On 16 June 2022, the Court of Justice of the European Union ruled on an action for failure to fulfil obligations brought by the European Commission against Austria for violation of the Regulation on the coordination of social security systems (EU Regulation No. 883/2004 ).

Austria had set up an adjustment mechanism to calculate the lump sum of family allowances and other tax benefits for workers whose children permanently reside in another Member State, whereby the adjustment could be upwards or downwards depending on the general price level in the Member State concerned.

 

In this ruling, the Court of Justice finds, first, that family allowances and tax credit for workers' children constitute family benefits that are not subject to any reduction or adjustment by reason of the fact that the recipient or the members of his or her family reside in a Member State other than the one granting those benefits. The regulation on the coordination of social security systems requires strict equivalence between the amounts of family benefits granted by a Member State to workers whose family members reside in that Member State and workers whose family members reside in another Member State.

Furthermore, the Court points out that European Union law prohibits any discrimination, in matters of social security, based on the nationality of migrant workers. Whereas the Austrian system, by applying these adjustments only when the child resides outside the national territory, essentially affects migrant workers, since it is more likely to be their children who reside in another Member State.

Indeed, as most migrant workers originate from Member States where the cost of living is lower than in Austria, they receive lower benefits and advantages than Austrian workers. Consequently, such an adjustment mechanism constitutes indirect discrimination based on nationality, which, in any event, is not justified. Migrant workers, in fact, participate in the same way as national workers in the determination and financing of the contributions underlying family allowances and tax advantages without the place of residence of their children being considered in that regard.

 

Therefore, the Austrian legislation constitutes, in the view of the Court of Luxembourg, a breach of the regulation on the coordination of social security systems and the free movement of workers within the Union.

 

(Comment by Nadia Spadaro)