11. May 2026 Globalization, remote work and the international shortage of skilled professionals increasingly lead companies to deploy managing directors across borders. This gives rise to key tax and social security issues which, if insufficiently planned, may entail significant risks.
This article provides an overview of what expatriate managing directors can expect and which aspects companies should pay particular attention to.
What Is an Expat Managing Director?
An expatriate managing director is a person who
- has their residence or center of vital interests abroad but acts as a managing director of an Austrian company, or
- is an Austrian managing director who works abroad on a temporary or permanent basis.
In both cases, in addition to national law, double taxation agreements (DTAs) and any applicable social security agreements must be considered.
Tax Residence
The key initial question is the tax residence of the managing director. It determines whether Austria may tax the worldwide income or only certain items of income as the source state. For determining the state of residence, reference is made to a previous blog post (Part1).
For expatriates, the following aspects are particularly relevant:
- An Austrian managing director may remain tax resident in Austria despite working abroad, for example if their family continues to reside in Austria.
- A foreign managing director of an Austrian company who has neither a residence nor habitual abode in Austria is subject to limited tax liability in Austria if the activity is exercised in Austria (section 98 EStG).
Treatment under Double Taxation Agreements (DTAs)
From an Austrian treaty perspective, managing director remuneration is classified as follows:
- Managing directors without a substantial shareholding (<25%) and board members subject to instructions are generally treated as employees (Article 15 OECD Model Convention).
- Managing directors with a substantial shareholding (>25%) are generally treated as deriving self-employed income (Article 14 OECD Model Convention in the version prior to the 2000 update).
- Board members who are not subject to instructions derive business income (Article 7 OECD Model Convention).
In practice, the focus is often on employment income. The following employment models are distinguished:
1. Secondment
As a general rule, the right to tax lies with the state where the activity is performed. However, it reverts to the state of residence if the 183-day rule is fulfilled.
This means that if the managing director spends fewer than 183 days in the host state and neither an employer nor a permanent establishment bearing the remuneration is located in the host state, the full taxing right remains with the state of residence.
In the case of secondments, there is a risk of creating a permanent establishment for the sending company or even relocation of the place of management if key business decisions are taken abroad.
Example:
Mr K, who is tax resident in Austria, is seconded by the Austrian parent company to its Slovak subsidiary, where he acts as managing director. He has no shares of the Slovak company. He commutes to Bratislava four days per week and works one day per week from his Austrian home office. In 2025, this resulted in 180 working days in Slovakia, 40 working days in Austria and 3 days spent on business trips in third countries. In addition, he spent 8 days in Slovakia for private purposes.
Solution:
As Mr K spent more than 183 days in Slovakia during the relevant calendar year, the portion of his income attributable to working days performed in Slovakia (80.72%) is taxable in Slovakia. Income attributable to working days in Austria and third countries (19.82%) is taxable in Austria. The income allocated to Slovakia is considered in Austria for progression purposes. .
2. Temporary Agency Work (Personnel Leasing)
In the case of personnel leasing, the receiving company is regarded as the treaty employer. Consequently, the taxing right shifts to the state of activity from the first working day—irrespective of the duration of stay. In such cases, a permanent establishment risk for the leasing company generally does not arise.
Example:
Ms M, who is tax resident in Austria, is assigned to Hungary by an Austrian personnel leasing company. She holds the position of managing director at the receiving company. She spends 120 working days in Hungary and 95 working days in Austria.
Solution:
Regardless of whether she spends more than 183 days in Hungary, Hungary has the taxing right from the first working day performed there (55.81%). This is because, in cases of personnel leasing, the receiving company qualifies as the treaty employer. The conditions of the 183-day rule are therefore not cumulatively met. Income attributable to working days in Austria (44.19%) is taxable in Austria.
3. Direct Employment Abroad
Income attributable to working days in the employer state is taxable there. Working days in the state of residence or in third countries are subject to taxation in the state of residence.
Example:
Ms L, who is tax resident in Austria, accepts a position as managing director in the Czech Republic. She spends 150 working days in the Czech Republic and 70 working days in Austria and third countries.
Solution:
Income attributable to working days in the Czech Republic (68.18%) is taxable in the Czech Republic, while income attributable to working days in Austria and third countries (31.82%) is taxable in Austria.
Managing Director Income from Self-Employment
If, due to a shareholding of more than 25%, the managing director is regarded as self-employed, the taxing right under the DTA generally lies with the state of residence. An exception applies only if the managing director has a fixed base permanently available in the state of activity over which they can dispose. In some countries, this may also include the managing director’s private residence.
Special Provision in Certain DTAs
- Germany, Japan: Managing director remuneration is taxable exclusively in the state of residence of the company.
- Switzerland, Liechtenstein: Managing directors are always treated as employees, irrespective of any shareholding.
Social Security within the EU/EEA/Switzerland
Within the EU/EEA/Switzerland, the principle of single applicable legislation applies: a person is subject to only one social security system at any given time.
As a general rule, the place where the activity is performed is competent, subject to important exceptions:
- secondment (temporary activity in another state),
- multi-state activity (conflict-of-law rule),
- exception agreement.
1. Secondment
If the managing director works abroad within the EU on a temporary basis, they may remain within the Austrian social security system for up to 24 months. A valid A1 certificate is required, confirming that Austria is the competent social security state.
2. Parallel Multi-State Activity (Conflict-of-Law Rule)
Where activities are carried out alternately in two or more states, the following applies:
- social security competence lies with the state of residence if a substantial activity (>25% of total working time) is carried out there;
- social security competence lies with the employer state if no substantial activity is carried out in the state of residence.
3. Application for an Exception
If an assignment abroad exceeding 24 months is planned from the outset, the managing director may apply for an exception in order to remain within the social security system of the home state. The application must be filed in the state whose legislation is intended to apply and may be approved for a maximum period of five years. The competent authority in Austria is the Federal Ministry of Labour, Social Affairs, Health, Care and Consumer Protection.
Social Security in Relation to Third Countries
For activities outside the EU/EEA/Switzerland, it must be examined whether a social security agreement exists.
- With an agreement: The agreement regulates, inter alia, in which country contributions are to be paid and how pension periods accrued abroad are to be taken into account.
- Without an agreement: There is a risk of being subject to social security contributions in both states simultaneously.
Conclusion
The cross-border employment of managing directors requires careful tax and social security planning. The type of engagement, duration of stay and shareholding structure significantly influence the place of taxation.
Insufficient planning may lead to unexpected tax burdens, permanent establishment risks or the simultaneous assessment of social security contributions in two countries. Addressing these issues at an early stage can help avoid unpleasant surprises later on.
Your ARTUS advisors are happy to assist you with advice and support (info@artus.at).
