Through Circular Letter no. 20249, of 18-01-2023, the Tax Authority disclosed its interpretation of the tax treatment of remote working expenses incurred by employees for personal income tax (PIT) purposes.
 
This long-waited clarification raises, however, operational difficulties. It may also force companies to review agreements already in force with their employees. An additional difficulty shall arise in situations where the tax treatment followed by the employers, including for reporting obligations purposes, was different from the understanding now disclosed by the Tax Authority.
 
In summary, the Tax Authority has clarified the following:

1. Reimbursement of "additional expenses" borne by the employee, when duly proven and determined in accordance with the provisions of the Labor Code, is not considered employee’s income for PIT purposes;

2. For the purposes of proving the "additional expenses", evidence of the increase of expenses is required, by way of documentation/invoices made available by the employee, through comparison with the homologous expenses in the same month of the year prior to the application of the agreement and which clearly indicates that it concerns the place of work identified in the agreement (although it is not required that the documentation/invoice is addressed to the employee);

3. Payment of an amount as cash compensation for increased costs due to remote working, without a direct connection to the employees’ actual "additional expenses", will be subject to PIT;

4. The document evidencing payment of the "additional expenses" is the salary payslip or similar document, being the relevant tax document for the employer, who shall reflect such compensation paid for "additional expenses" in the Monthly Remuneration Statement (DMR), as employment income not subject to PIT (code A23), or as employment income subject to PIT, as applicable.

For more information on this Tax Alert please contact: [email protected]