Portugal's €0.40/km limit and the annual cap: what changes on the IRS return
How Portugal's €0.40/km limit and annual cap work — and how they affect the IRS return for people who use a personal vehicle for work.
The legal limit: €0.40/km
Portaria 1553-D/2008, still in force with periodic updates, sets **€0.40 per kilometre** as the maximum amount an employer can pay an employee — IRS- and Social Security-free — for using a personal vehicle on company business.[^pt-1553-99] Anything above is treated as employment income with IRS and Social Security withholding.
The same Portaria also sets **€0.30/km for personal vehicle on per-diem (ajudas de custo) journeys**, a separate category for non-routine travel. The employer picks the category by reference to the trip's nature, recorded on the trip slip.
The trip slip and what counts as the annual cap
There is no fixed annual cap in €/km, but the Tax Authority (AT) requires every trip to be documented on a worker-signed **boletim de itinerário** with:
- Date - Origin and destination - Business purpose - Vehicle plate - Kilometres driven - Amount paid
The slip is what supports the per-diem tax treatment. Without it, AT can reclassify the entire payment as employment income.
How it shows up on the IRS return
For an **employee**:
- Payments up to €0.40/km with a valid trip slip **are not declared** as income. - Payments above €0.40/km: the excess goes to Annex A (Category A — Dependent Work), and the payer withholds IRS at source. - Without a trip slip, even within the limit, the payment can be fully taxed.
For a **self-employed worker** (Category B):
- Under organised accounting: deduct real vehicle costs (fuel, maintenance, depreciation, insurance) in the business-use proportion. - Under the simplified regime: a coefficient already accounts for those costs; no extra per-km deduction.
Worked example: Porto SME
A Porto SME pays a sales rep €0.40/km for 1,500 km/month. Monthly payout: €600. Annual: €7,200.
- Tax treatment: IRS- and SS-free; deductible for the company under IRC. - Documentation: 12 monthly slips and individual receipts with the calculation. - AT risk: low, provided the slips exist and the rate is not exceeded.
If the company chose to pay €0.50/km instead, the extra €0.10/km (€150/month, €1,800/year) would land on Annex A with withholding.
EVs and hybrids: same rate
Portaria 1553-D/2008 does not distinguish ICE from electric. The €0.40/km rate applies equally. Employers wanting to compensate EV charging cost can do it separately, against a charging-point invoice, in parallel with the per-km reimbursement.
Critical points
1. **The rate has not been updated since 2008.** Real fuel cost has risen sharply; many employers pay €0.40/km knowing it under-recovers. Pressure to update exists but the 2026 State Budget did not include it.
2. **Confusion with the ordinary commute.** Home-to-workplace travel is not reimbursable. Only business travel.
3. **Company-supplied vehicle.** When the worker uses a company car, there is no per-km reimbursement — treatment falls under the IRC autonomous taxation regime for company vehicle private use.
What to do this quarter
1. Audit the last 12 months of mileage payments; confirm slips and rate. 2. Migrate from paper to digital slips with an integrity hash (AT accepts both). 3. If you pay above €0.40/km, check that source withholding is correct on the payslip.