Regulation 883/2004 – new Belgian policy on the principles of classification of activities
15 Nov 2019
The social security position of individuals who simultaneously work in two or more EEA Member States or Switzerland is governed by Regulations 883/2004 and 987/2009. The guiding principle of these Regulations is that every such an individual will be subject to the legislation of one Member State - and one Member State only. To this end, Regulation 883/2004 contains specific reference rules to determine the applicable legislation. In order to apply these reference rules, the activities in each of the Member States must be classified as an employed or self-employed activity in accordance with the national legislation of the Member State where the activity is performed. Once the applicable legislation has been determined, it’s up to that Member State to decide how it will treat the different activities when establishing the type of social security contributions that will be due. The Belgian authorities changed their long-standing policy in this respect last year and have now published a detailed note on their new approach.
General principles - classification of activities
When discussing the notion of classification of activities in the framework of the social security coordination of simultaneous professional activities in several EEA Member States and Switzerland, a distinction must be made between two levels of classification.
On the one hand, there’s the classification of activities used to apply the reference rules included in Regulation 883/2004 in order to determine which Member State’s legislation is applicable to the employment situation. It’s the prerogative of each Member State where an individual works to classify the activity that is performed on its territory as an employed or self-employed activity for the application of the provisions of Regulation 883/2004.
On the other hand, once the applicable legislation has been established, the entirety of the individual’s professional activities in the different Member States will become subject to the legislation of the competent Member State. As a result, it’s up to the competent Member State to determine the social security contributions that will be due on the individual’s income derived from the activities in the different Member States. To do so, the competent Member State again has to classify these different activities, in order to determine the type of social security contributions due.
With respect to the second type of classification, the Belgian authorities changed their approach to a policy of reclassification last year. The Belgian social security institutions for employees and self-employed individuals - the National Social Security Office (“NSSO”) and the National Institute for the Social Security of the Self-Employed (“NISSE”) - recently published a detailed note on this new policy.
Previous policy - retaining the foreign classification
In the past, once - after application of the reference rules adopted in Regulation 883/2004 - the Belgian legislation had been designated as the applicable legislation, it was Belgian practice to retain the foreign classification of the activities that was used to apply the reference rules to determine which Belgian social security contributions (employee/employer or self-employed) were due on income derived from an activity exercised in another EEA Member State or Switzerland.
For example: an individual who resides in Belgium and works as an employee for a Belgian company for 70% of his total working time combines this activity with a UK board membership that takes up the remaining 30% of his total working time. According to UK legislation, a board membership qualifies as an employee activity for the application of the reference rules in Regulation 883/2004 and, on the basis of article 13.1(a) of that Regulation, this individual will thus be subject to the Belgian legislation for the entirety of his Belgian and UK activities. Applying the previous approach adopted by the NSSO and the NISSE - i.e. retaining the UK classification of the board membership as an employee activity in order to determine which type of Belgian social security contributions would be due - meant that the income from the UK board membership would become subject to Belgian employee and employer social security contributions. The individual would thus be subject to the Belgian social security scheme for employees for both his activities as an employee in Belgium and his UK board membership.
New policy - reclassification
Effective 1 October 2018, the NSSO and the NISSE adjusted their approach in this respect and opted for a policy of reclassification of activities.
This means that, once the Belgian legislation has been determined to be the applicable legislation for a situation of simultaneous employment in the EEA and Switzerland, the entirety of the Belgian legislation will become fully applicable. As a result, the activities performed outside Belgium will in such a scenario be classified as if they were performed on the Belgian territory, when determining which type of Belgian social security contributions will be due.
If we revisit our above example in light of this new policy, the NSSO and the NISSE will analyse the UK board membership on the basis of the Belgian legislation - as if it was performed on the Belgian territory - and will no longer just refer to the UK classification of this activity as an employee activity. The Belgian social security legislation provides for a (refutable) presumption of self-employed activity for company officers and, as such, the UK board membership will be (re)classified as a self-employed activity in order to determine which social security contributions will be due. As a result, the income derived from the UK board membership will be subject to Belgian social security contributions for self-employed individuals. Contrary to the previous policy, the individual in our example will thus be subject to both the Belgian social security scheme for employees (for his employee activity in Belgium) and the Belgian social security scheme for self-employed individuals (for his UK board membership).
As illustrated in our example, the above new policy will mainly impact individuals who simultaneously work in several EEA Member States or Switzerland, are subject to the Belgian social security legislation and perform their activities in one or several of the other Member States in the capacity of company officer (member of the board of directors, member of the executive committee, etc.). The combination of the (refutable) presumption of self-employed activity for company officers that is included in the Belgian social security legislation and the fact that such activities are considered to be employee activities in several other EEA Member States makes such situations liable for reclassification under the NSSO’s and NISSE’s new policy.
New policy - temporal scope
As mentioned above, the new policy of reclassification applies from 1 October 2018 and the previous policy is therefore maintained until 30 September 2018. One exception exists for employment situations that started between 1 January 2018 and 1 October 2018; for such a situation, the new policy can - upon request - already be applied from the start of the employment situation.
Action points
The new policy that has been introduced by the NSSO and the NISSE can have a significant impact on the social security position of individuals who - on the basis of Regulation 883/2004 - are subject to the Belgian legislation for the entirety of their professional activities in the EEA and Switzerland, certainly if one of the activities outside Belgium is performed in the capacity of company officer.
That’s why we recommend you to analyse the situation of your mobile workers who are subject to the Belgian legislation and who perform activities in one or more other EEA Member States or Switzerland in order to identify activities that are impacted by the new policy of reclassification (e.g. activities as company officer). If such activities are identified, a regularisation will have to take place, whereby the individual has to be retroactively affiliated with a Belgian social security fund for self-employed individuals from 1 October 2018. Moreover, the individual will have to pay social security contributions for self-employed individuals on the income derived from the reclassified activity from that date. The Belgian employee and employer social security contributions that were paid on this income for the same period will in turn have to be reclaimed.
If you have any questions regarding the above or require assistance in analysing the impact of the NSSO’s and NISSE’s new policy, don’t hesitate to reach out to your PwC Legal contact person.
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