COVID-19: Austria-Germany consultation agreement on cross-border working of 15 April 2020

On 16 April 2020, the Austrian Ministry of Finance (BMF) published a consultation agreement concluded between Austria and Germany (Decree of 15 April 2020, 2020-0.239.636, BMF-AV Nr. 55/2020).
The goal of the agreement is to limit the individual impacts during the COVID-19 restrictions as far as possible for all employees who work cross-border between Austria and Germany.
The consultation agreement entered into force on 15 April 2020 and applies to working days in the period of 11 March 2020 to 30 April 2020, although an automatic extension is envisaged if the agreement is not terminated in a timely manner by either contracting state.

Home office days

As regards the application of Art. 15 para 1 of the Austria-Germany Double Taxation Treaty (DTT), working days which the employee carries out from a home office solely due to the COVID-19 restrictions will count as working days spent in the contracting state in which the employee would otherwise have carried out the activities. This does not apply to working days, which would have been spent working from a home office irrespective of the restrictions (e.g. based on provisions in the employment contract).
In order to make use of this regulation, the employee must inform both his/her employer and the competent tax office in the state of residence. The circumstances (in particular, the number of working days which the employee spent working from home due to COVID-19) must be disclosed using records kept by the employee with additional confirmation from the employer.

Example: An employee has a family home in Austria and is tax resident in Austria for DTT purposes. The employee normally carries out 100% of his/her working activities in Germany. The special regulation for cross-border workers does not apply to the employee, as his/her place of residence is too far from the German border. In normal circumstances, the income from the activities in Germany is subject to (wage) tax in Germany (100%).
Due to COVID-19, the employee works from home in Austria from 16 March 2020 to 30 April 2020. If the COVID-19 restrictions had not entered into force, the employee would have continued to work in Germany and be subject to taxation in Germany. Under the consultation agreement, if corresponding documentation is maintained and the employer/the tax office is notified, the employee will continue to pay tax in Germany in this period.

Special regulation for cross-border workers

Special regulations on cross-border working are in place between Austria and its neighbouring states of Germany, Italy and Liechtenstein. If these regulations are applied, the right to tax income from employment remains in the state of residence, even though the activities are carried out in another state. The regulation on cross-border workers with Germany can be applied if the employee does not return to his/her place of residence on 45 days per year or fewer. Home office days count adversely as non-return days. In this regard, the consultation agreement between Germany and Austria envisages that working days spent working from home solely due to the COVID-19 measures will not count adversely as non-return days.

Example: An employee has a family home in Austria and is resident in Austria for DTT purposes. The employee normally carries out working activities in Germany and only occasionally works from home. The special regulation for cross-border workers is applicable for the employee, as the place of domicile is sufficiently close to the German border. Normally, the employee’s income is subject to taxation in Austria at 100% due to the application of the special rule on cross-border workers.
Due to the COVID-19 restrictions, the employee only works from home in the period 16 March 2020 to 30 April 2020. With these activities, the employee exceeds the permitted 45 non-return days per year, and in normal circumstances tax splitting between Austria and Germany would be required.
As the employee would have carried out all working activities in Germany if the COVID-19 measures had not been observed, it is permissible that the employee will continue to be taxed in Austria if corresponding documentation and notification is provided to the employer/tax office in accordance with the consultation agreement.

Taxation of short-time working payments

In the event of temporary economic difficulties due to COVID-19, Austria offers the option of introducing subsidised short-time working. Numerous countries have introduced comparable models.
If the place of residence and the place where working activities are usually carried out are different, the question arises which state is responsible for the taxation of short-time working payments.
The consultation agreement of 15 April 2020 envisages that payments of this kind (Kurzarbeitergeld, Kurzarbeitsunterstützung) should be treated as statutory social security payments in the respective state. Such payments are therefore subject to taxation in the state which makes the payment.

Example: An employee of an Austrian company, who is resident in Germany and has social insurance coverage in Austria, is registered for short-time working in Austria. The short-time working support is subject to taxation in Austria.

Important in practice

We recommend requiring your employees to keep corresponding records of the place of work, in particular in connection with cross-border activities relating to Germany. This documentation must include the following information for each working day:

• Date of the working day
• Was the working day spent in a home office? In which country?
• Was the working day spent in a home office due to COVID-19?
• Where would the working day otherwise have been spent if the COVID-19 restrictions did not apply?

We also recommend informing any affected employees about the consultation agreement and creating internal documentation of which employees are affected.
Currently, the only consultation agreement concluded by the Austrian BMF is with Germany. It is anticipated that consultation agreements will be concluded with other neighbouring states.
PwC is available to support you on issues relating to the COVID-19 measures and their impacts on the cross-border activities of your employees.