Remote/home work has become a daily reality for many employees, and this has led to the adaptation of laws to regulate rights and obligations. One of these adjustments concerns the tax-exempt payment of a lump-sum allowance for working from home (remote work allowance), which was introduced to help employees cover costs incurred while performing their job from their own residence. Although this allowance has been in effect for some time, many are still unsure about the conditions and amounts that apply.

Right to Allowance According to the Labour Act

According to the Labour Act (Narodne novine 93/14 – 64/23, Article 17), if work at a remote workplace is agreed upon for the employee, the employer is obligated to reimburse the costs of working from home. This applies whether the employee works this way permanently, or if the work at the remote workplace lasts longer than 7 working days in one calendar month. These 7 days do not have to be consecutive. The employer can also allow the payment of the allowance for shorter periods if such a provision grants the employee a more favourable right, and the employer has defined this in their internal documents (employment contract, rulebook, or collective agreement).

Key Conditions for Tax-Exempt Payment of the Allowance

For an employer to be able to pay the remote work allowance tax-exempt, the following conditions must be met:

• Documented Decision: Working from home must be defined by a written employment contract or an annex to the contract.
• Record-Keeping: The employer must maintain clear records of the work performed from home to justify the payment of the tax-exempt allowance.

1. Allowance Amount

• Daily Allowance: Pursuant to the Income Tax Ordinance (NN 10/17 – 16/25, Article 7, paragraph 2), a tax-exempt allowance of up to 4 euros can be paid to the employee for each day of working from home.
• Monthly Allowance: The maximum tax-exempt amount that an employer can pay on a monthly basis is 70 euros.

If the employer pays an amount greater than the prescribed tax-exempt limit, the difference will be treated as taxable employment income, and taxes and contributions will have to be calculated and paid.

The purpose of this allowance is to reimburse the employees for a portion of costs such as internet, electricity, heating, water, and other utilities consumed while working from home.

Note: Employees who work remotely i.e. in a way considered as distance work under the Labour Act are not entitled to the remote work allowance because this right is defined only for those employees working at a remote workplace i.e. from home. However, if the employer has enabled the payment of such an allowance for these employees through their internal documents, then the amount must be recalculated from the net amount to the gross amount, and taxes and contributions for this payment must be settled through the payroll calculation.

2. Deadlines for Payment

Although tax regulations do not define a strict deadline, the employer should determine the payment deadline in their internal documents (rulebook, collective agreement, or employment contract).

If internal documents do not establish a deadline, the allowance should be calculated and paid together with the regular monthly salary for the previous month or shortly thereafter.

3. Relationship Between the Remote Work Allowance and Commuting Expenses Reimbursement

It is important to know how the payment of the remote work allowance affects the payment of commuting expenses to/from work.

• If the employee works from home for only part of the month, they are entitled to the tax-exempt reimbursement for commuting expenses for the days they were physically present at the workplace.
• If the employee works exclusively from home for the entire month, or is on sick leave, paid, or unpaid leave, the employer cannot pay them the commuting allowance tax-exempt.

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