If entrepreneurs take advantage of the opportunity to work in the home office, this offers certain tax advantages. Because per day in the home office entrepreneurs can set EUR 6 as a home office lump-sum, for a maximum of 210 days per year. However, the home office also carries risks for entrepreneurs. A distinction must be made between sole proprietors and partnerships on the one hand and GmbH shareholders on the other. For example, home office can lead to a disintegration of business tax. In addition, there is the risk that GmbH shareholders will get into a business split through the home office.

The corona pandemic has brought about some changes in the world of work, but at least significantly accelerated them. In particular, the home office has gained massive importance in professions where only a digital infrastructure is needed. The end of restrictions after the pandemic flattened has hardly changed this. Working from the home office has also made adjustments to the tax laws. For example, employees can now set a home office lump sum for their work from the home office. Before that, there were at best tax reliefs for a separate study, which is used exclusively for this purpose.

However, in addition to employees, entrepreneurs can now set the home office for tax purposes. However, some special features must be considered here. What these are, we discuss in this post.

What we report about working in the home office as an entrepreneur in tax terms is based on legal bases that have emerged new in recent years. Therefore, it makes sense to respond to them initially. Thus, the home office lump sum is regulated in § 4 (5) sentence 1 number 6c EStG. In fact, there has been an increase in the lump sum in the annual tax law 2022. The annual maximum amount of the lump sum is now EUR 1,260. Every day, a flat rate of EUR 6 can be applied. Conversely, this means that you can use the home office lump sum on a total of 210 days a year.

What is important in the tax return if you as an entrepreneur want to start home office for tax purposes? First of all, the work must be carried out mainly in the home environment instead of at the other workplace used. This means that you can also carry out activities outside the home, provided that this excludes the company's place of activity. More importantly, however, it is primarily the quality of the work that one operates as an entrepreneur from the home office, has greater importance in the overall context. This can be the case, for example, with experts. But if no clear distinction is possible on this question, the quantity of work in the home office is also included in a second consideration.

Furthermore, you must be able to specify the number of days you worked as an entrepreneur in the home office. This is important so that the tax office can calculate for how many days the lump sum is to be granted. Misrepresentations could thus be regarded as attempted tax evasion.

Unlike a tax approach of a study, it does not matter if you use an explicitly furnished room for work. If you want to work on the balcony, living room, kitchen or garden, then this is covered by the home office regulation. As an entrepreneur, you can even work from abroad in the home office. However, you have to pay attention to other tax details. For example, you should avoid creating a business location abroad. Also relevant here is that the location of the management can relocate abroad due to long-term stays abroad in combination with working in the home office. Often it is better to avoid this. At least one should be aware of this and know the tax consequences at home and abroad.

Apart from the aforementioned general conditions, you also have to make a distinction according to the type of entrepreneur when reporting on the home office. Because whether you work as a sole proprietor or as a GmbH shareholder managing director in the home office, can cause serious tax risks of various kinds.

4.1.1. Avoidance of the creation of necessary business assets by working in the home office

Entrepreneurs of a partnership who use a home office as a workplace are subject to the risk of expanding their necessary business assets. If this happens, then the home environment that serves the home office also counts as business assets. In the future transfer of either the property or the company or shares thereto, the hidden reserves thus revealed are taxed. And although no depreciation had previously been made on this necessary operating assets, this is of no importance for the tax offices.

However, there are ways to avoid the presence of necessary operating assets. In doing so, we look at one of the fundamentals that make the home office the necessary operating assets, namely the relationship between operational and private use. If you manage to prove that the share of private use of the property used for the home office is high enough that it can be regarded as arbitrary operating assets, you can avoid this risk.

4.1.2. The home office of entrepreneurs as a permanent establishment is subject to trade tax

Another risk with regard to the existence of a necessary business asset is that then also trade tax is incurred in the municipality where the home office is operated. This is usually the hometown. If, however, no division of business tax is undertaken, it may constitute tax evasion, albeit out of ignorance.

As a GmbH shareholder, you should know the risk of a business split anyway. The Treasury can also see the home office as the basis for assuming an essential operating basis in the home environment of the entrepreneur. If this is the case, a sale or liquidation of the GmbH will result in taxation of the hidden reserves present in the property. It is irrelevant that in the past you could by no means depreciate the property tax for the GmbH. Therefore, as an entrepreneur in the home office, you should pay close attention to whether the home environment gives the appearance of an essential operating basis. Because the personnel interconnection is already given as a second condition for a division of operations by the home office anyway.

As we have been able to show, there are both advantages and risks when working as an entrepreneur in the home office. It plays a role whether you work as an entrepreneur of a partnership or as a GmbH shareholder from the home office. However, in both cases the risks lie in the hidden reserves of the domestic property. If you are their owner and one day a transfer of the company's share or the property takes place, the tax office charges this proportionally to the company. Consequently, the hidden reserves are discovered and thus taxation takes place. This is certainly a circumstance that one as an entrepreneur is hardly aware of when deciding to use the home office.