By Dr. Eduardo Serra Jorge
According to the new legislation, in 2013 employee food allowances paid in cash that are higher than €4.27 now have IRS and Social Security contributions. Therefore, the monthly amount exempt of taxation will be €93.94 (assuming a month of 22 working days).
The alternative being used by some employers is to replace the payment of allowance in cash; the maximum amount, using cards or tickets, that is exempt from taxation is €6.83 per day.
The meal card is a prepaid card identical to the meal ticket. The card will be preloaded and it will be used exclusively to effect payment of the food allowance. These cards can be used exclusively for payment in food establishments, including supermarkets and hypermarkets, as well as in restaurants and coffee shops.
However, the amounts charged into this card cannot be converted to cash, either by bank withdrawal or through bank transfers to current accounts of users of the card.
These cards offer tax benefits, not only to the employer but also to the employee, with the tax-free limits for food allowance as established in the State Budget for 2013. Such limits were fixed at €4.27 for payment in cash and €6.83 for payment by meal ticket.
The use of a meal card (that has the same tax treatment as a meal ticket), when compared to a cash payment, results in a tax reduction of €2.56 per day.
As an example, let us take the case of a worker whose food allowance is €6.83 per day. When the meal allowance is paid by meal ticket or meal card (instead of payment in cash), €2.56 per day is not subject to taxation, which corresponds to €56.32 (assuming a month of 22 working days) and to €691.52 (when 11 months of payment of food allowance are made).
If this allowance was paid in cash, the employer would have to pay social security contributions; with the meal card this value will be considered a tax benefit to the company, as it is exempt from taxation. Thus, there is a monthly saving to the company of €13.38 per worker (€56.32 x 23.75% (TSU) = €13.38) and an annual saving of €147.17 (€619.52 x 23.75% (TSU) = €147.14).
It is understood by the Finances that the meal cards assume a similar nature to the ticket meals, and benefit from the legal regime established by the article 2nd, n.º 3, paragraph b) 2 of the Code of Income Tax of Individuals, which establishes that “it is still considered income from employment and therefore subject to taxation, the meal allowance in the part that exceeds the legal limits established or that exceed in 60% whenever the respective allowance is awarded through ticket meals”.
The food allowance is not part of the standard retribution. The food allowance assumes remuneration for when an employee is working and, as a result, they are not paid during holidays and Christmas.
Employees cannot refuse an alteration to the way the food payments are made – for instance by meal cards – as the amount being offered is not reduced.
Finally, the use of such a card does not contain any legal impediment, since it is a legitimate and legal way for the employer to make payment of the food allowance. As mentioned above, the food allowance is intended to cover in part or whole the expenses that the employee has to pay out for having to eat away from home. Thus, the fact that the card can only be used in places that sell food is fully in line with the purpose of payment of the food allowance.
Dr Eduardo Serra Jorge is founding member, senior partner and CEO of lawyers firm Eduardo Serra Jorge & Maria José Garcia – Sociedade de Advogados, R.L., created in 1987. In his column, he addresses legal issues affecting foreign residents in Portugal.
Faro office at Gaveto das Ruas Pedro Nunes e José de Matos, 5 R/C 289 829 326 | www.esjmjgadvogados.com
