Cross-border commuting

Updated : 11/2011

Taxes

Which country can tax you?

Even if you are a cross-border commuter for social security purposes, your status for tax purposes depends solely on national laws and double tax agreements between countries which do not always cover all eventualities and vary considerably.

Many of these double tax agreements do not have any special arrangements for cross-border commuters, because there is no harmonisation in Europe in this area, and those special arrangements that do exist differ significantly from agreement to agreement.

The European employment services cross-border partnerships in your region will be able to help you find out if there are any special tax arrangements in place for cross-border commuters that would apply to you.

If you cross a border every day to go to work, you will have to pay taxes in the country designated as competent in the double tax agreement between your country of residence and your country of employment.

Normally, the country where you work will tax the income you earn on its territory. In some cases, income earned in the country where you work may be tax-exempt in the country where you are a tax-resident (where you live). Often both countries will be entitled to tax your income, according to their internal rules and to the double tax agreement, but the country where you live (where you are a tax resident) will probably grant you a tax credit for any tax paid abroad (although this might not entirely compensate for the double taxation).

Find out all you can on the tax situation in your case by contacting the European employment services cross-border partnership.

How much income tax will I have to pay?

For information on income tax, contact details for tax authorities and definitions of resident for tax purposes per country:

Fictitious tax resident status

Under EU rules, the country where you earn all or almost all of your income should treat you as tax resident, even if you don't live there. This means it should give you the same relief and exemptions as if you were living there. However, each country still has a certain latitude to decide which percentage of your income represents "almost all".

Some EU countries grant cross-border commuters working on their territory this fictitious tax resident status if:

their income derives entirely (or almost entirely) from their work in that country and
their income in the country where they live is below a certain amount.

Consider these conditions carefully before you start cross-border commuting.

Please note that some countries (i.e. the countries of work) may define the notion "almost entire income" differently and may take into account even very small amounts earned in other countries.

For more details, contact a tax office or European employment adviser.

If you have fictitious resident status, you will be treated just like the residents of the country where you work – for example you will be entitled to:

joint tax assessment with your spouse, if this is possible in that country
any available family allowances and tax deduction for childcare costs (even if they are incurred in the country where you live).
any tax deduction of mortgage interest for house owners, even for a house you own in the country where you live.

Sample story

Check whether you can be treated as a fictitious resident in the country where you work

Baptiste lives in Belgium and works in Germany. His wife Aurélie works in Belgium. Baptiste pays taxes in Germany and finds out that his net income is much lower than he expected. His German tax office informs him that he is taxed as a non-resident because Aurélie's income in Belgium exceeds the ceiling that would have allowed him to enjoy fictitious resident status in Germany.

Unfortunately, there is no solution in this case. Several EU countries offer cross-border commuters the possibility to pay taxes as fictitious residents (their income is taxed exactly as if they lived in the country where they work). This allows numerous reductions which are in principle not offered to non-resident tax payers. However, as in Baptiste’s case, conditions are usually very strict.

Example

As a fictitious resident, where national law provides for certain tax rebates (on contributions to an occupational pension, private sickness and invalidity insurance, etc.), you should be eligible for these on compulsory contributions in your home country. If you feel discriminated against, seek personalised advice.

Car registration

If you use your own vehicle to commute regularly from your country of residence to the country where you work, you have to register it and pay the relevant taxes in the country where you live — but not in the country where you work.

If you are an employee and drive a company car (property of the company which employs you) registered in the country where you work, you may use it for private purposes in the country where you live without having to register it there. You would then be driving with foreign plates in the country where you live. This may cause concern for the local police, who have to check that people under their jurisdiction have paid national vehicle registration taxes.

If you have problems, you can always contact our assistance services.

Sample story

Save money by getting to know your rights

Kiril lives in Bulgaria and works in Greece for a Greek company. He drives a company car — registered in Greece — which he also uses privately in Bulgaria.

He was once stopped by the Bulgarian police and fined for not having registered the car in Bulgaria. Kiril explained that cross-border commuters are entitled to use their company cars for private purposes in their home country, but the police were unaware of that right and issued the fine anyway. Kiril challenged the decision and the fine was eventually cancelled.

If you are a self-employed person living in country A and working in country B, you may use your company car in country A without having to register it there only if:

the car was bought in your company's name. If you drive a car bought in your own name, you must register it in the country where you live.
if that is not the main use of the car and
your company is legally based in another country.

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