Cross-border worker

What it means

A cross-border worker, sometimes called a commuter, lives in one country and works in another, returning home regularly, usually daily or at least once a week. Typical examples are Slovaks working in Austria, Czechia or Hungary, and Hungarians or Czechs working for Slovak companies.

Two separate questions arise for such a person. Tax on the wage is governed by the double tax treaty between the countries concerned, which usually gives the taxing right to the country where the work is done. Social and health insurance follow the EU coordination regulations and are in principle paid in the country of work.

The country of residence nevertheless still treats the person as its tax resident, so the foreign income must be declared in the tax return and double taxation is removed by exemption or credit under the treaty. Some treaties have special rules for border areas.

How it works in practice

When hiring someone who lives in another country, a Slovak employer checks where they are insured and whether they also work in their home country, because work in several states follows special rules confirmed by an A1 form. The employee is then registered with the Social Insurance Agency and a health insurer in Slovakia.

Slovak tax is normally withheld from the wage because the work is done here. An employee who is not Slovak resident is entitled to the tax-free allowance only if at least 90 % of their worldwide income comes from Slovakia, so for the annual reconciliation we need proof of their income at home.

Slovaks working abroad who ask us for help with their return must declare the foreign income in their Slovak return even if it was taxed abroad. With most neighbouring countries the credit method applies, so additional tax arises only if the foreign tax was lower than the Slovak tax.

What to watch out for

A common mistake is a cross-border worker not realising they must file a return in their country of residence and receiving a demand with interest years later. Countries exchange wage data automatically, so the tax office usually sees the foreign income.

Working from home changes the rules. If the employee works part of the time from their country of residence, the place of insurance and part of the taxation may shift and the employer may acquire new obligations in that country. We therefore always assess a remote work arrangement with a cross-border worker in advance.