Next year it will be less costly for many Dutch companies in China to second employees to the latter country. The reason for this is the pending social security treaty between both countries, the text of which was recently published. In practice, the specific provision for seconded employees and their family members will be of particular importance.
Once the treaty takes effect (expected to be in 2017), the number of double social security contributions and voluntary insurance payments will be scaled back. Dutch expats will then only have to pay Dutch state pension/surviving dependents’ and unemployment contributions. Conversely, Chinese expats will only have to pay Chinese social security contributions for the state pension and for unemployment. Surprisingly, the treaty does not grant a full exemption for all social insurance.
The treaty determines in which country an employee is insured for social security purposes. Employees that are seconded within a group and who, upon the commencement of their secondment, were not expected to be seconded for more than five years, will remain covered by the social security system of the country from which they were seconded for the duration of the secondment. The seconded employee is then exempted from paying social security contributions in the country where the activities are performed. If the secondment period is extended so that the total period of secondment exceeds five years, the social security insurance of the country of employment will, in principle, apply as of the extension date. However, the treaty does offer the Contracting States the opportunity to, upon request, have the social security system of the country from which the employee is seconded, apply to the extended period. The treaty therefore does not apply to employees that are sent to work in one of the countries on a permanent basis.
Employees who were already seconded to China or the Netherlands at the time the treaty takes effect will be able to invoke the treaty for a further period of no more than five years, commencing on the date the treaty takes effect, regardless of the length of their previous stay in the country of employment.
Both the employer and the employee must have a secondment certificate. The certificate can be applied for with the competent authority of the country from which the employee was seconded. In China this is the Social Insurance Administration of the Ministry of Human Resources and Social Security. In the Netherlands, it is the Social Insurance Bank (Sociale Verzekeringsbank, “SVB”). The secondment certificate must be requested prior to the commencement of the secondment. If it is applied for within six months of the commencement of the secondment (or the date the treaty takes effect), it will still apply retroactively. It is therefore important to apply for it on time.
Family members of the seconded employee who relocate along with the seconded employee will also remain insured for social security purposes in the country from which is seconded, for a period of no more than five years. If the family members themselves work, or start working as an employee or as a self-employed person, it will be compulsory for them to be covered by the social security system of the country of employment.
No full coverage
An important reservation is that this treaty does not apply to all parts of the Dutch or the Chinese social security system. Despite the secondment certificate, you should take account of the fact that Dutch employees are not insured for the other parts of the Dutch social security system, such as occupational disability, the child benefit or the Healthcare Insurance Act. The SVB has been asked if this is indeed the intention. Contributions for medical help and work-related accidents may be payable in China. A Chinese employee who is seconded to the Netherlands will only be insured for the state pension and for unemployment in China and furthermore may be subject to compulsory insurance for certain elements in the Netherlands. In our view, it remains a good idea to take out additional insurance with a private insurer.
If you have any questions regarding the above, please approach your designated contact at Meijburg & Co.