Volume 1, Issue 2

10th September, 2009

Business Alert
Indian SSA in play for Belgium and Germany

The recent Indian Social Security Scheme applicable for local and international workers resulted in additional compliance and costs for the expatriates, as contributions were required to be made in both home and host countries. With a view to avoid such non discrimination and treat the international workers at par, Social Security Agreements (SSA) were signed by India with Belgium, France and Germany.

Recently, the SSA with Belgium was notified and is effective from 1st September 2009. The SSA provides for exemption from the contributions to be made in the host country in cases involving short term deputation (up to 5 years). The contributions are to be made in the host country only for long term assignments (more than 5 years) and local employment in the host country. A Detachment Certificate or Certificate of Coverage is required to be obtained in case of short term assignments to host country with a view to claim exemption from contributions in the host country. The Government of India has issued Handbook and Frequently Asked Questions (FAQs) dealing with various aspects and procedural formalities relating to implementation of SSA between India and Belgium.

As its next step to avoid situations of double coverage or no coverage under social security schemes, India has notified its SSA with Germany and the same would be effective from 1st October 2009. The agreement would be applicable for employees who are on existing assignments as on 1st October 2009 or those assigned after 1st October 2009. While the complete text of India Germany SSA is not available, like the SSA with Belgium, the India Germany SSA provides exemption from contributions in the host country for short term assignments (up to 4 years, extendable to another one year on fulfillment of prescribed conditions). An application for Certificate of Coverage under the home country is required to be made to the local authorities (in case of India – an application is required to be made to Regional Provident Fund Commissioner of the Employees’ Provident Fund Organisation) in order to claim exemption from contributions in the host country.

Further, India has also signed social security agreements with France and Switzerland. However, the same is not yet active.

India is currently in discussion with the USA to sign a similar deal. Besides, talks are also on with the Netherlands, Czech Republic, Hungary, Norway, Switzerland, Sweden, Luxembourg and Australia for signing of similar social security agreements.

The SSA would assist in avoiding the impact on cash flows by avoiding dual contributions to be made in home and host countries.

We believe that the SSA can be an effective international tax planning tool, and if used with the help of expert professionals, could result in minimisation of the overall international assignment costs and an increase in the expatriate’s after tax take-home salary – a win-win situation for the organisation as well as the expatriate!