Payroll Tax Considerations for Home Office and Co-Working Spaces

With the shift towards remote working, employers in Germany face new challenges in payroll tax treatment for home office and co-working spaces. Recent developments have clarified how these arrangements should be handled for tax purposes, particularly with regard to expense reimbursements and tax exemptions. This article summarizes the key payroll tax rules for employers to consider when their employees work remotely.

Home Office Expense Reimbursement

When employees work from home, employers may choose to reimburse specific costs associated with the home office setup. These reimbursements can cover items like:

  • Furniture or equipment, such as desks and chairs.
  • Utility costs, like electricity or internet.

According to the tax rules, if the reimbursement relates to work-specific expenses, these amounts are generally tax-free for the employee. However, the employer must ensure that the payments are made within the defined scope of work-related needs to avoid creating a taxable benefit for the employee.

Tax-Free Home Office Allowance

A home office allowance, which is not dependent on whether a dedicated room is available, allows employees to deduct up to 1,260 euros per year as part of their tax return if they worked from home for more than 42 days in a year. Employers should inform employees about this option, as it can reduce the employee’s overall tax burden.

Co-Working Spaces

For employees who do not have a suitable home office environment, some companies offer access to co-working spaces. The tax treatment of these spaces depends on how the costs are handled:

  • Direct payment by the employer for a co-working space is generally tax-free for the employee, as long as the space is primarily used for business purposes.
  • If the employee pays for the space and is later reimbursed, these payments could be considered taxable unless they meet the strict conditions for business-related expense reimbursements.

Travel Expenses to Co-Working Spaces

Travel expenses between home and a co-working space are generally treated similarly to commuting expenses. Employees can claim a commuting allowance for this distance, but only up to the standard rates applicable to travel between home and the primary workplace.

Social Security Considerations

For employers, it’s also essential to consider the social security contributions linked to home office and co-working space arrangements. If additional payments or reimbursements qualify as a taxable benefit, they may also be subject to social security contributions. Therefore, it is crucial to manage such benefits carefully to avoid unintended financial burdens for both the employer and the employee.

Conclusion

As remote working becomes more common, understanding the tax and social security implications for home office and co-working arrangements is critical for employers. Properly structured reimbursements and benefits can remain tax-free, while missteps could lead to unexpected payroll tax liabilities.

For more detailed information or personalized advice, contact WW+KN, a Baker Tilly Company, at info@payrollgermany.de. We are here to assist you with all your payroll and tax-related queries.