Indexation of family benefits: Commission takes next step in infringement procedure against Austria

Today, the Commission decided to send a reasoned opinion to Austria due to the incompatibility of its law on the indexation of family benefits and family tax credits with EU rules. As of 1 January 2019, Austria has made family benefits and family tax reductions paid for children residing in another Member State dependent on the costs of living of that Member State. This means that many EU citizens, who work in Austria and contribute to its social security and tax system in the same way as local workers, receive fewer benefits simply because their children are living in another Member State. The Commission finds that this indexation mechanism is not compatible with EU law.

Marianne Thyssen i, Commissioner for Employment, Social Affairs, Skills and Labour mobility, said: "Equal treatment is a fundamental principle of the EU. EU citizens, who work in another Member State than their own and pay taxes and social security contributions, have a right to the same family benefits.”

Austria replied to the European Commission's letter of formal notice in March 2019. Having thoroughly analysed the arguments put forward by Austria, the Commission has concluded that the concerns have not been addressed. Therefore, the Commission has moved to the second step in the infringement procedure with a reasoned opinion, following letter of formal notice sent in January 2019.

Next steps

Austria now has 2 months to take the necessary measures to comply with the reasoned opinion. If Austria fails to reply satisfactorily, the Commission may refer the case to the Court of Justice of the EU.

Background

EU rules on the coordination of social security systems (Regulation (EC) No 883/2004) do not allow a Member State to reduce cash benefits granted to persons insured under its legislation solely because they or their family members reside in another Member State. These rules also prohibit discrimination on grounds of nationality. Any reduction of family benefits solely because the children reside abroad, breaches the EU rules on social security as well as the principle of equal treatment of workers who are nationals of another Member State with regards to social and fiscal advantages (Regulation (EU) No 492/2011).

The Austrian indexation mechanism is discriminatory as it leads to a reduction of the family benefits and tax reductions granted to workers in Austria only because their children happen to reside in another Member State. The fact that a Member State has a lower cost of living than Austria is of no relevance for benefits paid out as a lump sum and not linked to the actual expenses for maintaining a child.