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Overview of Overview of Social Security AgreementsSocial Security Agreements
19 February 201019 February 2010
2© 2010 KPMG, an Indian 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.
Agenda
11Overview of Provident Fund (PF) Regime
Overview of Provident Fund (PF) Regime
22Overview of Social Security Agreements (SSA)
Overview of Social Security Agreements (SSA)
33 IssuesIssues
3© 2010 KPMG, an Indian 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.
Overview of PF regime
4© 2010 KPMG, an Indian 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.
No mandatory PF contributions for expatriate assignees in India
Social security regime
Flashback …
Compulsory social security contributions for Indian assignees going abroad
Provident Fund regime in India for Indian nationals
5© 2010 KPMG, an Indian 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.
Expatriates can no longer opt out
Required to contribute @ 12%
of salary
Salary includes overseas salary
Withdrawal of PF balance possible at the
end of assignment
Present …
Matching contribution by
employer
Repatriation of balance possible
New social security regime in India from October 1, 2008
“International Workers” (IW)
covered
6© 2010 KPMG, an Indian 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.
Roadmap of Developments
IWs required to contribute towards PF
India – Netherlands SSA signed
22 October 2009
India – Belgium SSA comes into
effect
1 November 2008
India - Germany SSA comes into
effect
1 October 2009
1 September 2009
India – Swiss SSA signed
3 September 2009
India – Luxembourg SSA signed
30 September 2009
7© 2010 KPMG, an Indian 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.
Overview of SSA
8© 2010 KPMG, an Indian 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.
What is a Social security agreement?
Avoidance of no/double
coverage of contributions
To protect the interest of workers in the Host country
Bilateral instrument
between two
countries
Equality of treatment with Host country nationals
9© 2010 KPMG, an Indian 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.
GERMANY
BELGIUM
LUXEMBOURG
NETHERLANDS
FRANCE
SWITZERLAND
HUNGARY
SSAs signed so far…
10© 2010 KPMG, an Indian 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.
Status of Agreements
Not effective30 September 2009Luxembourg
1 October 20098 October 2008Germany
Not effective3 September 2009Switzerland
Not effective22 October 2009Netherlands
1 September 20093 November 2006Belgium
Entry into forceDate when signedCountry
11© 2010 KPMG, an Indian 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.
General Benefits of SSA
Detachment Exportability of Pension
Benefits
Totalisation of insurance
periods
Encourages movement of cross border employees
12© 2010 KPMG, an Indian 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.
Detachment Certificate
For claiming exemption in the Host country
Detachment
To avoid double payment of
Social Security
Joint request by employer and employee in the Home country
Adhering to the social security system of Home country
13© 2010 KPMG, an Indian 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.
Exportability of pension
Export of benefits
Means
In a country where IW chooses to finally reside
Right to receive benefits/pension
14© 2010 KPMG, an Indian 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.
Totalisation of service periods
Home country work periodHome country work period
Host country work periodHost country work period
15© 2010 KPMG, an Indian 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.
Mr. X has rendered services of:
- 7 years in India; and
- 20 years in Belgium
Example…
Eligible for pension benefit
Total period of service is 27
years (20+7) > 10 yrs
Totalisation benefit available
SSA
16© 2010 KPMG, an Indian 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.
Benefits under various SSAs
√√√Luxembourg
×√√Switzerland
××√Germany
√
√
Exportability of Pension
×√Netherlands
√√Belgium
Totalisation of periodsDetachmentCountry
17© 2010 KPMG, an Indian 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.
Deputation/Posting by Home country employer:
- For period of detachment specified in SSA (48/60/72 months)
- For period more than period of detachment specified in SSA
Coverage under Host country
Social Security
Coverage under Home country Social Security
Nature of employment
Coverage of persons under SSA
18© 2010 KPMG, an Indian 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.
Issues
19© 2010 KPMG, an Indian 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.
Employee must perform services in the host country onlyfor the employer of the home country- PE issues…?
Can benefits be directly paid by the Indian PF authorities outside India?
If assignment gets extended beyond 48/60/72 months in between the tenure – exemption applicable?
Issues
20© 2010 KPMG, an Indian 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.
German SSA - Employer must have 25% of total turnover in home country - What is total turnover?
Legislation applicable to prior events – what are prior events?
Strict visa guidelines issued
Issues …
21© 2010 KPMG, an Indian 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.
Questions
Answers
22© 2010 KPMG, an Indian 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.
Thank You!
The information contained 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.