With more and more employees working from home, financial allowances for remote work are also becoming widely available. Also known as ‘working from home’ or ‘home office’ allowance it comes primarily in the form of a tax deduction for remote employees and is tied to an employee’s income tax and tax residency.
The Covid-19 pandemic has triggered a tidal wave of long-term changes to everyday life around the globe. One of the most crucial is that working from home is becoming the norm.
With more and more employees working from home, financial allowances for remote work are also becoming widely available. But this trend is actually not new. It has been around for a while to support certain individuals, like self-employed workers, entrepreneurs, and freelancers.
Today, with the drastic shift in global work cultures, employees across the board are becoming eligible for remote work allowances. Remote employees should be aware of the benefits they are eligible for. But awareness of remote work allowance can also help employers improve their employees’ remote work experience. Especially for companies employing remotely and internationally, knowing where and when your employees can access remote work financial allowances is essential and can contribute to a wider corporate culture of care. Here we shed light on this growing trend.
Remote work allowance - also known as ‘working from home’ or ‘home office’ allowance - comes primarily in the form of a tax deduction for remote employees. It is tied to an employee’s income tax and tax residency.
While in most countries remote employees will apply for tax deductions individually, there are exceptions. In Belgium, for example, employers can pay remote working allowances to employees directly. These payments are tax free. They can pay up to €129.48 per month to each employee for office related expenses as of April 2020. In this case, all employees must be paid equally.
The rules vary A LOT from country to country. But generally speaking, items like utility bills, internet, computers, technologies, software, and office furniture are tax deductible. In addition, rent may also be subject to tax deductions.
Not all countries offer remote work allowance. In some countries, like New Zealand, remote work allowance generally only applies to self-employed people. This is still the case amidst the covid-19 pandemic. The same largely applies in countries like Austria, Germany, and the US.
The good news is that many other countries have made remote work allowance accessible to regular employees. This is the case in countries like Belgium, the UK, Australia, and South Africa. While each country has its own rules, remote companies and employees stand to benefit from these new support structures for remote working.
Wherever remote work allowances are available to regular employees, the main consideration is that the home needs to be the primary place of work. In most cases, this means that at least 50%, if not all, of income is derived from work done at home. In Belgium, this criterion is less strict. Here employees need to be working from home regularly for at least 5 days a month.
Many authorities will also insist that an employee has a dedicated work space in their home that is used exclusively for professional purposes. It is only under this condition that tax can be deducted for home office items, such as furnishing and utilities.
In countries like the UK and Australia, you cannot have chosen to work from home to be eligible for remote work allowance. So in the case of remote and remote-first companies, employees would be eligible for remote work allowance. In both countries, temporary remote working during the covid-19 pandemic also qualifies employees for tax deductions.
Another general stipulation is that employers cannot have paid or reimbursed an employee for home office expenses. If they have, employees will no longer be eligible for tax deductions.
There are various methods for calculating remote work allowance. In the UK, for example, remote employees can claim taxes for £6 a week, with no evidence needed. On the other hand, taxes can also be deducted for the exact amount of expenses. In this case, evidence, including bills and receipts, is required. Individuals will also receive tax deductions according to the tax bracket at which their income is taxed.
In Australia, multiple calculation methods are also available. A short term method was set for 2019 and 2020. The fixed-rate method is a long-term solution. Employees receive AUD 0.52 in tax deductions per hour of home office work. This covers home office expenses incurred from:
To claim tax deductions, employees have to provide either of the following evidence:
In addition, to claim expenses for phone use, internet, technology, stationary, and the decline in value of equipment, separate claims need to be filed and additional evidence is needed including receipts and bills.
While these methods may seem cumbersome, they are well worth the trouble of alleviating the costs incurred by remote working. By staying abreast of these issues, companies can inform their remote employees and contribute towards a supportive remote working environment.
Generally employees apply for remote work allowance individually when filing their taxes - usually there are forms through which they can apply for tax deductions based on home office allowances. Companies and employers generally won’t get involved with this. However, in the case of countries like Belgium, where companies themselves are paying out remote work allowances, companies will file the relevant tax claims.
At Omnipresent, we are committed to supporting remote companies and employees with all their remote employment needs. This includes keeping you informed through our resource hub on topics of relevance to growing your remote team and fostering a positive remote working culture.
As a remote-first company ourselves, we are experiencing the same challenges in how best to build a productive and supportive remote work environment. Our expense policy includes remote allowances as we believe that it is vital to build a supportive and understanding remote working culture right from the get-go.
Omnipresent offers a holistic solution to businesses looking to employ remotely. Our goal is to make global remote employment a cost-effective, efficient, and pain-free process for employers and employees alike. Get in touch for a free consultation so we can help you find the best option for your business.
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