Over the last period, the term "homeoffice" has become more and more common in our country, i.e. the possibility for an employee to perform work for his employer remotely, by working from home. Such a practice often brings various situations where employees use tools, equipment or other objects that are their personal property while performing their work.

What tax implications arise on the part of the employee and the employer in connection with the use of own tools, equipment and other items necessary for the performance of the employee's work?

In accordance with § 145 par. 2 of the Labor Code, there is the obligation to pay employees financial compensation for such use. If such a claim is contractually agreed through a collective agreement, an employment contract or through another internal regulation, in this case we are talking about claim compensation, which is not subject to tax on the part of the employee according to the Income Tax Act.

However, if during the use of items of personal property by the employee, the conditions for their claimability by the employee were not agreed upon, but the employer would pay financial compensation to its employees despite this fact, we are talking about non-claimable compensation, which represents taxable income on the part of the employee. Therefore, if the employer provides compensation to the employee due to his increased expenses for heating, lighting or water consumption, which the employee incurs with the use of his own living space, according to the Financial Directorate of the Slovak Republic, this will not be a compensation claim under the Labor Code, since the employee's apartment cannot be considered as a tool, equipment or an item that the employee needs to perform the job, and thus it will be the employee's taxable income.

Although there is no legal provision in the Income Tax Act for a more detailed definition of the terms "own tools", "own equipment" or "own objects", the employer should define these terms in an internal regulation and specify in more detail what all falls under such definitions.

The fulfillment of what conditions is necessary in order to correctly assess the taxability of income, or his exemption, for an employee who uses his own tools, equipment or objects to perform his activities?

If it is the employee's expenses in the form of a one-time purchase of items according to the employer's instructions, which the employee uses in the performance of his activities in housework, or if it is the employee's increased expenses due to the use of the employer's tools or equipment, from the point of view of the tax legislation, these are demonstrable expenses incurred by the employee on behalf of the employer, which are not subject to tax according to § 5 par. 5 letters c) of the Income Tax Act. They are understood as if such expenses were incurred directly by the employer. The employer will reimburse such an increased expense paid by the employee in one go, and thus it would not be an assessment according to § 5 par. 5 letters f) of the Income Tax Act, which requires the gradual exclusion of income from the employee's tax base during the entire period of using one's own tools for the performance of work.

Conditions for (non-)taxability of reimbursements for increased expenses:

1. Employee expenses are higher compared to regular expenses. The general provability of the incurred expense results not only from the Income Tax Act, but in this context it is necessary for the employee to sufficiently demonstrate the justification of the "higher" expense in comparison with his normal expenses. Therefore, if an employee uses his own telephone, for which he has an agreed monthly "unlimited" flat rate, it is difficult to prove increased costs in connection with its use for the performance of work.
2. Demonstrability of expenses by the employee. This is the basic rule when it is necessary to start from the calculation of actual expenses.
3. Directly related to the employee's use (and not purchase) of their own tools, equipment, or object to perform work.

The employer's obligation to pay compensation for the use of employees' personal property is not limited only to the use of these items at the workplace, but may also apply to the work that the employee performs from his home. Recently, working from home has become an increasingly common phenomenon, but we point out that in this case it is necessary to distinguish between the so-called housework or teleworking and occasional work from home.

While in the case of domestic work, which is characterized by its regular performance within the scope of the established weekly working time or part of it from the employee's household (note, this is not work that is performed outside the workplace because it cannot be performed at the workplace, for example, due to its nature) the employer is obliged to reimburse employees for demonstrably increased expenses incurred as a result of the use of personal property; in the case of occasional work from home, the employer does not have such an obligation. Even in this case, however, the employee has the right to claim compensation or non-claim compensation if the established conditions are met.

At the same time, services that the employer paid as a flat rate under the conditions that the calculation of the lump sum was based on the average conditions decisive for the provision of these services, while their amount was determined on the basis of a proven calculation of actual expenses, are not subject to tax.

Payment of compensation, with which employees can cover increased expenses, or the wear and tear of personal property items caused by the use of these items in connection with the performance of their work is certainly perceived favorably from the point of view of these employees. From a tax point of view, however, it should be noted that in certain cases such compensation may be considered taxable income of the employee, which is also subject to health and social insurance.

In general, the subject of income tax is mainly non-entitlement compensation (i.e. compensation that the employer pays to the employee, although the conditions of the Labor Code are not met), but entitlement compensation can also be taxed, if their amount was not determined based on the calculation of actual employee expenses. In order for the paid claim compensation to be considered compensation that will not be subject to income tax for the employee, it is therefore essential that its amount is correctly calculated, based on the calculation of actual expenses, which the employee must sufficiently demonstrate to the employer.

Expenses related to the use of own tools can also be included in the calculation of actual expenses (if the employee proves them), e.g. increased expenses for electricity related to the use of own tools while working from home, which the employee can demonstrate in various ways, e.g. document or data on the average consumption of electricity for the operation of the tool or proof of payment for the electricity consumed.