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WORKING IN TWO OR MORE COUNTRIES OF THE EUROPEAN UNION

Since Croatia’s accession to the EU, persons engaged in business activity in two or more EU/EEA Member States and Switzerland are, in Croatia, subject to the EU regulations on coordination of social security systems. (*link)

One of the fundamental rules of the Basic Regulation states that social security system of only one member state applies to persons moving within the European Union, meaning that you can be insured in only one EU country at the time. Persons who engage in business activity as employed or self-employed person are subject to legislation of the country in which they engage in such activity.

One of the exceptions to this rule refers to persons engaged in business activity in two or more EU Member States. In order to maintain legal certainty and the application of only one legislation, special rules on determination of legislation applying to such persons were laid down.

 

Who is subject to rules on determination of relevant legislation?

Special rules apply to persons:

  1. Engaged in business activity as employed persons in two or more Member States
  2. Engaged in business activity as self-employed persons in two or more Member States
  3. Engaged in business activity as employed and self-employed persons in two or more Member States
  4. Employed by the Member State as civil servants, who also perform business activity as employed or self-employed persons in one or more Member States; and
  5. Employed as contract staff of the European Communities.

Persons engaged in business activity as employed persons are defined by the Basic Regulation. In Croatia, this group refers to persons who realise income from paid employment. The Basic Regulation also defines persons engaged in business activity as self-employed persons. In Croatia, such persons realise income from self-employment, including agricultural activity.

 

Determination of legislation which applies to persons engaged in business activity as employed persons in two or more Member States

A person is considered to be engaged in business activity as employed person in two or more Member States when such person is at the same time or occasionally engaged in one or more different business activities as employed person by one or more employers in two or more Member States.

Such person is subject to legislation of the Member State of his or her place of residence (the place of his or her permanent residence) or legislation of the Member State where registered office or place of business of the company or employer employing such person is located.

 

Determination of legislation which applies to persons engaged in business activity as self-employed persons in two or more Member States

A person is considered to be engaged in business activity as self-employed person in two or more Member States when such person is at the same time or occasionally engaged in one or more separate business activities in the capacity of self-employed person, irrespective of the nature of such activities.

A person engaged in business activity as self-employed person in two or more countries is subject to legislation of:

  1. The Member State of self-employed person’s place of residence when he or she performs a substantial part of business activity in that Member State, or
  2. The Member State where the centre of interest of such business activity is located when the person does not have a place of residence in one of the Member States in which he or she performs a substantial part of his or her business activity.

 

Determination of legislation which applies to persons engaged in business activity as employed and self-employed persons in several Member States

A person engaged in business activity as employed and self-employed person in two or more countries is subject to the legislation of the country in which he or she is engaged in business activity as an employed person. When a person is engaged in business activity in the capacity of employed person in two or more countries, the country of legislation applicable to him or her is determined in the manner described above.

 

Determination of legislation applicable to civil servants engaged in business activity in two or more countries

A person engaged in business activity as a civil servant is subject to legislation of the Member State to which the government office employing him or her appertains. When a civil servant performs business activity in two or more countries for two or more government offices, he or she is subject to legislation determined in the same manner as described above for persons engaged in business activity as employed persons in two or more countries. When a person engages in business activity as a civil servant in one Member State and engages in business activity as employed or self-employed person in another Member State, such person is subject to the legislation of the Member State to which the government office employing him or her appertains.

 

Determination of legislation applicable to contract staff of the European Communities

Contract staff of the European Communities may choose which legislation they will be subject to. They may choose between:

  1. Legislation of the country of their employment
  2. Legislation of the country which applied to them most recently
  3. Legislation of the country of which they are nationals.

They will be able to make such choice only once, at the time of entering into employment, namely at the commencement of applying the chosen legislation.

 

Procedure in case of engaging in business activity in two or more Member States

A person engaged in business activity in two or more EU Member States must notify the competent institution in the country of residence. When a person fails to meet this obligation, the procedure for determining the legislation applicable to that person will be exercised ex officio, when such fact becomes known.

The competent institution in the country of residence will, after carrying out the procedure for verification of all circumstances in a particular case, make a decision on the legislation to be applied. When making such decision, a prediction of circumstances expected in the next 12 months must be taken into account. The said decision may stipulate that such person is subject to either legislation of the country of residence or legislation of another Member State. All Member States in which business activity is engaged in or where registered office or place of business of the company or employer is located must be informed of the decision. The decision is considered provisional and will become final two months after competent institutions have received it but failed to inform the competent institution of the country of residence of their disagreement with the decision within the designated period, or earlier, should they agree with the decision.

The competent institution of the country whose legislation is determined to be the applicable legislation will inform the person and issues him or her the A1 certificate. The A1 certificate is a standard form valid throughout the EU which is considered the proof of legislation applicable to a person confirming that contributions are paid in the stated Member State and that there is no outstanding obligation to pay contributions in other countries where business activity is engaged in.

 

Jurisdiction for determination of legislation applicable in the Republic of Croatia

The process of determining the legislation applicable to persons engaged in business activity in two or more countries falls within the competence of the Croatian Pension Insurance Institute.

Documentation required for persons engaged in business activity as employed persons in two or more countries:

  • Completed form on employment in several Member States
  • Employment contracts
  • Employer’s confirmation of the amount of salary (or payroll certified by the employer)
  • When necessary, other evidence of working hours (especially for transport workers – driving schedules, number of loadings and unloadings).

 

Documentation required for persons engaged in business activity as self-employed persons in two or more countries:

  • Completed form on employment in several Member States
  • Printed copy of the FINA Annual Financial Statement Register entry (GFI form), or the Tax Administration
  • Certificate on the amount of income
  • When necessary, other evidence.

Forms on employment in several Member States are available on the website of the Croatian Pension Insurance Institute www.mirovinsko.hr as of 1 May 2013.

 

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QUESTIONS AND ANSWERS

1. When will a person who engages in business activity as employed person in two or more EU Member States be subject to legislation of the Member State of his or her place of residence?

Legislation of the Member State of person’s place of residence will apply to a person engaged in business activity as employed person in two or more countries:

a) When he or she performs a substantial part of his or her business activity in that country or

b) When he or she is employed in two or more companies or by employers with registered office or place of business in different Member States, at least two of which are not the country of such person’s place of residence or

c) When registered office or place of business of company or employer is outside the territory of the European Union, the European Economic Area and Switzerland.

2. When will legislation of the Member State, where registered office or place of business of company or employer is located, be applicable?

Legislation of the Member State where registered office or place of business of company or employer is located will apply when the person engaged in business activity as employed person in two or more countries does not perform a substantial part of his or her business activity in the country of his or her residence, namely:

a) When such person is engaged in business activity in only one company or with only one employer or

b) When such person is engaged in business activity with two or more employers with registered office or place of business in the same Member State or

c) When such person is engaged in business activity with two or more employers with registered office or place of business in two Member States, one of which is his or her place of residence.

A person engaged in business activity as employed person in two or more Member States, whose place of residence is in the same country as registered office or place of business of company or his or her employer, will be subject to legislation of that country. In this case, it is not necessary to check whether a person performs a substantial part of business activity in that country.

3. What does a substantial part of business activity mean in relation to employed persons?

A substantial part of business activity performed in the Member State refers to the quantity considered to be a substantial part of all business activities, but not necessarily the main part of such business activities.

When determining whether an employed person engages in a substantial part of his or her business activity in certain Member State, the following criteria must be taken into account:

  1. Working hours and/or
  2. Salary.

In order to determine whether a person performs a substantial part of business activity in the Member State of his or her place of residence, it is necessary that he or she spends at least 25% of working hours and/or earns 25% of his or her salary in that country. However, because these criteria are not final, sometimes other criteria must also be used to determine whether such part represents a substantial part of business activity.

4. What are marginal business activities?

Marginal business activities refer to business activities that are permanent but take up less than 5% of working hours and account for less than 5% of earned salary. They are not to be taken into account in determination of legislation which applies to a person engaged in business activity as employed person in two or more Member States.

5. What about transport workers?

The status of transport workers is equal to the status of other persons engaged in business activity as employed person in two or more countries in accordance with the criteria applicable for determining whether a person performs a substantial part of his or her activity in the country of his or her residence. Working hours represent the main criterion to be taken into account for this group of persons. When there are no data on working hours spent in the country of residence and where, according to circumstances, it is not possible to establish whether a substantial part of business activity is performed in that country, other criteria must be applied.

6. How can registered office or place of business of company or employer be determined?

Registered office or place of business of company or employer is the place where key business decisions are made and where the head office is located, and not merely the place where an office employing administrative staff without real power to take decisions is located. When there is doubt, registered office or place of business can be determined by using additional criteria.

7. What rules apply to aircraft flight and cabin crew?

Aircraft flight and cabin crew are subject to legislation of the Member State in which their home base is located. Home base is a place chosen by the air carrier from which a crew member normally begins and ends his or her duty period or duty periods and where, under normal circumstances, air carrier is not obligated to ensure accommodation for such crew member. When a crew member is assigned two or more home bases in more than one Member State or when he or she in addition to engaging in business activity as flight or cabin crew member is also engaged in another business activity as employed or self-employed person, legislation of the country to which he or she will be subject is to be determined as described in previous chapters.

8. How can it be determined whether a self-employed person performs a substantial part of his or her business activity in a Member State?

When determining whether a person engages in a substantial part of his or her business activity in certain Member State, the following criteria must be taken into account:

  1. Realised turnover
  2. Working hours
  3. Number of services rendered and/or
  4. Earned income.

A person is considered to perform a substantial part of his or her business activity in the country of his or her residence when he or she performs 25% of his or her business activity, that is, when in relation to the above-mentioned criteria, at least 25% of his or her business activity is performed in the country of his or her residence.

9. How can the centre of interest of a self-employed person be determined?

In order to determine the centre of interest of a self-employed person, all professional activities such person performs should be taken into account, and in particular the following criteria:

  1. Place where fixed and permanent business space of that person is located
  2. Usual nature or duration of business activity being performed
  3. Number of services rendered
  4. Clear self-employed person’s intention evident from all circumstances in a particular case.

10. Can there be any exceptions to prescribed rules in case of work in two or more EU countries?

By way of exception, it is possible that two or more Member States, competent authorities of those Member States or competent institutions by mutual agreement provide for exceptions to rules for determination of legislation to be applied. Exception from rules can be arranged for a particular person or category of persons only when it is in the interest of that person or persons. In this case, an employer or the person engaged in business activity as self-employed person submits an application for an exception to the competent institution of that EU Member State whose legislation he or she wants to be subject to, when possible, in advance. The said institution then informs the competent institution of the other Member State and seeks its consent and, when the agreement is achieved, informs the person and issues him or her the A1 certificate. In the Republic of Croatia, such application for exception is submitted to the Croatian Pension Insurance Institute.

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