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With the rise in working from home, there is a growing call from employees for their employers to contribute towards the costs of their home office set-up, as well as the costs associated with working from home.
These are costs that, until recently, were borne by the employer. After all, the workplace at the office is set up at the employer’s expense. And things such as electricity, heating and coffee/tea are provided by the employer at the office (tax-free). Employees who work from home pay these costs themselves.
What are the employer’s obligations?
The law does not impose any obligation on the employer to contribute towards the employee’s costs of working from home. Nor does it do so during periods when many employers, partly at the government’s urging, make working from home compulsory. Such an obligation may, however, arise from collective (collective labour agreement) or individual agreements with employees.
The health and safety obligations incumbent on the employer do, however, explicitly extend to the employee’s home workplace. The Working Conditions Order contains provisions on location-independent work. And Article 5.4 stipulates that workstations must be designed in accordance with ergonomic principles. The Working Conditions Regulations contains (in Chapter 5), particularly with regard to computer work, a comprehensive set of requirements with which the workplace – including the home – must comply.
Incidentally, employees are also expected to play their part in this regard. They must take care of their own physical and mental health and, if necessary, raise the alarm with their employer in good time.
Tax incentives
Any payment or benefit provided by the employer to the employee in the course of their employment is regarded as pay.
In the context of working from home, two specific exemptions may be applied:
- health and safety facilities;
- necessity criterion
We set out the conditions for these exemptions below.
All allowances and benefits in kind that do not fall within the scope of these specific exemptions are subject to payroll tax.
The employer may, however, still choose to allocate the salary to the discretionary allowance under the work-related expenses scheme (see below).
Health and safety facilities
These must be provisions that derive directly from the health and safety policy which the employer carries out under the Working Conditions Act.
The reimbursement or provision must arise from the health and safety plan by the employer. This is the minimum requirement. It is not entirely clear what exactly the maximum amount is that can be reimbursed or provided tax-free in the context of health and safety provisions.
Necessity criterion
Under the necessity criterion, only the following items may be reimbursed or provided tax-free:
- tools;
- computers;
- mobile communication devices;
- and similar equipment.
The costs of the associated data transmission (for example, the internet subscription) and the software required for its use are also covered by the targeted exemption.
The conditions are that whatever is reimbursed or provided:
- is, in the employer’s reasonable opinion, necessary for the proper performance of the employment contract;
- must be returned to the employer (or the value reimbursed by the employee) if it is no longer necessary for the performance of the employment contract (for example, upon termination of the employment contract).
The necessity criterion cannot be applied to remuneration and benefits in kind paid to directors and supervisory board members.
No personal contribution
If employees make a personal contribution or a cafeteria scheme is applied, the Tax and Customs Administration does not regard the benefit in kind as (sufficiently) necessary. The necessity criterion cannot therefore be applied.
A personal contribution, after all
With regard to the employee’s internet subscription, the Tax and Customs Administration has abandoned this strict stance. In such cases, the specific exemption from the necessity criterion may also be applied where the employee pays a personal contribution (for private use).
Personal contribution towards health and safety facilities
A personal contribution towards health and safety provisions is also not permitted. This follows from Section 44 of the Health and Safety at Work Act, which stipulates that the costs associated with compliance with that Act must not be borne by employees.
If the employee does contribute towards the costs of a facility, it is not (either) considered a tax-exempt health and safety provision for tax purposes.
This is somewhat nuanced in the update to the Guidance on targeted exemptions for the home workplace (the update published by the Tax and Customs Administration on 12 August 2021 on the Tax Service Providers’ Forum).
An employee’s personal contribution is now permitted, provided that it relates to the additional cost of a more expensive version of the health and safety provision.
Approval of a fixed travel allowance
It has been approved that (fixed) travel allowances agreed before 12 March 2020 may continue to be paid on the basis of the travel pattern envisaged at that time. This approval is valid (for the time being) up to and including 30 September 2021. Employers may, for the time being, compensate their employees working from home who fall under this approval, on a tax-free basis, for the costs of working from home.
Free space
The allowance under the work-related expenses scheme amounts to[1]:
| 2020 | 2021 | |
| total wage bill of up to €400,000 | 3% | 3% |
| the portion of the total wage bill exceeding €400,000 | 1,2% | 1,18% |
The employer is liable to pay payroll tax (final levy) on the amount by which the total of the allowances and benefits in kind designated for the ‘free space’ exceeds the ‘free space’ limit in a calendar year. The rate is 80%.
For example, if the tax-free allowance is exceeded by €1,000, the employer pays €800 in payroll tax. The employer is not permitted to pass this payroll tax on to the employee(s). The total cost to the employer therefore amounts to €1,800.
PLEASE NOTE: when determining whether the ‘free space’ limit has been exceeded, all allowances and benefits in kind received during a calendar year must be taken into account. Examples of items often included within the ‘free space’ are Christmas hampers (and other festive gifts), staff outings and similar items.
Not in free space
The employer may choose not to allocate the allowance or benefit to the discretionary allowance under the work-related expenses scheme. In that case, the allowance or benefit must be taxed as ordinary pay.
In that case, the payroll tax is payable by the employee. If the employer chooses to pay this payroll tax on the employee’s behalf, the tax must be included in the gross pay.
The gross (final) tax rate for 2021 is
| Annual salary | Gross rate |
| Up to €68,507 | 58,9% |
| From €68,507 | 98% |
Tax Plans for 2022
Calls for a tax relief scheme, in the form of a targeted exemption for working-from-home allowances, are growing ever louder.
It seems highly likely that this targeted exemption will be introduced in the tax plans for 2022, which are to be presented on Prinsjesdag 2021.
The purpose of this note is to outline a scheme. For the sake of readability, matters have therefore been simplified. VWG is therefore not liable for the consequences of actions taken or not taken as a result of this memorandum.
[1] For both 2020 and 2021, the tax-free allowance for the wage bill up to €400,000 has been increased “on a one-off basis” from 1.7% to 3% in connection with the coronavirus crisis.