In the previous article we considered the tax aspects that may occur in the implementation of labor mobility of workers in the following case:
Bulgarian citizens are employed for less than 183 days in the year by a company, that is registered in the Netherlands, which sends them on a project to carry out construction and installation activities of furniture in Hungary.
The present article will present the social security issues that may arise.
In such a situation, some of the following questions may arise:
- Where should Bulgarian workers be insured?
- For what and in what cases can an A1 certificate be used?
- Regulation (EC) 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems
- Regulation (EC) No. 987/2009 of the European Parliament and of the Council of 16 September 2009 laying down the procedure for implementing Regulation (EC) No. 883/2004 on the coordination of social security systems
Guidelines for answering the questions:
First of all, it is important to note that the social security obligation of a person towards a country depends on 2 factors:
- his/her employment status (employed person, self-employed person, posted abroad, cross-border worker, etc.) and
- his/her country of residence – not by his/her citizenship!
Therefore, the person can NOT independently choose in which country to be insured. This issue is determined by the law of the country in which he works. In the field of social security, European countries do not have a unified policy. Therefore, each Member State applies its own laws to determine its insurance policy. In order to avoid possible problems, the obligations arising from the social security system of the host country should also be checked.
Pursuant to Regulation / EC / № 883/2004 (‘the Regulation’), ‘activity as an employed person’ means any activity or equivalent situation treated as such for the purposes of the social security legislation of the Member State in which such activity or equivalent situation exists. Next, ‘insured person’, means any person satisfying the conditions required under the legislation of the Member State competent under Title II of the Regulation to have the right to benefits.
According to the Bulgarian social security system, employees with an employment contract are insured for all insured social risks (temporary incapacity for work – sickness; invalidity; maternity; unemployment; old age; death). For their part, the assignees under concluded civil contracts are insured only for invalidity, old age and death. This means that, depending on which type of contract is concluded, the volume of workers’ compensation/benefits rights is determined, taking into account the specifics of the insurance system of the country in which they work.
The A1 Certificate is issued by the competent authority of the sending State concerned on posting abroad of staff employed by a company resident in that State, i.e. such certificate could be issued by the Bulgarian National Revenue Agency (NRA) only if the employees are in an employment relationship with a Bulgarian employer and they have an employment contract. If the workers perform work under a civil service contract, then they are not treated as employees, and there is no employer. In such case their qualities are of an assignee and assignor. Accordingly, in the presence of such contract, there is no possibility for posting abroad and respectively an A1 certificate to be issued.
The explanatory practice of the NRA clarifies that the A1 certificate does not constitute a work permit in the EU and the refusal of its issuance does not mean that the employer cannot send the employee to work for him in the territory of another Member State, but only that the same cannot remain subject to Bulgarian legislation.
In practice, this means that a person pursuing an activity as an employed or self-employed person in a Member State is subject to the legislation of that Member State and its social security rules. In this case, there are consequences for employers. According to Regulation / EC / № 987/2009, an employer whose registered office or place of business is located outside the competent Member State shall fulfill all the obligations arising from the legislation applicable to that employee, in particular the obligation to pay social security benefits (the social security contributions provided for in that legislation), as if the registered office or place of business were located in the competent Member State. There is an option for negotiation between the employer and the employee, according to which the latter to fulfill the obligations of the employer to pay installments on its own behalf. In the event of such an agreement, the employer shall undertake to notify that agreement to the competent institution of that Member State.
In this case, the workers should be defined from the Bulgarian perspective as ‘employed’ abroad, but according to the Netherlands and Hungary, they will be ‘posted abroad’ from the first to the second country.
According the Regulation persons to whom it applies should be subject to the legislation of only one Member State. In the specific case, the provision of Art. 11 (3) of the Regulation is applicable, which provides that a person pursuing an activity as an employed or self-employed person in a Member State is to be subject to the legislation of that Member State.