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1 JanuaryDEDUCTIONS FROM PREDIAL INCOME
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1 DecemberPersonal insolvency
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1 NovemberSTATE BUDGET proposal for 2017
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1 OctoberTaxation of donations
I received a vehicle from my uncle as a donation. Is this subject to any taxation, and if so, what is the tax rate and who is obliged to pay it?
The donations classified as being gratuitous transfers in terms of Stamp Duty are subject to the incidence of this tax under article no. 1 of the Stamp Duty Code.
In accordance with article 2, paragraph 2 of the same code, in these transfers taxable persons are those for whom the assets are transferred. It should be noted that in case one of these persons are married or are in a civil partnership, direct descendants and direct relatives in the ascending line would be exempt from tax payment in accordance with article 6 of the Stamp Duty Code.
In the case of a car, the taxable amount, in accordance with article no. 14, paragraph 2 of the mentioned code, is its market value. Market value corresponds to the difference between the acquisition price and the product of this value by the coefficient of devaluation, in accordance with the table approved under the Ministerial Decree No. 383/2003 of May 14th.
The taxable amount is subject to the rates present in the general table of the Stamp Duty Code, where the amount of due tax is inscribed. In the case of a vehicle, the rate applied is 10%, in accordance with section 1.2 of the mentioned table.
To ensure compliance with all obligations, declaration Model 1 of the Stamp Duty, with respective annexes, should be submitted to the local finance office before the end of the third month after the gratuitous transfers of the asset.
In accordance with article 45 of the Stamp Duty Code, tax on gratuitous transfers is paid in full before the end of the second month following the notification. If the amount of tax due is greater than €1,000, the Tax Authority allows it to be paid in a maximum of 10 installments and in no less than €200 per installment.
The first installment is due in the second month following the notification and the remaining ones should be paid every six months. However, if you pay the total amount of tax until the end of the second month following the notification, you will benefit from a reduction of 0.5% in each installment, with the exception of the first.
For more information, please feel free to contact Guimafluxo.
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1 SeptemberChanges to the municipal tax on real estate
The media has made public a number of changes to the municipal tax on real estate. What do they truly mean?
On 1st August, the Decree-Law no. 41/2016 was published in the Official Gazette of Portugal with amendments to the Code of Municipal Tax on Real Estate (CMTRE). These included changes to articles 43 (Coefficient of quality and comfort) and 77 (Impugnation).
Article 43 is the one that has raised more issues due to its subjectivity. The main change resides is the increase of the surcharge from 5% to 20% and the rebate from 5% to 10% for relative localization and operations. First, it should be noted that this coefficient of quality and comfort results in the assessment of the intrinsic characteristics of the building and its surrounding area; these can be increased, to the extent that they improve the quality and comfort of the property, or reduced, if they degrade these elements. Localization and operations is affected by the location of the property and its positive or negative influence. Thus, factors such as views and sun exposure have a direct influence on this coefficient. But, contrary to what one might think, these factors were already considered for the calculation of the CMTRE. However, they have now a greater weight in the formula of this coefficient, which may result in an increase in the amount of payable tax.
With regard to article 77, the amendment introduced the possibility of rebuttal of the evaluation of a property being done by Municipalities and Parishes, when the latter benefits from the tax income. This amendment does not represent a new practice, since the municipalities already had the power to contest the outcome of the first evaluation. With this amendment they will now be able to impugned a second evaluation.
For more information, please feel free to contact Guimafluxo.
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1 AugustFiscal Domicile
The company where I work wants me to relocate to Spanish territory for a few months in order to develop a new project from our portfolio. What happens to my fiscal domicile?
In accordance with article 16 of Personal Income Tax Code, residents are those who have remained more than 183 days, consecutive or not, in any 12-month period beginning or ending in the year considered or, having stayed for less time, possess a house in this territory in conditions which lead to the intention of maintaining and occupying it as habitual residence.
In this way, you will only be considered a resident in Portuguese territory if you stay during this interval of time in the national territory and own a residence with the intention of staying to reside.
If your work relocation is less than 183 days, you will always be considered a resident in the national territory. However, if that is not the case upon your return to the country, assuming that you have a residence is Portugal, you will be considered resident again if you intend to stay in the national territory.
As a mere formality, you will need to change your status of residence from "resident in Portugal" to "resident in Spain" and the vice versa. This has to be reported to the Tax Authority, within 60 days, updating your fiscal domicile stated in your Citizen Card. If you do not submit this procedural alteration, it will conflict with your tax return for the period in question.
When submitting your tax return form, you will have to submit two forms (one as a national tax resident and another one as non-resident). You also have to fill in the start and end dates in the new field in table 8 of the income statement's front cover.
For more information, please feel free to contact Guimafluxo.
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1 JulyInheritance taxation
I received immovable property as an inheritance from my parents and I want to put it up for sale. Will I have to pay taxes?
In accordance with article 6 of the Stamp Duty Code, people who receive assets by inheritance of a spouse or in a civil partnership, of the direct descendants and direct relatives in the ascending line are exempt from payment of tax.
However, even though they are exempt, they are obliged to duly to declare all taxable assets received to the Tax and Customs Authority (TCA), via the submission of the Declaration Model 1. This submission should be done before the end of the third month following the issuing of the tax liability (date of death), in any finance office.
However, when the sale made generates income IRS taxation may apply. The Tax Authority carries out the result of capital gains or losses. However, the annex of Declaration Model 3 will have to be submitted. The value subject to taxation, in simple terms, will be 50% of the difference between the sale value and the value of the acquisition. This value will be considered as a category G income and to be included in remaining other incomes obtained in fiscal year 2016 (if the sale takes place in this calendar year).
The value of the acquisition, although fictitious (given that it is an inheritance), results from the patrimonial taxation value registered in the fiscal property register at the date of death. The coefficient of currency devaluation should be applied to that value, and all costs incurred in the last five years should also be subtracted, together the property appreciation of the immovable, as well as all expenses related to the acquisition and disposal.
For more information, please feel free to contact Guimafluxo.
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1 JuneSimplex Programme 2016
What is Simplex programme? What are the fiscal implications for taxpayers?
Simplex Program (Programme for Administrative and Legislative Simplification) consists of a package of measures designed by the Portuguese Government and created in 2006. New measures have been added over the last few years aimed at combatting bureaucracy, modernising public administration and facilitating the life of individuals and businesses.
The Government has already announced that there will be a new package of measures this year in the context of that programme called Simplex+2016. After examining the programme, we found that in terms of taxation there will be some important measures implemented, with clear implications for taxpayers.
Firstly, the most obvious one it is automatic tax return, resulting from the gradual end of the IRS submission process for taxpayers who are classified as employed (category A) and retirees or pensioners (category H). The calculation of tax due will be carried out based on the information already made available by the Tax Authority.
We anticipate that taxpayers will have to analyse their deductions throughout the year in the portal e-invoice, as well as their Monthly Declarations of Remuneration in order to check if the employer is duly submitting the declarations (only in category A).
We can also highlight measures such as: no longer being necessary requesting the exemption from the Municipal Tax on Real Estate whenever the Tax Authority is already in possession of the necessary information; the possibility of taxpayers paying their taxes by direct debit; and obtaining a non-existence of assets certificate.
In this way, it seems to us that this package of measures, if adequately used, will benefit taxpayers, but some effort is required in order to adapt to the new practices.
For more information, please feel free to contact Guimafluxo.
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1 MayTax benefits for urban renewal and regeneration
I am interested in buying a property in the historical centre of Guimarães (for renewal purposes). Will I have some tax benefit?
There are some tax benefits that may be included in the purchase of your property. In the municipality of Guimarães there is, at this moment, two areas of urban renewal and regeneration: Taipas's city centre (from Avenida da República to Rua da Charneca) and city centre (from Rua D. João I to Couros's district). We can highlight the exemptions from Municipal Real Estate Tax (MRET) and Municipal Real Estate Transfer Tax (MRETT) that can be obtained.
Under MRETT, one can benefit from a total tax exemption, in accordance with Article 45, Paragraph 2 of the Tax Incentives Statute (TIS) provided that construction begins within a maximum period of 3 years from the date of acquisition. In this context, there are two important points to highlight: this exemption takes place after its liquidation, meaning you will have to pay the tax and after exemption is verified, you will be refunded of the value. The acquisition contract must express the intention of regenerating the property.
In terms of MRET, and in accordance with Article 71, paragraph 7 of TIS, urban buildings that are regenerated can benefit from to a total tax exemption for a period of five years starting from the completion date of the renewal.
Additionally, if your property is located in the UNESCO World Heritage Site, there will not be MRET exemption mentioned above and you will benefit from a total and permanent exemption from MRET in accordance with article 34, paragraph 1, subparagraph n) of TIS, because the building is classified as a national monument. The Secretary of State of Local Administration recognized this exemption very recently.
For more information, please feel free to contact Guimafluxo.
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1 AprilLegality of tax planning
Is tax planning a violation of law?
Tax law allows taxpayers to act in the manner they think is most appropriate, provided they do not violate the rules laid down by tax law. Thus, taxpayers can manage their businesses in the way they see fit provided they are within the limits laid down by tax law.
In this sense, there are specific regulations for resolving these issues, called "Anti-abuse clause" regulated in the Portuguese legal under Law no. 30-G/2000 December 29th, which was added to the General Tax Law in article 38, paragraph 2. This clause has as its primary objective the fight against abuse of the right to obtain tax advantages because some businesses can be considered legitimate, but they may prove to be abusive or biased.
For the application of this regulation it is necessary to bear in mind that taxpayers are free to practise tax planning as a way of free fiscal management. There can only be a stop to this when acts or legal transactions are practised in way that might be considered abusive or designed to obtain a given tax advantage.
Evasion or tax avoidance is behind all this, to the extent that this results from the practice of acts or lawful business but tax law interprets them as not being in line with the economic reality behind them, so they are interpreted as being abusive or biased (also characterized "extra legem" behaviours).
The resolution of this issue will always be done within the scope of action of the Tax Authority, which will have an imbroglio to resolve because it will have to declare as ineffective all acts or legal transactions that are created with the purpose of obtaining a given tax advantage.
Thus, tax planning is a taxpayers' right provided they do not have the purpose of obtaining a tax advantage via abusive or biased acts. In this context, let us analyse a very common act: divorce as a way of protecting personal assets in the event of debts. Given the characterisation of this act as biased, this constitutes a violation of law. In the corporate world context, in the context of group companies, this is also frequently done, especially as regards transfer prices and tax losses reported in previous years.
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1 MarchIRS Taxation of Couples
Considering IRS submission period is close, what does it mean filing joint or separate income tax returns?
One of the main changes to be taken into account when preparing tax return is the fact that, by default, the taxation of taxpayers who are married or in a civil partnership is carried out separately. However, it will be possible to opt for a joint taxation, provided that it is properly marked in the return form.
Thus, what option should be chosen? The answer to this question differs from couple to couple, especially taking into account the income received by each individual because if there is a great disparity of income between the two taxpayers, the average income will certainly assign a lower taxation value to the individual with the highest income.
However, the individual that has a lower income will be taxed according to a higher scale. Therefore, it is important to simulate the two situations and draw the necessary conclusions. Another aspect that should be considered when choosing between joint or separate taxation is the question of the number of dependents and expenses that can be deducted (education, health, amongst others).
After conducting some simulations, we have found that, as a general rule, either when the individuals in the couple have taxable incomes significantly different or when the incomes are similar, the option for joint taxation tendentiously more favourable.
We would like to point that, by default, the tax return selects separate taxation for married taxpayers or in a civil partnership, something that looks like a disguised attempt at collecting more taxes. Thus, we strongly advise, prior to submitting the tax return form, doing the necessary simulations to understand which tax scenario is more favourable.
For more information, please feel free to contact Guimafluxo.
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1 FebruaryDraft State budget for 2016
What can one expect from the new measures presented in the draft State budget for 2016?
According to Minister Mário Centeno, the State budget for this year includes measures of economic growth, something we have not seen since 2011. Thus, there is likely to be a contribution to the recovery of the economy, which, of course, will affect the financial situation of Portuguese citizens positively.
The draft budget's measures with more direct implications for the taxpayers are: first, the elimination and reduction of the IRS surcharge which means all income up to €801 per month will cease to be subject to this tax. For incomes over this amount, rates will vary between 1% and 3.5%; second, another measure which will have implications on monthly Portuguese incomes will be the reduction of the single social security contribution, since workers who have salaries equal to or less than €600 a month will benefit from a reduction of up to 1.5%.
In terms of taxation, some significant changes are expected. With regard to petroleum and tobacco taxes, an increase between €0,04 and €0,05 for fuels and about 3% in the case of tobacco is expected. In relation to VAT, the much-vaunted reduction in this taxation for the restaurant industry (intermediate rate at 13%) will start to show from July 1, 2016 onwards. Finally, when it comes to Corporate Tax, no changes are expected to the 21% rate introduced in the State Budget for 2015.
When it comes to social benefits, the expectation is of an increase in pensions and family allowances. With regard to pensions up to €628, they will be updated, in effect from the beginning of the year. With regard to family allowances, there will be an update of 3.5% for the first scale, 2.5% for the second, and 2% for the third.
In this way, this State Budget aims at having a tax burden more favourable to employment and growth, and with less direct tax (IRS), which will free up net income for taxpayers and thus promoting consumption. Consequently, an increase in revenue from indirect taxes (VAT) is expected.
For more information, please feel free to contact Guimafluxo.
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1 JanuaryRevaluation of the patrimonial value of property
Should I revaluate the patrimonial value of my property or not?
The answer depends on several factors that influence this revaluation. For this revaluation three main factors should be taken into consideration that relate to the coefficient of localization, quality, comfort and age of the building (regulated by article 38 of the Code of Municipal Tax on Real Estate)
With regard to the coefficient of localization, the Tax and Customs Authority (TCA) is currently reviewing all zonings and their respective coefficients of localization. An interactive map is presently available in TCA's website, where one can check the current value of the individual coefficient of localization. One can also check in the website the coefficient of localization assigned to one's immovable by accessing the real estate register. In this way, if the value registered in your real estate register is greater than the one stated in the interactive map, it is advisable to ask for the revaluation of the patrimonial value of one's property.
In terms of the coefficient of quality and comfort, it should only be taken into account if your property suffers significant improvements in its structure, such as the construction of a swimming pool, a tennis court or even a garage. Therefore, if any of those constructions take place it is not recommended to ask for the revaluation of the patrimonial value of one's property because it will tend to increase.
On the other hand, and still in the context of this coefficient, if the situation is contrary to the stated above, i.e., if, for example, the house once had a swimming pool and now it has been demolished or the building has suffered an accentuated deterioration, it is recommended asking for a revaluation of the patrimonial value of one's property, since it will tend to decrease.
Finally, the coefficient that presents itself as the most favourable is the coefficient of age. This coefficient will decrease over the years, in accordance with the temporal intervals of different amplitudes. So, if your property has exceeded the threshold of 2, 9, 16, 26, 41, 51 and 60 years, it is very likely that the patrimonial value of one's property will decrease.
In conclusion, consider also that it will be the mix of these coefficients, allied to other coefficients less prone to changes, which give the patrimonial value of one's property. In this sense, one should check if the mentioned three coefficients have oscillations and if they are cumulatively positive or negative.
For more information, please feel free to contact Guimafluxo.
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22 DecemberLower vat on restaurants: a fallacious argument
The reduction in VAT on restaurants from 23% to 13% is one of the measures that the new government, headed by Prime Minister António Costa, wants to add to next year's State Budget.
It is clear that this measure will necessarily have a positive impact on this sector, resulting in three possible factors of improvement: increase of profits, investment in business or lower prices. This last factor, which is, in our view and for many people, the objective of the measure, will not, unfortunately, produce any effects. This is due to the fact that this sector is experiencing, like the rest of the country, serious difficulties, and with this reduction in taxation better economic conditions would be created, contributing to the development of business endeavours and the increase in jobs.
Take, for example, a €10 meal. With the reduction in VAT taxation, business owners will retain 80 cents approximately, i.e., reducing the price will lead to maintain the current situation or even aggravate it. Thus, from the point of view of the taxpayer, this measure will have no effect on the price to be paid. We witnessed the same effect when VAT was increased to 23%, resulting in a substantial increase in the tax bill with no reflection in the PVP prices. The increase was incorporated in the companies' costs.
Presently, we have the lowest average price per meal in the European Union. In some cases, it can be even cheaper than a simple coffee in many European cities. Therefore, it seems clear to us that the change in VAT will produce no reductions in prices paid by consumers.
About eight years ago in this country, we had an excessive number of establishments dedicated to this sector, one thousand more than the European average. Many of these closed because they did not to not comply with the European Union's regulations or simply because they were not economically viable.
But not everything is bad. Presently, the historical centre of Guimarães is a tourist destination in constant rise and featured in the top 10 world recommendations for travellers using the portal TripAdvisor. This portal stands out as being the most important in the travel industry around the world. Guimarães's historical centre is ranked 4th place amongst all world destinations with UNESCO Heritage. With this measure, it is expected that the existing establishments in the city will further development, creating new jobs, and new businesses be created.
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15 DecemberThe vagueness of the State Budget for 2016 and its implications
The 19th Constitutional Government headed by Prime Minister Pedro Passos Coelho ended his term in office on October 30th this year. However, in accordance with Article 39, paragraph 1, subparagraph c) of the Budgetary Framework Law (Law no. 151/2015, September 11th) when the term of the legislature occurs between October 1st and December 31st, the State Budget for the following financial year should be submitted by the government to the Parliament of the Portuguese Republic and sent to the European Commission within the next 90 days after the government takes office.
Thus, the new government, headed by Prime Minister António Costa, will have until February 24th to submit to Parliament a proposal for the State Budget for 2016. The parliamentary debate on the budget, in accordance with article 38, paragraph 2 of the Budgetary Framework Law, will be held within 45 days after its submission to the Parliament of the Portuguese Republic.
That said, it is almost certain that, at the start of next year, there will not be a State Budget in force, and a provisional twelfths State Budget will adopted. But then, what does it mean a provisional twelfths State Budget, and what are the implications for the country's economy?
A provisional twelfths State Budget means being obliged to comply with the limits laid down in the State Budget for the previous year, i.e., we are necessarily restricted to a monthly expense of 1/12 of the total of the previous year, keeping the revenue.
On the whole, everything will continue to function normally, because we will have a budgetary policy equal to that of the previous year. However, this turns out to be fallacious, because we do not have a policy of fiscal consolidation and consequent control of the deficit.
Although this provisional twelfths State Budget is based on the limits established in the previous year, there is a range of situations in which the levying of taxes will expire and the expense will change. This group includes, for example, the cuts in wages in public administration and the IRS surcharge. In the first case, they were already planned in Law no. 75/2014 September 12th, although its article 4 reads that these cuts in wages were only included for the years 2014 and 2015, i.e. in 2016, they will cease to exist.
In the second case, the situation is identical. According to article 12-H, paragraph 3, subparagraph (b) of Law No. 41/2014 July 10th, the extension of the validity of the law of the State Budget does not cover the authorization for the collection of revenue whose fiscal framework was only valid until the end of the fiscal year to which the law pertains. That is, because the provisional twelfths is considered extraordinary revenue, it will not be extended to the provisional twelfths State Budget. Cutting these two measures will have a negative monthly impact of approximately 125 million Euros.
With this provisional twelfths State Budget, there will be some problems that will represent implications throughout the year. These implications will be felt mainly in periodic taxes such as VAT, where one might see some cuts in taxation, but they will only be altered when the State Budget 2016 is in force. When it comes to direct and indirect taxes (for example IRS and Corporate Tax), they can only change when the State Budget 2016 is in force, but will have a retroactive effect, i.e., will have implications from January 1st to 31st December of the year in question.
In this way, my dear taxpayer, when faced with the news, for example, of the increase in the minimum wage or other measures to eliminate budgetary constraints, do not be fooled, because until we have the State Budget for 2016, we will tend to have a budgetary policy equal to the previous year. And if this is not the case, then we run the risk of living beyond our means.
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1 DecemberIRS deductions 2015
Taking into account that the year is ending, which new deductions are possible in terms of tax return with the new IRS CODE for 2015?
In accordance with Law no. 82-E/2014 December 31st, subsequently amended by Law no. 67/2014, July 6th, IRS code has been substantially amended. Through this framework, all IRS deductible expenses have been redesigned. Deductions were expanded. However, in order to have valid invoices they have to be issued using the fiscal number and submitted on time to the tax authority.
The expenses that were not covered until now were related to families’ general expenditure, which included, for example, groceries, water, electricity, and telephone. Here, one can only benefit from a deduction of 35% of the total expenditure up to a maximum of €250,00 per person. In addition, it will also be taken into account the deductions allowed by the sheer issuing of invoice, in which are included services such as meals, hotels, hairdressers and vehicle repair, where it is possible to deduct 15%, up to the maximum amount of €250,00.
In order to monitor this situation, one should check the website "E-Invoice", tab "consumer", where one can find a summary table of the invoices registered under the fiscal number of each taxpayer. If all business owners comply with their obligation, all invoices registered with the individual fiscal number will feature in that table. It is also possible to select the sector of activity to which the invoices relate.
If you conclude that the invoices issued under your fiscal number are not registered in the portal, it is possible to register manually. In order to do this, you need to know the business owner's fiscal number and the exact value of the invoice in question. The registration and validation of your invoices must be done until February 15th 2016.
For more information, please feel free to contact Guimafluxo.
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28 AugustThe importance of a management consultant and a finantial advisor for the future of a society
As we all know, the entities are required by law, since 1995, to have a qualified professional in supporting accounting and fiscal organization, usually called the Accountant.
About 20 years ago, this professional was seen only as a "bookkeeper" that simply put on paper all relevant information to state interests and other entities. However, over the years, it importance for societies was growing, particularly for companies and individuals and in their relations with the state and other institutions. More recently, we have witnessed the increasing added value that this professional has proved within each company or business structure which he collaborates. It is required of him a perfect command of heterogeneity of skills to fulfill the functions entrusted to him and which are of public interest.
In the current economic environment is absolutely necessary increasing grow in a consistent and cost effective manner. To this end, it is essential to meet market challenges with strategic clarity and operational efficiency. For all of this to become reality, it is imperative to have support from an external professional, with extensive knowledge of the market and fair view of the business. In other words, companies today, not only can develop using the "know-how", but have to perfectly master another crucial method, the "know-know."
As previously mentioned, a Chartered Accountant plays an increasingly important role in society. However, due to limitations of its college’s rules, as well as technical and operational aspects, this professional does not acquire a broad vision to assist companies in their sustained growth. In this context, it is imperative to contact a professional with wider views, the so-called management consultant. This has a decisive role in the accounting and tax development (which the entities are obliged to perform), but more importantly in the active decision-making on the direction of the company; to participate, for example, in human resources management, financial restructuring, in sustained growth, in entrepreneurship and internationalization.
This aid proves to be extremely important in startups, in the development and testing of ideas and in the creation of systems and in the creation of active support structures and subsequently, in the control of costs and fundraising on financial resources. In the case of consolidated companies, it is crucial to focus on national and international growth, in which this professional, will have an active role in implementation plans, processes, and, perhaps, access to finance.
In this context, it becomes imperative having a consultant with the capacity to create innovative, fast and functional solutions to get in the competitive world of business in which they are surrounded by an increasingly aggressive competition in a constantly evolving market.
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