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If you come from abroad to (live and) work in the Netherlands, chances are that something will change in your social security position. Will you be covered by Dutch social security or will you stay covered by the social security scheme of your (former) state of residence? Will you be covered by both or none at all? In this article, we will explain some of the basics of social security in cross-border situations.
Regulation (EC) No 883 / 2004 on the coordination of social security systems
To avoid double social security coverage or no coverage at all, a regulation was introduced within the European Union. The regulation determines that persons, to whom the regulation applies, are subject to social security legislation of a single Member State only. In the case of cross-border working, it is important to determine your social security position, since it can also influence your family members’ social security position.
General rule
For employees, the principle rule is that you are subject to social security legislation of the Member State where you exercise your employment. For example, an employee that exercises his employment in the Netherlands shall be subject to Dutch social security legislation. Based on Dutch legislation, national insurance and / or employee insurance contributions may be due in the Netherlands.
Specific rules apply to civil servants, a person receiving unemployment benefits, a person called up or recalled for services in the armed forces or civilian service, a person pursuing activities on board a vessel at sea and flight crew or cabin crew members. These exceptions will not be discussed in this article.
Secondment
Special rules apply to employees who are seconded by their employer from one Member State to another Member State. In principle, the secondee remains covered by the social security system of the sending state if:
- The employee is seconded by an employer that normally carries out its activities in the sending State;
- The anticipated duration of the secondment does not exceed 24 months; and
- The employee is not sent to replace another person;
For example
A company in Poland, specialised in software engineering, seconds one of their employees, Marek, to a group company in the Netherlands. He is expected to work on a project in the Netherlands for a period of 12 months. In this case, all of the abovementioned conditions are met, meaning the employee will stay covered by Polish social security while living and working in the Netherlands.
Activities in two or more Member States
A person who works as an employee in two or more countries shall be subject to the legislation of their state of residence, if the employee works at least 25% in their state of residence or earns at least 25% of their income in their state of residence. If this is not the case, the employee shall, in principle, be subject to the legislation of the country where the employer is situated if the employee only has one employer.
For example
Maria, who lives in Spain, works as a Sales Manager for a software company in the Netherlands. Maria primarily works in the Netherlands and Spain. She works for 2 days in a week in Spain and 3 days in the Netherlands. Since Maria works more than 25% in her state of residence (2 out of 5 days per week), she is subject to Spanish social security legislation. As of January 2020, Maria will only be working one day from Spain. This means Maria will be covered by Dutch social security as of January 2020.
Third-country nationals
The Netherlands also has bilateral treaties concerning social security with a couple of countries that are not a member of the EU or EEA. Please see the following website of the SVB for an overview of these countries. Each treaty contains specific rules regarding social security, which is why it is not possible to fully discuss these in this article.
A1-certificate / certificate of coverage
Based on the regulation or treaties, individuals can apply for an A1-certificate / certificate of coverage in their state of residence. An A1-certificate / certificate of coverage is evidence of your social security position, because it states in which country a person is covered for social security purposes and for which period. The certificate must be recognised by other countries, unless granted based on a false application.
If your family members do not generate their own income from professional activities, they will derive their social security benefits and cover from your social security position. However, if they start generating their own income, they must individually assess their situation.
It is not uncommon for an expat to come to the Netherlands with a (dependent) partner on secondment and remain covered by the home country social security system. If the partner, in the course of the assignment, secures a job in the Netherlands, he or she will become subject to the Dutch social security system and no longer be able to derive rights as a dependent.
The Netherlands
Dutch national law determines whether and to what extent a person is covered by the social security system in the Netherlands. In the Netherlands, social security is divided into two schemes: the national insurance scheme and the employee insurance scheme.
The national insurance schemes are: General Old Age Pensions Act (AOW), Surviving Dependents Act (Anw), Long-Term Care Act (Wlz) and Child Support (Kinderbijslag).
National insurances are due when you are:
- Considered a resident of the Netherlands; or
- Subject to payroll tax in the Netherlands in respect of employment that is carried out in the Netherlands.
National insurances are collected through the withholding of wage tax from the employee’s salary. For self-employed people, the contributions are collected via a personal income tax assessment, issued after the individual has filed their personal income tax return (due per April 1st, following the tax year concerned).
The employee insurances are: the Unemployment Insurance Act (WW), Work and Income Act (WIA), Sickness Benefits Act (ZW) and Invalidity Insurance Act (WAO). Employee insurances are due when a person is employed in the Netherlands. The premium for employee insurance is paid by the employer.
National- and employee insurances are also due when a treaty or a regulation of the European Union stipulates that Dutch social security legislation applies. Therefore, a person should always check which legislation is applicable, based on a treaty or regulation.
A separate category is the mandatory health cover (Zorgverzekeringswet or ‘Zvw’). By law, anyone covered by Long-term Care (Wlz), is covered by the Zvw. Everyone covered is required by law to take out at least a basic insurance policy for the Zvw. Often, in addition to the basic cover, additional cover is offered. For the insurance policy (and additional cover), a -modest- insurance premium is due.
The bulk of the Zvw is funded by contributions made by the employer for their employees. For self-employed people, retirees and some other specific groups, these contributions (at a reduced rate), are collected either through the withholding of old age benefit payments or via an assessment (self-employed).
Check your social security position
Checking your social security position before you start working cross border (if possible) is crucial, as it could have a major impact. Some key points are:
- When treaties nor EU Regulations are applicable, Dutch social security legislation is applicable when working in the Netherlands, regardless of whether other social security legislation applies. This could mean double coverage or no coverage at all.
- Request for an A1 / certificate of coverage on time.
- Family members’ social security position can be affected.
Do you want to know more about moving to the Netherlands and how this will affect you financially and tax-wise? The BDO expat team has a wide knowledge regarding wage and income tax, social security and the 30% ruling. Please feel free to contact BDO for more information or fill in the form below.