Natural gas companies can now recover the amount paid to the State at an extraordinary rate.

The Constitutional Court issued a ruling deeming unconstitutional the rule that requires the Extraordinary Contribution on the Energy Sector (CESE) to be paid by natural gas companies , whether they are concessionaires for transportation, distribution, or underground storage, Jornal de Negócios reported this Thursday. According to lawyers consulted by ECO/Capital Verde, the companies in question can now recover the amounts charged.

As a rule, the declaration of unconstitutionality with general binding force – applied in this case – has retroactive effects, “which may allow taxpayers who have paid CESE (transporters, storage and distributors of natural gas) to complain or request a refund of the amounts paid” , argues lawyer Frederico Vidigal, from Macedo Vitorino.

If companies have contested the 2019 CESE and paid the amounts in question (instead of providing guarantees), the State will have to return the amounts, plus compensatory interest.

" If companies contested the 2019 CESE and paid the amounts in question (instead of providing guarantees), the State will have to refund the amounts, plus compensatory interest ," according to Joana Lobato Heitor, partner in the Tax Department at MFA Legal, and Catarina Gomes Correia, senior associate in the same department. This is because the TC's generally binding decision is limited to the natural gas sector and refers to 2019.

Filipe de Vasconcelos Fernandes, Professor at the Lisbon Faculty of Law and Senior Counsel at Vieira de Almeida (VdA), states that the court's decision applies to tax years 2019 onward, "and those affected should use the mechanisms established by law to review their respective values." This is despite the Tax Authority being required to comply with the decision upon its publication in the Official Gazette, he adds.

According to the experts consulted, the amounts collected by the State through the Extraordinary Contribution for the Energy Sector are not published by entity or sector, so the amounts involved in this decision are not yet known. However, a recent survey indicates that the State, in total—that is, considering all energy subsectors, from gas to electricity—has collected over one billion euros, looking at the ten years from 2014, the year CESE was created, to 2024.

The companies subject to this contribution have long contested it. REN has always paid, but is one of the main opponents, having already filed 40 lawsuits. In this year's earnings presentation, the company highlighted the recognition of €5.6 million in Extraordinary Contribution on the Energy Sector, after, for the first time, the Constitutional Court ruled favorably on two appeals filed in the gas sector.

EDP defaulted in 2023 , when it owed €49.3 million, and did so again in 2024, when the cost amounted to €47.7 million. Between 2014 and 2022, the group paid over €558 million in CESE. Galp, at least until 2023, claimed it had never paid CESE , accumulating provisions of almost €500 million.

The TC's decision has general binding force, meaning that any case brought before the court on the same matter must be decided in the same way. At the same time, it dictates that the unconstitutional rule must be removed from the law.

Natural gas companies with pending court cases that have challenged the 2019 CESE "will benefit immediately and directly from this decision," say lawyers from MFA Legal 's Tax Department . " They simply need to wait for the ruling, which will be favorable, and for the refund of the amounts paid, plus compensatory interest (if they have paid the tax)," they conclude.

According to Macedo Vitorino, companies that benefit from the unconstitutionality decision must now complain or request a refund of the amounts paid to the Tax Authority, benefiting from a period of four years after the publication of the ruling to file a lawsuit for the refund of the amounts, if the request is not accepted by the Tax Administration.

Decision does not benefit electric companies, but opens doors

The application of CESE to gas transportation and distribution companies had already been analyzed by the same court, which considered the application of this contribution in specific cases within the sector to be unconstitutional.

" The issue at hand is that the Constitutional Court considers that these taxpayers are not responsible for the electricity sector's tariff debt and are not the originators or beneficiaries of public benefits ," explains the partner and associate of the Tax Department at MFA Legal. This violates the principle of equivalence or equality that underlies the unconstitutionality ruling.

The contribution was created with the aim of applying an extraordinary tax on the energy sector of "150 million euros per year, in 2014 and 2015", to finance a fund for the sustainability of the energy sector and "share the effort of budgetary adjustment with companies with the greatest contribution capacity, without the possibility of repercussions on consumers".

But the CESE is not only the target of TC decisions in the natural gas sector. In April of last year, the Constitutional Court published a decision declaring the unconstitutionality of the Extraordinary Contribution on the Energy Sector (CESE) levied on renewable energy production centers , once again limited to a specific case. Shortly thereafter, a similar decision was issued regarding wholesale crude oil and petroleum product trading companies.

The Constitutional Court's decision weakens the constitutional basis of the CESE, potentially paving the way for future declarations of unconstitutionality.

In the view of VdA's Senior Counsel , " the case of electricity companies is completely distinct [from that of natural gas], so there is no connection" with the current decision . However, "there are other possible connections," for example, regarding companies that are not part of the National Electric System (SEN). "The decision is not a declaration of the unconstitutionality of the CESE itself, but of its application to the aforementioned natural gas operators. In this sense, the CESE's unconstitutionality decision has no direct effect on electricity companies ," Frederico Vidigal unanimously states.

Even so, Macedo Vitorino's lawyer believes that "the TC's decision weakens the constitutional basis of the CESE, potentially paving the way for future declarations of unconstitutionality ." Furthermore, he believes that electricity companies subject to the CESE will begin to invoke grounds adopted by the TC to challenge the legality of the contribution, " therefore, an increase in litigation between sector operators and the Tax Authority is anticipated ."

Companies in the electricity sector can challenge CESE charges through administrative means, requesting the Tax Authority to review the settlements, or through legal means, by filing an appeal in the administrative courts.

He notes that, if three different decisions recognize the unconstitutionality of the same rule or interpretation, the TC may issue a decision with general binding force. This "would strengthen the position of companies in the electricity sector and oblige the Tax Authority to apply this understanding to all similar cases," he concludes.