Subsistence allowances: What the law says in Portugal

29 de May, 2024

Have you ever had to travel for work on behalf of your company? Then the concept of subsistence allowance is probably not new to you.

Subsistence allowances are an item inherent to various professional activities and apply to three categories: transportation, accommodation and food.

Find out what they are in practice and what Portuguese legislation says about subsistence allowances.

What are subsistence allowances?

Subsistence allowances are financial support granted by the employer to employees when they have to travel on company business, inside or outside the country.

For example, if an employee needs to have a meeting with a client in another city, or take part in a fair or conference, the company uses subsistence allowances to cover the costs associated with this trip: transport (fuel, tolls, parking meters, public transport tickets, etc.), food and accommodation, if necessary.

These costs can be covered by the company in advance or, alternatively, within 30 days of submitting proof of payment: receipts and invoices requested with the company’s VAT number.

What does Portuguese legislation say about subsistence allowances?

Subsistence allowances apply to both public and private sector workers. However, there is no legislation in Portugal that regulates this in the case of private companies.

There is, however, Decree-Law 106/98 of April 24, later clarified by Decree-Law 137/2010 of December 28 (as last amended by Decree-Law 33/2018 of May 15), which applies to the public administration and is used as a reference by private sector companies. Even so, they are free to define their own subsistence allowance policy, as well as the amounts to be allocated.

What is provided for in Decree-Law no. 106/98, of April 24th

This decree-law establishes rules on the payment of subsistence and transportation allowances for journeys undertaken on public service. It defines the types of travel covered by the payment of subsistence allowances, as well as the minimum distances eligible for reimbursement.

The journeys covered are:

• Daily commuting: carried out over a 24-hour period (or, if the period is longer than 24 hours, does not entail additional expenses). In this case, there is a right to subsistence allowance for distances of more than 5km from the workplace, but the amount paid by the company depends on the period of the day in which the journey is made.
• Trips for successive days: made over a period of more than 24 hours or not covered by the above. There is a right to subsistence allowance when the distance exceeds 20km from the workplace, and the amount paid by the company also depends on the employee’s departure and arrival times.

In both cases, the amount of the allowance is calculated on the basis of the employee’s salary.

As far as meal allowances are concerned, the reference values are those of the meal allowance and the respective allocation format: if it is allocated in cash, together with the monthly salary, the reference amount is €6.00/day; if it is allocated on a meal card, this amount rises to €10.20/day.

Are subsistence allowances subject to taxation?

An important aspect to bear in mind is that the maximum limits set for the public sector are those that are tax-free for the employee, even in the private sector.

In other words, if the company gives the employee a higher amount than that defined, the remaining amount will be subject to personal income tax as category A income and to social security contributions.

This is the case, for example, with the meal allowance: if the company pays €6.50/day in cash, the employee will have to pay IRS on €0.50, since the maximum amount exempt in cash is €6.00/day.