Indexation of family benefits: Commission opens infringement procedure against Austria - Main contents

Today, the Commission decided to send a letter of formal notice to Austria. It concerns new legislation under which EU citizens working in Austria face an indexation of their family benefits and family tax reductions when their children reside abroad.

As from 1 January 2019 Austria makes 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, would receive fewer benefits only because their children are living in another Member State.

Marianne Thyssen, Commissioner for Employment, Social Affairs, Skills and Labour mobility, said: “Our single market is based on fairness and equal treatment. There are no second-class workers in the EU. When mobile workers contribute in the same way to a social security system as local workers, they should receive the same benefits, also when their children live abroad. There are no second-class children in the EU.”

The EU rules on the coordination of social security systems[1] (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 as regards social and fiscal advantages (Regulation (EU) No 492/2011).

By sending a letter of formal notice to Austria, the European Commission officially launched the infringement procedure. Austria now has two months to address the Commission's concerns. Otherwise, the Commission may decide to send a reasoned opinion.

Background

A fair Single Market is a priority for this Commission. In December 2016, the Commission presented a revision of the rules on coordination of social security systems, to make them fair, clear and easier to enforce. The proposal safeguards free movement and protects citizens' rights, while strengthening the tools to address possible abuse. EU Member States came to an agreement on the proposal in June 2018. The European Parliament voted on the proposal in December 2018. Suggestions were raised by some voices in the Council and in the Parliament to allow indexation of family benefits granted to children residing abroad, but these have been clearly rejected. Final negotiations between the three institutions to reach a compromise (“trilogues”) are ongoing.

The principle of equal treatment prohibits any discrimination, be it direct or indirect, on grounds of nationality. 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 such Member State has a lower cost of living than Austria is of no relevance for a benefit paid out as a lump sum and not linked to the actual expenses for maintaining a child.

For More Information

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  On EU Social Security coordination.
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  On the key decisions in the January 2019 infringements package, see full MEMO/19/462
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  On the general infringements procedures, see MEMO/12/12 or this infograph.
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  On the EU infringement procedure.

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[1] JO L 166, 30.4.2004, p.1

IP/19/463