Overview Social Security Agreement

Overview of Social Security Agreements 19 February 2010

Agenda Overview of Provident Fund (PF) 11 Overview of Provident Fund (PF) Regime Regime Overview of Social Security 22 Overview of Social Security Agreements (SSA) Agreements (SSA) 3 Issues 3 Issues © 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. 2

Overview of PF regime © 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. 3

Flashback … Provident Fund regime in India for Indian nationals Social No mandatory PF contributions for security expatriate assignees in India regime Compulsory social security contributions for Indian assignees going abroad © 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. 4

Present … New social security regime in India from October 1, 2008 Required to Repatriation of contribute @ 12% balance possible of salary “International Matching Workers” (IW) Salary includes contribution by covered overseas salary employer Withdrawal of PF Expatriates can balance possible at the no longer opt out end of assignment © 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. 5

Roadmap of Developments India – Netherlands SSA signed India - Germany SSA comes into effect 22 October 2009 India – Luxembourg 1 October 2009 SSA signed India – Swiss SSA signed 30 September 2009 India – Belgium SSA comes into effect 3 September 2009 1 September 2009 IWs required to contribute towards PF 1 November 2008 © 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. 6

Overview of SSA © 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. 7

What is a Social security agreement? Bilateral To protect the instrument interest of between workers in the two Host country countries Equality of Avoidance of treatment no/double with Host coverage of country contributions nationals © 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. 8

SSAs signed so far… BELGIUM LUXEMBOURG GERMANY HUNGARY NETHERLANDS SWITZERLAND FRANCE © 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. 9

Status of Agreements Country Date when signed Entry into force Belgium 3 November 2006 1 September 2009 Germany 8 October 2008 1 October 2009 Luxembourg 30 September 2009 Not effective Switzerland 3 September 2009 Not effective Netherlands 22 October 2009 Not effective © 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. 10

General Benefits of SSA Exportability of Detachment Pension Benefits Encourages Totalisation of movement of insurance cross border periods employees © 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. 11

Detachment To avoid double payment of Social Security Joint request by For claiming employer and Detachment exemption in the employee in the Certificate Host country Home country Adhering to the social security system of Home country © 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. 12

Exportability of pension Means In a country where Export of Right to receive IW chooses to benefits/pension benefits finally reside © 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. 13

Totalisation of service periods Home country work period Home country work period Host country work period Host country work period © 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. 14

Example… Totalisation benefit available Mr. X has rendered services of: Total period of service is 27 - 7 years in India; and SSA years (20+7) > 10 yrs - 20 years in Belgium Eligible for pension benefit © 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. 15

Benefits under various SSAs Exportability Totalisation Country Detachment of Pension of periods Belgium √ √ √ Germany √ × × Luxembourg √ √ √ Switzerland √ √ × Netherlands √ √ × © 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. 16

Coverage of persons under SSA Nature of employment Coverage under Coverage under Home country Host country Social Security Social Security 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 © 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. 17

Issues © 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. 18

Issues Employee must perform services in the host country only for 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? © 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. 19

Issues … 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 © 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. 20

Questions Answers © 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. 21

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. © 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. 22

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Overview Social Security Agreement

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