New regulation on social security for expatriates and commuters(Taxwatch (Tax news in english))
21-04-2010 07:30
Af
Anders Kiærskou
New regulation on social security within the EU becomes effective 1 May 2010. The new regulation is especially important for people who normally live in Denmark but are seconded to work in another EU country. The new regulation will also affect people living abroad who work in several countries including Denmark. The regulation also concerns self-employed and officials.
Secondment
An employee seconded to another country will basically be covered by the social security legislation in the country where he performs his work. This usually means that the employee must pay social security contributions (tax) in the country of work just as the local employer must pay employers’ contributions.
However, by intra-group secondments within the EU, special rules apply. This means that the employee may remain covered by social security in the home country if it is a short-term assignment. So far this has covered secondments of up to 12 months. With effect from 1 May 2010, this is extended to secondments of up to 24 month. It is a great advantage for most expatriated Danish residents and their employers because the social security charges in other European countries are significantly higher than the Danish social security contributions. Not least the employers’ contributions.
Under certain conditions, the current regulation allows expatriates to remain covered by Danish social security for up to 3 years. These rules continue to apply. The new regulation only applies to new secondments. People, who are already seconded will remain covered by the current regulatory framework and retain their so-called E101 for the remaining period. Hence, no new application should be submitted.
Commuters across Øresund and others with work in several countries
People living in one country and working in several countries, including their country of residence, are generally covered by social security in the country of residence. A Danish company hiring an employee residing in e.g. Sweden or Germany must therefore pay employers’ contributions to the country where the employee resides. This can be quite expensive.
This only applies if the employee is not exclusively working in Denmark but also in his country of residence. So far, an employee merely had to work 10 hours monthly in his home country before the Danish employer had to pay employers’ contributions to the country of residence. The new regulation increases this level significantly. In the future, the employee can work for up to 25 pct. of the work time in his country of residence without obligating the foreign employer to pay employers’ contributions. Danish companies employing people residing abroad who work between 6 pct. and 25 pct. in their country of residence can conveniently make use of these new rules and apply for the employees to remain covered by Danish social security after 1 May 2010.
For commuters across Øresund holding a so-called “Øresundserklæring”, the issue concerning work in third countries can in some cases be solved by instead using the new regulation.
If a person has obtained an E101 from the Danish authorities before 1 May 2010 concerning work in several countries including the country of residence, this E101 is valid for 10 years counting from 1 May 2010.
Companies having employees working in several countries, including less than 6 pct. in the country of residence, and currently have not applied for E101's should apply during April 2010, as the E101’s will then be valid for 10 years rather than having to renew the application annually.
Self-employed
If a person is self-employed in one country and employee in another country, the person will in the future be covered by social security in the country where he is an employee. So far, the person would have been covered by social security in both countries of the respective income.
Other changes
The forms - including E101 - lapse as a consequence of the new regulation. However, the forms will still be used in the EEA-countries and Switzerland. Possibly, a form A1 may be required instead of the E101. An official or equivalent will also be required to use form A1.
Questions regarding the above can be addressed to Anders Kiærskou at aek@bdo.dk
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