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Beyond the salary: 6 rules on the managing partner’s benefits
Step Inside Accounting · Practical guide
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1. A personal benefit is income in kind
Anything the company pays for the managing partner’s personal benefit generally counts as employment income, even if it is not paid in cash. This is called income in kind: it pays income tax (IRS) and, in some cases, Social Security. For the company, it is a staff cost.
There are important exceptions, but many of them depend on the benefit being general, that is, given to all employees on the same terms. In a company with no employees, where only the managing partner is paid, the Tax Authority considers the benefit individual. That is why several of the rules below have a different answer for these companies.
2. Training and work tools do not count
Professional training is not income, as long as it is provided by the company itself, a public body or a recognised training provider. A course related to the company’s business can be paid for by the company at no tax cost to the manager.
The computer, phone and software the company buys for work are not income either: they are work tools and still belong to the company. They become income if the company pays, for example, for the family’s phones or gives the equipment to the manager.
3. Health insurance: only tax-free if it is for everyone
Health insurance paid by the company is not income when it is general. When the managing partner is the only beneficiary, the Tax Authority has held that the insurance is individual and therefore income in kind, subject to IRS. For the company, it is still an expense.
Example
A €600-a-year health insurance policy, paid only for the managing partner, adds €600 to their income for IRS. If the company has employees and they all have the same insurance, it stops being income.
4. PPR and pension funds: IRS yes, Social Security no
The company can contribute to a retirement savings plan (PPR) or a pension fund in the managing partner’s name. When the money belongs to the manager straight away, in their name, it counts as income for IRS in the year the company pays it. Even so, it pays no Social Security, and for the company it is an expense.
Compared with a pay rise, the saving is in Social Security: the 34.75% (23.75% from the company and 11% from the manager) is not paid. The money stays in the PPR and follows the PPR’s own withdrawal rules.
Example
Instead of a €2,000-a-year pay rise, the company puts €2,000 into the managing partner’s PPR. The IRS is practically the same, but €695 of Social Security is saved (€475 from the company and €220 from the manager).
5. Childcare and education vouchers
Social vouchers are used to pay for nursery, kindergarten or the children’s school:
- Childcare voucher (vale infância): children up to age 7, for nursery, kindergarten or crèche.
- Education voucher (vale educação): children aged 7 to 25, for school, tuition, textbooks and school books.
Neither pays Social Security. The education voucher always pays IRS. The childcare voucher pays no IRS when it is general, and in that case the company deducts 140% of the cost. In a company where the managing partner is the only employee, the Tax Authority considers that the childcare voucher also pays IRS.
The vouchers have to be an extra: they cannot replace part of a salary that is already paid.
Example
The managing partner’s daughter goes to a nursery that costs €400 a month. Paying €4,800 a year in childcare vouchers instead of salary saves about €1,668 of Social Security (34.75%).
6. Company car: with a written agreement, it is income
If the company has a car and a written agreement assigns it to the manager for personal use, the benefit is income: for IRS, 0.75% of the car’s market value for each month; for Social Security, 0.75% of the purchase cost.
In return, the company no longer pays autonomous taxation on that car’s costs. Without a written agreement, there is no income for the manager, but the company pays autonomous taxation, which can be high for petrol and diesel cars.
Example
A car bought for €40,000, with a market value of €32,000 in January. For IRS, the manager adds €240 a month (0.75% × €32,000); Social Security is charged on €300 a month (0.75% × €40,000).
Team tip
Before you set up a benefit through the company, talk to us and we will run the numbers for your case. Sometimes a PPR or a childcare voucher pays off; other times it is simply better to raise the meal allowance, which pays no IRS or Social Security up to the legal limit.
Want us to handle this for you?
Companies
Monthly accounting
Bookkeeping, tax obligations and managing partners’ salaries, all in one place.
€250 + VAT / month
Self-employed
Recibos verdes without the stress
Tax returns, VAT and Social Security handled by people who know the regime inside out.
from €80 + VAT / month
This article is for information only and does not replace professional advice. Figures and rules are those in force at the date of publication and may change.
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