The structure of social insurance when working and residing in different locations

Dániel and his team worked on this case with fellow member firm in Belgium, Tax Consult.

According to the facts of the case a Belgian citizen (employee) moved to Hungary, registered, and became tax resident there. The citizen retains employment in Belgium.

The citizen will be based at home in Hungary and there is no regular requirement to travel to work in Belgium except for around 1-2 times per month.

The employee does not work in Hungary at all and only retains work for the Belgium employer.

However, even though the employee becomes tax resident in Hungary, the citizen aims to keep Belgian social insurance status for as long as possible so to avoid becoming resident in view of the social insurance in Hungary.

So, is this possible for the long term?

To answer this question, we must look at the legal background, and, whether a separate Social Insurance Agreement between Hungary and Belgium exists.

Since this is not the case yet, the Regulation (EC) No 883/2004 of The European Parliament and of the Council of 29 April 2004 on the coordination of social security systems (Coordination Agreement) will need to take place and the rules of the Coordination Agreement must be mandatory applied.

According to these there is only a very short period of transition. A Belgian social insurance relationship can be kept while living in Hungary for 3 months, after which the employee must establish a social insurance legal relationship there.

This can happen easily if the employee establishes an occupation relationship with a Hungarian employer or registers as an entrepreneur.

If these options are not possible the employee or the Belgian employer is incumbent on the registration in Hungary.

In the case of registration by employees, a citizen will be responsible for the declaration and paying of the taxes and social contribution of themselves and of the employer. In such instances, the Belgian employer will not intervene in Hungary from a legal or taxation point of view.

In our experience of such cases the employers will pay all duties on behalf of the employees by bank transfer. So that these transfers can be identified by Hungarian authorities, the employers will indicate the tax and social insurance number of the employee(s) in the transfer notice.

In the latter case the employer is obliged to fulfil the registration and claim a Hungarian tax number, submit all declarations, and pay the taxes and social contribution also for the employee as would happen in regular employment between national participants.

However, the deregistration of the employee from the Belgian social insurance system is in both cases very important!

For more information contact Daniel.Feher@feherlegal.hu 

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About Feher Legal & Tax:

At Feher Legal and Tax we provide permanent legal representation to Hungary-based companies owned by foreign investors. However, we also render legal advisory services to several large corporations. Most of our clients come from the areas of banking, insurance, building industry, machine building and distribution, advertising and media, service industry, chemical industry, food industry, and forwarding and logistics.

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