When a business has employees doing business abroad, social security contributions may also become due in that country in addition to the obligations in their home country. To combat this, employees working in Europe should have an A1 certificate, which certifies which social security legislation applies. This is required in situations where the employee has a connection through employment or self-employment with more than one EU/EEA country (plus Switzerland).
Since the start of 2019, the electronic application and certification procedure in Germany has become mandatory for employers. Until 30 June 2019, employers can continue to submit paper applications if the case is justified. This changeover to the electronic application and certification procedure has recently increased European social authorities’ attention to this issue.
The A1 certificate is not only required for longer-term assignments, but also for every meeting, training session and even in certain situations when an employee is transiting internationally during the period of service abroad. This makes it highly challenging for many employers to manage and the legal framework in Germany doesn’t provide any time tolerance limit.
In a tightening compliance environment, it’s advisable the employee should also have a copy of their A1 certificate available when traveling. If the employee does not have this on a business trip abroad and is requested to provide proof it is in place, the following actions may be taken by the European tax authorities:
Our recent experience indicates that the number of audits is increasing, especially in Austria and France.
To avoid administrative fines and to safeguard employees, even for short business trips to other EU/EEA countries (or Switzerland), the employer must make sure that A1 certificates are applied for on a timely basis, ie before the start of the business trip, and are carried by the employee.
In some countries, the local authorities do not impose an administrative fine if it can be proven that the A1 certificate was applied for before the posting or the start of the business trip. In pending approval and issuance, it is recommended that the employee carries the relevant application for the A1 certificate as proof the process has been initiated.
The European Union has identified the compliance impact the regulations impose and is working on a revision. Accordingly, companies may not be obliged to apply for an A1 certificate for short business trips in the future. However, the exact form and the first-time date of application are not yet final. In the meantime, businesses should review their compliance processes for applying for A1 certificates and manage overseas business trips accordingly, whether short or long.
We hope you found this summary useful. If you would like to discuss any of the areas raised in this article, please contact:
Stephanie Saur
Grant Thornton Germany
T +49 211 9524 8592
E stephanie.saur@wkgt.com
Kathrin Reitner
Grant Thornton Germany
T +49 89 36849 4231
E kathrin.reitner@wkgt.com
Dennis Holtus
Grant Thornton Germany
T +49 211 68784434
E dennis.holtus@wkgt.com
Marco Schader
Grant Thornton Germany
T +49 69 905598 659
E marco.schader@wkgt.com
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