The regulations for frontier workers in the Austrian double tax treaties with Germany, Liechtenstein, and Italy stipulate that income derived by a resident of one contracting state from an employment exercised in a neighbouring state shall generally be taxed in the residence country if the employee normally returns across the border every day. As far as a withholding tax at the source is applicable in the working country, this tax is considered as a tax credit in the tax residence country.

Against the backdrop of the free movement of labour guaranteed by the EC Treaty and the respective agreement with Switzerland, Markus Steiner analyses whether the historical reasons for enacting the regulation for frontier workers – which is not included in the original OECD Model Convention – are still well-founded or not. In this context, he also presents the reasons for the revision of the double tax treaty between Austria and Switzerland and explains the tax effects on frontier workers which took effect retroactively as of January 1^st, 2007.