Wednesday 2 October 2013

FREE PROVISION OF SERVICES: APPEALING ON SUBCONTRACTORS FROM BULGARIA

Belgium has foreseen no exceptions on the principle of free movement of services. This means that service providers from the new EU Member States are able to offer their services in Belgium and here in Belgium with their employees can run out orders  without that they must have a work permit or card (provided they fulfil a number of formalities dealt with below).
The fact that transitional agreements are foreseen in the framework of the free movement of workers, is without prejudice to the principle of the free movement of services. As a result of the accession of Portugal, the Court of Justice at that time already pronounced on this issue.
The Court of Justice pointed out that the foreign service provider must not be confined to merely employing local labour forces to broadcast them to other Member States. The foreign service provider may in other words be no interim office, nor de facto acting as an interim agency
Formalities to fulfil
A foreign EU service provider who comes to run out orders in Belgium with its own staff must take into account following formalities:
the social security scheme of the interim state will only apply in the case of posting (if not the foreign service provider in Belgium will be subject to the Belgian social security);
the external service provider needs to respect the Belgian labour legislation with respect to its employees who are employed in Belgium (which inter alia means that the Belgian minimum wages have to be paid, that the stipulations on working hours must be respected and that social documents must be kept in Belgium);
the foreign service provider should do a LIMOSA declaration;
there should be fulfilled some formalities regarding the access to the territory;
what their tax situation is concerned, the foreign labourers should take into account, the rules included in the applicable double-taxation treaty.
We discuss these conditions in detail below.
Social security:  posting
The designation of the applicable social security legislation is regulated in the European Regulation 1408/71. This Regulation is applicable to the new EU Member States.
The basic rule of the regulation is that social security is applicable in the country where one has being worked in. For example, when workers from Bulgaria come to work in Belgium, in principle the Belgian social security regulations will apply.
This means that the Bulgarian employer must apply for a social security number and will have to pay social security contributions in Belgium.
The possibility exists, however, to diverge from this rule and yet to remain subject to the social security of the interim state. In this case, one must rely on the rules on posting.
In order for a foreign EU employer to be able to have workers in posting to another EU Member State, in which the workers remain subject to the social security of the posting state, following points should be taken into account:
posting is always temporary
the duration of the labour in the receiving state shall be not more than 24 months and the employee should not be broadcast to replace another employee whose posting is terminated.
exceptional postings for longer duration can also be requested. Belgium, however, only accept postings available up to 5 years, the original period of 24 months included.
the "organic band ' with the interim employer must be preserved
Posting is only possible when an "organic band ' is preserved between the sending employer and the posted worker. This means that the employee must remain subordinate to the sending employer which one has still the employers’ authority. Consequently, the sending employer remain responsible for things like recruitment and dismissal, determination of the nature of the work, the contract of employment, ...
This means that the employment contract with the interim employer should not be suspended and that no employment contract (not even of limited duration) may be closed with the company in the receiving state, and that this company may not exercise any  employers ' authority in respect to the  workers.
the sending employer must have substantial economic activities in the interim state
Posting rules are sometimes abused by companies which in reality turn out to have no activity in the interim state (so-called ' mailbox companies '). However, the Court of Justice has concluded that the sending employer should exercise substantial activities in the interim state so that a legal posting might be accomplished.
The European Administrative Commission on social security for migrant workers has developed a so called “code of good practices” in which are discussed a number of problems of interpretation and ambiguities concerning to the posting. This code is not legally binding, but the administrative institutions of the Member States will in principle be pointed to. In the code states that the existence or non-existence of significant activities in the interim state can be traced on the basis of a number of objective criteria.
Following elements are important:
where has the posting company its seat and administration;
the number of administrative staff of the posting company in the posting state and in the state of labour (if there is only administrative staff present in the posting state, the application of the posting stipulations is excluded);
where are the posted workers recruited;
where are most of the contracts with customers concluded;
what legislation is applicable to the contracts that the posting company conclude with its customers and its employees;
the turnover realized by the posting company in the interim state and in the receiving state during a sufficient representative period (if the turnover in the interim state is less than 25%, one will examine the situation further);
the company should already have done activities for at least four months on the territory of the interim state.
Application for a document A1: the posting employer must request for its employees a posting form  (formerly E 101 document). This should be done at the social security administration of the posting state.
It is therefore extremely important that the concerned workers always have their A1 form with them, and certainly at work. So in case of control they can immediately demonstrate that they are posted and therefore not subject to the Belgian social security.
Until recently, the Belgian client in addition had the obligation to present to the social inspection in writing, the names of the employees who are not able to present the A1 form, as well as the name and address of their employer and this had to be done during the first day of presence of employees of a third-party who are working for him or with him and remain subject to another social security scheme than the Belgian.
The non-compliance of this obligation was criminally sanctioned. This obligation is cancelled with effect from 1st of April 2007 and replaced by the LIMOSA declaration where there is also a control obligation.
Nevertheless, we believe that it is preferable that the Belgian client checks whether the foreign workers of subcontractors are in the possession of an A1 form.
Employment law: compliance with Belgian rules
Wage and working conditions
When a foreign service provider comes to Belgium with its employees to run out orders, it will have to comply with the Belgian labour law provisions. It comes in particular to ensure compliance with ' the labour, wage and employment conditions which are determined by legislative, regulatory or conventional provisions that are criminal punished. '
The reference to provisions ' that are criminal punished ' implies that almost the entire Belgian labour law is applicable. To illustrate the Minister for employment and labour referred in the discussion of the law, among other things, to:
the labour law of 16 March 1971 (which includes the rules on working hours, overtime, night work, work on Sunday, ...);
the law of 4 January 1974 on the holidays;
the laws regarding annual leave of workers coordinated on 28 June 1971;
the law of 24 July 1987 on temporary work, interim work and hiring-out of workers for the benefit of users;
the law of 4 August 1996 concerning the welfare of workers at work;
the law of 8 April 1965 establishing the labour rules;
the Royal Decree No. 5 of 23 October 1978 on tracking social documents;
the law of 12 April 1965 on the protection of wage;
the implementing decrees of these different laws;
the declared generally binding collective agreements.
In certain circumstances, the foreign employer is not required to the Belgian wage conditions and regulations on annual leave.
It concerns the situation in which certain works are carried out whose duration is no longer than eight days. It concerns in particular work on the initial assembly and/or first installation of a good, form an integral part of an agreement for the supply of goods, which are necessary for the entry into force of the delivered good and be carried out by qualified and/or specialist workers of the supplying company.
Specifically, it concerns the situation where a foreign company delivers a good in Belgium and therefore sends its employees to Belgium to properly assemble and/or install this good. It is required that there is an agreement for the supply of the goods in which this is expressly included and that the  work will not take more than eight days.
This exception does not apply for certain activities in the construction sector.
Social documents
As was indicated under previous point, the foreign employer in principle must fulfil the law on labour regulations and the Royal Decree nr. 5 on tracking social documents. This means that the foreign employer need to keep a labour regulation in Belgium, to keep pay slips, ...
Above-mentioned Act of 5 March 2002, however, had introduced an exception regime that was significantly altered by the program act of 27th of December 2006.
Since 1st of April 2007, the concerned employers when they do a LIMOSA declaration, they do not have to keep a labour regulation and they do not have to fulfil the formalities for part-time workers.
New notification requirement from 1st of April 2007: LIMOSA
The program law of 27th of December 2006 with effect from 1st of April 2007 introduces a new system, called ' prior notice to posted workers and self-employed persons '.
The foreign employer (or his representative), is previous required to report to the social security that  his ' posted worker ' will come to work in Belgium.
It concerns an electronic report, called LIMOSA, mapping the employment of foreigners. The intention is to set up an electronic system with the information obtained that should allow control for any kind of employment of foreigners in Belgium.
This new mandatory declaration is important for subcontractors from all over Europe (new, like the Bulgarian contractors, but also from old Member States), even from across the world who would work in Belgium, with their foreign workforce.
What is the LIMOSA Declaration?
Prior to the employment on Belgian territory, the employer of the posted worker must inform the Belgian social security company RSZ. This notification shall be done electronically via the website www.LIMOSA.be, where the foreign employer must create an account. By Royal Decree is decided which data will have to be mentioned in the notification.
The foreign employer – here the subcontractor – should report following data in the declaration:
WHO will be posted? Identification data of the workers who will carry out the work.
WHEN will the work be done? Starting date of the order / last date of the order. When the order  lasts longer than foreseen, a new declaration has to be done. If the posting will not go on, the declaration must be cancelled.
WHAT? At the declaration, the type of services or the economic sector should be indicated.
WHERE? Location in Belgium. On which yard will the activities take place?
For WHOM will the activities occur? Also the identification data of the Belgian client must be indicated.
Who is the posting employer? The foreign subcontractor will also have to report his identification data.
HOW LONG PER WEEK? In order to allow effective control the working week should also be reported.
WHEN EXACTLY? Also the working schedule of the foreign workers should be indicated
The employer gets a receipt of this notification. This receipt is called LIMOSA 1-form or L1 form.
The Belgian client will have to consider whether the foreign employer or self-employed person has complied with this obligation. In particular, he will have to consider whether the employee has the receipt (the L1-form), and if not, the client itself must do the declaration to the RSZ (and this prior to employment).
This obligation does not apply if the client is a natural person and the employment is done for strictly private purposes.
As a result of this, the obligation for the Belgian client to check the presence of the A1 form is not needed. The LIMOSA declaration, however, by no means replaces the A1 form. Only the duty to control the A1 form is abolished.
Exemptions
Since the scope of the LIMOSA declaration is very spacious, the draft Royal Decree has foreseen some exemptions from this prior notification. These exemptions are either motivated by the nature or duration of the employment. Often the declaration of employment is only exempted, when this does not exceed a certain duration. So are the workers exempted from declaration in LIMOSA, if they are be sent to Belgium for the initial assembly and/or first installation of a good. It must be about qualified and/or specialised employees of the company delivering the good. The duration of the work may be no longer than 8 days. For an extended period there has to be a prior notification. The construction sector cannot invoke this exception occupations and should therefore always do a declaration.
Also specialised technicians of foreign companies are exempt if they come to Belgium for urgent maintenance work or urgent repair works. This exception only applies to repairs to machinery or equipment that are provided directly by their employer to the company where the repair or maintenance takes place. The exemption only applies when the workers concerned are no longer than 5 days per month in Belgium.
Also employees who attend meetings in a closed circle are not subject to the notification requirement, provided that there are no more than 60 days meetings per year of which a maximum of 20 calendar days per meeting. The travel days or days for tourism prior to or subsequent to the meeting are no longer charged.
Generalized declaration
When the foreign employer has regular orders in Belgium and its employees, consequently, are working on a regular basis in Belgium, in addition to activities in one or more other countries, and they are not living in Belgium, they can file a declaration that is valid for 24 months. That way they avoid that they should do a declaration, every time they come again to Belgium.
Their employers must not indicate the location, nor the work schedules (note, the working week should be indicated).
This generalized notification requirement does not apply to everyone. The interim sector and the construction sector are excluded. At frequent postings in both sectors the employment from abroad must therefore continually be reported. In addition, the KB mention what should be understood under ' regular activity in Belgium and one or more other countries '. The Royal Decree sets out in this way, the scope of this generalized notification off.
It must be concerning ' an activity that structurally is carried out in different countries with an substantial part in Belgium, whereby the person concerned is frequently present in Belgium for short periods for vocational reasons '.
Although the practice will tell how this strict definition should be understood, we believe that it is already clear that this generalized declaration must remain the exception.
Consequences of the Declaration
The employer who has done the prior declaration, has not the obligation during the next 24 months:
 to draw up labour regulations;
to fulfil certain disclosure obligations regarding part-time work;
to set up and maintain social documents (with the exception of the individual account, unless a copy of similar foreign documents is available);
to make pay slips (provided that a copy of similar foreign documents is available).
For a period of 2 years after the end of the employment period, the competent inspectors can ask to the employer the transferring of these similar documents.
So in practice, this means that the foreign employer in Belgium for each worker employed in Belgium need to keep following documents: a Belgian individual account or a copy of a similar foreign document and a copy of a foreign document that is similar to the Belgian wage sheet.
Sanctions
Infringements of the above-mentioned provisions are criminally sanctioned, both on the part of the employer who posted the employees as on the part of the Belgian client.
Access to the territory
no work permit or card
As already indicated, free provision of services implies that no work permits or cards must be requested, provided that it concerns a legal service. So there is an exemption to apply for a work permit and – card for persons employed by a company in the European economic area who go to Belgium for the provision of services, provided that:
they are lawfully employed in the Member State of residence;
this legally way of employment at least is valid for the duration of the work to be carried out in Belgium.
As a consequence an employment of posted Bulgarian in Belgium in the context of providing a service  can happen without work permit or card, provided that these Bulgarians validly are employed in Bulgaria and that this valid way of employment persists for the entire time required for carrying out the work effectively in Belgium.
Administrative formalities
Subjects of the new EU Member States who are posted to Belgium in the context of providing a service must present at the time of arrival on Belgian territory, in addition to the identity card or a valid national passport, following items to the Municipal Council of the municipality where they stay:
the proof of service;
the proof of posting (A1 form issued by the social security institution of the employment State);
If necessary, the authorization to work in the interim State.
On presentation of these documents the municipality will than hand over a document, depending on the foreseen duration of the service:
planned duration shorter than or equal to 3 months: certificate in which the notification is confirmed (so-called ' annex 22 ');
planned duration longer than 3 months: inscription in the foreign register and hand over a certificate of registration (' model B ').
Tax: double tax treaties
In function of the actual data,  there is a possibility that the foreign labourers in Belgium will be subject to the personal income tax (as a non-resident). This should be assessed on the basis of the relevant double-taxation treaty.
Additional points of interest
Even if the rules are fulfilled on free movement of services, posting, employment law provisions and administrative formalities on entry to the territory, there are risks associated with working with subcontractors from other EU Member States.