Cash-handling allowance: what it is and how it is taxed
The cash-handling allowance is paid to workers who handle money. It is exempt from income tax and Social Security up to 5% of the fixed monthly remuneration; anything above that counts as salary.
TL;DR
The cash-handling allowance (abono para falhas) is a pay supplement given to workers who have to handle cash or valuables and are responsible for them (cashiers, treasurers, collectors). It compensates the risk of small till shortages. It is exempt from income tax and Social Security in the part that does not exceed 5% of the fixed monthly remuneration, which for this purpose is (14 × base salary) ÷ 12. With a €1,000 base salary, the fixed monthly remuneration is €1,166.67 and the exempt limit is €58.33 a month. Anything above that limit is treated as employment income and pays income tax and 11% Social Security. The exemption only applies to workers who meet the cash-handling requirements.
What is the cash-handling allowance?
The cash-handling allowance (in Portuguese, abono para falhas) is a pay supplement given to workers who have to handle cash or valuables and are responsible for them1. Think of a supermarket cashier, a treasurer or a collector: people who handle money risk small till differences, and this allowance compensates that risk. You can see the exempt and the taxed part of your case in the cash-handling allowance calculator.
Up to 5% of the fixed monthly remuneration, the cash-handling allowance is tax-free. Above that, it counts as salary.
The cash-handling allowance is not required by general law: it comes from the employment contract or the applicable collective-bargaining agreement. What the tax law defines is how it is taxed when it exists.
Tax-free up to 5% of fixed monthly pay
The tax rule is in article 2(3)(c) of the IRS Code1: cash-handling allowances are employment income only in the part that exceeds 5% of the fixed monthly remuneration. Up to that limit, they are exempt from income tax and Social Security.
The point most people get wrong is what counts as "fixed monthly remuneration". For this purpose, it is the base salary grossed up with the proportional holiday and Christmas bonuses, excluding seniority allowances (diuturnidades)3. In other words:
Fixed monthly remuneration = (14 × base salary) ÷ 12
The exempt limit is then 5% of that value. See how it changes with the salary:
| Base salary | Fixed monthly remuneration | Exempt limit (5%) |
|---|---|---|
| €870 | €1,015 | €50.75 |
| €1,000 | €1,166.67 | €58.33 |
| €1,500 | €1,750 | €87.50 |
| €2,000 | €2,333.33 | €116.67 |
Anything above 5% counts as salary
Whatever the employer pays above that limit stops being exempt and becomes employment income (category A): it enters income tax, at your rate, and the Social Security base (11% employee, 23.75% employer)2. It is exactly like receiving a little more salary.
The cash-handling allowance calculator shows that excess and deducts the 11% Social Security. The income tax depends on your bracket, so it is flagged but not computed: to see the income-tax effect on a salary, use the net salary calculator.
It only counts for those who handle money
The tax exemption is not for everyone. It applies only to workers who actually handle or keep cash, securities or valuables in treasury or collection roles and are responsible for them1. If an employer pays a "cash-handling allowance" to someone who does not meet these requirements, the amount loses its nature as a cash-handling allowance and is added to the base salary, taxed under the general rules. Check your payslip to see whether the line is identified as abono para falhas.
The cash-handling allowance is not the meal allowance
It is a common mistake to mix the two allowances up:
- The meal allowance is a daily amount on any working day, with its own exempt limit (see the meal allowance calculator).
- The cash-handling allowance compensates the risk of till shortages for those who handle money and is exempt up to 5% of the fixed monthly remuneration.
They are different allowances, with their own rules. You can receive both in the same month.
A worked example from start to finish
Imagine a €1,000 base salary and a €75 monthly cash-handling allowance:
- Fixed monthly remuneration: (14 × 1,000) ÷ 12 = €1,166.67.
- Exempt limit: 5% × €1,166.67 = €58.33.
- Exempt part: €58.33; taxed excess: €16.67, which pays 11% Social Security (€1.83) plus income tax at your rate.
- Over a year, with 12 months: €700 tax-free and €200 taxed.
Work out your own case in the cash-handling allowance calculator.
Common mistakes
Thinking the cash-handling allowance is always tax-free
The exemption only applies up to 5% of the fixed monthly remuneration. Above that, the excess is employment income and pays income tax and Social Security like the rest of the salary.
Applying the 5% to the plain base salary
The 5% is applied to the fixed monthly remuneration, which includes the proportional holiday and Christmas bonuses: (14 × base salary) ÷ 12, not the bare base salary.
Receiving a cash-handling allowance without handling money
The exemption only exists for workers who actually handle cash or valuables and are responsible for them. Paid to others, it is added to the salary and taxed in full.
Frequently asked questions
What is the cash-handling allowance (abono para falhas)?
Does the cash-handling allowance pay income tax and Social Security?
How is the 5% of fixed monthly remuneration calculated?
Who is entitled to the cash-handling allowance?
What happens if the employer pays a very high cash-handling allowance?
Related reading & calculators
Sources
- 1.Código do IRS, art. 2.º, n.º 3, al. c) (cash-handling allowances, part exceeding 5%) — Diário da República · retrieved 28 Jun 2026
- 2.Código dos Regimes Contributivos (Lei n.º 110/2009), art. 46.º (Social Security contribution base) — Diário da República · retrieved 28 Jun 2026
- 3.Ordem dos Contabilistas Certificados, Abono para falhas (calculating the 5% on the fixed monthly remuneration) — Ordem dos Contabilistas Certificados · retrieved 28 Jun 2026
Author / Reviewed by
Author
Thorben Rasmus Idel
Co-founder & writer
Co-founder of Calculadora Capital and the writer behind the methodology on every calculator and article. An entrepreneur and active investor, Thorben founded Idel Versandhandel GmbH, an international trading company operating across 16 countries, and invests across stocks, ETFs and cryptocurrency. He writes the methodology and verifies the math behind each page, drawing on hands-on business and investing experience to keep the tools and explanations grounded in how money, markets and taxes actually work for everyday people in Portugal.
Reviewed by
Nahar Geva
Co-founder & reviewer
Co-founder of Calculadora Capital and the independent reviewer behind every calculator and article. An entrepreneur and active investor, Nahar brings a data- and product-driven mindset together with hands-on experience in the markets — investing across stocks and ETFs as well as cryptocurrency and other digital assets, alongside broader personal finance and real estate. On each page Nahar reviews the methodology and double-checks the math and figures, pressure-testing how the tools and explanations hold up against the way money, markets and taxes actually work for everyday investors.
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