Most OÜ owners work from home at least some of the time. Your company can reimburse a portion of your household costs for that — electricity, heating, internet, even rent. But unlike some countries that offer a simple flat-rate deduction, Estonia requires every home office expense to be individually documented and proportionally calculated.
Get it right, and the reimbursements are completely free of income tax and social tax. Get it wrong — or skip the documentation — and the amounts are reclassified as fringe benefits, triggering a tax surcharge of roughly 70%.
This post covers exactly which expenses qualify, how to calculate the proportions, and what paperwork you need to keep.
What Can Be Reimbursed Tax-Free
Your company can reimburse the following home expenses proportionally, based on the share of your home used as workspace. The rules apply equally to employees and board members.
| Expense | Reimbursable? | Typical Proportion |
|---|---|---|
| Electricity | Yes | Workspace area % |
| Heating | Yes | Workspace area % |
| Water / sewage | Yes | 10-15% |
| Internet and communication | Yes | 50-80% |
| Security / alarm services | Yes | Workspace area % |
| Cleaning services | Yes | Workspace area % |
| Rent (tenants only) | Yes | Workspace area % |
| Room renovation for workspace | Yes | Workspace area % |
"Workspace area %" means the dedicated office area as a share of total home area. More on the calculation method below.
Internet and communication typically carry a higher proportion (50-80%) because these costs are driven more by usage pattern than by physical space. Water and sewage carry a lower proportion (10-15%) because office work has minimal impact on water consumption.
Rent reimbursement is available only if you are a tenant. If you own the property, the rent line does not apply — and mortgage costs are explicitly excluded (see next section).
What Cannot Be Reimbursed
The following home-related expenses cannot be reimbursed by the company under any circumstances. If the company pays these, the full amount is treated as a fringe benefit and taxed accordingly.
- Mortgage principal and interest — loan repayments are personal, not a household running cost
- Housing association repair fund payments (remondifondi maksed)
- Housing association loan payments
- Land tax (maamaks)
- Home insurance
There are no exceptions or proportional workarounds for these categories. Even if 100% of the property is used as an office, these costs cannot be reimbursed tax-free.
How to Calculate the Proportion
The standard method is area-based: measure your dedicated workspace and divide by the total home area.
Dedicated workspace
Workspace proportion = office area (m2) / total home area (m2)
Example: Your apartment is 60 m2 total. You have a 12 m2 room used exclusively as an office.
12 / 60 = 0.20 = 20%
Your workspace proportion is 20%. This percentage applies to electricity, heating, rent, security, and cleaning.
Shared space
If your workspace is not a dedicated room — for example, you work at the dining table — an additional 50% reduction applies to the area proportion.
Example: You use a 10 m2 corner of a 50 m2 apartment, but it doubles as living space.
Area proportion: 10 / 50 = 20% Shared-space reduction: 20% x 50% = 10%
Your effective proportion is 10% for area-based expenses.
One-room apartment
If you live in a one-room apartment, a 50% proportion is generally accepted by EMTA for area-based expenses.
Different proportions per expense
Not every expense uses the same percentage. Internet might be 70% work-related even if your office is only 20% of the apartment. Your proportion calculation document can (and often should) specify different proportions for different expense types. This is specifically permitted.
Worked Example: Monthly Reimbursement
Here's a concrete calculation for a worker with a 60 m2 apartment and a 12 m2 dedicated office (20% workspace proportion).
Monthly household costs:
| Expense | Monthly Cost | Proportion | Tax-Free Reimbursement |
|---|---|---|---|
| Electricity | EUR 80.00 | 20% (area) | EUR 16.00 |
| Heating | EUR 60.00 | 20% (area) | EUR 12.00 |
| Internet | EUR 35.00 | 70% (usage) | EUR 24.50 |
| Rent | EUR 600.00 | 20% (area) | EUR 120.00 |
| Total | EUR 775.00 | EUR 172.50 |
The company reimburses EUR 172.50 per month completely free of income tax and social tax. Over a year, that is EUR 2,070 in tax-free reimbursements.
If these amounts were instead paid as additional salary or board member fee, the company would need to pay 33% social tax on top, and the recipient would pay 22% income tax. The tax-free reimbursement route is significantly more efficient.
Documentation Checklist
EMTA requires five things to be in place for home office reimbursements to qualify as tax-free. Missing any of these can result in the entire amount being reclassified as a fringe benefit.
1. Written agreement between the OÜ and worker
A formal agreement (tasuta kasutamise leping or üürileping) specifying which rooms are used, the total area, the expense types covered, and the proportions applied. This agreement should be signed before the first reimbursement.
2. Board decision
A board decision (juhatuse otsus) documenting the business purpose of the home office arrangement and the expense types the company will reimburse.
3. Monthly expense claims with original invoices
Each month, the worker submits an expense claim with copies of the actual utility bills, internet invoices, and rent invoices. The claim applies the agreed proportions to the actual amounts.
4. Proportion calculation document
A separate document showing the mathematical basis for each proportion — the office area measurement, total home area, and any per-expense adjustments (e.g., 70% for internet vs 20% for electricity).
5. Seven-year retention
All of the above documents must be retained for 7 years per the Estonian Accounting Act. This applies to the agreements, board decisions, monthly claims, original invoices, and the proportion calculation.
Equipment: Buy Through the Company
Separately from utility reimbursements, your company can purchase office equipment — desks, chairs, monitors, keyboards — completely tax-free, provided the items remain company property on the balance sheet.
This is often more straightforward than reimbursing the worker, because:
- The company pays the supplier directly
- Input VAT is recoverable on the purchase (24% from 1 July 2025)
- No proportion calculation is needed — the item either serves a business purpose or it doesn't
- Items over EUR 2,500 are capitalised and depreciated as fixed assets; items below that threshold are expensed
When a worker leaves the company, the equipment must be returned. If the worker keeps it, they pay the company market value — otherwise the difference is treated as a fringe benefit.
E-Residents: Permanent Establishment Risk
For e-residents living outside Estonia, home office reimbursements carry an additional risk that domestic residents do not face: permanent establishment (PE) exposure.
If your Estonian OÜ pays for your home internet, office furniture, or utility costs in your country of residence, this can be interpreted as the company maintaining a fixed place of business in that country. A PE determination could subject the company to local corporate tax on profits attributable to activities in that country.
The expenses that create PE risk include:
- Home internet and phone contracts abroad
- Office furniture for a foreign home office
- Utility costs (electricity, heating) for a foreign home
EMTA has not issued specific guidance for e-resident home office costs. The general home office framework described above applies in principle, but PE considerations are layered on top. E-resident service providers (such as Xolo and 1Office) typically apply more conservative rules than the law technically requires, as a risk management measure.
If you are an e-resident considering home office reimbursements, this is an area where professional advice specific to your country of residence is particularly valuable.
Tracking Home Office Expenses in Arvello
Arvello's Home Office Expense Tracker applies the proportion calculation automatically. Enter your home dimensions and office area once, attach your monthly utility invoices, and the system calculates the tax-free reimbursement for each expense type. All documentation — the agreement, board decision, monthly claims, and proportion calculations — is generated and stored in one place.
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