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Changes brought by the EC Regulation no. 883/2004 to the European social security systems
As a consequence of the repeated amendments and modifications that Regulation no. 1408/1971 (the main European regulation regarding social security) was subjected to in order to reflect the changes in both European and national legislations during the past years, the rules for coordination of social security systems have grown in complexity. Given the fact that the modernization and simplification of these rules was considered essential in order to achieve the goal of freedom of movement of EU citizens, the European Commission adopted a new set of rules in the field of social security.
Although Regulation no. 833/2004 was approved by the European Commission in 2004 and its implementing Regulation (no. 987/2009) was approved in 16 September 2009, they are set to enter in force starting May 1st 2010.
As opposed to the old legislation, the new Regulation focuses on the coordination rather than the harmonization of the EU Member States social security systems, thus respecting the characteristics of national social security legislation.
The main purpose of the new regulations is that of simplifying the existent rules and procedures, while reinforcing the basic principles that they are based on, regarding equality and freedom of movement of workers within the European Union.
Coverage
The provisions cover anyone who moves to another Member State to settle permanently, work temporarily or study, and even those who are travelling to take a holiday (e.g. tourists, mobile workers, jobseekers, retired people, etc.).
The most important provisions of Regulation 883/2004 are:
Regulation 883/2004 will repeal Regulation 1408/1971, but the latter will still be applicable regarding some acts and treaties that the Community is part of, in order to ensure the legal certainty;
Only one social security system will be applicable at a time for the same person;
The applicable legislation will be established under the provisions of Title II of Regulation 883/2004;
Situations of simultaneous insurance in two or more Member States of employed or independent workers, will no longer be possible;
Possible modifications of local registration procedures and withholding and payment of the contributions;
The documentation that governs secondment missions will be changed;
Electronic communication and information or documents exchange between relevant authorities of different Member States will become mandatory;
The certificates (forms) regarding the applicable legislation are to be replaced by an electronic certification system, as coordination of the relevant institutions from different Member States will be put in place;
Additional social security fields such as paternity benefits, survivors’ benefits or pre-retirement benefits are regulated
The application of Regulation 883/2004 can influence the business environment by the mere obligation of employers to review the social security treatment of their cross-border employees. Financial consequences are possible, as some social security treatments can prove themselves more cost efficient than others, leaving room for fiscal optimization.
What’s next?
The new regulations state a transitional period between the adopting of the implementation regulation and its entering in force. This period is used by national institutions of the Member States to prepare the transition to the new procedures.
Also, an Administrative Commission will be established in order to coordinate the social security systems. The Commission will be composed of a Government’s representative from each of the Member States and will play an important part in facilitating a unitary application of the Community Law, promoting and development of cooperation among the Member States and their relevant institutions in the field of social security. The Commission will also encourage a broader use of the new technologies, in order to facilitate the freedom of movement of the EU citizens.
Furthermore, the new legislation regulates the establishment of a series of mechanisms for the guarantee of the proper functioning and cooperation among the Member States and their relevant institutions in the field of social security. As a consequence, a technical commission, an audit board as well as a consultancy committee will be established.
During the transition period, the provisions of the Regulation 1408/1971 will still be applicable to the existing situations, as long as the facts remain unchanged or the employee does not expressly request the application of the new provisions.
Adrian Serban, Consultant
Tax Advisory Services - MAZARS
As opposed to the old legislation, the new Regulation focuses on the coordination rather than the harmonization of the EU Member States social security systems, thus respecting the characteristics of national social security legislation.
The main purpose of the new regulations is that of simplifying the existent rules and procedures, while reinforcing the basic principles that they are based on, regarding equality and freedom of movement of workers within the European Union.
Coverage
The provisions cover anyone who moves to another Member State to settle permanently, work temporarily or study, and even those who are travelling to take a holiday (e.g. tourists, mobile workers, jobseekers, retired people, etc.).
The most important provisions of Regulation 883/2004 are:
Regulation 883/2004 will repeal Regulation 1408/1971, but the latter will still be applicable regarding some acts and treaties that the Community is part of, in order to ensure the legal certainty;
Only one social security system will be applicable at a time for the same person;
The applicable legislation will be established under the provisions of Title II of Regulation 883/2004;
Situations of simultaneous insurance in two or more Member States of employed or independent workers, will no longer be possible;
Possible modifications of local registration procedures and withholding and payment of the contributions;
The documentation that governs secondment missions will be changed;
Electronic communication and information or documents exchange between relevant authorities of different Member States will become mandatory;
The certificates (forms) regarding the applicable legislation are to be replaced by an electronic certification system, as coordination of the relevant institutions from different Member States will be put in place;
Additional social security fields such as paternity benefits, survivors’ benefits or pre-retirement benefits are regulated
The application of Regulation 883/2004 can influence the business environment by the mere obligation of employers to review the social security treatment of their cross-border employees. Financial consequences are possible, as some social security treatments can prove themselves more cost efficient than others, leaving room for fiscal optimization.
What’s next?
The new regulations state a transitional period between the adopting of the implementation regulation and its entering in force. This period is used by national institutions of the Member States to prepare the transition to the new procedures.
Also, an Administrative Commission will be established in order to coordinate the social security systems. The Commission will be composed of a Government’s representative from each of the Member States and will play an important part in facilitating a unitary application of the Community Law, promoting and development of cooperation among the Member States and their relevant institutions in the field of social security. The Commission will also encourage a broader use of the new technologies, in order to facilitate the freedom of movement of the EU citizens.
Furthermore, the new legislation regulates the establishment of a series of mechanisms for the guarantee of the proper functioning and cooperation among the Member States and their relevant institutions in the field of social security. As a consequence, a technical commission, an audit board as well as a consultancy committee will be established.
During the transition period, the provisions of the Regulation 1408/1971 will still be applicable to the existing situations, as long as the facts remain unchanged or the employee does not expressly request the application of the new provisions.
Adrian Serban, Consultant
Tax Advisory Services - MAZARS
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