# 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.

**Author:** Inês Pereira — Portuguese Tax Specialist (AT)  
**Published:** 2026-04-27  
**Updated:** 2026-04-27  
**URL:** https://quilometragem.com/blog/portugals-0-40-km-limit-and-the-annual-cap-what-changes-on-the-irs-return

**TL;DR:** 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.

- 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.
- Without it, AT can reclassify the entire payment as employment income.
- How it shows up on the IRS return.
- A Porto SME pays a sales rep €0.40/km for 1,500 km/month.
- Portaria 1553-D/2008 does not distinguish ICE from electric.

## 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.

## Sources

- [Portaria 1553-D/2008 — Tabelas de subsídios](https://dre.pt/dre/legislacao-consolidada/portaria/2008-58961025) — Diário da República (2026-04-27)
- [Autoridade Tributária — Circular sobre ajudas de custo](https://info.portaldasfinancas.gov.pt/) — Autoridade Tributária (2026-04-27)