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India – Totalisation Agreement with Japan Entered into Force on 1 October

India – Totalisation Agreement with Japan Entered into

This GMS Flash Alert briefly discusses the Social Security Agreement between India and Japan, signed on 16 November 2012, that came into force on 1 October 2016.

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The Social Security Agreement between India and Japan that was signed on 16 November 2012, came into force on 1 October 2016.  India’s Ministry of External Affairs issued a press release1 notifying that the Social Security Agreement (SSA) was to come into effect from 1 October 2016.2    

The India-Japan SSA is the 17th SSA to come into effect – the countries with which India already has effective SSAs are listed in the table in Appendix A.

WHY THIS MATTERS

The primary purpose of the SSA is to help ensure that workers on international assignment from one country to the other will not pay double social security taxes.  This can help to mitigate the costs of Japan-to-India and India-to-Japan international assignments.  

Also, this SSA fosters the principle of reciprocity in respect of benefits accrued by employees who are posted to the other country by their employers.  This should help employees trying to decide whether to take an assignment to Japan or to India to make a positive decision to take the assignment, assured in the knowledge that the social security contributions they make in the one country where they are working on assignment will be added to the period of contributions in their home country for purposes of determining entitlement to benefits.

In general, the existence of an in-force SSA can help enhance commercial and economic activities between Japan and India.

Key Benefits under the India-Japan SSA

Exemption from Social Security Contributions in the Host Country

The employees of one country posted by their employers in the other country on short-term assignments may be exempted from social security contributions in the host country a period for up to of five years.  

However, such an exemption can be availed only after obtaining a Certificate of Coverage (CoC) from the respective authorised agencies of India and Japan. 

Totalisation of Contributory Periods

The period of service rendered by an employee in the host country will be added for the purpose of eligibility requirements under the respective social security scheme in the home country, subject to certain conditions.

Lump-Sum Refunds

The benefits acquired by international assignees under their respective social security systems can be paid in lump-sum, subject to conditions.

Export of Benefits

The benefits acquired by international assignees under the social security legislation of one country will be “exportable” to the other country.  

KPMG NOTE

Japanese and Indian employers sending employees to work in the other country should consult with their qualified tax, social security, or global mobility professionals to ascertain:

  • the benefits to be derived under the SSA,
  • what next steps should be for existing – as well as future – assignees between the two countries, and
  • the types of communications, systems, and procedures that will help foster compliance.

Companies that have inbound assignees to India or outbound assignees to Japan may wish to review their assignment policies with a view to making modifications to account for the terms and conditions of the new SSA.  

FOOTNOTES

1  See the Ministry of External Affairs Media Center Web page, “India-Japan Social Security Agreement.”

2  Article 28 of the SSA mentions that the Agreement shall enter into force on the first day of the fourth month following the date of receipt of last notification.  On 20 July 2016, the two governments exchanged Notes in accordance with Article 28, notifying of the completion of the respective constitutional and legal procedures required for the entry into force of the Agreement.

RELATED ARTICLE

This article is excerpted, with permission, from “India’s Social Security Agreement with Japan Will Come into Effect from 1 October 2016,” in TaxNewsFlash (21 July 2015), a publication of the KPMG International member firm in India.

CONTACTS

For further information or assistance, please contact your local GMS or People Services professional or the following professional with the KPMG International member firm in India:  

 

Parizad Sirwalla

tel. +91 (22) 3090 2010

psirwalla@kpmg.com

APPENDIX A

Country Effective Date
Belgium 1 September 2009
Germany 1 October 2009
Switzerland 29 January 2011
Denmark 1 May 2011
Luxembourg 1 June 2011
France 1 July 2011
Republic of Korea 1 November 2011
Netherlands 1 December 2011
Hungary 1 April 2013
Finland 1 August 2014
Sweden 1 August 2014
Czech Republic 1 September 2014
Norway 1 January 2015
Austria 1 July 2015
Canada 1 August 2015
Australia 1 January 2016

The information contained in this newsletter was submitted by the KPMG International member firm in India.

© 2017 KPMG, an Indian registered partnership 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.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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