Tax effects of work from home (the so-called homeoffice)
Below, we would like to summarise the tax effects related to work from home, which is now widely used by employees due to the current emergency situation linked to the spreading of SARS – CoV 2 virus.
If the employer agrees with the employee that the employee will work fully or partly from home, under the stipulation of article 2 paragraph 2 of act no. 262/2006 Coll., the Labour Code (hereinafter the “Labour Code”) and the stipulation of article 151 of the Labour Code, the employer is obliged reimburse the employee for expenses that will provably incur in connection with performing work. In case of work from home, this may be especially the costs of heating, electricity, cleaning of the home office, Internet connection etc. It is recommendable to treat work from home for example in the internal guidelines etc.
The employee must be able to substantiate the amount of costs (i.e. substantiate invoices for expenditure) and must provide cooperation to the employer in determining the amount of the reimbursed costs, which needs to correspond to fact or to an economically rational estimate. The employer is obliged to prove that the provided reimbursement is a compensation of reasonably spent costs of the employee relating to the performance of his work.
The Labour Code enables flat rate expenses only in case of reimbursement for the wear own assets and maintenance of work clothes, where the amount of the flat rate must be stipulated in an internal guideline of the employer or in the employment contract or another contract. Reimbursement of travel costs is governed by the stipulation of article 152-189 of the Labour Code in case of work from home as well.
If no costs incur for the employee in relation to work from home, no entitlement to reimbursement arises. We would like to point out, though, that the employee cannot validly release the employer from the obligation to provide reimbursement of costs (stipulation of article 346c of the Labour Code).
The provision of reimbursement of costs provably spent by the employee on working from home is not taxable income on the part of the employee. Taxable income would only arise in case of reimbursement beyond the provable costs and non-fulfilment of conditions according to the Labour Code and act no.586/1992 Coll., on income taxes. The payment of public service insurance premium paid by the employer and the employee will then follow the same regime.
From the perspective of the corporate income tax, on the side of the employer the paid claims to reimbursement of costs that incurred for employees in relation to performing work from home will represent tax eligible costs.