Working from home: Amendment of the Income Tax Treaty with Austria

The working world keeps developing further – in particular, working from home is becoming established. The German-Austrian Income Tax Treaty’s cross-border commuter regulation has been revised in order to take account of the new forms of work. It provides employees in the border zone with more flexibility. In future, people will already qualify as cross-border commuters if they work and have their main place of residence in the border zone. Commuting across the border every day is no longer a prerequisite. Previously, in order to be deemed a cross-border commuter, an employee had to drive to his place of work and return to his place of residence each working day. 

Days of working from home are now no longer considered “detrimental” within the meaning of the cross-border commuter regulation. Furthermore, the cross-border commuter regulation will be extended to also cover public sector employees. 

What is the content of the new Income Tax Treaty between Germany and Austria?

The definition of the “border zone” will be simplified and slightly extended geographically. Previously, the place of residence had to be located – and individually examined – within a zone of 30 kilometers from the border; now, it is sufficient if the area of the municipality of residence touches such zone. This simplifies the regulation’s applicability. 

Furthermore, the selection decisions of both countries on the BEPS – Multilateral Instrument will be implemented in order to counteract tax evasion by means of the Income Tax Treaty. In addition, the Treaty will be further adjusted to the current German negotiation policy.

The amending protocol is still subject to ratification by both contracting states.

What is the Income Tax Treaty?
With an Income Tax Treaty, countries avoid that taxpayers will be charged more than once for equivalent tax types in different countries, for example, if taxpayers live or generate income in two countries. The double taxation can be based upon principles such as country of residence, source country, worldwide income or territoriality. 
In Germany, the country-of-residence and worldwide-income principles apply to residents, while non-residents are subject to the source-country and territoriality principles.