.png)
A home office is understood to mean a situation in which an employee or entrepreneur uses the premises of his home for the activities of a company. According to the Estonian Employment Contracts Act and tax laws, certain expenses can be reimbursed by an employer or a company, provided that they are related to the performance of work duties and are sufficiently justified. In order to pay home office benefits, the company must be satisfied that the use of the premises is necessary and the costs are proportionate.
For example, if a member of the board of directors or an employee of a company uses a separate room at home to carry out work, such expenses are more easily justified. If the workplace is located on a shared surface, for example, in the corner of the living room, the principle of proportionality must be used when dividing the costs.
Home office expenses can generally be divided into four main categories: utilities, communications expenses, office supplies, and office furniture. Reimbursement must be made only within the limits of actual labor costs.
Home office utilities include electricity, heating, water, and other overhead costs. They can be compensated by the employer tax-free in proportion to the share of the working space in the total living space. For example, if 20% of the home's space is used for work, the electricity cost can also be passed on to the company's expense in the same proportion.
If it is not possible to determine the exact proportion based on square metres, an estimated proportion (30-50%) may be used, but this must be clearly justified and documented.
The acquisition of the necessary accessories to equip the home office is a normal expense from the point of view of the company. These include, for example:
These costs may be reimbursed tax-free, provided that they are necessary for the performance of the work and acquired on behalf of the company.
The use of the Internet and the telephone is inevitable in the home office. The reimbursement of these costs must be based on the proportion related to the work. For example, if the Internet is used 50% for work and 50% for personal purposes, half the monthly fee may be reimbursed. The proportion of costs must be documented and, if necessary, justified.
Some expenses are not eligible for tax-free reimbursement because they are treated as private consumption. These include, for example, the following:
When such expenses are reimbursed, a special deduction or rental income is generated, which is taxable.
If an employee or board member rents a portion of their home to the company, they will incur rental income, which must be declared and taxed. Income tax is charged on rental income in the amount of 22%, and the employer is obliged to withhold it and declare it in the TSD.
Important to know: If the company reimburses part of the rental of the home, it is taxable on the same basis as the lease agreement.
The calculation of VAT depends on the person in whose name the invoices for expenses are drawn up.
If the invoices are drawn up directly in the name of the company and the company is subject to VAT, the input VAT may be refunded in proportion to the share of use of the workspace.
If an employee or a member of the board pays the expenses personally and submits an expense report, it is not possible to recover the VAT. In this case, the costs are reimbursed together with VAT.
Fair reimbursement of home office expenses is always based on the principle of proportionality. That is, the employer cannot compensate for the cost of the entire living space if only part of the apartment or house is used for work.
The most common is to take into account the ratio of the working space to the total living space in square meters. For example:
If the workplace is located in a shared space, for example, a living room, the proportion can be determined by estimate, but it must be justified. A common practice is to use a range of 30 to 50% depending on the nature of the work and the soil to be used.
Recommendation:
Fix the proportion in writing in the decision of the board or in the annex to the cost accounting. If necessary, draw up a separate calculation document so that the tax office does not have doubts.
Example of reimbursement of utility costs:
By the same principle, heating, water and other overhead costs can be taken into account.
If the proportion of the workspace changes over time (e.g. due to home repairs or work arrangements), it should be reviewed and documented again.
Reimbursement of expenses is legal only if it is transparently proven. Correct preparation of documents will help to avoid subsequent disputes and tax problems.
First of all, it is necessary to draw up a decision of the board, in which:
If the employee is permanently engaged in remote work, it is recommended to include the corresponding clause in the employment contract:
A clear agreement helps to avoid misunderstandings and provides a legal basis for reimbursement of costs.
Although it is perfectly legal to reimburse home office expenses, mistakes are often made that can result in tax liabilities or interest. Common problems:
Each expense must be directly related to the work, clearly justified and documented.
1. Can the entire Internet bill be reimbursed tax-free?
No, only the work-related part. If the Internet is also used in person, the proportion must be set (e.g. 50%).
2. Can an employer reimburse the rent of a home tax-free?
No. Rental compensation is taxable as rental income and must be declared.
3. Is it permissible to buy home office furniture?
Yes, if the furniture is needed to do the work, and the invoice is in the name of the company.
4. Can the interest on a home loan be reimbursed?
No, home loan interest is a personal expense.
5. If the employee buys the expenses himself, will the VAT be refunded?
No, input VAT cannot be deducted from invoices in the name of the employee.
6. How much proportion is reasonable?
The most common are 20-40%, depending on the soil used and the nature of the work.
Correct reimbursement of home office expenses requires:
If the reimbursement of expenses is transparent and correctly formalized, you avoid tax risks and show that the company is acting responsibly. If necessary, it is worth consulting with an accountant or tax advisor.