By Sergio Goncalves
LISBON (Reuters) - Portugal will end property tax exemptions on the country's around 60 hydroelectric plants and reintroduce - with retroactive effect from 2019 onwards - an annual tax of up to 0.8% on the value of their assets to finance municipalities, a top official said on Wednesday.
Utilities had been exempt from paying the Municipal Property Tax (IMI (LON:IMI)) on hydroelectric plants since 2016, but the exemption sparked criticism from many municipalities that have claimed hundreds of millions of euros in unpaid taxes.
Nuno Felix, secretary of state for tax affairs, said in August he gave "a very clear order to the Tax Authority to develop efforts to ensure the payment of the IMI tax from 2019 onward".
The Tax Authority is responsible for collecting this tax -which fluctuates between 0.3% and 0.8% of the plants' asset value - and redistributing it to the municipalities.
Felix said an assessment of the value of each dam will have to be carried out, involving other entities such as the Portuguese environmental agency APA, which he hopes will be completed before this year.
"We must be aware that it is a complex process as dams of this size have not been evaluated for several decades ... and litigation (by utilities) is a factor of uncertainty," he told a parliamentary committee.
Miguel Stilwell, chief executive of Portugal's largest utility EDP, which owns the bulk of the country's hydroelectric plants, said in April that he did not understand why the government wanted to reintroduce this tax and that the utility could appeal to the courts.
In 2019, a consortium led by France's Engie purchased six dams from EDP in a deal valued at 2.2 billion euros ($2.36 billion), including debt.
Last year, Spanish company Iberdrola (BME:IBE) inaugurated its hydroelectric mega-project in the country, with three dams on the Tamega river, with an investment of more than 1.5 billion euros.
($1 = 0.9314 euros)