There is an important change in the position taken by the Belgian social security authorities with regard to the qualification of activities in a cross-border context once Belgium is identified as the competent country on the basis of the social security coordination rules in EC Regulation 883/04. Where the Belgian authorities previously did not ‘requalify’ and kept the qualification of the activity given by the country where the activity was performed, they now apply the Belgian legislation for the qualification of the foreign activity.
The EC Regulation 883/04 on the coordination of social security provides coordination rules for individuals who normally work in two or more Member States of the European Economic Area (EEA) and Switzerland. Following the basic principles of EC Regulation 883/04, the rules are designed to ensure for individuals that the social security legislation of only one country is applicable at a time (although exceptions may rise for third country nationals working in certain EEA Member States or Switzerland).
When applying these coordination rules in order to determine the competent country, the qualification as given by the country where the activity is performed is respected.
Once the competent country is determined in accordance with EC Regulation 883/04, it is up to that country to determine to which (national) social security regime a person should be subjected. The most common social security regimes are the regime for self-employed persons, the regime for employed persons and the regime for public officers. Under which social security regime an individual falls is determined by national legislation.
Where the Belgian authorities previously did not ‘requalify’ and kept the qualification of the activity given by the country where the activity was performed, they now apply the Belgian legislation for the qualification of the foreign activity. This new position is in line with article 17a of the preamble to the Regulation which states that ‘once the legislation of a Member States becomes applicable to a person under Title II of this Regulation, the conditions for affiliation and entitlement to benefits should be defined by the legislation of the competent Member State while respecting Community Law’.
According to Belgian legislation there is a legal presumption that company directors and business managers are regarded as self-employed persons and thus subject to the social security regime for self-employed workers. In other countries (e.g. United Kingdom, the Netherlands, Switzerland), company directors can be subject to the social security regime for employees.
When an individual is executing a corporate mandate at a Swiss company in Switzerland and is performing substantial activities as an employee in his home country Belgium, Belgian social security applies. The application of the new position can lead to a different outcome on the applicable Belgian social security regime.
In the past, the individual was subject to the Belgian social security regime for employees for his entire professional income. If Belgium, being the competent country, now applies Belgian legislation and requalifies the directorship in Switzerland as a self-employed activity, this will lead to the application of Belgian social security for self-employed workers on the income earned from the director’s mandate in Switzerland.
This important change of heart can be the result of several factors. What immediately comes to mind is the equal treatment of self-employed workers performing their activity in Belgium and self-employed workers performing this self-employed activity in another country, whilst both individuals are subject to Belgian social security according to EC Regulation 883/04, and the prevention of (social) fraud.
As a remark, it should be noted that Belgium becomes competent to provide for a qualification on social security of an activity (only) performed abroad. This might lead to discussion with the Belgian authorities. For example and provided that Belgium is the competent country: how will Belgium qualify taxi drivers (as employee or as self-employed worker?) when only performing their taxi services in France and having another employee activity in Belgium?
A case by case assessment is required for existing and future situations.
For more information, contact a social security professional with KPMG’s Global Mobility Services practice:
© 2018 KPMG Tax and Legal Advisers, a Belgian Civil Cooperative Company with Limited Liability (burg. CVBA/SCRL civile) and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.