A challenging year with Corona is almost behind us. The Corona pandemic has turned our lives completely upside-down and, for many of us, our work methods as well. Regulations at the onset of the Corona pandemic have resulted in many employees working remotely. Since March 2020, there has been a 20% increase of employees working remotely when compared to the previous year, according to Statista. In April 2020, a total of 15 million workers were working remotely. Since November-December of 2020, the second lockdown has resulted in many working remotely once again. Once again, many companies and authorities were challenged to instruct their employees to work remotely when possible in order to reduce the risk of contracting Covid-19. For many establishments, this regulation is also important to keep the workflow in place.
As a result of remote work, there are additional costs for electricity, water, heat and telephone while the commuting allowance (Entfernungspauschale) continues to decrease with each passing day. In addition, there can be possible reduced revenues due to short-term work (Kurzarbeit). On top of homeschooling and childcare during Corona times, the additional financial burden causes a significant strain for employees. For this reason, the government would like to relieve the affected workers.
Home Office Lump Sum (Home-Office-Pauschale)
In the German Annual Tax Act of 2020, parliament passed the so-called Home Office Lump Sum, which provides tax relief for all employees who have switched to remote work due to Corona and have no home office (häusliches Arbeitszimmer) to deduct from their taxes. In your 2020 tax return, 5 euros can simply be deducted for each calendar day spent exclusively working from home. The lump sum is limited to 600 euros per calendar year and the limit of days that can be deducted for remote work is 120 days. The Home Office Lump Sum is valid for the years 2020 and 2021.
However, there is a catch for some taxpayers. The Home Office Lump Sum is included in the Employee Lump Sum (Arbeitnehmer-Pauschalbetrag). This belongs to the Income-Related Expenses (Werbungskosten). Every taxpayer who files a tax return has 1,000 euros automatically deducted from their taxable income as a lump sum for Income-Related Expenses. The Tax Office does not need proof of your actual expenditures for this. Even when your work-related expenses are under 1,000 euros, this fixed rate will still be deducted. Therefore, if your days working from home and other work-related expenses do not exceed 1,000 euros, the Home Office Lump Sum, unfortunately isn’t an advantage.
If the new lump sum were separate from the Lump Sum for Income-Related Expenses (Werbungskostenpauschale), most employees would directly profit from it.
The Federal Ministry of Finance (Bundesfinanzministerium) fears that it could be an “excessive benefit” and therefore unconstitutional. Whether and how you must prove your remote work is still not completely clear. Since 2017, you must typically only provide evidence to the Tax Office when specifically requested. However, experts believe that a confirmation from the employer will be required, especially if you alternate between working from home and in the office.
Tax tip: Employers may offer their employees tax-free Corona bonuses (Corona-Prämie) that can amount up to 1,500 euros in order to lessen the difficulties of the Corona crisis. Regulations have allowed employers to offer this up to December 31st, 2020. The Annual Tax Act of 2020 (Jahressteuergesetz 2020) now allows employers to extend this offer until the end of June 2021.
Can I Also Prove Higher Income-Related Expenses Individually?
Yes, this is possible. You can benefit from the Home Office Lump Sum if your days spent working remotely and additional professional expenses exceed 1,000 euros. You can then prove these expenses individually and deduct them from your taxes. Have you bought a new laptop or an office chair that is good for your back for your home office? Or perhaps you continued your education or training?
The Home Office Lump Sum may compensate for the lack of Commuting Allowance (Pendlerpauschale), which amounts to 0.30 euros per kilometer for one-way travel to work. Of course, that depends on variables such as your route length to work as well as vehicle expenses, fuel price and fuel consumption. The Home Office Lump Sum of 5 euros per day is equivalent to a daily commute of approximately 17 kilometers. Commuters from rural areas who usually travel 30 kilometers to work cannot be compensated for that loss through the new flat rate. Travel costs i.e. public transportation tickets, as well as fuel and car mileage, are eliminated through working from home, for this reason, the Home Office Lump Sum was created.
Tip: The Home Office Lump Sum is in effect until the end of 2021. In the new year, please continue keeping a precise record of all days spent working remotely and store all receipts for working equipment or materials as well as other professional expenses, so that you are able to deduct the costs in the case that you had over 1,000 euros in expenses. If you have not yet received a written arrangement from your employer concerning working remotely, please take care of this as soon as possible.
Can’t I Deduct a Home Office from My Taxes Anyway?
Only very few employees, primarily in metropolitan areas, have enough space to set up a home office that can be deducted from taxes (häusliches Arbeitszimmer). Nevertheless, many employees are working from home due to Corona. The new Home Office Lump Sum is geared specifically towards them.
In case you are one of the few that do have a home office, there are specific requirements for deducting it from your taxes. Extensive information on this topic can be found in the article Home Office - How That is Profitable When Working Remotely. Expenses that stem from a home office are generally not deductible. However, there are two exceptions: either your employer has not provided you with an office workstation, or the core of your work takes place in your home office. The following are requirements for a home office deduction:
- It must be a separate room that is incorporated into your home.
- It should be equipped with office supplies and equipment.
- The office must be used at least 90% of the time for work purposes.
- There should still be enough space for all residents of the home outside of the office.
If no workstation is provided for you at your job for your professional tasks, you are permitted to deduct up to 1,250 euros for space (proportionate costs of the office in relation to the costs for your entire apartment) and equipment. If the core of your work takes place in your home office, you may deduct the full cost of your expenses from your taxes.
What Should I Consider When Working Remotely?
Currently, employees in Germany have neither a legal entitlement to working from home, nor can they be forced to work remotely by their employer. However, due to the Corona crisis, many companies are obligated to send their employees to work from home. The fight against the Corona pandemic and the consequent measures taken by authorities force many parents to be at home for both work and childcare. In addition to a mutual agreement there are two requirements for this: first, one’s professional activity must be able to be performed at home. Second, it must be technologically possible to work from home.
Many are unaware that working remotely in the sense of telecommuting (Telearbeit) is a legally defined term. Employers are required to provide a computer workstation in the employee’s home and agree on weekly working hours as well as the duration of this arrangement. On the other hand, mobile working (mobiles Arbeiten) is not regulated by law although the German Working Hours Act (Arbeitszeitgesetz) still applies. Remote work should be clearly negotiated between employers and employees and flexible terms agreed on when necessary, especially given the current corona crisis. A bill to strengthen employees’ entitlement to mobile work (from any location) and remote work (working from home) is currently being developed. According to a survey, 64% of Germans would like to have a legal claim to this.
Data Protection and Surveillance Authority
Even when working from home, data protection laws such as GDPR (General Data Protection Regulation/ DSGVO) must be taken into account. Employers are responsible for taking appropriate technical and organizational measures to ensure protection for personal rights and processing sensible data. An example of this is exclusively using company work equipment and encrypted communication channels.
The federal states’ surveillance authorities have also shined light on the risk regarding data protection laws and published practical tips. The Agency for the Protection of Data in Schleswig-Holstein has issued a guide specifically for video conferences.