Austrian family allowance and cross-border cases

In today’s globalised world, an increasing number of employees are working across borders, which often leads to uncertainties, especially concerning family benefits. Which state is primarily responsible for providing benefits, what are the eligibility requirements and what does the application process look like? The following blog post provides clarity.

Cross-border competence 

The Austrian family allowance is granted for a child who has their centre of vital interests and residence in Austria and lives in the common household of the parents.  

In cross-border cases within the EU/EEA/Switzerland, there may be an entitlement to Austrian family allowance even if the child has neither a centre of vital interests nor a residence in Austria. However, a relevant connection to Austria is required. The rules on competences are defined in EU Regulation (EC) No 883/2004. It is important to note that parents are not granted any options in this matter. Family benefits that are received wrongly and/or in duplicate lead to claims for repayment by the competent authorities. 

The applicable rules on competence of EU Regulation No 883/2004 for cross-border cases are as follows in detail: 

1.State of employment principle 

If the common household or centre of vital interests is not in Austria but in EU/EEA/Switzerland, Austria is primarily responsible for paying family allowance if at least one parent is employed and insured in Austria (“state of employment principle”).  

If the Austrian family allowance is lower than the family benefits in the state of residence, the difference can be claimed as compensation or differential payment in the state of residence (where the centre of vital interests of the child is).  

Example: Both parents are employed and insured in Austria. The common household and centre of vital interests is in Hungary, where also the common children live. Due to the state of employment principle, Austria is primarily responsible for the family allowance. If the Austrian family allowance is lower than the Hungarian family benefit, the difference can be requested in Hungary as compensation payment.  

2.State of residence principle 

If the parents are employed and insured in different states, the state of employment principle does not offer a satisfying solution. In this case, the state of residence principle is applied, which stipulates that the Member State in which the child lives with their parents and in which the child has their centre of vital interests, is primarily responsible. However, in such cases, an entitlement to compensation or differential payments might exist in the other state of employment. 

Please note: This regulation applies also to parents that live apart. 

Example: The father is employed and insured in Austria, while the mother is employed and insured in Hungary. The common household and centre of vital interests is in Hungary, where also the common children live. Due to the state of residence principle, Hungary is primarily responsible for family benefits. If the Hungarian family benefit is lower than the Austrian family allowance, the difference can be requested in Austria as differential payment. 

Application process and payment modalities 

The Austrian family allowance is granted at birth without application. This means, the parents do not have to apply for it. In all other cases (e.g., in case someone moved to Austria), an application for family allowance at the Austrian tax authority is required. This application can be made anytime (also retrospectively for the last five years). The primary entitlement to family allowance is held by the parent who predominantly manages the household. Until proven otherwise, it is presumed that the mother takes on this role. If the father wishes to apply for family allowance, he must either demonstrate that he is the primary household manager or obtain a waiver declaration from the mother.  

The family allowance is tiered according to amount and is paid monthly along with the children payment deduction (Kinderabsetzbetrag). It is granted starting from the month of the child’s birth or arrival in Austria. Depending on the age of the child and the presence of siblings, additional allowances are provided on top of the basic amount. 

If there is an entitlement to compensation or differential payment in Austria, this must be requested by submitting an application (form “Beih38”) to the competent tax authority.  

If you need assistance with the application process, the People & Organisation team is happy to help. 

Important note for remote work in the state of residence 

If Austria is responsible for family allowance benefits based on the state of employment principle, employees may easily risk losing this entitlement if they work remotely from their foreign state of residence. Depending on the foreign state of residence, a switch to the foreign social security system may be required with as little as 25% remote work activity, which consequently results in a loss of the Austrian family allowance. 

Do you have more questions regarding cross-border family benefits? Our P&O team of PwC Austria is looking forward to support you. 

Stay tuned! In our next blog post, we inform you about tax benefits for families in Austria.