childcare voucher is a social voucher offered to employees with children or dependants up to the age of seven in Portugal, and can be used to pay for the costs of nurseries and kindergartens. With a favourable tax framework for both companies and employees, it is used as a way of retaining and attracting talent. But how does it work? Where can it be used and which taxes are associated with it? We'll explain everything in this article.
What's a childcare voucher?
The childcare voucher is a social voucher offered by companies to their employees to pay for the costs of kindergartens and nurseries for their children or equivalent (adopted, fostered, and any other minors whose responsibility for their upbringing and maintenance is the responsibility of the employees), up to the age of seven (excluding). The issuing and attribution of childcare vouchers is regulated by Decree-Law 26/99.
How do childcare vouchers work?
In order to offer childcare vouchers to employees, the employer uses an issuing organisation, which issues the vouchers and is responsible for intermediating between the company and the participating kindergartens and nurseries. The vouchers issued by this organisation are only valid within its network of member schools.
The childcare voucher can have any amount, which is decided by the employer, who pays a commission on this amount to the issuing organisation. Once the voucher has been issued by the issuing organisation or autonomously by the company, it can be used by the employee at the institution that welcomes their children. The voucher issuer reimburses the employee within a few days.
As the scope of childcare vouchers depends on the partnerships that the issuing organisation establishes, this is one of the criteria that companies should take into account when choosing their voucher issuing partner.
Where can childcare vouchers be used?
As mentioned above, a company's employees can use childcare vouchers at any establishment that accepts them (meaning any establishment belonging to the voucher issuer's network of schools), be it a kindergarten or nursery, in the public, private or public-private sector. However, if an establishment does not belong to the network of the childcare voucher issuer, it is possible for it to join the network, at no cost for the school.
Who can ask for a childcare voucher?
All employees with children under the age of seven can ask their employer for a childcare voucher. However, despite the tax benefits associated with it and the advantages when it comes to retaining talent, it is not compulsory for companies to grant childcare vouchers.
Which are the taxes associated with childcare vouchers?
As it is not considered remuneration, childcare vouchers are tax-free (personal income tax and Social Security tax) for the employees who receive it.
The company, in turn, is also exempt from paying the Single Social Tax (TSU) and also has a benefit in terms of Corporation Tax, as the amount allocated in childcare vouchers to its employees can be deducted, increased by 40% of its value, with no maximum limit.
What are the advantages of childcare vouchers?
As we've mentioned above, childcare vouchers offer a number of advantages for both companies and employees.
Advantages of childcare vouchers for employees:
- Extra-wage benefits
- IRS exempt (variable rate) and Social Security (11%)
- Help with family costs
- Wider choice of nurseries and kindergartens, thanks to the financial support provided
Advantages of childcare vouchers for companies:
- TSU exempt (23,75%)
- 40% cost markup for Corporate Tax, with no maximum limit
- More talent attraction and retention
- Freedom to set the vouchers' amount
Which precautions should be taken when using childcare vouchers?
We mentioned earlier that the kindergarten or nursery school must be a partner of the issuing organisation in order for the childcare voucher to be accepted. Therefore, as some establishments may not accept the voucher, it is necessary to check what partnerships exist before choosing an institution for a child or dependant (remembering, however, that it is possible to ask the issuing body to establish a partnership with the school in question).
Another important point to bear in mind is the fact that the childcare voucher attributed to employees may not be kept over time. It is therefore important for families to consider a situation in which this benefit is no longer granted to them.
Even if the childcare voucher is maintained over the years, its amount may vary, which is something that should also be taken into account by parents.
As far as the company is concerned, it's important to note that there are rules in the legislation for the tax benefits associated with the childcare voucher to be applied, in accordance with article 43.º of the Portuguese Corporate Tax Code (CIRC). Specifically, it must be awarded to all employees who have dependants up to the age of seven, regardless of their position, seniority or achievement of objectives.
While not exactly a disadvantage, as we're talking about benefits that help attracting and retaining talent, childcare vouchers represent a cost for the company and can result in demotivated teams if they are no longer awarded or if their amount is reduced.
Childcare vouchers and education vouchers: are they the same thing?
Unlike the childcare voucher, the education voucher is intended to pay for books, school and teaching materials, schools, and other expenses related to the education of dependant children and young people who are studying and aged between 7 and 25.
Like the childcare voucher, the education voucher is exempt from Social Security tax. However, as it is considered income in tax terms, it is subject to personal income tax.
In simplified terms, we can say that there are two types of vouchers to cover dependant children's education expenses:
- Childcare voucher:
- For dependants up to 7 years old
- Payment of expenses with nurseries and kindergartens
- Exemption of Social Security tax for companies and employees
- Exemption of personal income tax for employees
- 40% cost markup for Corporate Tax, with no maximum limit
- Education voucher:
- For dependants aged between 7 and 25 who are studying
- Payment of expenses with books, school material and colleges tuition, among others
- Exemption of Social Security tax for companies and employees
How can you issue a childcare voucher with Coverflex?
Coverflex is a certified organisation for issuing childcare vouchers.
The Coverflex childcare voucher can be issued autonomously and digitally, directly on the platform, in less than 3 minutes, in a very simple process.
After registering your company with Coverflex, simply fill in the details of the employee and dependant to whom the childcare voucher will be issued, and also select the school. Once the payment has been made by the company, the amount is immediately transferred to the school. The company, the employee, and the school are notified of the issue and payment of the voucher.
With a network of over 2,400 accredited schools, Coverflex Childcare is the childcare voucher with the lowest commission on the market - just 2%, unlike other issuers' commissions, which range from 3% to 7%.
Find out more about Coverflex Childcare.
Despite not being compulsory, childcare vouchers are widely used by companies as a way of retaining and attracting talent. With tax advantages for employees and employers, it's also an incentive for birth.
