Home office expenses: what can be deducted in an Estonian private limited company?

Author: OK Services OÜ

Working from home is no longer an exception, but a completely normal arrangement for many small businesses and private limited companies. Many private limited company owners keep records, communicate with clients, prepare reports, and carry out daily tasks without leaving home.

This naturally raises the question: which home-related expenses can legally be recorded as business expenses, without attracting undue attention from the Estonian Tax and Customs Board? Let us look at the main types of expenses one by one.

1. Utility costs – partially

Utility costs include, for example:

• heating

• electricity

• water (and sewerage, if necessary)

They can be accounted for proportionally:

• based on floor area (for example, in a 60 m² apartment, 12 m² is used as workspace – therefore, 20% of the costs are related to the business);

• or according to actual use, if you can provide a convincing justification.

Important:

• Only consumption-related costs (electricity, water, heating) can be recorded as business expenses.

• Payments such as an apartment association's repair fund contributions do not fall under this category.

• The selected proportion should be documented in writing – for example, in a record, an internal company directive, or an agreement between the apartment owner and the company.

2. Internet

If an entrepreneur uses their home internet for work, the cost may be recorded as a business expense.

Options:

• in full – if the internet at home is used primarily for work;

• proportionally – the most common option when the internet is used by both the family and the company.

It is important to document and justify which portion of the internet cost is related to the activities of the private limited company.

3. Telephone

The same logic applies to phone expenses as to internet expenses:

• work-related calls and communication with clients are business-related expenses;

• personal communication is not.

Often, one phone number and one plan are used, so it makes sense to apply a proportional split. This proportion must be reasonable and explainable, for example, 50/50 or 70/30 in favor of the company if you communicate with clients very frequently.

4. Office furniture

Everything necessary to set up a home workspace can be purchased as a business expense:

• desk;

• office chair;

• desk lamp;

• equipment stands, cabinets and shelves for documents, etc.

There is no need to limit this to “traditional office furniture.” What matters is that the furniture is genuinely necessary for business purposes.

Example:

• if you are a seamstress working from home, shelves for fabrics, supplies, and finished goods are fully justified business expenses;

• if the shelf stands in the living room solely for interior design purposes and is not related to work, claiming it as a business expense is already debatable.

5. Computers and other equipment

This is a standard expense item in every business, including a home-based one:

• a laptop or desktop computer;

• monitors;

• keyboards and mice;

• printers and scanners;

• other equipment without which you would not be able to do your work.

If the equipment is actually used for the company's activities, it is a completely normal and justified expense.

6. Office supplies and other consumables

Small but essential items without which work cannot run smoothly:

• paper;

• pens, markers;

• folders, plastic sleeves, document boxes;

• envelopes, labels, packaging materials (if needed for work).

All of these are necessary business expenses, which may be recorded as expenses of the private limited company.

7. A portion of residential rent

If you rent a residence and also use it to perform work duties, a portion of the rent expense may be recorded as a company expense.

However, there is an important nuance here:

• for an individual (the recipient of the rent or you as a private individual), this payment is not treated as compensation;

• Maksu- ja Tolliamet considers this income, on which income tax must be paid.

Therefore, dividing residential rent between a company and a private individual requires careful consideration and knowledge of tax accounting.

Basic rule

Every expense you wish to record as a business expense must be:

• logical – it must be clear why it is necessary specifically for your company's business activities;

• justified – you can explain the amount, proportion, and purpose;

• business-related – not a personal expense, but a work tool or an expense directly related to the business activity.

If these conditions are met, the Estonian Tax and Customs Board will generally have no additional questions. You need common sense, transparent accounting, and properly maintained documentation: statements, contracts, internal policies, and explanations where necessary.

Expert:
Ksenia Shinwari
Certified accountant and trainer in taxation and accounting.

Properly accounted home office expenses help the owner of an Estonian private limited company keep the company financially healthy.