Portuguese Carbon Tax

The Portuguese Carbon Tax, also known as Taxa de carbono sobre viagens aéreas, has undergone recent amendments that expand its coverage to include non-commercial business jet flights. This article provides a detailed explanation of the carbon tax, its applicability, exemptions, and the obligations of aircraft operators.

The Portuguese Carbon Tax was initially implemented on 1 July 2021, applying solely to passengers departing from Portuguese airports on commercial flights. However, the tax scheme underwent significant amendments and extensions on 1 July 2023, now encompassing non-commercial business jet flights as well.

What is the Carbon Tax?

The Portuguese Carbon Tax is imposed on passengers departing from airports located within Portuguese territory. Currently set at 2 € per chargeable passenger, the tax applies to commercial flights operated for compensation, using aircraft with a maximum seating capacity exceeding 19. However, commercial or non-commercial departures on aircraft with a seating capacity of 19 or below are not subject to the fixed 2 € head tax. Instead, the carbon tax for such flights is calculated using the following formula:

Carbon Tax = TC * CP * S * (D+1)

Where:

TC = Tax rate of currently 2 €
CP = Pollution coefficient of 10
S = Maximum seating capacity of the aircraft used
D = Distance in KM divided by 1000 and rounded to the first decimal place. It is worth noting that the regulator requires the use of the actual distance (opposed to flight plan or great circle distance), although this information may not be readily available.

The Portuguese National Civil Aviation Authority (ANAC) is responsible for administering the Carbon Tax. ANAC is authorized to request flight information from airport operators to ensure compliance and perform necessary inspections. This regulatory oversight shall ensure the effective implementation and enforcement of the Carbon Tax scheme.

Who is liable to pay the Carbon Tax?

The Carbon Tax is levied on passengers carried on board two types of flights: commercial airliner flights and business jet flights. Commercial airliner flights refer to commercial flights departing from Portugal with a seating capacity exceeding 19. Business jet flights include both commercial and non-commercial flights departing from Portugal with a seating capacity of 19 or lower.

The liability for paying the carbon tax rests with the aircraft operator, who exercises control over the aircraft's use and operations. If the aircraft operator is unknown, it is assumed to be the natural or legal person under whose name the aircraft is registered, unless proven otherwise.

There are various exemptions applicable to both commercial airliner flights and business jet flights.

Commercial airliners are eligible for exemptions in the following cases: infants onboard, flights between mainland Portugal and Madeira/the Azores, flights following forced landings at Portuguese airports due to adverse weather conditions, technical issues, or similar reasons, as well as flights performed as part of public service obligations (PSO).

In contrast, business jet flights have their own set of exemptions. These include all-electric aircraft, state flights, training flights, medical emergency flights, and search and rescue flights. Business jets can also benefit from exemptions pertaining to PSO flights and flights resulting from forced landings due to adverse weather conditions, technical issues, or similar reasons. Additionally, repositioning flights from Portugal are exempted as long as the aircraft is not piloted by its owner.

What Are the Tax Obligations?

As a participating aircraft operator, you must:

• appoint a fiscal representative, such as FCC Aviation, if you don’t have a fixed establishment in Portugal. The appointment is optional for EU based aircraft operators although ANAC recommends appointing a fiscal representative nevertheless.
• register for tax;
• submit a tax declaration by the 15th day of the month following the reporting month unless you don't have any chargeable flights during that period;
• pay carbon tax by the last day of the month following the end of the reporting month;
• pass on carbon tax to passengers on commercial flights and clearly display the tax in the advertised fare.