectural project. - Project clearance from the Fire Department. Approval of the architectural project depends on the issuance of a favorable opinion from the Fire Department. The costs involved are chargeable only at the issuance of the operating license. The company should also request approval of the security system against fire risks that would be filed upon submission of the specific drawings. - Specific drawings, such as drawings of the electrical power layout. Approved project design drawings are valid for 6 months but are subject to a 3-month extension upon the company's request. - Specification of patent. - Direct billing, issued to the owner. - Schedule of construction work execution. - Other forms and documents deemed relevant. This procedure is not mandatory but it is common practice. Procedure 2 Obtain approval of project designs from the municipality and other relevant entities Time to complete: 110 days Cost to complete: EUR 136 Comment: The company must present the project design to the local municipality and consult with the relevant public entities, such as the Monuments Protection Authority. The number and type of entities that must be consulted vary from case to case. The municipality forwards the file to the public entities to be consulted. After the municipality grants approval of the design project, it requests the applicant to present, within 6 months, the "specialty projects," for instance, the stability, electricity, gas, sewage, waste water, telephone and telecommunications, thermal and acoustic behavior of the building, elevators, and the like. The municipality then forwards the specialty projects to the relevant entities for approval. The design project approval takes on average the first 30 days of the previous procedure, after which the specialty projects can be sent for approval at the same time that the approval from the relevant entities in the previous procedure is being requested (these two steps take 10 and 20 days, respectively). Once all approvals from third parties have been granted, it takes 45 days for the municipality to make its final decision. Because the applicant can present both the designs and specialty projects at the same time and to the same agency, those steps are considered as one procedure here. The applicant can also directly ask the relevant authorities for approval of the specialty projects and submit those approvals with the designs, which saves substantial time. 58 Procedure 3 Obtain a building permit (alvará) and pay fee Time to complete: 42 days Cost to complete: EUR 2,860 Comment: BuildCo must request a building permit within a maximum of a year from the date of notification of final approval of the building project. The building permit is issued after the relevant taxes have been paid. Procedure 4 Inform the labor inspection agency about the new construction site Time to complete: 1 day Cost to complete: no charge Comment: The labor inspection agency might perform on-site inspections during construction. The project might also receive unscheduled inspections from other agencies, such as the agency issuing construction licenses, the Register (INCI), and the municipality. Procedure 5 Notify municipality when reaching plinth level in the construction and receive site inspection Time to complete: 1 day Cost to complete: no charge Comment: The municipality might inspect the site after receiving notification. Procedure 6 Notify municipality before proceeding with concrete work and receive inspection Time to complete: 1 day Cost to complete: no charge Comment: The municipality might inspect the site after receiving notification. Procedure 7 Receive inspection from Labor authority Time to complete: 1 day Cost to complete: no charge Comment: Labor Inspectorate shows up more in recent years due to increased cases of using illegal labor force by construction companies. Although BuildCo is a law abiding company it is most likely it will be inspected at least once during the contruction cycle. Procedure 8 Apply for occupancy permit and pay fees Time to complete: 1 day Cost to complete: EUR 1,405 Comment: Once the building has been completed, the applicant requests the occupancy and use permit, which costs EUR 1,404.65. The payment can be required either when the application form is filed or when the license is issued, depending on the municipality. The 59 municipality might charge EUR 80.92 due to an additional inspection of the works. In this case, this procedure might cost around EUR 1,485.57. The timelimit within the permit must be issued is 15 working days from previously registered 30 days. Procedure 9 Request inspection by the Fire Department Time to complete: 1 day Cost to complete: no charge Comment: The company must inform several entities of building completion so that inspections can be carried out. Procedure 10 Submit application for a water and sewerage connection at the water and sewerage authority Time to complete: 1 day Cost to complete: no charge Comment: Procedure 11 Submit application for an electricity connection at the power authority Time to complete: 1 day Cost to complete: no charge Comment: Procedure 12 Submit application for a telephone line at the telecommunications authority Time to complete: 1 day Cost to complete: no charge Comment: Procedure 13 Receive inspection by the water and sewerage authority Time to complete: 1 day Cost to complete: EUR 31 Comment: Procedure 14 Receive inspection by the power authority Time to complete: 1 day 60 Cost to complete: no charge Comment: Procedure 15 Receive inspection by the telecommunications authority Time to complete: 1 day Cost to complete: no charge Comment: Procedure 16 Receive inspection by the Fire Department Time to complete: 1 day Cost to complete: no charge Comment: Procedure 17 Obtain water and sewerage connection Time to complete: 31 days Cost to complete: EUR 70 Comment: The steps for obtaining a water and sewerage connection are as follows: 1. Filing of an application for water connection with the Water Authority (EPAL). When the connection involves installation of a water meter, the cost is about EUR 69.70. The request must be filed in triplicate and accompanied by the localization map at a scale of 1:1000, the operating license, the direct billing of the water design engineer concerning the project and the execution of the water connection, the name of the design engineer, a favorable opinion issued by the Fire Department, the security certificate, and the certification of the Fire Department. This procedure may occur simultaneously with procedures 1, 4, and 16 . BuildCo can deliver the operating license to EPAL at any time before the first on-site inspection. 2. First on-site inspection by EPAL, following the company's request. The cost of each inspection is EUR 31.17. 3. Completion of the water connection work. BuildCo is responsible for establishing the water connection and bearing the associated costs. 4. Execution of the water supply agreement and installation of the water meters. 5. Issuance of a certificate by EPAL. The company must file a copy of the certificate with the municipal authority. Procedure 18 Obtain electricity connection Time to complete: 8 days Cost to complete: EUR 399 Comment: The request must be accompanied by several documents, such as the electrical plans, a map with the warehouse location, the operating license or the direct billing of the electric design engineer, and information regarding the needed voltage, conduit size, and 61 materials needed to establish the electricity connection. The costs of installing electricity depend on the size and technical characteristics of the connection and the adaptations to the power network needed to complete the installation. Those costs have increased. For one meter, the applicant now pays EUR 281.33, plus EUR 45.38 for fire services, at the time the application is filed. Fees of EUR 27.23 are needed for each additional meter. The applicant is entitled to two free inspections. Each additional one costs EUR 40. Issuance of the certificate costs EUR 72,60. The total cost is therefore EUR 399.31. (It is assumed that one water meter is needed and that no inspections other than the free ones take place. All these amounts include value-added tax.) Procedure 19 Obtain phone connection Time to complete: 14 days Cost to complete: EUR 100 Comment: Procedure 20 Receive inspection and obtain occupancy permit Time to complete: 39 days Cost to complete: no charge Comment: Procedure 21 Register the building with the real estate registry Time to complete: 51 days Cost to complete: EUR 2,625 Comment: 62 Employing Workers in Portugal Employing workers indices are based on responses to survey questions. The table below shows these responses in Portugal. Employing Workers Indicators (2008) Answer Score Rigidity of Employment Index 47.8 Difficulty of Hiring Index 33.3 Are fixed-term contracts prohibited for permanent tasks? Yes 1 What is the maximum duration of fixed-term contracts (including renewals)? (in months) 72 0.0 What is the ratio of mandated minimum wage to the average value added per worker? 0.24 0.00 Rigidity of Hours Index 60.0 Can the workweek extend to 50 hours (including overtime) for 2 months per year to Yes 0 respond to a seasonal increase in production? What is the maximum number of working days per week? 6 0 Are there restrictions on night work? Yes 1 Are there restrictions on "weekly holiday" work? Yes 1 What is the paid annual vacation (in working days) for an employee with 20 years of 22 1 service? Difficulty of Firing Index 50.0 Is the termination of workers due to redundancy legally authorized? Yes 0 Must the employer notify a third party before terminating one redundant worker? Yes 1 Does the employer need the approval of a third party to terminate one redundant worker? No 0 Must the employer notify a third party before terminating a group of 25 redundant Yes 1 workers? Does the employer need the approval of a third party to terminate a group of 25 redundant No 0 workers? Is there a retraining or reassignment obligation before an employer can make a worker Yes 1 redundant? Are there priority rules applying to redundancies? Yes 1 Are there priority rules applying to re-employment? Yes 1 63 Firing costs (weeks of salary) 95.2 What is the notice period for redundancy dismissal after 20 years of continuous 8.6 employment? (weeks of salary) What is the severance pay for redundancy dismissal after 20 years of employment? (weeks of 86.7 salary) What is the legally mandated penalty for redundancy dismissal? (weeks of salary) 0.0 Note: The first three indices measure how difficult it is to hire a new worker, how rigid the regulations are on working hours, and how difficult it is to dismiss a redundant worker. Each index assigns values between 0 and 100, with higher values representing more rigid regulations. The overall Rigidity of Employment Index is an average of the three indices. 64 Registering Property in Portugal This topic examines the steps, time, and cost involved in registering property in Portugal. STANDARDIZED PROPERTY Property Value: 728,257.47 City: Lisbon Registration Requirements: No: Procedure Time to complete Cost to complete 1 Request an information certificate on the property at the 4 days EUR 31.5 (Assuming the Registry certificate will be up to 10 pages long) 2 Request a tax certificate on the property 1 day no cost 3 Payment of the real property transfer tax 1 day 6.5% of the of the property's fiscal value or sale price, whichever is higher 4 Formalize the sale and purchase public deed 15 days 0.8% of the sale price or fiscal value, whichever is higher + EUR 195.59 in notary's fees + EUR 25 for public deed taxation 5 Register the property at the Real Property Registry 14 - 28 days EUR 150 (registry of transmission and actualization of the property's registry identification) or EUR 125 (registry of transmission only) 65 Procedure 1 Request an information certificate on the property at the Registry Time to complete: 4 days Cost to complete: EUR 31.5 (Assuming the certificate will be up to 10 pages long) Comment: According to the Decree-Law 76-A/2006 (March 2006), the cost has been increased to EUR 31.5 from EUR 27. The cost is 31.5 EUR assuming that the certificate is up to 10 pages long; 1 EUR is charged for each additional page after 10 pages. Procedure 2 Request a tax certificate on the property Time to complete: 1 day Cost to complete: no cost Comment: This certificate may be requested and validly printed from the internet site, www.dgci.min-financas.pt. When it is requested this way, it is received immediately and free of charge. If one requests it directly from the Tax Registry, a cost of EUR 4.96 is incurred. One may use this internet site after applying with the Tax Authorities for a username and password regarding tax declarations by internet; notaries can also obtain tax certificates free of charge on behalf of the seller and the buyer, according to Decree-Law no. 238/2006, of December, 20th. Procedure 3 Payment of the real property transfer tax Time to complete: 1 day Cost to complete: 6.5% of the of the property's fiscal value or sale price, whichever is higher Comment: The payment can be made at any post office or ATM terminal, but must be initiated (or paid) at the Tax Authority office or at the internet site www.e-financas.gov.pt. Applicants can use this site after applying with the Tax Auhorities for a username and password. Procedure 4 Formalize the sale and purchase public deed Time to complete: 15 days Cost to complete: 0.8% of the sale price or fiscal value, whichever is higher + EUR 195.59 in notary's fees + EUR 25 for public deed taxation Comment: This procedure may take up to 30 days or a minimum of 7 days, depending on the notary used. As of February 2004 through full implementation in February 2006, the notarial profession has been liberalized. One can contract either a public notary and pay according to the scale of costs as noted above; or one can contract a private notary and agree on any cost for his services. The majority of notaries are private as of January 2007. Because of the law on prevention and repression of money-laundering (Section 1, no. 2, i), parties' identities must be verified for sums over EUR 15,000 as well as information about the origin and destiny of funds involved, justification of the transaction and identities of the beneficiaries (if other than the parties) if the transaction is over EUR 12,500. Procedure 5 Register the property at the Real Property Registry 66 Time to complete: 14 - 28 days Cost to complete: EUR 150 (registry of transmission and actualization of the property's registry identification) or EUR 125 (registry of transmission only) Comment: The time to complete is variable according to the department in Lisbon where one registers--it may at times take as little as 2 weeks, or as much as one month depending on department and time of year, for example. 67 Getting Credit in Portugal The following table summarize legal rights of borrowers and lenders, and the availability and legal framework of credit registries in Portugal. Getting Credit Indicators (2008) Indicator score Private credit Public credit Private bureau coverage (% adults) 4 bureau registry Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative data distributed? Yes Yes 1 Does the registry distribute credit information from retailers, trade No No 0 creditors or utility companies as well as financial institutions? Are more than 2 years of historical credit information distributed? No No 0 Is data on all loans below 1% of income per capita distributed? Yes Yes 1 Is it guaranteed by law that borrowers can inspect their data in the Yes Yes 1 largest credit registry? Coverage 11.3 76.4 Number of individuals .. 6,563,620 Number of firms .. .. Legal Rights Index 3 Can any business use movable assets as collateral while keeping possession of the assets; and any financial Yes institution accept such assets as collateral ? Does the law allow businesses to grant a non possessory security right in a single category of revolving movable No assets, without requiring a specific description of the secured assets ? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without No requiring a specific description of the secured assets ? May a security right extend to future or after-acquired assets, and may it extend automatically to the products, No proceeds or replacements of the original assets ? Is a general description of debts and obligations permitted in collateral agreements, so that all types of obligations Yes and debts can be secured by stating a maximum amount rather than a specific amount between the parties ? Is a collateral registry in operation, that is unified georgraphically and by asset type, as well as indexed by the No grantor's name of a security right ? Do secured creditors have absolute priority to their collateral outside bankruptcy procedures? No Do secured creditors have absolute priority to their collateral in bankruptcy procedures? No 68 During reorganization, are secured creditors' claims exempt from an automatic stay on enforcement? No Does the law authorize parties to agree on out of court enforcement? Yes 69 Protecting Investors in Portugal The table below provides a full breakdown of how the disclosure, director liability, and shareholder suits indexes are calculated in Portugal. Protecting Investors Data (2008) Indicator Disclosure Index 6 What corporate body provides legally sufficient approval for the transaction? (0-3; see notes) 2 Immediate disclosure to the public and/or shareholders (0-2; see notes) 1 Disclosures in published periodic filings (0-2; see notes) 2 Disclosures by Mr. James to board of directors (0-2; see notes) 1 Requirement that an external body review the transaction before it takes place (0=no, 1=yes) 0 Director Liability Index 5 Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller 1 transaction causes to the company. (0-2; see notes) Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) 1 liable for for damage to the company. (0-2; see notes) Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0 (0-2; see notes) Whether Mr. James pays damages for the harm caused to the company upon a successful 1 claim by the shareholder plaintiff (0=no, 1=yes) Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 shareholder plaintiff (0=no, 1=yes) Whether fines and imprisonment can be applied against Mr. James (0=no, 1=yes) 1 Shareholder plaintiff's ability to sue directly or derivatively for damage the transaction 1 causes to the company (0-1; see notes) Shareholder Suits Index 7 Documents available to the plaintiff from the defendant and witnesses during trial (0-4; see 4 notes) Ability of plaintiffs to directly question the defendant and witnesses during trial (0-2; see 1 notes) Plaintiff can request categories of documents from the defendant without identifying specific 0 ones (0=no, 1=yes) Shareholders owning 10% or less of Buyer's shares can request an inspector investigate the 1 transaction (0=no, 1=yes) 70 Level of proof required for civil suits is lower than that for criminal cases (0=no, 1=yes) 1 Shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 0 filing suit (0=no, 1=yes) Investor Protection Index 6.0 Notes: Extent of Disclosure Index What corporate body provides legally sufficient approval for the transaction? 0=CEO or managing director alone; 1=shareholders or board of directors vote and Mr. James can vote; 2=board of directors votes and Mr. James cannot vote; 3 = shareholders vote and Mr. James cannot vote Immediate disclosure to the public and/or shareholders 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures in published periodic filings 0=none; 1=disclosure on the transaction only; 2=disclosure on the transaction and Mr. James' conflict of interest Disclosures by Mr. James to board of directors 0=none; 1=existence of a conflict without any specifics; 2= full disclosure of all material facts Director Liability Index Shareholder plaintiff's ability to hold Mr. James liable for damage the Buyer-Seller transaction causes to the company 0= Mr. James is not liable or liable only if he acted fraudulently or in bad faith; 1= Mr. James is liable if he influenced the approval or was negligent; 2= Mr. James is liable if the transaction was unfair, oppressive or prejudicial to minority shareholders Shareholder plaintiff's ability to hold the approving body (the CEO or board of directors) liable for for damage to the company 0=members of the approving body are either not liable or liable only if they acted fraudulently or in bad faith; 1=liable for negligence in the approval of the transaction; 2=liable if the transaction is unfair, oppressive, or prejudicial to minority shareholders Whether a court can void the transaction upon a successful claim by a shareholder plaintiff 0=rescission is unavailable or available only in case of Seller's fraud or bad faith; 1=available when the transaction is oppressive or prejudicial to minority shareholders; 2=available when the transaction is unfair or entails a conflict of interest Shareholder plaintiffs' ability to sue directly or derivatively for damage the transaction causes to the company 0=not available; 1=direct or derivative suit available for shareholders holding 10% of share capital or less Shareholder Suits Index Documents available to the plaintiff from the defendant and witnesses during trail Score 1 each for (1) information that the defendant has indicated he intends to rely on for his defense; (2) information that directly proves specific facts in the plaintiff's claim; (3) any information that is relevant to the subject matter of the claim; and (4) any information that may lead to the discovery of relevant information. Ability of plaintiffs to directly question the defendant and witnesses during trial 0=no; 1=yes, with prior approval by the court of the questions posed; 2=yes, without prior approval 71 Paying Taxes in Portugal The table below addresses the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year in Portugal, as well as measures of administrative burden in paying taxes. Tax or mandatory Payments Notes on Time Statutory tax Tax Totaltax rate Notes on contribution (number) Payments (hours) rate base (% profit) TTR Value added tax (VAT) 1 online 96 21.0% value added filing Stamp duty 1 0.5% transaction value Tax on check 1 per check 0.00 transactions Vehicle tax 1 per vehicle 0.07 Tax on interest 0 withheld 20.0% interest 0.51 income Municipal business tax 0 paid jointly 10.0% corporate 0.90 income tax Property tax 1 0.8% property 1.19 value Fuel tax 1 fuel 1.45 consumption Corporate income tax 1 online 40 25.0% taxable profit 13.19 filing Social security 1 online 192 23.8% gross salaries 26.79 contributions filing Totals 8 328 43.6 72 Notes: a) data not collected b) VAT is not included in the total tax rate because it is a tax levied on consumers c) very small amount d) included in other taxes e) Withheld tax f) electronic filling available g) paid jointly with another tax Name of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. When there is more than one statutory tax rate, the one applicable to TaxpayerCo is reported. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. 73 Trading Across Borders in Portugal These tables list the procedures necessary to import and exports a standardized cargo of goods in Portugal. The documents required to export and import the goods are also shown. Nature of Export Procedures (2008) Duration (days) US$ Cost Documents preparation 10 150 Customs clearance and technical control 1 100 Ports and terminal handling 3 260 Inland transportation and handling 2 175 Totals 16 685 Nature of Import Procedures (2008) Duration (days) US$ Cost Documents preparation 10 300 Customs clearance and technical control 2 264 Ports and terminal handling 3 260 Inland transportation and handling 1 175 Totals 16 999 Export Bill of lading Commercial invoice Customs export declaration Inspection report Packing list Technical standard/health certificate Import Bill of lading Certificate of origin Commercial invoice Consular invoice Customs import declaration 74 Import license Packing list Enforcing Contracts in Portugal This topic looks at the efficiency of contract enforcement in Portugal. Nature of Procedure (2008) Indicator Procedures (number) 34 Duration (days) 577 Filing and service 60.0 Trial and judgment 337.0 Enforcement of judgment 180.0 Cost (% of claim)* 14.22 Attorney cost (% of claim) 11.9 Court cost (% of claim) 1.8 Enforcement Cost (% of claim) 0.5 Court information: Lisbon Civil Court ("Varas Cíveis do Tribunal Judicial da Comarca de Lisboa Juízos") * Claim assumed to be equivalent to 200% of income per capita. 75 76 77