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Expense Reimbursement Process in Portugal – A Guide for Overseas Employers

Hiring employees in Portugal will mean reimbursing expenses for business related travel.  Like many countries, Portugal has limits and specific processes for expense reimbursements to qualify as tax free.

If you are new to the country, how will you learn the limits and expense reporting rules to make sure that your employees don’t incur tax liability for reimbursements?

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What is the difference between actual expense reimbursement and per diems for travel in Portugal?  Here is an overview of how one of our clients faced these very issues.

Direct Expenses vs Per Diem in Portugal

While submitting receipts for direct travel expenses is fairly straightforward, the process and limits are different for per diem expenses.  Because per diem daily travel rates are fixed for food and accommodation, many employers believe that an expense report is not needed, but that is not the case in Portugal.

Client Case Example: Per Diems in Portugal

We had a client with employees in Portugal that had questions about how to handle reimbursement and reporting of travel per diems.

Q.) Do per diem amounts require an expense report?

A.)  Yes, an expense report is needed that details the per diems claimed by the employee, along with some proof that the employee was in the location such as flight ticket or hotel booking.

Q.) Do we need to supply expense receipts for per diems, and how does that work?

A.) You don’t need to supply actual expense receipts like a restaurant charge for per diems. The per diem covers a daily rate for food and accommodation and for that we just need an expense report listing the countries of travel and the per diem to be claimed.  Note that on those days a per diem is claimed, you cannot claim any actual food or accommodation items as expense reimbursements.

Q.) What are the per diem limits for travel?

A.) For tax-free per diem (amounts that can be paid to the employee without incurring tax or social security withholding) the rates are as follows:

Per Diem – Portugal Travel (+50km from work place)
Director: up to 69,19€ per day
Other employees: up to 50,20€ per day

Per Diem – Foreign Travel
Director: up to 100,24€ per day
Other employees: up to 89,35€ per day

Any amounts paid that are higher will incur tax and social security for both the employee and employer.

Need More Information About Portugal?

Employing in Portugal will present many new challenges, and we are prepared to answer your questions, such as:

What is the proper format for per diem expense reports?

How do you include necessary excess per diem amounts in payroll for taxes?

We can make international employment simple for you and your employees, ensuring compliance with all payroll, expense and tax regulations.

 Need more information about employing in a new country? Learn more about:

 

 

Looking to Hire an Employee in Portugal? Get in touch.

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