The German government announced on Monday that it was planning a tax rebate for people working from home during the coronavirus pandemic, to help offset the extra cost of running a “home office”. Some details still need to be finalised. 

German government plans tax relief for home workers

Angela Merkel’s “grand coalition” government wants to give tax relief to those who have been working from home due to coronavirus. According to a report in the Frankfurter Allgemeine Zeitung, representatives from both the CSU / CDU union and the SPD have agreed to a proposal that would allow employees working from home to reduce their annual tax bill by 5 euros per working day.

According to the financial policy spokesperson for the SPD, Lothar Binding, the flat rate would amount to a maximum of 600 euros per year, and the regulation would initially be limited to two years. Finance Minister Olaf Scholz said the proposed legislation is “not a big fiscal challenge for the German state” and could be approved by parliament in December. 

Law designed as flexible solution to changing working habits

Laws governing taxation in Germany mean that home workers are usually only eligible for rebates if they use one room in the house exclusively as an office. But with the COVID-19 pandemic forcing millions of workers out of their offices and into their living rooms and kitchens, the government is under mounting pressure to relax the rules. The existing law “no longer correlates to today’s working world,” said Sebastian Brehm, a tax advisor for the CSU. 

The law is therefore designed as a flexible solution. “From the perspective of the federal government, the efforts of employees and, above all parents, working from home requires special support,” said the Federal Ministry of Finance. “We are in favour of including a home office flat rate of five euros per working day in the Annual Tax Act 2020. Discussions are currently underway.”

A few details still need to be clarified, however. It’s unclear, for example, whether the new home office flat rate will be granted in addition to the 1.000-euro annual flat rate that every employee in Germany already gets for work-related expenses like transportation and work clothing. If it were granted on top of this, every employee would directly benefit.