Nowadays many companies assign to their employees a package of benefits that complement the retribution and that are advantageous not only for employees but also for companies, because of the exemptions at the Tax level.
According to a study by Mercer, the most awarded by the Portuguese companies in 2016 are the sickness payment, company car and education.
The sickness payment: is assigned to compensate for the loss of remuneration in case of sickness, when it is not fully supported by Social Security. The labor code, law 7/2009 of 12 February, don’t establish the obligation for pay this add-on, however, there could be Collective work regulatory instruments that require it and then this comes out of the sphere of benefit to become a mandatory value to be assigned. To calculate the add-on in general the company performs the calculation of the value that Social security covers, according to the duration of sick leave and remuneration of the worker’s reference, and assumes the differential. Opinions differ about this benefit to the extent that some argue that it is an incentive to increased absenteeism. This income is excluded from the tax base for social security by article 48 of the code of the Contributory Social Security Schemes.
Company Car Policy: this is a topic that often raise doubts in its taxation. In this sense, it is important to distinguish company car and Car Allowance. The use of the company car is considered taxable income every time that the employee uses the car for personal effects being all the costs supported by the company and the agreement of its use is reduced in writing. The taxable income corresponds to 0.75% of the market value of the car reported to 1st of January multiplied by the number of months of usage that year.
If we are talking of an allowance to compensate the employee of the expenses of the car, the amount paid is totally taxed, because it doesn’t exist any legal exemption for that and besides that the employee doesn’t justify the expenses through an expenses report.
Education: Benefit granted to workers with children, to benefit from tax exemption should have character of generality, i.e. be put at the disposal of the universe of workers who meet the conditions of the assignment. This benefit is attributed through vouchers and they can be one of the following: education vouchers or daycare vouchers.
Education Vouchers – These titles are destined to employees with children between 7 and 25 years.
The last revision of the Personal Income Tax code (PIT) came to introduce the concept of education vouchers between non-taxable income since attributed up to the amount of € 1.100,00 per child, and since it’s attributed to all employees of the company that have the necessary conditions to beneficiate of it.
To point out that the voucher is meant to the parent that is responsible for the education and livelihood of the children and never can constitute the replacement, even if partial, of the current remuneration.
Daycare Vouchers – Follows the same general rules although are destined to employees with children up to 7 years.
In this case there is no maximum limit, which means that this type of income is non-taxable in the terms of PIT.
Regarding Social Security both vouchers are not taxable, because are excluded of the basis of taxation the subsidies granted to workers for offsetting family expenses, including those relating to frequency of daycares, educational establishments, nursing homes and other services or establishments of social support.
In terms of payroll these are shown in the payslip as benefit in kind remunerations.