European Union : Social Security : New guidelines (part III)

As mentioned in previous issues (Part I, Part II) of the Employment Newsletter, the introduction of EU social security Regulations 883/2004 and 988/2009 has given rise to new interpretations and guidelines for determining the social security regime applicable to mobile workers within the EU*. In this concluding part III, we outline the legislation applicable to the self-employed.

Secondment of self-employed persons

A person who is normally self-employed in one Member State ("the secondment State") may want to go and work temporarily in another Member State as a self-employed person ("the State of employment"). Like seconded employees (see part I), it would cause administrative difficulties and confusion if a self-employed person temporarily working in another Member State became subject to the legislation of the State of employment. This might also be detrimental in respect of their benefits.

Regulations 883/2004 and 987/2009 therefore provide a special rule for self-employed persons working temporarily in another Member State, which resembles - but is not identical to - the rule for seconded employees. The secondment can last a maximum of 24 months (extendable on the basis of the exception rule, article 16 of Regulation 883/2004).

This rule provides that a person normally self-employed in the seconding Member State who pursues a similar activity in the Member State of employment continues to be subject to the legislation of the seconding State.

The Regulations provide that a person "who normally pursues an activity as a self-employed person" means a person who habitually carries out substantial activities on the territory of the Member State in which he or she is established. In particular this applies to persons who:

  • have pursued their self-employed activity for some time before the date when they move to another Member State (at least two months); and
  • fulfil any necessary requirements for their business in the Member State in which they are established and continue to maintain there the means to enable them to carry on their activity on their return (the non-exhaustive list of factors includes, for example, keeping an office in the seconding State; paying taxes in the seconding State; maintaining a VAT number in the seconding State; being registered with chambers of commerce or professional bodies in the seconding State; or having a professional card in the seconding State).

The similarity of the activity will be assessed on the basis of its actual nature (working in the same sector would qualify, for example).

Please note that self-employed workers should apply for an A1 document. After the period of secondment, they will not be able to apply for a new secondment period to the same country (the State of Employment) until at least two months have elapsed from expiry of the previous secondment period.

Simultaneous self-employed activity

A person who "normally pursues an activity as a self-employed person in two or more Member States" in particular means a person who simultaneously or alternately carries on one or more separate self-employed activities in the territories of two or more Member States. Marginal and ancillary activities that are insignificant in terms of time and economic return are not taken into account for determining the applicable legislation.

There is a special rule for persons normally self-employed in two or more Member States, which provides that they are subject to:

  • the legislation of the Member State of residence if they pursue a substantial part of their activity in that Member State;
  • the legislation of the Member State in which the centre of the interests of their activity is situated if they do not reside in one of the Member States in which they carry on a substantial part of their activity.

Substantial part of the self-employed activity

A ‘substantial part of self-employed activity' pursued in a Member State of residence means that a quantitatively substantial part of all the activities of the self-employed person is carried on there, without this necessarily being the major part.

For the purposes of determining whether a substantial part of the activity of a self-employed person is pursued in a Member State, account must be taken of:

  • turnover;
  • working time;
  • the number of services rendered; and/or
  • income.

If, in the context of carrying out an overall assessment, it emerges that 25% or more of the above criteria are met in the Member State of residence, this is an indicator that a substantial part of all the activities is pursued in the Member State of residence.

While it is obligatory to take account of these criteria, this is not an exhaustive list and other criteria may also be taken into account.

Centre of interests

The centre of interests of the relevant activities should be determined by taking account of all the aspects of that person's occupational activities, notably the following criteria:

  • the locality in which the fixed and permanent premises from which the activities are carried on are situated;
  • the habitual nature or the duration of the activities pursued;
  • the number of services rendered; and
  • the intention of the person concerned as evidenced by all the circumstances.

In addition to the above criteria, when determining which Member State's legislation is to apply, the assumed future situation over the next 12 calendar months must also be taken into account. Past performance can be also taken into account as far as it gives a sufficiently reliable picture of the self-employed person's activity.

Both employed and self-employed in different States

Persons who normally work as employees and carry on activities as self-employed persons in different Member States are subject to the legislation of the Member State where they are employed as salaried worker. Where, in addition to being self-employed, they work as salaried workers in more than one Member State (see part II):

1.the legislation of the Member State of residence applies if they work for one employer operating in different Member States and pursue a substantial part of their activities in the Member State of residence;

2.the legislation of the Member State of residence applies if they are employed by various undertakings or various employers whose registered offices or places of business are in different Member States;

3.the legislation of the Member State in which the registered office or place of business of the undertaking employing them is situated applies if they do not pursue a substantial part of their activities in the Member State of residence.

Please also note that the so-called ‘Annex VII situations', whereby a person was exceptionally subject to two different social security schemes (i.e. in a case of being self-employed in Belgium and in employment in another Member State), has been abolished. A person who works as an employee and a self-employed person in several countries at the same time will automatically be subject to the social security scheme for self-employed persons in the State that is already competent for the employed activities (with regard to his entire income and activities).

 *Regulations 883/2004 and 988/2009 do not yet apply as between EU Member States and Switzerland, Norway, Iceland and Liechtenstein.