Will you reimburse coffee and printing paper used at home?
As a result of the coronavirus pandemic, the traditional office in an organization has mostly been replaced by a home office and working from home. Because the pandemic is still ongoing and working from home will – even after the pandemic – remain commonplace, more and more the question arises of whether or not an employer can provide employees working from home with a tax-free allowance to cover additional costs.
Employees working from home instead of at the office incur additional costs. Think of costs on coffee, tea, toilet paper, printing paper, heating, electricity, etc. Normally, when working at the office, these provisions and their costs are covered by the employer. And these provisions are then tax-exempt, because employees use them at the office when performing their duties.
The average extra costs of working from home
According to the Netherlands National Institute for Budgetary Advice (NIBUD), employees incur an extra € 2 per day per person when working from home (based on an eight hour working day). When working five days a week, this equals € 43.30 per month. These calculations exclude the costs often covered by employers, such as expenses on computer equipment, telephony and commuting/traveling. NIBUD recommends people to take these extra costs into account, so that a higher energy bill will not come as a surprise. Of course, in addition to these extra costs there are also areas where money is saved, such as on commuting expenses.
When used at home, these provisions are only tax-exempt when the home office in question qualifies as an office for tax purposes. In order to do so, the following conditions must be met:
- the home office must be an independent part of the house, with e.g. its own toilet and accessible through an independent staircase;
- the employer and employee have entered in a business rental agreement, so that the home office is at the disposal of your organization only;
- the employee uses the home office to work in.
These conditions are rarely met. By law, an employer does not have to reimburse the extra costs incurred by employees as a result of working from home. The law only mandates that an employer must ensure an office meets the conditions set in the ‘arbowet’ (Working Conditions Act), even if this office is a home office. Nonetheless, more and more employers pay their employees working from home an allowance to cover the extra costs. Various trade unions are also committed to this. As a result, the right to such a homeworking allowance or budget has now been included in a number of collective labor agreements (CLAs). Based on these CLAs, it can thus be(come) mandatory for an employer to pay his/her employees an allowance for working from home.
By the way, such a homeworking allowance is not the same as e.g. continuing the payment of a fixed, tax-free travel allowance to an employee working from home – and thus without commuting expenses – so that (s)he can cover the extra costs incurred. The homeworking allowance is an independent allowance – or budget – available to the employee for (extra) costs made at home. Conditions may be attached to such an allowance, for example that the employee must meet a certain minimum in working days or hours.
In any way
A one-off or periodic homeworking allowance which can be spent at the employee’s discretion cannot be provided tax-free in any way. However, different rules apply to an allowance given for specific work-related provisions at home. If the allowance is then declared as wages subject to a final levy (‘eindheffingsloon’ in Dutch) and you have proof the allowance was spent on work-related provisions, the allowance may be tax-exempt. The only extra conditions which must be met are that the work-related provisions must be related to the obligations of your organization as stated in the ‘arbowet’ (Working Conditions Act), that the employee uses the provisions (partly) in his/her home office and that the employee pays for part of the expenses him-/herself. In addition, the home office must be well-lit and meet ergonomic requirements. The latter means the employee must use a proper office chair and have a good desk or worktop at his/her disposal. By the way, a good alternative to having to reimburse the costs of a newly bought office chair or desk is by allowing the employee to use the chair or desk (s)he used in the office. Be sure to make written agreements on e.g. when to return the items!
Allowances given specifically for tools, computers, mobile means of communication and similar equipment (an office chair is not part of such items!) may also be tax-exempt, as these items are necessary for employees to perform their duties, including in the home office. In addition to the required proof and declaration as ‘eindheffingsloon’ – as was mentioned in the previous section – the following conditions apply:
- the provision must be necessary in your judgement for an employee to perform his/her duty;
- the costs are covered by your organization and not by the employee him-/herself;
- the employee must return the items or pay back the residual value when (s)he no longer needs the item at home for work.
Remember that for combo packs including internet, telephone and television, only the part of the invoice applying to internet can be exempt from taxation when reimbursed. Furthermore, make sure to check if provisions are still necessary when the employee returns to office for work in the (near) future. Any tools not necessary for work but used by the employee in the office and only for work may also be reimbursed tax-free by declaring the reimbursement as ‘eindheffingsloon’. But mind you: if the employee only works from home, the home office (s)he uses must qualify as an office for tax purposes in order for the use of the tool at home to qualify as use of the tool in the office. We already mentioned that a home office rarely qualifies as an office for tax purposes. This means costs on these tools can then only be reimbursed tax-free if the tool is used by the employee at his/her office in the organization and additionally at home.
In sum, this means a homeworking allowance or budget can often only be provided tax-free if it is declared as ‘eindheffingsloon’ and included in the ‘vrije ruimte’ (the scope of tax-free aggregated personnel costs). This means a homeworking allowance will take away part of your ‘vrije ruimte’, whereas the tax-exempt reimbursement of items as mentioned in the section above does not. For 2020, including extra costs in the ‘vrije ruimte’ was not such a big deal, as the scope of tax-free aggregated personnel costs was temporarily increased. However, as of 2021 the ‘vrije ruimte’ is once again the total of 1,7% of the first € 400,000 of the wage bill and 1,18% (a lower percentage than in 2020) of the remaining part. This could change the picture of a tax-free homeworking allowance drastically!
It is recommended to record any agreements reached with employees pertaining to working from home – including a possible homeworking allowance – properly in writing.
Written by Lotte van Rees, freelance specialist payroll taxes (orginal article is in Dutch).