If you have been running a company for a while, chances are you are already familiar with autonomous taxation (TA) rates. However, in recent years, there have been several changes to the autonomous taxation rates for vehicles, which depend on the acquisition cost and, notably, the vehicle type.
If you are not aware of these changes and how the autonomous taxation rates work, then we explain everything you need to know about tax. Know the main rates for expenses subject to autonomous taxation.
WHAT IS AUTONOMOUS TAXATION?
Implemented during the tax reform in 2001, autonomous taxation is an additional tax levied on specific expenses that are not directly linked to a company's regular business activities.
These expenses subject to autonomous taxation include:
Representation Expenses: These cover costs incurred by managers and sales personnel while visiting clients or suppliers, such as meals, travel expenses, and other related costs.
Undocumented Expenses: These are expenses without proper invoices or receipts that the company incurs, and they are subject to autonomous taxation.
Cost Aids for Employee-Owned Vehicles: If a company compensates its employees for using their personal vehicles for business purposes, and these costs are not invoiced to customers, they are subject to autonomous taxation.
Bonuses Exceeding 27,500 Euros: Any bonuses paid to managers, administrators, or executives that exceed the threshold of 27,500 Euros and represent more than 25% of their total income are subject to autonomous taxation.
It's important to note that the rates and regulations for autonomous taxation can vary depending on the country or region. Therefore, businesses should comply with the specific tax laws in their respective jurisdictions and seek professional advice to ensure proper adherence to tax regulations and reporting requirements.
Note: To know all the expenses of a company subject to autonomous taxation fees you should consult Article 88.º of the IRC Code.
Nevertheless, for a clearer comprehension, this form of taxation is entirely disconnected from your company's business volume, profits, or losses. As the term "autonomous" suggests, this tax operates independently, meaning it is not linked to your company's income.
For instance, even if your company is exempt from certain taxes due to experiencing a loss, it does not imply an exemption from autonomous taxation fees. On the contrary, autonomous taxation remains applicable regardless of other tax exemptions or losses incurred.
If you have a small car fleet, you will be responsible for covering the costs of autonomous taxation, which will vary depending on the types of vehicles you own. The same applies to other expenses mentioned in Article 88.º of the CIRC (Corporate Income Tax Code).
However, it's important to be cautious. Even though these fees are autonomously applied, if your company faces a financial loss, it will incur a 10% penalty on the applicable AT (Autonomous Taxation) rate for the charges subject to this taxation. Nevertheless, there are certain exceptions that can exempt companies from this penalty during the fiscal period of 2023, which we will explore further later.
HOW MUCH DOES MY COMPANY HAVE TO PAY FOR AUTONOMOUS TAXATION?
Absolutely, your company will only be liable to pay autonomous taxation (AT) if it has expenses that fall under this category. The tax is specifically applicable to certain types of expenses.
Furthermore, if your company does have expenses subject to AT fees, the amount to be paid will vary based on the specific type of expense incurred. Each type of expense will have its own corresponding AT rate, and the tax amount will be calculated accordingly. It's essential to understand the individual rates for different expense categories to accurately determine the total AT liability.
For example, a rate of 50% or 70% is applied to undocumented expenses. On the other hand, representation expenses apply an AT of 10%. But if the expense is related to cost allowances and compensation for travel in an employee's own car (when not invoiced to the customer), an AT of 5% applies.
In the event that your company has expenses related to payments to residents outside the Portuguese territory who are covered by a more favorable tax regime, or when the payment is made in accounts of financial institutions resident or domiciled there, AT rates of 35% or 55% are applied.
If the expenses are related to profits distributed to taxable persons who are totally or partially exempt, the TA applied is 23%. In compensation not related to the achievement of productivity objectives, resulting from the termination of functions of a manager, administrator, or manager, the AT rate of 35% applies.
The 35% rate also applies to bonuses and variable remuneration paid to managers, administrators, or managers whenever they exceed 25% of the annual remuneration and when they exceed 27,500 euros.
WHAT ARE THE TAX RATES APPLIED TO CAR FLEETS?
If your company has or thinks it will have a car fleet, know that the Autonomous Taxation applied to vehicle charges represents a very high cost. However, this taxation is applied according to the different stipulated levels, which vary according to the cost of acquisition of the vehicles, as well as their typology.
Thus, your company's vehicles will be taxed according to the following data:
Vehicles with a purchase cost of less than 27,500 euros
10% rate - Diesel/gasoline passenger cars and hybrids, plug-in hybrids that do not enjoy tax benefits and LPG;
Rate of 2.5% - CNG and Hybrid Plug-in Vehicles;
0% rate - In electric vehicles.
Vehicles with acquisition costs between 27,500 euros and less than 35,000 euros
Rate of 27.5% - Diesel/gasoline passenger cars and hybrids, plug-in hybrids that do not enjoy tax benefits and LPG;
7.5% rate - CNG and plug-in Hybrid vehicles;
0% rate - In electric vehicles.
Vehicles with an acquisition cost of more than 35,000 euros
35% rate - Diesel/gasoline and hybrid passenger light vehicles, plug-in hybrids that do not enjoy tax benefits and LPG;
15% rate - CNG and Hybrid plug-in vehicles;
0% rate - Electric vehicles if the acquisition costs are less than 62,500 euros (excluding VAT). From this value, an AT of 10% is applied.
However, according to the State Budget 2023, taxable persons who fall into category B of the IRS are exempt from the payment of the AT of 10%, when the purchase value of an exclusively electric vehicle is greater than 62,500 euros.
Please note that there are rules to benefit from the reduced rates applied to plug-in hybrid vehicles when they have a battery that can be charged through a connection to the mains and that have the minimum autonomy, in electric mode, of 50 km and official emissions of less than 50 gCO2/Km.
If my company has incurred a loss and I have expenses subject to autonomous taxation (AT), will I face a 10% penalty on the AT amount?
This year, the worsening of TA by 10% in the face of tax losses is not applied to the taxation periods of 2022 and 2023, provided that the company has made a taxable profit in one of the three previous periods, has fulfilled its declarative obligations (delivery Model 22 and IES) in the last two years, within the legal deadlines.
In addition to these situations, companies that have tax loss in the taxation period of the start of the activity or in one of the following two periods continue to be exempt from the worsening of AT.
However, be aware that in order to be exempt from the worsening of 10% of AT, your company needs to fit the definition of cooperative or SME according to the criteria defined in Article 2.º of the annex to Decree-Law No. 372/2007, of November 6, in its current wording.
If your company requires assistance with tax or accounting matters, rest assured that INLIS Consulting possesses over 15 years of experience in supporting companies to reach their objectives and succeed in various markets. We would be delighted to provide guidance and support to you and your company.
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