On 1 September 2009, the long-anticipated Social Security Agreement between the Kingdom of Belgium and the Republic of India (the “SSA”) entered into force. The SSA was signed in New Delhi on 3 November 2006 and is considered as a landmark agreement as it was the first treaty of its kind to be signed by the Indian authorities. Therefore it is likely to serve as a benchmark for similar agreements between India and other countries.
It goes without saying that this SSA will greatly affect Indian companies who are actively engaged in business in Belgium (or elsewhere in Europe while using Belgium as their platform) or who aspire to do so. Moreover, the SSA will affect Indian individuals who are working or who envisage working in Belgium (and Belgian individuals working or planning to work in India), with regard to some of their social security benefit rights.
The purpose of this short memo is to highlight the most relevant provisions of the SSA.
Scope of application (Articles 2 and 3 SSA)
The SSA covers the main social security insurance schemes in both countries, which are (1) the old-age and widows’ pension for employees and the self-employed; (2) the Belgian invalidity insurance and the Indian Total Disability benefit; and (3) the social security regulations for employees.
The SSA applies to all individuals who are, or were, subject to the social security legislation of Belgium or India.
This means the SSA’s scope extends to third-country nationals who are, or were, subject to Indian or Belgian social security legislation, as well as to Indian and Belgian citizens, all of whom can rely on the rights granted under the SSA.
Payment of social security benefits (Articles 11,12, 16 and 17 SSA)
Due to the SSA, social security benefits will no longer be restricted by the claimant’s place of residence, i.e. social security benefits will be paid to Indian nationals living in Belgium and to Belgian nationals living in India.
For example, Indian nationals who have paid or who will be paying Belgian social security contributions will receive a Belgian old-age pension upon their retirement, even if they have returned to India.
With regards to the retirement benefits (old-age and widows’ pensions) and invalidity benefits, the SSA specifies that the insurance periods during which an individual paid either Indian or Belgian social security contributions will be added up (to the extent that they do not overlap) on retirement to calculate the pension payable. This implies that the Belgian and Indian social security authorities will count periods of coverage under the social security system of the other country when calculating entitlement to an old-age or invalidity pension. This is the so-called “totalisation principle”, which features in most bilateral social security treaties.
In practice, the Belgian social security authorities will first calculate the benefit under the Belgian old-age and widows’ pension schemes on the basis of contributions paid in Belgium only. They will then calculate the benefits due after totalisation, and will pay the individual whichever is the higher of the two amounts. The same will apply in India.
Secondment of employees (Articles 7 to 10 SSA)
Articles 7 to 10 SSA set out the social security rules that apply to seconded employees (but not seconded self-employed individuals). The general rule is that employees employed in either India or Belgium will be subject to the social security scheme of that country.
However such employees who are seconded by their employers to work in the other country willl remain subject to the social security scheme of their “home” country if their secondment does not exceed 60 months (5 years). On completion of a 60-month secondment, the employer can request an extension from the relevant authorities.
This means, for example, that an Indian national seconded by his employer to Belgium can live and work in Belgium without paying Belgian social security contributions (but still paying Indian social security contributions) for up to five years, or more if an extension is granted.
Notwithstanding the provisions on secondment set out in the SSA an Indian employer can nevertheless opt to apply the general rule instead, hence subjecting his employee to the social security scheme of Belgium, and vice versa.
International Workers
This bilateral SSA led to the Indian government introducing the concept of international workers into its social security scheme, which in turn led to an increase of contributions for international workers to approximately 12% of basic pay for both employees and employers.
International workers as defined under the Employees Provident Fund and Miscellaneous Provisions Act 1952 (as amended by the Salient Features of the Provident Fund (Third Amendment) Scheme, 2008) are:
- Indian employees having worked or going to work in a foreign country with which India has entered into a social security agreement and who are eligible to avail the benefits under the social security programme of that country by virtue of the eligibility gained or going to gain, under the said agreement; or
- employees other than Indian employees, holding other than an Indian passport, working for an establishment in India to which the Employees Provident Fund and Miscellaneous Provisions Act 1952 applies.
However these payments are not payable for employees who are paying social security contributions in their home country, if India has a reciprocal social security agreement with that country and the employee enjoys the status of a “detached worker” under the relevant SSA.
Transition Measures
Last but not least, the SSA set up a wide range of transition measures. Employees employed in Belgium but making contributions to the Indian social security scheme, who currently enjoy an exemption from paying Belgian social security contributions granted before the SSA came into force are also entitled to enjoy the benefit of the SSA’s secondment provisions, for a new period of 5 years. The same applies to Indians currently paying contributions to the Belgian social security scheme and who meet the conditions to obtain a ‘certificate of coverage’ (Article 8 SSA).
