Working from Home: Employer’s Expense Reimbursement Would Be Non-Taxable at 66.37 Euros per Month

The amended Labor Law, effective January 1, 2023, precisely delineates the work of an employed worker who performs tasks for the employer remotely from work performed at a designated workplace. Remote work is always conducted using IT technology, and the worker and employer agree on the worker’s right to independently determine where they will work. Generally, this concerns IT professionals who can perform tasks for the employer at any location where technical conditions for communication with the employer and/or clients are installed. Given that the worker independently determines where they will work and can change their work location at will, the employer’s obligations regarding occupational safety have been reduced.

Agreement, but there are exceptions

Work at a designated workplace is defined as work that the worker does not perform in the employer’s business premises, but at home or another private location, such as a weekend house, in a space where they temporarily reside, and it can be permanent, occasional, or temporary. Occasional work implies a combined work location schedule: some days of the week or month the worker works from home, and some days in the employer’s business premises, which some employers had already introduced before the amendments to the Labor Law. Temporary work from home is possible at the worker’s initiative, in agreement with the employer, if due to family circumstances the worker needs to temporarily work from home instead of in the employer’s premises.

There are also prescribed cases in which the employer is obliged to consider the worker’s request to work from home for a certain period, including the protection of the health of a worker diagnosed with an illness or established disability, pregnancy, parental obligations towards children up to the age of eight, and providing care for a sick family member living in the same household as the worker.

When a special contract is needed

For work from home lasting up to thirty days, it is not necessary to conclude an annex to the employment contract, but only if the work from home is determined due to the occurrence of extraordinary circumstances such as floods, earthquakes, and disease epidemics. However, if under these circumstances the worker works from home for more than thirty days, either at the employer’s initiative or their own, the employer and worker must conclude an annex to the employment contract that must define six additional elements compared to the employment contract for work in the employer’s premises. It should define the organization of such work that will ensure that the worker is available to the employer and that they have the right to unobstructed access to the employer’s premises, the method of communication with other workers with whom the worker is professionally connected, the method and conditions of communication with third parties, all to ensure that business processes run smoothly.

The employer and worker can determine which work tools the employer will procure and install in the worker’s private space or agree that the worker will use their own work tools. It is important to agree on how long the work from home will last, during which periods the worker needs to be available to the employer and/or third parties, and the method of recording working hours. It is possible to agree that the worker will keep their own record of working hours. If work from home is agreed upon as permanent or lasts longer than seven working days in a month, the employer is obliged to reimburse the worker for expenses incurred due to working from home, and the amount of those expenses should be stated in the contract. The Labor Law does not specify the minimum amount of expenses that the employer is obliged to reimburse the worker; the amount of expenses is freely negotiated and can also be determined by a collective agreement binding the employer.

What about transportation

The obligation to reimburse expenses to a worker who works from home, as prescribed by the Labor Law, has resulted in amendments to tax regulations and the introduction of a non-taxable reimbursement for work from home. According to the amended Article 7 of the Income Tax Regulation, the employer can non-taxably reimburse the worker who works from home for expenses up to 3.98 euros per day, but no more than 66.37 euros per month. The daily limit on the non-taxable amount implies the obligation to keep records of the number of working days the worker worked from home. A worker who receives a non-taxable reimbursement for working from home does not have to prove that expenses were incurred, nor is it relevant for tax purposes what those expenses are.

The reimbursement is set at a flat rate and does not depend on the worker’s actual expenses. If a lower reimbursement than the non-taxable amount is agreed upon, the agreed amount is paid non-taxably; if a higher reimbursement amount is agreed upon, the difference is paid as salary for tax purposes. The monthly amount of non-taxable reimbursement for working from home is less than the product of the daily amounts and the number of working days in the month. If the employer were to commit to paying the worker 3.98 euros per day, for a month with 22 working days, the total reimbursement amount would be 87.56 euros per month, while the non-taxable amount is limited to 66.37 euros per month, so contributions and income tax would need to be calculated and paid on the difference. A ban has also been introduced on the payment of non-taxable transportation reimbursement to a worker who worked from home for the entire month. However, if the worker came to the employer’s premises at least one day in the month, the conditions for non-taxable transportation reimbursement are met.