Mileage allowance and car reimbursements in Portugal: the lowdown

So, first things first. What is mileage allowance? It’s the amount employees can claim to cover the cost of fuel, insurance, road tax, and the general wear and tear of their own car (specifically not a company car). Journeys that qualify might be taken for business trips and purposes, excluding commuting allowances and personal journeys. The amount paid will be tax deductible for the business, as long as it doesn’t exceed government guidelines.It’s a win-win for employees and employers alike: car mileage allowance benefits workers who

might pay for travel expenses out of their own pocket

, and helps businesses enjoy tax relief on company journeys. Mileage reporting is an essential tool for companies that have a fleet of vehicles or whose employees use their own vehicles for work-related purposes. It provides a number of benefits, from reducing company travel expenses to increasing staff safety. Approved mileage often depends on vehicle used and distance covered, as rates and conditions vary from country to country. To get the most out of the mileage reimbursement system, it’s important for employees and employers to understand the different rates applied in each country.Let’s move onto mileage allowance rates in Portugal.

As of 2024, an employee can reimburse an employee travelling in Portugal up to 0.40€ /km, up from 0.36€ /km the previous year. This is a flat rate for employee-owned cars. This information is

published annually

by Portugal's tax authority, Autoridade Tributária e Aduaneira.

In addition to business mileage remuneration, employers can also pay their employees a daily (per diem) travel allowance covering costs including accommodation and meals. There are two types: As with mileage allowance, private companies can use different values to those defined for the public sector. However, if the reimbursement exceeds the referenced values, a company becomes subject to personal income tax (IRS). The amount per day for daily trips is: For trips of successive days, the percentages to be paid by the employer are different depending on the day:On the day of departure:On the day of arrival the prices are:On the remaining days, the bonus is paid in full (100%).The same applies to employees travelling from another country to Portugal. For example, if an employee is travelling to Lisbon for work from the United Kingdom, their employers can reimburse any actual costs up to £74.50, plus room rate, which is £106.50. Have a look at the

HMRC page

to see how rates vary from Oporto to Portimão.

A common question concerns tax-deductible travel reimbursements for the self-employed. Well, if you’re working as a freelancer in Portugal, you’ll have to choose between two accounting schemes: simplified and organised. Determining your taxable income and resulting tax liability, this accounting option will impact costs for your self-employment, from internet to meals and even travel expenses.In Portugal, you can claim car-related expenses, including fuel costs, when used for professional purposes, if under organised accounting. This is the case in many European countries, including France and Germany, but in other countries such as Finland, it’s up to the company to determine how much they pay. It’s vital for corporate travellers and digital nomads to know what’s what, to avoid the annual headache at the end of the tax year.

It’s important to remember that not all journeys carried out during an employee’s business hours will be covered by Portugal’s business mileage allowance. The most common types of trip which are not included in an employee’s travelling allowance are:

In the majority of European countries (including Denmark, France and Sweden), companies handle their mileage allowances internally. This means that you usually don’t have to fill out a specific government form. However, it’s still advisable to check government guidelines regularly, as these are updated on an annual basis. When a business compensates their employees for travel or accommodation expenses, they must do so in one of two ways: Proof of expenses take the form of invoices, referencing the company’s respective taxpayer identification number, or Número de Identificação Fiscal (NIF).

Whether it’s Portugal, Denmark, Sweden or somewhere outside Europe you’re heading to, keeping track of travel expenses is key. One of the easiest, most efficient ways to keep a hand on it is to connect your expense management solution to a dedicated business travel management platform—like TravelPerk.With an array of

third-party integration

s

from Divvy to Expensify, TravelPerk can take your business travel management to the next level by keeping your expenses all in one place and a tight grip on your company’s travel budget. Most important of all, it avoids headaches on both sides of the corporate travel process, ensuring that employers and employees alike can enjoy a seamless travel experience.