Reimbursement of costs for remote work equipment and income tax exemption

Never before, before the coronavirus epidemic, such an important importance – for both employers and employees – had no form of remote work.

In fact, not only the management methods of the subordinates by the superiors have changed dramatically, but also the issues related to the daily use by staff, outside the company's premises, of the equipment to perform tasks. Employers try to secure work tools in different ways during pandemics to facilitate their distance activities.

one from such means is the purchase of the necessary equipment directly by the company and making it available to persons working remotely employed or, for example, its refund, the payment of the cash equivalent on the basis of a name invoice when the employee purchased it himself.

The question then arises – will the reimbursement of the costs incurred by the employee be considered by the tax authorities as income from the employment relationship which benefits from the income tax exemption?

1. Introduction

On 1 February 2021 Director of National Tax Information issued an individual interpretation 1 on whether, in connection with the commission of remote workers, it will be possible to reimburse the costs of purchasing the equipment necessary to carry out it during the pandemic COVID-19, apply tax exemption under the law on 26 July 1991 on personal income tax 2 (Further: u.p.d.o.f.). The activity of the applicant of interpretation, the company of o.o., consists, inter alia, of processing data, managing websites, providing services related to IT and computer technologies.

Company, acting on the basis of Article 3 Act on 2 March 2020 specific prevention, prevention and eradication solutions COVID-19, other infectious diseases and the resulting crises[3] (Next: uCOVID-19), it introduced a mode of remote operation (consistent with the system of working time included in the contract of employment and provided that it can only be performed in the territory of Poland and in a place in accordance with the principles of health and safety and certain conditions), as well as in mid-September 2020 – Regulations of that remote work, concerning only staff employed in this entity on the basis of employment contracts.

According to these rules, it is possible to reimburse employees (not due during the notice period) of their acquired equipment for the equipment of the workplace necessary to carry out their corporate duties in the form of remote work.

The amount of the refund shall be maximum 800 PLN gross and employees may apply for reimbursement on the basis of a personal invoice or a personal receipt (accepted by the superior), the said amount being used once or in part.

The rules also state that the purchased equipment is the property of the employee and will remain the property of the employee at the end of the employment relationship. The refund included: chair, table/office, footrest, document holder, first aid kit, powder fire extinguisher.

The company informed in its application that, in compliance with the above requirements, it had reimbursed some of its employees the costs acquired by the equipment and would continue to make such reimbursement for the persons employed.

The applicant asked the tax authority whether the company would recover the costs of the purchase of remote work equipment by the employees would benefit from the tax exemption according to Article 21(1)(13) u.p.d.o.f. and whether, therefore, the company as a payer should collect advances on income tax according to Article 31 U.P.D.F.?

2. Conditions for tax exemption

According to the applicant, the reimbursement should be exempt from income tax and the company will not be obliged to collect advances. Article 21(1)(13) u.p.d.o.f. provides that income tax exemptions are: cash equivalents for the tools, materials or equipment used by employees in carrying out their work.

The company pointed out that in the regulations uCOVID-19 it is said that remote work can be recommended if the person employed has the skills and technical and local capacity to perform it, and the type of work allows it.

The Act specifies that an employee may use measures not assured by the employer, provided that this is in accordance with the respect and protection of confidential information and other legitimate secrets 4 .

The company also indicated that it is the employer's responsibility to provide the appropriate equipment for the remote workstation, including, for example, the provision of necessary equipment such as computer, monitor, scanner or printer, and appropriate work workshop through the provision of desk, chair, footrest, document holder. At the same time, ‘allowing an employee to use measures not provided for by the employer (...) can be considered to be a kind of interaction with the employer in order to properly carry out its activities through the proper performance of labour duties during remote work’.

The applicant also pointed out that the amount of the equivalent paid benefits from the tax exemption if the cumulative conditions are met: the equivalent must be paid in money; the amount of the payment should be equivalent to the value for the use of the equipment; the tools, materials or equipment must be the property of the worker; the tools, materials or equipment that belong to the worker must be used in the performance of the work for the employer.

These. four the requirements are met by the company and therefore, according to its position, the reimbursement of the costs incurred by the employee in purchasing remote work equipment constitutes an income from the employment relationship, subject to tax exemption on the basis of Article 21(1)(13) u.p.d.o.f.

and the company does not have to calculate and collect advances.

The applicant referred to the content in its argument Article 12(1) u.p.d.o.f., according to which revenue from the business relationship, the employment relationship, the overhead work and the cooperative employment relationship shall be considered to be all kinds of cash payments and the monetary value of benefits in kind or their equivalents, irrespective of the source of the financing of those payments and benefits.

and in particular: basic salaries, overtime salaries, various types of allowances, prizes, allowances for unused leave and any other amount, irrespective of whether their amount has been fixed in advance and in addition the cash benefits incurred for the worker, as well as the value of other unpaid benefits or partially paid benefits.

3. Equivalent to employee income

In its interpretation, the Director of National Tax Information found the applicant’s position to be incorrect.

The tax authority stated that in the case of a remote work order under the rules uCOVID-19, with regard to Article 3(4) this Act – which states that the tools and materials needed to perform remote work and logistics of this work are provided by the employer – on the employee's side, in the light of u.p.d.o.f. will not generate revenue.

Director KIS also pointed out that “the way tools and materials are provided remains irrelevant, i.e. whether it comes in kind or through payment of the benefit for the use of the employee’s own materials and tools.

Therefore, he considered that in the case of workers of the applicant who carry out remote work in connection with an outbreak, the reimbursement of the purchase costs necessary for the work of the equipment would not result in revenue arising on their side within the meaning of u.p.d.o.f.

Consequently, the provision cannot apply Article 21(1)(13) Act. At the same time, the Applicants are not subject to the obligation of the payer.’

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1 reference no. 0115-KDIT1.4011.851.2020.1.KK. 2 Act of 26 July 1991 on income tax on individuals, i.e. Journal of Laws of 2020, item 1426 as amended 3 Act of 2 March 2020 specific prevention, prevention and eradication solutions COVID-19, other infectious diseases and their emergency situations, Journal of Laws of 2020, items 374, 567. 4 Article 3(1-5) uCOVID-19.