Tax considerations when working from home

At Zirkzee Group, we have thoroughly renovated our office in 2021. The physical walls have been knocked down and activity- based working should further break down the virtual walls between employees. The new office space is fully equipped for activity-based working: there are, among other things, workplaces that are suitable for small and larger teams, silence pods and various meeting places. The idea of the head office in Noordwijk as a ‘Zirkzee clubhouse’ has been pushed into the background due to the pandemic – because that is the most important function of the office after Covid-19: a place where people meet for ideas, innovation, collaboration and exchange of information.

But in addition to the workplace at the office, the home workplace has also become more important: this is often a very suitable workplace for work that requires a lot of concentration. Working from home, whether or not as a result of the pandemic, raises a number of interesting tax questions that I will answer below.

In which country is the frontier worker liable for tax and social security contributions if he or she works from home?

An employee who lives, for example, in Belgium and works in the Netherlands, is liable to pay income tax and social security contributions in the Netherlands for his wage income. But if the employee starts working (partially) from his home in Belgium, this can affect his tax liability and his social security liability.

• The Netherlands has made specific agreements with Germany and Belgium about the tax treatment of working days at home during the pandemic, which are applicable from March 11, 2020 until at least September 30, 2021. During this period, the home working days may be treated as days worked in the country where the employee would have worked under normal circumstances. But the employee can also treat the home working days as days worked in the country where the work was actually done.

For all other countries (and for Germany and Belgium after the Covid-19 measures have been withdrawn), the regular rules apply: based on OECD guidelines, the income is taxable in the country where the employee lives, if the employee does not stay in the other country for at least 183 days and the remuneration is not paid by an employer that is based in (or paid by a permanent establishment in) the other country.

What about a fixed travel allowance?

In the Netherlands it is permitted to pay a fixed tax-free commuting allowance to employees. The compensation is €0.19 per kilometer and is based on 214 travel days for a full-time employment. In those 214 days, incidental working from home, illness and holidays have already been taken into account. But if the employee works from home more than incidentally, a fixed travel allowance only remains possible if the employee travels to the office at least 60% of his working days.

• An exception applies during the pandemic: up to and including 30 September 2021, the employer is permitted to continue to pay the fixed commuting allowance based on the travel pattern on which the allowance was based on 12 March 2020 at the latest.

If the employee works more than 40% from home after the Covid-19 measures have been withdrawn, the only option to provide a tax-free commuting allowance for travelling by car is to pay a compensation for the actual travel days of the employee. An alternative can be found in a reimbursement for public transport costs or by providing a bicycle.

Can the employer reimburse a home workplace tax-free?

Unfortunately, it is not always possible in the Netherlands to reimburse the costs of a home workplace completely tax-free. The employer can reimburse the costs of working from home tax-free if there is an independent workspace with its own sanitary facilities and its own entrance. But most employees will not have such an independent workspace.

An employer may reimburse or provide PCs, mobiles, tools and similar equipment tax-free if these items are necessary for the work. An employer is, according to the Working Conditions Act, responsible for the workplace of his employees, even if they work from home. This means that the employer may provide or reimburse a desk, chair and lighting to his employee tax-free if he needs this in his office. The employee is not allowed to pay a personal contribution for this. If there is no independent workspace, this can only be done via the work-related expenses scheme. The allowances and reimbursements are only tax-free insofar as they fall within the so-called free space of the work-related expenses scheme.

Although working from home is becoming more and more common, tax legislation is not yet up-to-date in this area.

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Contributing Advisors