Germany: tax deduction for remote work being prepared

The parties in Germany’s governing coalition have agreed to introduce a tax deduction for employees that are working remotely, the newspaper Frankfurter Allgemeine Zeitung reported on Monday 30 November. The tax break would amount to €5 per day, up to a maximum of €600 year. Germany’s finance ministry confirmed the proposal. However, some details still need to be worked out. The idea came from a proposal by the Länder of Hesse and Bavaria which, in anticipation of a much-needed law on remote work and in the face of administrative constraints, wish to offer compensation to employees forced to telework as a result of the pandemic and who are not all supported by their respective companies. Questions remain as to whether the deduction will be calculated separately or integrated into the existing system of professional expenses, which would make it less advantageous. Tax authorities currently systematically deduct €1,000 per year per employee for professional expenses (Werbungskosten). However, to obtain a deduction of more than €1,000, an employee must declare their actual expenses. If the new deduction for telework is included in this scheme, only employees who spend more than €1,000 per year on professional expenses will be eligible to benefit. If it is calculated separately, then all employees will be eligible to benefit from the deduction, in addition to the €1,000 already automatically deducted.