Social Security Agreement between India and Belgium

Social Security Agreement between India and Belgium

14 April 2011

India – Belgium Social Security AgreementPage 2

Provident Fund and International Worker

► In October 2008, the Government of India issued notifications extending the

applicability of Employees' Provident Funds and Miscellaneous Provisions

Act, 1952 to a new category of workers called ‘International Workers’.

► The Employees' Provident Funds and Miscellaneous Provisions Act, 1952

comprises of the following schemes:

► Employees' Provident Funds Scheme, 1952 (‘Provident Fund Scheme’)

► Employees’ Pension Scheme, 1995 (‘Pension Scheme’)

► Employees’ Deposit Linked Insurance Scheme, 1976

► In September 2010, the Government of India issued further notifications

thereby amending the Provident Fund Scheme and Pension Scheme as

applicable to International Workers.



► Establishment employing 20 or more persons

engaged in specified / notified industry;

► Establishment employing even less than 20

persons can opt to be covered voluntarily.

► International Workers contributing to the social

security of their country of origin with whom India

has entered into a Social Security Agreement and

enjoying the status of a detached worker.

Excluded

Employee

Covered

establishment

► Non Indian employees, not holding an Indian

passport, working for an establishment in India to

which the Provident Fund Act applies;

► Indian employees having worked or going to work

in a foreign country with which India has entered

into a Social Security Agreement.

International

Worker



Contribution

► Employer is required to contribute 24% of the assignee’s ‘Monthly Pay’ in the

Provident Fund Scheme and Pension Scheme.

► Employer has an option to recover 12% of the assignee’s ‘Monthly Pay’ from

his salary.

► Contribution made by employer allocable as follows:

► 12% of ‘Monthly Pay’ as assignee’s contribution to Provident Fund Scheme.

► 8.33% of ‘Monthly Pay’ as employer’s contribution to Pension Scheme.

► 3.67% of ‘Monthly Pay’ as employer’s contribution to Provident Fund Scheme.

► Exchange rate to be used for converting salary received overseas:

► Telegraphic transfer buying rate offered by State Bank of India as on the last

working day of the month for which the salary is due.



Withdrawal from Provident Fund

► International Worker will be entitled to withdraw accumulated balance in the

Provident Fund Scheme in the following circumstances:

► On retirement from service after attaining the age of 58 years;

► On permanent and total incapacity;

► On grounds specified in the relevant Social Security Agreement under which the

International Worker is covered.

► Such refund will be available by deposit in the International Worker’s Indian

bank account (except where the assignee is covered under a Social Security

Agreement).

Pension Benefit

► No pension benefit available to International Worker under the Pension

Scheme (except where the assignee is covered under a Social Security

Agreement or has rendered more than 10 years of service in India).

► Loss of contribution 8.33% of ‘Monthly Pay’ annually.

India – Belgium Social Security Agreement



Detachment-

Certificate of

Coverage

Exportability

of Benefits

Equality of

Treatment

Totalization

of Insurance

Period

Social

Security

Agreement



Detachment

► Under Article 7 of the Social Security Agreement, a person who works as an

employee in one country is required to contribute towards social security of

that country.

► However, under Article 8 of the Social Security Agreement, an employee may

continue to contribute towards social security of home country and obtain

exemption from social security of host country if the ‘detachment’ conditions

as prescribed therein are satisfied.

► Under Article 8 of the Social Security Agreement, an employee will be exempt

from making contributions to the social security of host country provided:

► Employee is on secondment to the host country for a period not exceeding 5

years; and

► Employee continues to make contribution under home country social security and

obtains a Certificate of Coverage from home country social security authorities.



Guidance issued by the Indian Provident Fund Authorities on

conditions governing secondment:

► While deciding eligibility for detachment, the emphasis is on the following

three issues:

► The employee should be in services of the home country employer (i.e.

employer-employee relationship between employee and home country

employer must remain intact).

► Employee and home country employer must pay contributions under the

home country social security legislation.

► Employee and home country employer must continue to pay contributions

under the home country social security legislation during the period of

detachment.



► Illustrative examples for employer-employee relationship that must remain

intact between employee and home country employer:

► Existence of master and servant relationship between the employee and the home

country employer;

► Power to hire and fire retained exclusively by the home country employer;

► No agreement of employment of limited or unlimited duration (implied, oral or

written) between the seconded employee and host country employer;

► Employment agreement with the home country employer is not suspended during

the period of assignment;

► Only the employer is allowed to pay social security contributions;

► Existence of return guarantee (i.e. employer undertaking to employ the employee in

the same or a comparable function post completion of assignment/secondment);

► Home country employer retaining the exclusive power to extend or prematurely

terminate the secondment.



Equality of Treatment

► Persons who ordinarily reside in either country to receive equal treatment with

the nationals of that country in the application of the social security legislation.

► No specific provisions in the Social Security Agreements on withdrawal from

Provident Fund Scheme. Analysis of practical implementation to be made of

Article on ‘Equality of Treatment’.

Export of Benefits

► Provision for payment of benefits to the International Workers irrespective of

the location (India, home country or a third country).



Totalization of Periods

► International Workers who have contributed to social security in both

countries are eligible to aggregate periods covered in both countries to

determine eligibility to pension benefits in either country.

► Aggregation of periods are permissible only for determining eligibility and not

for the purpose of determining actual level of benefit payable.

► Pension benefit available to International Workers under the Pension Scheme

even where totalized period of contribution in Indian and home country social

security is less than 10 years.



Nature of employment Social Security System

Indian National working in Belgium

Short term posting by an Indian employer for a period upto 5 years Indian System

Long term posting for a period of more than 5 years Belgian System

Local employment by an Indian or Non-Indian employer directly in Belgium Belgian System

Belgian National working in India

Short term posting by a Belgian employer for a period upto 5 years Belgian System

Long term posting for a period of more than 5 years Indian System

Local employment by a Belgian or Non-Belgian employer directly in India Indian System

Snapshot of coverage

Applicable Social Security Rates

Rate of contribution India Belgium

Employer’s contribution 12% Approx 34.5%

Employee’s contribution 12% 13.07%



Benefit Caution Point / Risk

Coverage for

globally mobile

employees

► Continued coverage under

home country social security

► No requirement to make

contributions to host country

social security

► Underlying Permanent

Establishment exposure

► May be mitigated with proper

structuring

Withdrawal from

Provident Fund

► Not Benefit ► No specific provisions on

withdrawal from Provident Fund

Mechanics of

refund

► Export of benefits allowed ► How this will be practically

implemented by Provident Fund

Authorities is to be seen

Withdrawal from

Pension

Scheme

► Totalization of period of

contributions in India and home

country allowed

► Withdrawal allowed even where

totalized period is less than 10

years

► Not Applicable

Thank You

Technology

Social Security Agreement between India and Belgium