Portugal: Non-Taxable Caps Applicable to Expense Allowances Paid by Employers to Employees Working from Home

Under the basic principle that the employer will fully compensate the employee working from home for any additional expenses that the latter incurs as a direct result of acquiring or using computer or telematic equipment and systems required to carry out the work and on paying increased energy and communication costs. The amendments introduced by the Decent Work Agenda in Portugal, effective 1 May 2023 that focused on regulating such expenses set the following principles:

• The employment contract executed between the employer and the employee working remotely (or the applicable collective bargaining agreement) will fix the amount of the allowance due to the employee working from home to face additional expenses, such as increased power supply expenses, internet connection, and use of own equipment.
• In the absence of an agreement on a fixed allowance amount, additional expenses to be borne by the employer are considered to be those corresponding to the acquisition of assets or services that the employee did not have prior to the conclusion of the teleworking agreement that are used to provide work from home, as well as additional expenses (energy, internet, communications) assessed by comparing the new expenses with the employee’s corresponding (personal) expenses in the last month that the employee was working in the office (employer premises).

An additional rule indicated that for tax purposes, such allowances (or expense reimbursement amounts) would qualify as a cost for the employer and would not be deemed taxable income for the employee, up to a limited amount, as subsequently defined by the government.

Although the above rule was effective from 1 May 2023 until the end of September, the government had not yet defined the relevant amounts. On 29 September, a government order was published (Portaria n.º 292-A/2023 | DR (diariodarepublica.pt) to fix that, as detailed below. The provisions contained in this order entered into force on 1 October 2023.

The limits for the tax and social security exemption for compensation for teleworking expenses are now fixed as follows:

a) Electricity (power) consumption – € 0.10 / day

b) Internet consumption costs – € 0.40 / day

c) Use of a personal computer or equivalent IT equipment belonging to the employee – € 0.50 / day

These limits only apply to full days of remote work effectively carried out and duly agreed in a remote work written agreement (either part of the original employment contract or part of an addendum) between the employer and the employee.

The government order also allows collective bargaining agreements to fix higher limits (up to 50% higher than those fixed in the order).