Social Security Agreement between India and Belgium

Social Security Agreementbetween India and Belgium14 April 2011

Provident Fund and International Worker► In October 2008, the Government of India issued notifications extending the applicability of Employees Provident Funds and Miscellaneous Provisions Act, 1952 to a new category of workers called ‘International Workers’.► The Employees Provident Funds and Miscellaneous Provisions Act, 1952 comprises of the following schemes: ► Employees Provident Funds Scheme, 1952 (‘Provident Fund Scheme’) ► Employees’ Pension Scheme, 1995 (‘Pension Scheme’) ► Employees’ Deposit Linked Insurance Scheme, 1976► In September 2010, the Government of India issued further notifications thereby amending the Provident Fund Scheme and Pension Scheme as applicable to International Workers.Page 2 India – Belgium Social Security Agreement

Provident Fund and International Worker Covered ► Establishment employing 20 or more persons establishment engaged in specified / notified industry; ► Establishment employing even less than 20 persons can opt to be covered voluntarily. International ► Non Indian employees, not holding an Indian Worker passport, working for an establishment in India to which the Provident Fund Act applies; ► Indian employees having worked or going to work in a foreign country with which India has entered into a Social Security Agreement. Excluded ► International Workers contributing to the social Employee security of their country of origin with whom India has entered into a Social Security Agreement and enjoying the status of a detached worker.Page 3 India – Belgium Social Security Agreement

Provident Fund and International WorkerContribution► Employer is required to contribute 24% of the assignee’s ‘Monthly Pay’ in the Provident Fund Scheme and Pension Scheme.► Employer has an option to recover 12% of the assignee’s ‘Monthly Pay’ from his salary.► Contribution made by employer allocable as follows: ► 12% of ‘Monthly Pay’ as assignee’s contribution to Provident Fund Scheme. ► 8.33% of ‘Monthly Pay’ as employer’s contribution to Pension Scheme. ► 3.67% of ‘Monthly Pay’ as employer’s contribution to Provident Fund Scheme.► Exchange rate to be used for converting salary received overseas: ► Telegraphic transfer buying rate offered by State Bank of India as on the last working day of the month for which the salary is due.Page 4 India – Belgium Social Security Agreement

Provident Fund and International WorkerWithdrawal from Provident Fund► International Worker will be entitled to withdraw accumulated balance in the Provident Fund Scheme in the following circumstances: ► On retirement from service after attaining the age of 58 years; ► On permanent and total incapacity; ► On grounds specified in the relevant Social Security Agreement under which the International Worker is covered.► Such refund will be available by deposit in the International Worker’s Indian bank account (except where the assignee is covered under a Social Security Agreement).Pension Benefit► No pension benefit available to International Worker under the Pension Scheme (except where the assignee is covered under a Social Security Agreement or has rendered more than 10 years of service in India).► Loss of contribution 8.33% of ‘Monthly Pay’ annually.Page 5 India – Belgium Social Security Agreement

India – Belgium Social Security Agreement

India – Belgium Social Security Agreement Detachment- Equality of Certificate of Treatment Coverage Social Security Agreement Totalization Exportability of Insurance of Benefits PeriodPage 7 India – Belgium Social Security Agreement

India – Belgium Social Security AgreementDetachment► Under Article 7 of the Social Security Agreement, a person who works as an employee in one country is required to contribute towards social security of that country.► However, under Article 8 of the Social Security Agreement, an employee may continue to contribute towards social security of home country and obtain exemption from social security of host country if the ‘detachment’ conditions as prescribed therein are satisfied.► Under Article 8 of the Social Security Agreement, an employee will be exempt from making contributions to the social security of host country provided: ► Employee is on secondment to the host country for a period not exceeding 5 years; and ► Employee continues to make contribution under home country social security and obtains a Certificate of Coverage from home country social security authorities.Page 8 India – Belgium Social Security Agreement

India – Belgium Social Security AgreementGuidance issued by the Indian Provident Fund Authorities onconditions governing secondment:► While deciding eligibility for detachment, the emphasis is on the following three issues: ► The employee should be in services of the home country employer (i.e. employer-employee relationship between employee and home country employer must remain intact). ► Employee and home country employer must pay contributions under the home country social security legislation. ► Employee and home country employer must continue to pay contributions under the home country social security legislation during the period of detachment.Page 9 India – Belgium Social Security Agreement

India – Belgium Social Security Agreement► Illustrative examples for employer-employee relationship that must remain intact between employee and home country employer: ► Existence of master and servant relationship between the employee and the home country employer; ► Power to hire and fire retained exclusively by the home country employer; ► No agreement of employment of limited or unlimited duration (implied, oral or written) between the seconded employee and host country employer; ► Employment agreement with the home country employer is not suspended during the period of assignment; ► Only the employer is allowed to pay social security contributions; ► Existence of return guarantee (i.e. employer undertaking to employ the employee in the same or a comparable function post completion of assignment/secondment); ► Home country employer retaining the exclusive power to extend or prematurely terminate the secondment.Page 10 India – Belgium Social Security Agreement

India – Belgium Social Security AgreementEquality of Treatment► Persons who ordinarily reside in either country to receive equal treatment with the nationals of that country in the application of the social security legislation.► No specific provisions in the Social Security Agreements on withdrawal from Provident Fund Scheme. Analysis of practical implementation to be made of Article on ‘Equality of Treatment’.Export of Benefits► Provision for payment of benefits to the International Workers irrespective of the location (India, home country or a third country).Page 11 India – Belgium Social Security Agreement

India – Belgium Social Security AgreementTotalization of Periods► International Workers who have contributed to social security in both countries are eligible to aggregate periods covered in both countries to determine eligibility to pension benefits in either country.► Aggregation of periods are permissible only for determining eligibility and not for the purpose of determining actual level of benefit payable.► Pension benefit available to International Workers under the Pension Scheme even where totalized period of contribution in Indian and home country social security is less than 10 years.Page 12 India – Belgium Social Security Agreement

India – Belgium Social Security AgreementSnapshot of coverage Nature of employment Social Security System Indian National working in Belgium Short term posting by an Indian employer for a period upto 5 years Indian System Long term posting for a period of more than 5 years Belgian System Local employment by an Indian or Non-Indian employer directly in Belgium Belgian System Belgian National working in India Short term posting by a Belgian employer for a period upto 5 years Belgian System Long term posting for a period of more than 5 years Indian System Local employment by a Belgian or Non-Belgian employer directly in India Indian SystemApplicable Social Security Rates Rate of contribution India Belgium Employer’s contribution 12% Approx 34.5% Employee’s contribution 12% 13.07%Page 13 India – Belgium Social Security Agreement

India – Belgium Social Security Agreement Benefit Caution Point / Risk Coverage for ► Continued coverage under ► Underlying Permanent globally mobile home country social security Establishment exposure employees ► No requirement to make ► May be mitigated with proper contributions to host country structuring social security Withdrawal from ► Not Benefit ► No specific provisions on Provident Fund withdrawal from Provident Fund Mechanics of ► Export of benefits allowed ► How this will be practically refund implemented by Provident Fund Authorities is to be seen Withdrawal from ► Totalization of period of ► Not Applicable Pension contributions in India and home Scheme country allowed ► Withdrawal allowed even where totalized period is less than 10 yearsPage 14 India – Belgium Social Security Agreement

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Social Security Agreement between India and Belgium

by BLBA BLBA on May 09, 2011

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