Aviation Finance & Leasing Portugal 2025

1. General and Contractual

1.1 What are the typical structures available for financing the purchase of an aircraft?

There are no restrictions to the structures for financing the purchase of an aircraft, other than the ones resulting from limitations on anti-money laundering and the prevention of terrorism financing. Therefore, typical structures include financing obtained on a cross-border basis, being the lender's foreign financial institutions, or national obtained financing. Depending on the jurisdiction of the lender(s), i.e. if the lender(s) are foreign or national entities, financing can be structured as standard loans or as bond issuances pursuant to which the purchaser of an aircraft issues bonds that are subscribed by the lender(s).

1.2 What are the key advantages/disadvantages and main issues arising in relation to these financing structures?

In the case of a lender that is foreigner and a Portuguese borrower: a financing for the purchase of an aircraft shall be structured as a bond issuance by the borrower, with such bonds to be subscribed by the lender. These bonds must be registered with the Portuguese clearing system (managed by Interbolsa – Sociedade Gestora de Sistemas de Liquidação e de Sistemas Centralizados de Valores). This structure has, in this situation, the advantage vis-à-vis a standard loan of withholding tax not being due in interest payments. The only disadvantage of this structure is that there are a few non-EU banks that are not allowed to hold securities.

In the case of a lender that is Portuguese and a Portuguese borrower, both the standard loan and bonds issuance structure would be appropriate, without any disadvantages or issues.

1.3 What types of leasing are possible under the laws of your jurisdiction? What are their essential characteristics?

There are no restrictions on the types of financial leasing possible under the laws of Portugal. Its registration with the National Aircraft Registry (“RAN”) is not mandatory.

1.4 Are there any proposals for reform in the area of aviation finance?

There are currently no proposals for reform in the area of aviation finance.

1.5 Is it possible according to the laws in your jurisdiction to enter into non-binding or partially binding pre-contractual agreements (e.g. ‘letters of intent') that will NOT take effect as fully enforceable agreements?

Yes, it is possible to enter into pre-contractual agreements (e.g. letters of intent or memorandums of understanding) in Portugal that are non-binding to the parties in the sense that such agreements are not enforceable against the parties. However, one should note that such pre-contractual agreements must be drafted in a way that could not be interpreted as a promissory agreement. In case such pre-contractual agreement is drafted in such a way, the counterparty would have grounds to judicially seek compliance by the promissory party of such promise, potentially leading to the promised agreement being entered into by court order.

1.6 Is there a doctrine of ‘good faith' in your jurisdiction that applies to all pre-contractual agreement, financing and leasing transaction documents, and the conduct of parties connected to them?

Yes. The Portuguese legal system applies the doctrine of “good faith” or “bona fide” to all legal relationships in Portugal. This said, in case any of the parties to a pre-contractual agreement, financing and leasing transaction documents behave in a way that is contrary to good faith, then the counterparty is entitled to seek indemnification for any damages arising from such behaviour.

2. Taxation and Related Matters

2.1 Which government authority in your jurisdiction has primary responsibility for the accounting for and regulation of revenue control and taxes?

The Portuguese Tax Authority is the primary government body responsible for tax administration and regulation, assessing taxes, including fuel taxes, and other aviation-related tax obligations.

2.2 What are typically the taxes in your jurisdiction that may arise in relation to a sale, a lease or a financing of an aircraft or an engine?

The taxes that may arise in relation to the sale, lease, or financing of an aircraft or an engine depend on the specific transaction and the parties involved. Notwithstanding this, as a rule, a 25% withholding tax applies on both payments made by a Portuguese resident company to a non-resident entity (without a permanent establishment (“PE”) in Portugal to which the rental income is attributable). An aggravated 35% withholding tax rate may apply whenever the lessor is a resident of a blacklisted jurisdiction.

Portuguese-sourced income derived from the lease of aircraft, which generally qualifies as royalties under the Portuguese Double Tax Treaties (“DTT”), may, however, benefit from a reduced withholding tax rate (from 5% up to 15%). The same may also be the case with regard to interest payments.

Furthermore, a withholding tax exemption on rents paid by a Portuguese lessee may apply if, among the fulfilment of other requirements set forth in the domestic rules transposing Directive 2003/49/EC of 3 June 2003 ("Interest & Royalties Directive"), for a period two years prior to the payment the lessor has: (i) held directly at least 25% of the lessee's share capital; (ii) been directly held in at least 25% by the lessee; or (iii) been directly held in at least 25% by an entity that also holds at least 25% of the lessee's share capital.

Portuguese-sourced capital gains derived from the sale of aircraft are generally subject to Portuguese Corporate Income Tax at a rate of 25%. However, as a rule, Portuguese DTTs do not grant Portugal taxing rights over capital gains derived from the sale of aircraft.

In addition to the above, according to Portuguese law, VAT applies on the sale or lease of an aircraft or parts thereof (23%), whenever these transactions are deemed located in Portugal under the Portuguese VAT place of supply rules. A VAT exemption may, however, apply to: (i) transactions involving the supply, modification, repair, maintenance, chartering and hiring of aircraft used by airlines operating for reward chiefly on international routes, and the supply, hiring, repair and maintenance of equipment incorporated or used therein; or (ii) the importation such aircraft or of the equipment used therein.

2.3 Is the provision of a current tax-residency certificate by a payee sufficient for a lessee or a borrower potentially subject to withholding taxes in your jurisdiction on rental or interest payments to avail itself of treaty access and the mitigation of tax liability?

No. The non-resident entity obtaining Portuguese-sourced items of income should provide the Portuguese payee with both: (i) a duly filled in “Modelo 21-RFI” form; (ii) a tax residence certificate issued by the tax authorities of its country of origin, attesting to the fact that it is both a residence of that country and that it is subject to Corporate Income Tax therein. Alternatively, a duly filed “Modelo -01 DJR” form to request a reduction or exemption from withholding tax should be provided.

2.4 Has the advent of BEPS (the Base Erosion and Profit Shifting initiative of the OECD) had any effect as regards structures in aviation finance and leasing or their interpretation?

Yes, as Portugal is following the OECD's BEPS rules and guidance but there are no particular changes to highlight in aviation finance and leasing sector.

2.5 What are the typical thresholds in your jurisdiction for which a permanent establishment may be triggered under the terms of any relevant double-tax treaty or similar?

The definition of PE adopted by Portugal closely follows the 2017 OECD Model Tax Convention. However, Portugal also includes the notion of a services PE as provided for in the UN Model Convention. Typical thresholds that may result in a non-resident entity being deemed to have a Portuguese PE include:

• The carrying out of construction and installation projects in the Portuguese territory for a period of more than six months (e.g. building aviation infrastructure).
• The provision of services in the Portuguese territory for a period that, in total, exceeds 183 days within a 12-month period (e.g. services like aircraft maintenance or repairs may fall under this provision).
• A fixed place of business or dependent agent in Portugal may also trigger a PE in specific circumstances.

2.6 Is the authority at question 2.1 likely to establish a ‘look-through' right or similar as regards a lender or a lessor that is a special-purpose vehicle involved for the purpose of tax treaty access?

Yes. Under domestic law, any non-resident entity (regardless of tax status or legal form) is deemed as a Portuguese corporate taxpayer if it earns Portuguese sourced income. However, a look through approach may be adopted in cases in which the recipient of income is not the beneficial owner or when it is a tax-transparent entity that fails to qualify as tax-resident in a jurisdiction for DTT purposes.

2.7 Will the import of an aircraft into your jurisdiction and/or the sale or leasing of the aircraft give rise to any VAT, sales or use taxes or any customs import or excise duties?

Yes, the import, sale, or leasing of an aircraft is generally subject to VAT (23%) and custom duties. However, aircraft used for commercial international aviation (including import, lease, repair, and maintenance) are exempt from VAT. Customs duties may apply for aircraft imported from outside the EU.

2.8 Are there any documentary taxes (for example, stamp duty payable on the execution of documents)?

In general, no stamp duty applies to the sale or lease of aircraft in Portugal. Notwithstanding, please note that stamp duty applies: (i) to loans and financing agreements, the applicable rate varying between 0.04% and 0.6%, depending on the loan term; and (ii) on guarantees, such as mortgages over aircraft or bank guarantees, over the maximum secured amount, according to the same rates mentioned above for the loans. Certain notarial deeds and registrations may be subject to stamp duty, depending on the nature of the act.

3. Registration and Deregistration

3.1 Which government authority in your jurisdiction has primary responsibility for the regulation of aviation and the registration of aircraft? Is it an owner registry or an operator registry? If the aircraft register is an operator register, is it possible to record the details of an owner or lessor and any financier with an aircraft mortgage?

The most important regulatory body in Portugal is the National Civil Aviation Authority (“ANAC”). ANAC regulates and monitors the civil aviation sector and has broad powers, including to enact regulations. ANAC also controls the RAN, which is an owner–register aircraft registry system. An aircraft and its equipment, the ownership interest in the aircraft, lease agreements (including any amendments thereto) and mortgages (and other facts related with the aircraft) are registered with the RAN.

3.2 What is the effect of registration of the aircraft? Does registration on your national aircraft register confer proof of ownership of the aircraft and/or engine?

Registration of ownership with the RAN requires no additional filings/registration with any other entities and constitutes proof of title and renders ownership effective against third parties.

Engines (and other autonomous equipment, such as auxiliary power units, rotors and propellers) are also registerable with the RAN.

Title to an engine included in the application form for aircraft registration will automatically vest in the owner of that aircraft unless a specific reference is made in the application to enable the registration of ownership (or of any type of interest) with a different entity.

3.3 Can foreign-owned aircraft be registered on your national aircraft register and are there limits or restrictions on the age of aircraft that may be registered or operated?

Yes. There are no restrictions on the nationality of the owner and/or age of aircraft that may be registered or operated.

3.4 Can aircraft leases be registered? If so, in what circumstances? Must the lease be in a particular form if it is to be valid and enforceable (for example, must it be in a particular language or be notarised, legalised or apostilled)?

Yes. Under Regulation (EC) No. 1008/2008 of the European Parliament and of the Council of 24 September 2008 on common rules for the operation of air services in the community, an aircraft used by a community air carrier must be registered, at the choice of the Member State whose competent authority issues the operating licence, either in its own national register or in the national register of another Member State. However, this is not the case if the aircraft is used under a dry lease or a wet lease agreement in accordance with Article 13 of the Regulation, in which case such aircraft may be registered in the national register either of any Member State or of a third country. This means that there are situations where a lease agreement must be registered with the RAN to allow the operation of the aircraft.

It is advisable to double check the fulfilment of the conditions established under Regulation No. 32/2003 of ANAC before filing the lease with ANAC. However, the majority of the conditions established under the said Regulation are applicable to the airline (lessee) (e.g. the airline shall demonstrate that such lease is necessary for the reinforcement of its fleet or the temporary replacement of an aircraft).

The documents required to complete the registration of a lease agreement over an aircraft registered in Portugal are:

1. an application form;
2. an original or certified copy of lease agreement;
3. a proof of payment of the applicable registration fee; and
4. a notarised and apostilled power of attorney enabling local counsel (or other representative) to sign the application to be submitted with ANAC (if applicable).

If the documents are issued in Portugal by a legal entity or by an attorney-in-fact, the signatures of the signatories must be certified in accordance with Portuguese law and the certification must specifically state that the signatory(ies) is(are) acting in a specific capacity and are duly empowered to do so.

If the documents are issued in a foreign country, the signatories' signatures must be (i) certified by a notary, and (ii) apostilled or certified by the diplomatic or consular agent of the Portuguese consulate in the country of origin.

3.5 How is deregistration affected and what steps can a lessor take to deregister the aircraft on termination of the lease?

To deregister an aircraft, a lessor will have to apply for deregistration with the RAN. The procedures and supporting documents vary depending on the exact situation.

The procedure to be followed with ANAC for deregistration purposes (the so-called “abate”) is the following:

1. The owner or an appointed attorney duly empowered for such purpose shall file an application with ANAC for the issue of the Deregistration Certificate and inform about the next state of registration of the aircraft.
2. In case the aircraft will be exported to a non-EU country, an additional application shall be filed by the owner to obtain the Certificate of Airworthiness (CoA) for Export. If applicable, the issue of the CoA for Export is a condition precedent for deregistration and will require an on-site inspection of the aircraft by ANAC's technicians. This on-site inspection can take place in a foreign country but will depend on the availability of ANAC's technicians.
3. Since the lease, sub-lease, wet lease and/or management agreements are usually registered with ANAC, the intervention of the lessor, lessee, airline, etc. will also be required to confirm that such other parties have no objection to the deregistration requested by the owner. For this purpose, it is sufficient to file certified declarations from the relevant contractual counterparties confirming that they have no objection to deregistration.
4. The aircraft certificates, the journey logbook, engine logbooks and the aircraft logbooks shall be returned to ANAC along with the deregistration request or within the deadline agreed between the applicant (owner) and ANAC. ANAC usually allows a certain delay in the delivery of the documentation so that the owner is able to make the ferry/positioning flight to the next state of registration.

In the case of a lessor under a lease agreement, the application for deregistration will need to evidence, inter alia, that the lease agreement has been terminated. Typically, lessors are provided with irrevocable powers of attorney to enable applying for deregistration without lessee's intervention. However, in practical terms, it may still be difficult to repossess the aircraft without the lessee's cooperation and/or court intervention, as there are certain material acts where that cooperation may be crucial (such as obtaining airport access and access to the aircraft itself and to its technical books).

4. Security

4.1 Is it possible to create a mortgage over an aircraft or engine in your jurisdiction? If so, what are the types of aircraft mortgage and engine mortgage available and what formalities are required in order to perfect it?

Security interests over Portuguese registered aircraft are created under a mortgage agreement (“hipoteca").

The mortgage agreement must clearly indicate: (i) the identity of the mortgagor and the mortgagee; (ii) the type, model, registration marks and serial number of the mortgaged aircraft; and (iii) the maximum secured amount.

The maximum secured amount will correspond to the sum of:

1. principal amount;
2. costs, charges and expenses that might arise of, or in connection with, the enforcement of the mortgage (including, inter alia, all expenses incurred by the mortgagee to enforce its rights under the mortgage);
3. interest over the outstanding principal amount (up to a maximum period of 36 consecutive calendar months).

A mortgage created under Portuguese law does not involve the transfer of ownership or the possession of the mortgaged aircraft. Moreover, it does not allow the mortgagee to dispose of the mortgaged aircraft. However, it does grant the mortgagee a preferred interest to be repaid out of the proceeds of the judicial sale of the aircraft under any foreclosure proceedings. Any provisions in the mortgage agreement aimed at granting the mortgagee the right to directly dispose of the aircraft would be null and void (due to the prohibition on any commissary pact (“pacto comissório”).

The documents required to complete the registration with the RAN of a mortgage over an aircraft registered in Portugal are:

1. the application form;
2. an original or certified copy of the mortgage agreement, which must:
   1. be subject to the Portuguese law; and
   2. indicate the maximum amount secured by the mortgage and the fact that the mortgagor explicitly recognises the existence of such debt and its position as debtor towards the mortgagee.
3. proof of payment of the registration fee; and
4. a power of attorney enabling local counsel (or other representative) to sign the application form on behalf of the applicant. If issued abroad, this power of attorney must be notarised and apostilled (or notarised and legalised at the Portuguese consulate with jurisdiction over the country).

If the documents are issued in Portugal by a legal entity or by an attorney-in-fact, the signatures of the signatories must be certified in accordance with Portuguese law and the certification must specifically state that the signatory(ies) is(are) acting in a specific capacity and is(are) duly empowered to do so.

If the documents are issued in a foreign country, the signatories' signatures must be (i) certified by a notary, and (ii) apostilled or certified by the diplomatic or consular agent of the Portuguese consulate in the country of origin.

4.2 Can spare parts, including future parts, be subject to the aircraft mortgage or engine mortgage (as the case may be)? If not, are there any other forms of security that can be taken over spare parts?

Yes, spare parts can be subject to that aircraft mortgage. Future parts will only be included in the mortgage as from the date they are registered with the RAN.

Spare parts qualify as a moveable asset. For such reason they can be the object of a pledge agreement.

4.3 Is there a register of mortgages or rights over aircraft and/or engine?

Yes. Registration of the mortgage with the RAN is mandatory and ensures the validity, effectiveness (between the parties and towards third parties) and enforceability of said security interest with priority over common creditors of the mortgagor and holders of mortgages that are subsequently registered with the RAN.

4.4 What other forms of security can be taken over an aircraft and/or engine and can these other forms be registered?

Security over aircraft or engines must be created by means of a mortgage. Portugal has not ratified the Cape Town Convention (Convention on International Interests in Mobile Equipment) and ANAC only accepts the registration of mortgages over an aircraft and/or engines.

4.5 What claims and rights would take priority in your jurisdiction over a registered mortgage?

Portuguese law acknowledges the existence of liens and possessory rights, notably in the form of “privilégios creditórios” (which may be roughly translated as “privileged credits”). This type of privilege is the strongest form of guarantee under Portuguese law because it is not dependent on registration and prevails over in rem guarantees (even if registered before). We highlight the following credits within the aviation sector that may benefit from this type of creditor privilege:

1. State – for taxes and duties owed to the state
2. ANA, S.A. (airport authority) – pursuant to Decree-Law No. 254/2012, of 28 November 2012, ANA, S.A. is granted a privilege over the assets of the debtors located within the area of the airport and/or airfields and may seize the same until full payment of outstanding amounts or until a judicial decision is obtained. In the case of perishable goods or goods that constitute a risk for health and physical integrity, airport authorities may proceed with the respective elimination or, if possible, sale. In the latter case, the amount of the outstanding debt shall be deducted from the sale proceeds. Moreover, the holders of licences, their personnel, as well as the aircraft captain's or their representatives must provide the airport authorities with any information required for the assessment and collection of the relevant fees, in the form requested by airport authorities and an aircraft may be seized whilst the requested information is not provided and whilst the provisions related with the payment of fees are not duly complied with.
3. Credits for salvage and extraordinary expenses – under the Geneva Convention, credits corresponding to compensation due for salvage of the aircraft, or extraordinary expenses indispensable for the preservation of the aircraft give rise, under the law of the Contracting State where the operations of salvage or preservation were terminated, to a right conferring a charge against the aircraft, which shall be recognised by Contracting States and shall take priority over all other rights in the aircraft.
4. Retention rights – a creditor may retain an object if certain requirements are met, particularly the existence of a direct and material link between the credit of the possessor and the object itself. Retention rights are also not dependent on registration. A creditor who benefits from a right of retention will be ranked above a guaranteed creditor in the event of enforceability or insolvency, even if the registration of the security precedes the creation of the right of retention.

As a rule, seizure of aircraft is followed by notice to the competent authority that controls the operations of the place where the aircraft is located, and it is the authorities' duty to apprehend the documentation and, consequently, the aircraft.

4.6 What other forms of security can be granted over an aircraft and/or engine lease?

Security in rem over aircraft and/or engines is created by means of a mortgage agreement, which must be subject to Portuguese law and registered with the RAN.

Under Portuguese Law, it is possible to perform an assignment of rights and benefits as security pursuant to which the debtor assigns certain receivables to the creditor as a way of providing security for the underlying obligations that have arisen from the lease agreement. As a rule, in accordance with the Portuguese Civil Code (“PCC”), the assignment of receivables entails the transfer to the assignee of the ancillary rights and related security to the assigned receivables that are not indissociable from the person of the assignor, notably: (a) all ownership interests, liens, security interests, charges or encumbrances, or other rights or claims, of the assignor on any property or asset from time to time, if any, purporting to secure payment of such receivables; (b) all guarantees, insurance policies, and other agreements or arrangements of whatever character from time to time supporting or securing payment of such receivables; and (c) all records related to such receivables.

This type of security is perfected on closing, by means of a notice served to the debtors of the relevant credits, although subject to the condition that a second notice is served by the creditors to the debtors of the relevant credits stating that an event of default has occurred and that, as a result, the relevant receivables should be paid directly to the creditor. The creditor may then use these payments as discharge of the secured obligations. The registration of a security assignment with the RAN is authorised when ANAC deems said assignment as a lien or charge over the aircraft.

5. Enforcement and Repossession

5.1 What are the circumstances in which a mortgagee or owner can take possession of the aircraft and/or sell the aircraft? What requirements must the mortgagee or owner comply with?

Typically, a mortgagee or owner of an aircraft can only take possession of and/or sell the aircraft in the case of a default by the counterparty under the respective agreement. In any case, the parties to an agreement can foresee additional events in which the mortgagee or owner of the aircraft can take possession of and/or sell the aircraft.

Assuming a scenario in which a default has occurred, and a de-registration power of attorney in favour of the mortgagee or owner is in place, the mortgagee or owner shall contact the RAN in its capacity as attorney under the de-registration power of attorney to promote the de-registration of the aircraft and consequently sell it or register the aircraft in its name.

In case a de-registration power of attorney is not in place, the mortgagee shall initiate enforcement proceedings in the Portuguese courts to enforce the mortgage over the aircraft. Such enforcement proceedings can either culminate in the judicial sale of the aircraft to a third party or in the award of the aircraft by the mortgagee as payment to the credit secured by the mortgage. In the case of an award by the mortgagee, the value of the aircraft shall be taken into consideration, because if the aircraft's value is higher than the amount of the secured credit, the excess amount shall be delivered to the owner of the aircraft. The enforcement request shall be based on an enforcement title (“título executivo”) and the corresponding initial court fees shall be paid prior to the submission of the enforcement request to the court.

In case a de-registration power of attorney is not in place, the owner of the aircraft shall initiate judicial proceedings with a view to obtaining a court decision that in a first stage stays the use of the aircraft, thus not allowing the operator of the airplane to fly it, and in a second stage to condemn the operator of the aircraft to deliver possession of the aircraft to the owner.

5.2 What is the procedure for repossession of the aircraft?

Please refer to our answer to question 5.1 above.

5.3 Will local courts recognise a choice of foreign law in an aircraft mortgage? Are there any mandatory local rules that apply, despite a choice of foreign law?

Under the PCC, liens over real estate assets or moveable assets subject to registration (such as aircraft) are created through mortgages. Moreover, Article 46(3) of the PCC requires that the creation (or assignment) of security interests over any means of transportation subject to registration are governed by the laws of the country of the relevant registry.

Therefore, if an aircraft is registered in Portugal, a mortgage over the aircraft will have to be created in accordance with Portuguese law. The mortgage must be registered with the RAN in order to be valid, effective and enforceable in Portugal. The RAN is organised and maintained by the ANAC. Only a mortgage created over a Portuguese-registered aircraft under Portuguese law and registered with the RAN would be upheld by a Portuguese court in the case of enforcement proceedings.

5.4 Will local courts recognise and enforce a foreign court judgment in favour of a mortgagee or lessor? Are any interim relief measures available?

Yes, foreign judgments are recognised and enforceable by Portuguese courts. The applicable procedure varies depending on the country of origin of the foreign judicial decision:

1. If the court decision is rendered by a court of an EU Member State, the judgment is automatically enforceable in Portugal, without any prior recognition requirements (pursuant to Articles 36 and 39 of Regulation (EU) No. 1215/2012 of the European Parliament and the Council of 21 December).
2. If the court decision was rendered by a court of a non-EU Member State, the judgment is only enforceable after completion of a review and confirmation by procedure by the competent Portuguese court (the procedure is laid out in Articles 978 to 985 of the Portuguese Civil Procedure Code). The party interested in the recognition and subsequent enforcement must provide an original or a certified copy of that decision. If the decision was not rendered in Portuguese, a duly certified translation is also required. Once these documents are filed, the opposing party is served with notice to submit its opposition within 15 days of service.

In addition to the above rules, Portugal is bound by The Hague Convention on Choice of Court Agreements (as a result of its approval by the European Union). This Convention provides a framework of rules relating to exclusive jurisdiction agreements in civil and commercial matters, and the subsequent recognition and enforcement of a judgment given by a court of a Contracting State designated in the jurisdiction agreement.

5.5 Are powers of attorney from a local airline in favour of a lessor or mortgagee likely to be effective to allow the lessor or mortgagee to deregister the aircraft? Can such powers be irrevocable, be governed by a foreign law and/or do they need to be in any particular form for local recognition?

De-registration powers of attorney are typically issued in Portugal in the context of aviation finance transactions and such powers of attorney can be irrevocable, provided that they are executed before a Portuguese notary and framed as irrevocable powers of attorney in accordance with Portuguese law. Such powers of attorney must be governed by Portuguese law.

Without prejudice to the above, we are not aware of any de-registration power of attorney being used before the RAN, so we anticipate that using it may not be a process as straightforward as it should be due to lack of experience from the RAN and ANAC.

5.6 If recovery of the aircraft is contested by the lessee and a court judgment is obtained in favour of the lessor, how long is it likely to take to gain possession of the aircraft?

Upon obtaining a court judgment in favour of the lessor, we estimate that gaining possession of the aircraft would not take less than one year as enforcement proceedings for the delivery of the aircraft (“ação executiva para entrega de coisa certa”) would be required.

5.7 To what extent is there a risk from the perspective of an owner or financier that a lessee of aircraft or other aviation assets in your jurisdiction may acquire an economic interest in the aircraft merely by payment of rent and thereby potentially frustrate any rights to possession or legal ownership or security?

We do not anticipate any risk of a lessee acquiring an economic interest in the aircraft merely by payment of rent that would frustrate rights to possession or legal ownership or security.

5.8 Are there any restrictions on the ability of the lessor to export the aircraft from your jurisdiction on termination of the leasing?

The conditions to re-export the aircraft from Portugal are the ones applicable to deregistration and detailed above.

A special reference shall be made to the additional certificate that shall be obtained in case the aircraft is exported to a non-EU country. In this case, the owner (and lessor) shall file an additional application with ANAC to obtain a CoA for Export. If applicable, the issuance of the CoA for Export is a condition precedent for deregistration and will require an onsite inspection of the aircraft by ANAC's technicians. This onsite inspection can take place in a foreign country but will be subject to the availability of ANAC's technicians.

5.9 Are exchange controls prevailing in your jurisdiction as regards payments in foreign currency? Will any consents be required for the remittance of the sale proceeds abroad?

No exchange controls apply in Portugal.

5.10 If the lease is governed by English law and a judgment is obtained by the lessor in the English courts, can that judgment be automatically enforced in your jurisdiction or will the case have to be re-examined on its merits?

A judgment from an English court is only enforceable after completion of a review and confirmation by procedure by the competent Portuguese court (the procedure is laid out in Articles 978 to 985 of the Portuguese Civil Procedure Code). The party interested in the recognition and subsequent enforcement must provide an original or a certified copy of that decision. If the decision was not rendered in Portuguese, a duly certified translation is also required. Once these documents are filed, the opposing party is served with notice to submit its opposition within 15 days of service.

In addition to the above rules, Portugal is bound by The Hague Convention on Choice of Court Agreements (as a result of its approval by the European Union). This Convention provides a framework of rules relating to exclusive jurisdiction agreements in civil and commercial matters, and the subsequent recognition and enforcement of a judgment given by a court of a Contracting State designated in the jurisdiction agreement.

5.11 What is the applicable procedure for repossession of an aircraft under other forms of security interests?

As referred in our answer to question 5.3 above, the only admissible form of security in Portugal over assets subject to registration is a mortgage.

6. Conventions

6.1 Has your jurisdiction ratified any of the following: (a) The Chicago Convention of 1944 on International Civil Aviation (the Chicago Convention); (b) The 1948 Convention on the International Recognition of Rights in Aircraft (the Geneva Convention); (c) The 1933 Convention for the Unification of Certain Rules Relating to the Precautionary Arrest of Aircraft (the 1933 Rome Convention); and (d) The Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment (the Cape Town Convention) and the Protocol to the Convention on International Interests in Mobile Equipment on Matters Specific to Aircraft Equipment?

Portugal is a party to the 1944 Convention on International Civil Aviation (Chicago Convention) and the 1948 Convention on the International Recognition of Rights in Aircraft (Geneva Convention).

The 1933 Rome Convention and the Cape Town Convention are not in force in Portugal.

6.2 Has ratification of the Cape Town Convention caused any conflicts or issues with local laws?

This is not applicable, as Portugal has not ratified the Cape Town Convention.

6.3 What is the legal position regarding non-consensual rights and interests under Article 39 of the Cape Town Convention?

Please refer to our answer to question 6.2 above.

6.4 Has your jurisdiction adopted the remedies on insolvency provided under Article XI of the Protocol to the Cape Town Convention?

Please refer to our answer to question 6.2 above.

6.5 What is the procedure to file an irrevocable deregistration and export request authorisation under the Cape Town Convention (IDERA)?

Please refer to our answer to question 6.2 above.

7. Liability for Damage and Environmental

7.1 Can the owner be strictly liable – liable without a requirement to prove fault or negligence – for any damage or loss caused by the aircraft assuming the owner is an innocent owner with no operational control of the aircraft?

During the term of the lease, the operator is generally liable for the operation of the aircraft and no liability is transferred to the owner/lessor/financier.

7.2 Does the EU Emissions Trading System (EU ETS), or ICAO's Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA), apply to aircraft and aircraft operators in your jurisdiction? Will charges levied according to the EU ETS, or its equivalent, give rise to any in rem rights in relevant aircraft that are part of the fleet of the operator concerned and, if so, will such rights rank in priority ahead of any mortgage interests properly registered in the relevant aircraft and/or engine?

Portugal is an International Civil Aviation Organization (“ICAO”) Member State and a CORSIA state (Chapter 3 State Pairs). As from 1 January 2022, a Portuguese carrier with annual CO² emissions arising from international flights with aircraft having a maximum take-off weight (“MTOW”) of more than 5700 kg above 10,000 metric tons must participate in CORSIA.

Decree-Law No. 98/2024, of 29 November 2024 transposed Directive 2003/87/EC as amended by Directives 2008/101/EC, 2009/29/EC, 2023/958 and 2023/959. This statute also establishes the rules for the implementation of CORSIA through the European Greenhouse Gas Emissions Trading System (“ETS”).

In addition, Portugal has created its own domestic charge on air travel in the form of a Carbon Tax, pursuant to Order 38/2021, of 16 February 2021, of €2 per passenger, which is generally levied on passengers departing on commercial flights from Portugal.

Under Regulation EU 598/2014, noise restrictions enacted prior to 13 June 2016 remain in force until the authorities decide to review them. Thus, there are significant noise restrictions at Lisbon, Porto, Madeira, Porto Santo and Ponta Delgada airports.

7.3 What liabilities (actual or potential) could an owner, lessor or financier of an aircraft incur in your jurisdiction because of a failure to comply with local environmental law and/or regulations on the part of an operator of aircraft leased or financed by it?

During the term of the lease, the operator is generally liable for the operation of the aircraft and no liability is transferred to the owner/lessor/financier. Moreover, the Portuguese environmental liability framework is built around the polluter pays principle. Although this is the rule, the possibility that the owner is also held liable in certain circumstances cannot be completely excluded. We do not anticipate a scenario where the liability can be extended to financiers.

8. Insolvency and Searches

8.1 Are there any public registers in your jurisdiction where a search can be carried out to determine whether an order or resolution for any bankruptcy, bankruptcy protection or similar insolvency proceedings has been registered in relation to an operator or lessee?

Yes, there is a publicly available online platform from the Portuguese courts ( [Hyperlink] in which it is possible to search the existence of insolvency and recovery proceedings in relation to entities incorporated in Portugal.

8.2 In the event that an operator or lessee were to become insolvent either on a balance sheet basis (assets less than liabilities) or is unable to pay debts as they fall due, would an operator or lessee be required to file for insolvency protection?

Yes, the directors of such operator or lessee have a legal duty to file for insolvency of the company within 30 days from the date they become aware (or should be aware) that the company is insolvent according to the cash-flow test (i.e. the company in unable to pay its debts as they become due).

Directors are presumed to be aware of the insolvency if at least three months have passed since the company has generally ceased paying: (i) tax obligations; (ii) contributions and quotas to social security; (iii) debts arising from an employment contract, or from the violation or termination of this contract; or (iv) rents of any kind of lease, including financial, instalments of the purchase price, or of a loan secured by the respective mortgage, concerning a place where the debtor carries out its activity or has its headquarters or residence.

8.3 Do the available forms of insolvency protection in your jurisdiction involve the appointment of either an officer of the court or a specifically court-appointed official to take control of the operator or lessee (an ‘Insolvency Official') while in insolvency protection?

Yes, once a company is declared insolvent, an Insolvency Official (in Portuguese “administrador da insolvência”) is appointed by the court, which can follow an indication by the entity that filed for the company's insolvency, which can be the insolvent company itself or a creditor. We note that under certain circumstances and provided certain requirements are met, the insolvent company may stay in possession (i.e. managing the company).

8.4 Does the commencement of insolvency protection involving the appointment of an Insolvency Official in your jurisdiction have the effect of prohibiting the owner from taking the following actions to enforce the lease after commencement of such protection: (a) applying any security deposit held by the owner against any unpaid amounts due under the lease; (b) accepting payment of rent or other lease payments from the lessee, a guarantor or a shareholder; (c) giving notice of default under the lease; (d) obtaining a judgment or arbitral award for unpaid lease payments; (e) giving notice to terminate the leasing of the aircraft and/or engine; or (f) exercising rights to repossess the aircraft and/or engine?

The declaration of insolvency of a company does not prevent the owner of an aircraft leased to the insolvent company from the action referred to in (a), provided that such security deposit is in fact held by the owner and no act from the lessee is required and the unpaid amounts became due by the lessee prior to the insolvency declaration.

Further to the above, the insolvency of the lessee also does not prevent the owner of a leased aircraft from: (i) receiving rent payments as such payments result from the compliance with the terms of the lease agreement; (ii) giving notice of default under the lease agreement; (iii) giving notice to terminate the leasing of the relevant aircraft/engine, provided that such notice is not based on the insolvency declaration but on a default under such lease agreement (which cannot be the lack of payment of rents prior to the insolvency declaration neither the deterioration of the lessee's financial conditions); and (iv) exercising rights to repossess the aircraft/engine, considering that such assets are not part of the insolvency estate.

With regard to obtaining a judgment or arbitral award for unpaid lease payments, any ongoing legal actions against the debtor or third parties, with potential impact on the insolvency estate's value, are merged into the insolvency proceedings at the discretion of the insolvency administrator. The declaration of insolvency leads to the suspension of arbitration agreements involving the debtor, especially those affecting the value of the insolvency estate, with certain exceptions. Furthermore, it initiates a general suspension of enforcement proceedings sought by insolvency creditors that target assets within the insolvent estate. This suspension extends to new enforcement proceedings initiated against the debtor.

As a rule, the owner of the aircraft/engines must claim any credits arising under the lease agreement prior to the commencement of insolvency proceedings within the deadline set by the court in the insolvency decision (typically within 30 days). As regards any unpaid amounts arising post-insolvency in connection with the performance of the lease agreement, the owner may initiate proceedings against the insolvency estate to recover such amounts.

8.5 Can the commencement of insolvency proceedings have retrospective effect in relation to any such actions taken before commencement? If so, for what period can there be a look back?

The Insolvency Official may set aside acts carried out by the debtor, as a rule, within two years prior to the start of the insolvency proceedings if they are harmful to the interests of the insolvent estate. Generally, claw-back requires the third party's bad faith, which is presumed when the act or omission occurred within two years prior to the start of the insolvency proceedings and involved (or benefited) a person especially related to the debtor. However, certain acts are considered harmful regardless of bad faith and, as such, can be unconditionally set aside by the insolvency administrator.

Claw-back has retroactive effects (meaning that the insolvent estate must be placed in the situation that would have existed if the act had not been carried out) and can be carried out by the Insolvency Official within a deadline of six months from the date on which the Insolvency Official became aware of such act, but never after two years from the date of declaration of insolvency. We note that the claw-back can be challenged by the affected party.

8.6 Is there, either under law or as a matter of practice in your jurisdiction, a period of time within which the Insolvency Official will either ‘adopt' the lease and pay rent and other lease payments as an expense of the insolvency or ‘reject' the lease and permit the owner to enforce such rights as it may have under the lease? (a) If the lease is ‘adopted', will the Insolvency Official also pay any unpaid lease payments due as at commencement of the insolvency protection? (b) If not or if the lease is ‘rejected', would the owner's claim for any outstanding sums rank equally with other ordinary unsecured creditors of the lessee?

The declaration of insolvency of the lessee does not suspend an operational lease agreement, but the Insolvency Official can terminate the agreement by serving a termination notice to the lessor with at least 60 days of prior notice. This prerogative of the Insolvency Official has no deadline. Thus, the Insolvency Official can serve this notice at any time after the insolvency declaration.

In case of a financial lease, the Portuguese Insolvency Code establishes that the agreement is suspended by the insolvency declaration, provided that the agreement is not being fully complied with. The lessor can notify the Insolvency Official to confirm, within a certain deadline, whether it intends to continue performing the agreement or otherwise terminate it. Such deadline is determined by the lessor in the notice to the Insolvency Official, but it must be at least five days after the date in which the meeting for the assessment of the report of the Insolvency Official takes place (which shall occur between 45 and 60 days after the insolvency declaration). A shorter period can be determined in case the asset subject to the agreement considerably depreciates if the deadline established in the Portuguese Insolvency Code is respected.

In case the lease is “adopted”, any credits arising under the lease agreement prior to the commencement of insolvency proceedings must be claimed within the deadline set by the court in the insolvency decision (typically within 30 days) and may only be paid if the claim is accepted by the court, pursuant to applicable payment rules and creditors ranking. Also in this case, as well as in cases where the lease is “rejected”, and unless an in rem  security was granted in favour of the owner in connection with the lease agreement, the owner's credits will be ranked as common credits.

8.7 Are there certain types of preferred creditors whose claims will rank above claims of the owner?

Claims in insolvency are classified according to the following categories: (i) privileged credits; (ii) secured credits; (iii) common credits; and (iv) subordinated credits.

The classification is as follows: (a) special privileged credits – credits associated with a specific asset (movable or immovable), up to the amount obtained from the sale of that asset (e.g. employee's credits arising from an employment contract or its violation concerning the employer's property where the employee performs their activities; credits of the State and Local Authorities related to property tax); (b) secured credits – credits that benefit from security (up to the amount guaranteed by the security and paid only with the proceeds from the sale of assets burdened with the security); (c) general privileged credits – credits that apply to the general assets of the debtor (e.g. tax credits from the Tax Authority regarding income taxes; Social Security credits); (d) common credits (including the portion of secured or privileged credits that exceeds the proceeds obtained from the sale of specific assets); or (e) subordinated credits (e.g. credits held by persons or entities with a special relationship with the debtor or credits emerging from shareholders loan (suprimentos)).

Unless an in rem security was granted in favour of the owner in connection with the lease agreement, the credits of the owner will be ranked as common credits. Therefore, both special privileged credits, secured credits and general privileged credits will be senior to the owner's credits.

8.8 If the aircraft is in the possession of a person other than the operator or lessee at the commencement of insolvency protection of the operator or lessee, for example, an independent maintenance facility, will such person be entitled, under the laws of your jurisdiction, to assert a lien arising under law or contract over the aircraft in respect of amounts then due and unpaid to such person by the operator or lessee?

The PCC confers a retention right to a person or entity that holds a credit over certain asset (moveable or immoveable) if such person or entity is obliged to deliver such asset and its credit results from expenses incurred with the asset. In the situation described above, a retention right would arise if all the following criterion are met: (i) the maintenance facility has performed the maintenance works in the aircraft and it is obliged to deliver the aircraft to the entity that contracted the maintenance works; (ii) the entity that contracted the maintenance works is obliged to pay for the works but did not pay; and (iii) the maintenance facility holds the aircraft, as it is in its warehouse.

In case the entity that contracted the maintenance facility to perform the maintenance works is the owner of the aircraft, the maintenance facility would have a retention right.

However, considering that in the situation described in this question, the entity that contracted the maintenance facility is not the owner of the aircraft, it is not clear whether a retention right would arise via-à-vis the owner. Portuguese scholars debate whether it is possible that a retention right arises in this situation and court decisions are not unanimous in this situation. Therefore, one should note that there are grounds to defend that no retention right would arise and could be used against the owner of the aircraft, but this is not settled by scholars and/or past court decisions.

9. Detention and Confiscation

9.1 Other than insolvency laws (see section 8), are there any laws that may have the effect of defeating the owner's right in the aircraft – for example, government requisition? Do the laws of your jurisdiction provide for any compensation in such circumstances?

Yes, the PCC provides the government requisition of moveable assets in cases where there is a public interest that requires such assets to be used by the government to be satisfied. The PCC also provides that a specific procedure shall be adopted for the government requisition to occur and compensation is always due in such cases.

9.2 Are there any rights in relation to third parties to detain or sell the aircraft pursuant to illegal activities, tax or any other laws if the operator or lessee fails to pay when due? If so, can the aircraft be forfeited and sold without the owner being made aware?

In respect of the existence of liens and possessory rights, such as “privilégios creditórios”, please refer to our answer to question 4.5 .

In the specific case of seizure of an aircraft as a result of tax debts (including, notably, customs duties) one should understand the mechanics of the Portuguese tax regime. Under the Corporate Income Tax Code, non-resident entities without a Portuguese PE are only subject to tax over its Portuguese sourced income.

Payments made to non-resident entities are, in general, subject to a domestic 25% withholding tax rate, which may be limited by means of the application of a tax treaty entered into between Portugal and the State of Residency of the beneficiary.

To this end, Portuguese tax law imposes on certain paying entities resident in Portugal, notably corporations, to be responsible for said withholding tax, meaning they are responsible for: (i) assessing the tax nature of the income paid to the foreign beneficiary; (ii) assessing the applicable withholding tax rate; (iii) confirming the conditions upon which a reduced rate or an exemption apply; and (iv) the payment of the tax withheld to the Portuguese State.

As a consequence of said obligation, Portuguese resident entities, such as the case of an aircraft lessee resident in Portugal, will be primarily responsible before the Portuguese tax authorities for the payment of the tax that should have been withheld.

In case the lessee fails to levy withholding tax that ought to be withheld, Portuguese tax authorities will try to collect the outstanding tax due by enforcing against the lessee a tax enforcement process (so-called "processo de execução") that implies, among other proceedings, the seizure of all the lessee's assets (to secure the payment of the respective debt plus the interest due). Under this context, aircraft owned by a foreign lessor should not be subject to any lien for any unpaid withholding tax.

However, in a worst-case scenario, if the Portuguese tax authorities conclude that the proceeds that may result from the sale of the lessee's assets are not sufficient to settle the outstanding tax debt, in some circumstances the tax authorities are allowed to revert the collection proceeding against the lessor and, consequently, they are entitled under said circumstances, to seize the aircraft, as well as other assets belonging to the lessor, even if not related to the lease agreement entered into with the lessee who has failed to pay the taxes due, which may include other aircraft operating in Portugal and/or any credits to be collected by the lessor from other lease agreements. Theoretically speaking, Portuguese tax authorities may launch a collection proceeding worldwide.

To this end, we would like to draw your particular attention to the fact that this risk of seizure may result not only from the aircraft to be leased to a given lessee, but also from previous Portuguese debts that are still outstanding, notably those with withholding tax due, arising from previous lease agreements entered into between the lessor and the same lessee or other lessees that are resident in Portuguese territory.

The owner would be made aware of the detention of the aircraft at the beginning of the proceedings.

10. Aircraft/Engine Technology

10.1 With the global commitment of IATA to zero-emissions by 2050, are there any particular developments regarding the associated new aircraft and engine technology which might be foreseeable as regards aviation finance in your jurisdiction, e.g. as regards taking security (battery powertrain equipment) or enforcement (different airport infrastructure environments)?

There are no particular developments regarding the associated new aircraft and engine technology as regards aviation finance in Portugal.

Originally published by ICLG.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.