The double taxation treaty concluded between Austria and Germany contains a special provision deviating from the OECD Model Convention on the tax treatment of remunerations for employees living and working across the border (so-called frontier workers). Certain open questions have now been jointly addressed by the Austrian and German competent authorities.
In general, the double taxation treaty concluded between Austria and Germany ("DTT Germany") provides that salaries, wages and other similar remuneration derived by an employee who is a resident of one contracting state and who exercises their employment in the other contracting state, shall be taxable in both states. However, in case of so-called frontier workers, only the state of residence shall have the taxation right regarding such income. Frontier workers are defined as persons (i) residing in the frontier zone of one contracting state; (ii) exercising their employment in the frontier zone of the other contracting state; and (iii) returning daily from the place of employment to the place of residence.
Austria and Germany have now reached consensus on the following interpretation:
- The frontier zone comprises a border strip of 30 km along the border and is calculated on the distance as the crow flies rather than on the number of road kilometres.
- The establishment of a secondary residence within the border zone generally does not suffice for the application of the frontier worker regime.
- If the frontier worker fails to return to the place of residence on a daily basis or if he/she is exceptionally employed at places outside the frontier zone, the status as a frontier worker shall not be lost provided that the frontier worker is employed throughout the calendar year and the days of non-return / employment outside the frontier zone do not exceed a threshold of 45 days.
- Days on which the frontier worker exercises their employment (i) in the state of residence; (ii) in the other contracting state but outside of the border zone; or (iii) in a third state are to be regarded as non-return days, provided that the frontier worker stays there for more than half of the daily working time.
- Sickness or vacation days as well as days of parental leave are not to be qualified as non-return days. However, days on which the employee does not cross the border due to working at home are to be qualified as non-return days.
This joint interpretation will be applied by the Austrian tax authorities to all pending cases.