Tax relief–how different European countries tax working from home

From spontaneous power naps to meetings in sweatpants and a 30-second commute from your bed to your desk—working from home has some definitive advantages. And many of us now have personal experience working from home, since the outbreak of COVID-19 forced societies around the world into varying stages of lockdown. To avoid collapsing economies and to keep businesses running, many employers pivoted to working remotely. Plenty of governments then reacted to the new situation by adjusting tax regulations for people working from home. After all, many regulators agreed that the added financial burden shouldn’t fall solely on individual employees. We did some research to learn more—and discovered stark differences between several countries. Let’s take a look at current tax regulations across Europe and whether you have opportunities to save more when tax time comes around again. 

We looked at eleven different European countries: the Netherlands, Germany, Spain, Italy, Austria, Ireland, Belgium, Portugal, Greece, Poland, and France. As it turns out, there are some significant differences depending on where you file your taxes. So, you might be wondering—what country offers most for its remote workforce? Here’s a hint: It’s a country that neighbors Germany, the Netherlands, Luxembourg, and France. It’s also famous for a certain vegetable that’s named after its capital and ends in “sprouts.” We’ll come back to this country later. For now, let’s focus on governments where tax relief regulations that benefit remote workers haven’t come to fruition yet.

In four of the eleven countries, lump-sum regulations don’t exist yet or have to be negotiated directly with your employer. In Spain, companies are encouraged to voluntarily take responsibility for compensating employees, but currently there are no specific tax refund regulations in place. Still, employers are legally obliged to provide—or cover all costs for—any equipment and tools necessary for remote workers to do their jobs successfully.

In Italy, there are three options for employers to voluntarily support their workers:

1. direct purchases of necessary equipment, such as computer hardware or general office material
2. individually agreed-upon contributions towards expenses accrued during your work from home
3. reimbursements for necessary work expenses (travel expenses, accommodation, meals, etc.)

Employers may add corresponding sections to their employees' contracts or amend them accordingly.

Portugal also doesn't provide any legally binding regulations yet. Nevertheless, there are still some possibilities for employers to compensate their employees for certain expenses that directly result from working at home. Without a legal framework, however, this remains based on individual agreements between employees and their employers.

In any case, employers should put any and all such individual deals and agreements in writing, ideally signed by everyone involved.

Meanwhile, other countries, such as Poland, are still in the process of releasing similar laws. The Polish government is actively working on adapting existing laws to provide more tax relief to remote employees. Currently, the decision to reimburse work from home is still up to each individual employer and is not obligatory. Experts expect new revisions to the current status by the fall of 2022. Reimbursing remote workers for electricity, telephone, and internet costs may then become mandatory for employers. Polish taxpayers will have to wait patiently to find out what the finalized process is once the changes to the law have passed. 

The most worker-friendly regulations were put in place in Belgium. Here, the maximum available amount adds up to a fixed weekly lump sum of €142.95. The only conditions: Employees are required to work at least one full day per week at home and their employer has to grant them their benefits. 

To make things even easier, employees are allowed to schedule their time according to their individual needs. You could do a full week at home, for example, and then visit the office the rest of the month. Or you could split up your time completely and only work two hours per working day at home during each week of the month. As long as everything adds up on a monthly basis, a whopping total of up to €1,715.40 per year can be added to your regular salary, completely free of taxes.

Ireland, in comparison, handles things a bit differently. Irish workers who have a formal agreement with their employer that requires them to work from home are eligible for a fixed per diem of €3.20. Therefore, employees in Ireland are eligible for the second-highest deduction, with a yearly total of €736 over the course of 230 working days per year (the standard metric used for this analysis).

Workers in Germany will be happy to find out that they are eligible for the third-highest deductions overall. At €5 per diem, the daily home office lump sum is actually the second-largest in the analysis, but the German government has put a cap at a maximum of 120 days or €600 per year. There is also a notable difference in the process. German taxpayers need to reclaim their money through their tax declaration at the end of the fiscal year, instead of receiving it on top of their regular salary directly from their employer.

Technically, German law distinguishes between “mobile work” and true “work from home.” Even though both imply that you don't work at your employer's premises, there are important differences: “mobile work” simply means that your employer provides you with mobile devices such as laptops or smartphones which you can use to work from anywhere.And that really means anywhere: on the train, in a hotel, or in the little café on the corner. You can even claim this deduction if you choose to work from home voluntarily. 

An actual “home office,” on the other hand, is a fixed workplace at home. The home office lump sum only applies to the latter, though you may still be entitled to different tax refunds for work-related expenses if you're part of the “mobile work” group.

* The metric of 230 working days is based on an example calculation including the amount of time a regular full-time employee works per year and deducting public holidays and the EU minimum of four weeks paid holidays per year. Actual applicable time may vary depending on the individual country. 

The following countries offer similar regulatory approaches: France offers a total of €580 per year or €2.52 per diem, the Netherlands have a yearly maximum of €460 (€2 per diem), and Greece grants €336 per year and €1.46 per diem. The government in Austria offers €300 per year or €3 per diem for a maximum of 100 days. 

Here’s what you should do:

• Find the right sources: Use unofficial sources as a place only to start. Look for official government information that is up to date. Ask friends, your company, or trusted experts in case there is a language barrier and necessary information isn’t available in a language you understand perfectly.
• Get to the point: Search specifically for regulations regarding work from home and taxation. 
• Dive in: Read up and figure out what applies to you, what criteria have to be met, what information authorities require, what timeframes apply, etc. Make sure to take notes on anything that applies to your individual situation.
• Prepare the paperwork: Gather detailed documentation that supports your claims to eligibility. If you need specific documentation from your employer or your government, consider that it may take a while before everything gets back to you.
• File your taxes: Provide your collected documents to your local tax authorities. Make sure to keep everything within the specified deadlines.

Make sure to look into your country’s rule book

While COVID has slowed down a bit, it is still influencing the decisions of lawmakers in many countries. As temperatures get colder, the issue is only going to become more prevalent again. Additionally, and unrelated to the pandemic, there are many older regulations in place in various national tax codes. Be sure to check how your government gives tax breaks through different systems, such as tax deductibles or refunds. In the Netherlands, for instance, employees who aren’t permitted to work remotely may claim a tax deduction of up to €0.19 per km traveled to the workplace. Remote-working Austrians may get the costs for adequate furniture for their out-of-office workplace refunded, up to €150 per year. Other similar opportunities may also apply to your country.

As the data shows, there are plenty of different regulations around, and it pays to stay on top of current developments. At N26, we want to help you make informed decisions and take advantage of any saving opportunities—no matter where you are.

About this analysis

This analysis is based on official government regulations or context provided by professional lawyers with long-standing expertise on the subject. The eleven countries analyzed are the Netherlands, Germany, Spain, Italy, Austria, Ireland, Belgium, Portugal, Greece, Poland, and France. The annual amounts are calculated based on 230 working days per year, unless a different applicable maximum amount was already specified within the corresponding regulation. The metric of 230 working days is based on an example calculation including the amount of time a regular full-time employee works per year and deducting public holidays and the EU minimum of four weeks paid holidays per year. Actual applicable time may vary depending on the individual country.