This report covers the broader implications of a social security-related ruling by the European Court of Justice involving a cross-border mariner.
To subscribe to GMS Flash Alert, fill out the subscription form.
The European Court of Justice (“ECJ” or “Court”) ruled in the case C-631/17 SF v Inspecteur van de Belastingdienst that mariners who work on board a ship flying a flag of a third country are covered by social security in their country of residence.1
The case concerns a mariner who resides in Latvia and who is employed by a company in the Netherlands. The mariner works onboard a ship flying the Bahamas flag and sails over the German part of the continental shelf of the North Sea.
Although the ECJ ruled that the competent country for social security is the country in which the mariner in this case resides, this decision has broader implications for cross-border workers.
The implications of this decision go beyond what this means for mariners. The Court’s ruling changes the interpretation of applicable law for social security for workers who work outside of the EU, and who reside in an EU country, and their employers are located in another EU country.
Until this ruling was delivered, the interpretation of these working arrangements rested on a perception that the competent country for social security was the country in which the employer is located. This interpretation stems from the old EC Regulation 1408/71 on coordination of social security and is by and large supported by the case law. However, the Court now finds that this interpretation cannot be maintained under new EC Regulation 883/2004 on the coordination of social security.
The effect of this ruling means that the employers in the EU must register and comply with the social security legislation in every EU country where their employees reside when the employees work in non-EU countries. This is a significant change, as the employers until now complied only with the social security legislation in the country where they are located. This change may present a significant administrative burden to the employers whose employees reside in several EU countries and work outside the EU.
“SF” is a Latvian national residing in Latvia. From 13 August until 31 December 2013, he was working as a steward for a transportation company (a Dutch “B.V.”) based in the Netherlands. SF worked on board a ship flying the flag of the Bahamas, which sailed over the German part of the continental shelf of the North Sea. SF did not find that he was liable for social security in the Netherlands during this time period.
The ECJ made the following important arguments in this case:
In general, EC Regulation 883/2004 applies when there are at least two EU member states involved. EC Regulation 883/2004 applies to situations where the work is performed outside of the EU, as long as the worker and the employer are situated in two different member states. In such case, the worker is covered by social security in the country of residence.
EU employers must comply with the social security legislation in each member state where their employees reside when the employees work in a non-EU member state. This means that when an employee carries an A1 certificate for social security which states that he is covered by social security in the country where his employer is located, the social security shifts to the country of his residence when he works in a non- EU member state. This situation commonly occurs for multi-state workers, business travelers, etc.
It is therefore important to emphasize that the outcome of this case does not only affect shipping and offshore industry, it also applies to all other sectors that display the same pattern: employer is situated in a member state, worker resides in another member state and works outside of the EU.
1 For text of the case and the Court’s conclusion, click here.
The information contained in this newsletter was submitted by the KPMG International member firm in the Netherlands.
© 2019 KPMG Meijburg & Co., a Netherlands partnership and a member of the KPMG network of independent firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.
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.