Taxation of remote work Portugal – Update – BELIM CASTILHO - Tax Law office, Tax Lawyers and Tax advisors, Lisbon Portugal

WHAT IS IT?

Telework or remote work is the provision of work:

1. In regime of legal subordination (i.e. dependent work);

2. In a place not determined by the employer (e.g. employee’s home but not necessarily);

3. Through the use of information and communication technologies (i.e. it does not include work that can be carried out entirely remotely without the need for computer interaction with the employer and/or clients).

WHAT IS THE REMOTE WORKER ENTITLED TO AND HOW WILL HE BE TAXED?

The Portuguese legislation foresees, since January 1st, 2022, that the remote worker will be entitled to the full payment of the additional expenses he/she proves to bear with teleworking, in one of the following two modalities:

Modality

Mode of calculation

PIT taxation*

SS taxation

Direct compensation for additional expenses with the acquisition of goods and services needed for remote work (e.g. equipment, energy, internet)

Expenses demonstrably borne by the employee (by presentation of invoice)

In the case of expenses of mixed personal/professional use (e.g. energy/internet), the value is calculated by comparison with the cost supported by the worker in the homologous month of the last year prior to the beginning of the remote work)

No taxation.

Arbitrarily determined fixed amount for indirect compensation for teleworking expenses

Amount paid by the employer

Yes, for the part that exceeds €1 ** per day
^{(1.5€/day with Collective Labour Regulations)}

^{* Order no. 292-A/2023, of 29 September.}

^{** Assuming a scenario of cumulative consumption of the following goods and services (as long as they are not provided directly or indirectly by the employer)}
^{provided directly or indirectly by the employer) in full days of teleworking carried out under a teleworking agreement under the terms of the law:}
^{a) Residential electricity consumption (€0.10/day – €0.15/day with Collective Labour Regulations);}
^{b) Personal Internet consumption (€0.40/day – €0.60/day with Collective Labour Regulations);}
^{c) Personal computer or equivalent IT equipment (€0.50/day – €0.75/day with Collective Labour Regulations).}

IF I WORK REMOTELY FOR A FOREIGN EMPLOYER, AM I PUTTING THEM AT (TAX) RISK?

Portugal reserves the right to levy corporate income tax not only on companies formally established in Portugal, but also on permanent establishments located in Portugal of foreign companies.
The definition of permanent establishment is very complex and may include not only physical offices, but also dependent agents (e.g. employees).
To the best of our knowledge, the PTA has so far not ruled on whether a remote worker can be considered a permanent establishment.

However, judging by the position that has been adopted by other EU countries, it is anticipated that the PTA will take the view that a remote worker should not be considered a permanent establishment of his employer where:

1.	Remote working has not been imposed by the employer;
2.	It is not part of the company’s strategy to have this worker in our country;
3.	The home office has not been wholly or mainly funded by the employer;
4.	The employee will continue to have access to the company’s head office if he or she so wishes.

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