After the required 40-day viewing period for amendments that have been three years in the making, the Portuguese market uncovered the new securitization tax regime last week (see ASR 7/30/01).

"We have a changed law," said William Smithson, a partner with Simmons & Simmons Grupo Legal Portugues, which has been following the development of the law since its early stages in 1999. In a synopsis of the new securitization tax regime, Simmons & Simmons highlights changes to the November 5, 1999 decree (see Observation).

Portuguese regulators are said to be making further arrangements to facilitate securitizations and will be reviewing the status of sociedades de titularzacao de creditos (STCs). A meeting last week of the CEOs of Portuguese banks with the Bank of Portugal included discussions on the chapter covering STCs, said one market source.

Even with the change to the tax withholding regulation, the managing entities, STCs, are still exposed to approval by the Bank of Portugal. Portuguese law states that financial companies must have a minimum of two years legal existence to be able to issue bonds in the country. Under such design it could be considerable time before Portugal experienced the impact of the tax withholding amendment.

Following last week's meeting, market sources speculate that there will be an initiative to make STCs user-friendly, removing their status as financial companies and therefore bypassing the reviewing period.

The chapter is expected to be replaced, but as to how quickly the Bank of Portugal will move is still questionable. "We finally got the tax withholding amended and that in itself is slightly surreal," added the market source.

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