Company car in Portugal: who can drive it and what are the rules?

In Portugal, a company car can generally only be driven by employees or other drivers who have been authorised by the employer and included in the relevant company policy, insurance conditions or rental agreement.

More and more businesses provide company cars to employees for business travel, client visits and day-to-day mobility. But once a vehicle is assigned to an employee, a number of practical questions arise: who is actually allowed to drive it? Can a partner or family member use it? Can the car be taken abroad? And what happens if it is also used privately?

For foreign employees, expats and business owners who are new to Portugal, these questions can be even less straightforward. Company car use can have legal, insurance and tax implications, so understanding the rules and defining them clearly from the outset is essential.

The authorised driver is normally the employee assigned the vehicle, but companies may also allow other identified drivers depending on their internal rules and insurance conditions.

The authorisation should ideally be set out in writing, either in the company's vehicle-use policy, employment documentation or the relevant rental agreement. It should make clear who is allowed to drive the vehicle and for what purposes.

Depending on the business, authorised drivers may include employees, directors, managers, shareholders or company representatives. However, being an employee or company director does not automatically mean that any other person can use the vehicle.

Can a family member drive a company car? Not necessarily. A company employee who is authorised to drive a vehicle should not assume that they can lend it to their partner, child or another family member. This depends on the company's policy, the insurance arrangements and, where applicable, the terms of the rental agreement.

Allowing an unauthorised person to drive can create problems if an accident occurs, particularly in relation to insurance coverage and civil liability. For this reason, any additional driver should be expressly authorised and properly identified before driving the vehicle.

Whether an employee can use a company car for personal journeys depends on the terms established by the employer.

If the vehicle is provided exclusively for professional purposes, private use should not be assumed to be permitted. If personal use is allowed, the company should clearly define what that means. This may include commuting between home and work, weekend journeys, holidays or other private trips.

There can also be tax implications. Under Portuguese tax rules, private use of a company vehicle may create tax implications, particularly when the vehicle is allocated as part of the employee’s remuneration package. The exact treatment depends on the circumstances and should be confirmed with a tax adviser.

There are also VAT considerations when a company vehicle is made available for private use. Changes to the Portuguese VAT framework applicable from 2025 affected the treatment of vehicle-related expenditure and the right to deduct VAT, meaning that the tax treatment depends on the type of vehicle, the expenditure involved and the circumstances of its use. 

This is particularly relevant for businesses operating in Portugal, as the rules can differ depending on whether a vehicle is used exclusively for business purposes or is also made available for private use. Companies should therefore confirm the specific tax treatment with their accountant or tax adviser.

A clear company car policy helps prevent misunderstandings between the business and its employees. It should explain not only who can drive a vehicle, but also how and where it can be used.

Depending on the company's needs, it may cover:

The clearer these rules are, the easier it is for everyone to understand their responsibilities when something unexpected happens.

A company car can generally be driven in other countries, but the requirements should be checked before travelling. This is particularly important when the vehicle is registered in one country and the employee is working or living in another.

For longer stays or cross-border assignments, additional requirements may apply depending on the countries involved. It is therefore advisable to carry the vehicle registration document, employment contract or other proof of the professional relationship, as well as written authorisation from the company to drive the vehicle abroad. 

For stays of more than six months, additional rules may apply. Depending on the country, a special exemption or authorisation may be required. For example, an employee using a company car registered in another EU country during a long-term assignment in Portugal may need to obtain a traffic guide from the Portuguese authorities. 

It is also important to check that the insurance remains valid in the countries you intend to visit and that all required documentation is available in the vehicle.

For foreign employees working in Portugal, this is particularly relevant when the company car is registered in another country. The rules governing company cars and vehicle registration can vary significantly between EU countries, so checking the requirements before a long-term assignment is essential. 

For companies that need flexibility, renting can also be an alternative to owning and managing a fleet.

Choosing to rent vehicles for business use, rather than owning a fleet, can reduce some of these responsibilities and give companies greater flexibility.

With Guerin Business, companies can access flexible vehicle rental solutions adapted to different business needs, from short-term requirements to longer periods. The service is designed to simplify business mobility through digital management, a varied fleet and dedicated support. 

This can be particularly useful when several employees need access to vehicles at different times. Instead of maintaining a fixed fleet, a business can adapt its mobility according to its activity, projects or temporary requirements.

The Additional Driver option can also be useful when the same vehicle needs to be driven by different authorised employees. Each driver must be correctly identified and included in the relevant rental agreement.

For employee safety, Driver and Occupant Protection can provide additional protection for people travelling in the vehicle. And for companies whose operations involve driving across national borders, Cross Border can be a relevant complementary service, subject to the applicable rental conditions.

Guerin Business also offers flexible rental solutions that can help businesses reduce the administrative burden associated with fleet management, allowing them to focus more closely on their core operations. 

A company car can make professional mobility considerably easier, but it also comes with responsibilities. Who can drive it, whether it can be used privately, where it can travel and what happens in the event of an accident should all be established before the keys are handed over.

For foreign employees and business owners operating in Portugal, having these rules clearly documented can be particularly valuable, as the country's tax, insurance and vehicle regulations may differ from those they are familiar with.

A well-defined company car policy gives the business greater control over its vehicles while giving employees a clear understanding of what is and is not permitted.

And when a company chooses rental instead of managing its own fleet, solutions such as Guerin Business can help simplify the operational side of business mobility, with flexible vehicles and services designed around the needs of each organisation. 

Clear rules make company mobility simpler. And the right mobility partner can make managing those rules easier too.