The Social Security Agreement between India and the Netherlands What the agreement means for you

and your employees in the Netherlands? In this article, the Sociale Verzekeringsbank (SVB) and the Institute for Employee Benefit Schemes (UWV)* highlight the change in the social security agreement which will be effective from 1st December2011 and explains the consequences of this new agreement on various social security schemes for Indian companies and its employees seconded to the Netherlands. Introduction On 1st December 2011, a new social security agreement will enter into force between India and the Netherlands. After the agreement takes effect, an Indian employee working temporarily in the Netherlands will exclusively be subject to Indian social security legislation for a maximum period of 60 months. This will apply equally to Indian employees seconded (referred to simply as employees in the article) before or after 1st December 2011. The situation until 30th November 2011 Until 30th November 2011, employees in the Netherlands and their family members living in the Netherlands will be insured under the Dutch social security legislation. This means, for example, that they can build up rights to a Dutch old age pension, receive child benefit and be covered against sickness, incapacity for work and medical expenses. The employer, deduct social insurance contributions from their employees pay and pay these to the Dutch Tax Administration. The situation from 1st December 2011 From 1st December 2011, employees will exclusively be covered under the Indian social security legislation for a maximum period of 60 months. They will no longer be insured under the Dutch schemes. To show that they are insured in India, they will need a secondment certificate. The same applies to their family members also living in the Netherlands, unless they have a job in the Netherlands on a local contract in which case they will be insured in the Netherlands. From 1st December 2011 therefore, Indian companies in the Netherlands do no longer have to deduct and pay Dutch social insurance contributions for employees with a secondment certificate.

Explained below are the consequences for employees of no longer being insured in the Netherlands with regard to each of the social security schemes. For the sake of convenience, this article refers to 1st December 2011 as the effective date of the agreement. For secondment certificates starting on a later date, these would be applicable from that date onwards. National insurance schemes AOW pension Employees stop building up rights to an AOW old age pension as from 1st December 2011. For example, an employee who has already been working in the Netherlands for 4 years by 1st December 2011 will have built up rights to 8% of the full amount of AOW pension. Each year of insurance entitles a person to 2% of the full AOW pension. The SVB will pay the AOW pension as from the employees 65th birthday, regardless of where he or she is living at that time in the Netherlands, India or anywhere else. Employees requiring information about their AOW pension rights before they leave the Netherlands can visit www.svb.nl and request an SVB pension statement (pensioenoverzicht). (They will need a DigiD code for his). Employees wishing to maximise the amount of their AOW pension can take out voluntary AOW insurance as from 1 December 2011. Survivor benefit If an employee dies on or after 1st December 2011, a surviving partner will not be entitled to a Dutch survivor benefit, unless the employee had taken out a voluntary insurance to continue the insurance under the survivor benefit scheme Child benefit An employees entitlement to child benefit will end on 1st January 2012. The employee will receive any child benefit payable for the 4th quarter of 2011 in January 2012. Exceptional medical expenses Expenses for long-term care, e.g. nursing, will not be reimbursed from 1st December 2011. Employee insurance schemes Unemployment From 1st December 2011, an employee will no longer be insured against the risk of unemployment and in the event of being

unemployed on or after that date, no Dutch unemployment benefit will be payable. Sickness From 1st December 2011, an employee will no longer be insured against the risk of sickness. An employee who becomes sick on or after that date will not be entitled to a Dutch sickness benefit. Incapacity for work (WIA benefit) From 1st December 2011, an employee will no longer be insured under the WIA scheme. If an employee becomes incapacitated for work before 1st December 2011, a Dutch incapacity benefit will be paid. Under the agreement, it may be possible for the benefit to be paid in India after the employee returns to India. If an employee becomes incapacitated for work after 1st December 2011, India will pay the incapacity benefit because the employee will be insured under Indian legislation. Health insurance From 1st December 2011, costs incurred for medical care will no longer be reimbursed. Employers can, however, take out a private health insurance to cover these costs. When and where to apply for a secondment certificate Employees already working in the Netherlands on 1st December 2011 can apply for a secondment certificate with a commencement date of 1st December 2011. On that date, the secondment term (five years maximum) begins. They are advised to apply for the secondment certificate as soon as possible so that the employee will not have to repay any child benefit or reimbursements for medical costs after 1st December 2011. The employee can apply for a secondment certificate from the competent Indian organization (Employees Provident Fund Organisation; please visit http://www.epfindia.com). What should the employee do with the secondment certificate? The employee must keep an original copy of the secondment certificate. The employer must keep a copy, so that the employer can show it in the event of an inspection that no contributions are due in the Netherlands.

For more information More information about the agreement will be given at a seminar to be held on 22nd November 2011, from 16.00 to 20.00 hrs. at the SVBs head office (Van Heuven Goedhartlaan 1, Amstelveen). During the seminar, you will have the opportunity to put your questions to experts. For further questions, please send an e-mail to: tongersie@svb.nl You can also visit www.svb.nl for more information

*The Sociale Verzekeringsbank (SVB) and the Institute for Employee Benefit Schemes (UWV) are organizations that implement the Dutch social insurance schemes. The SVB implements the national insurance schemes that apply to all residents of the Netherlands, such as the schemes for old age pension, survivor benefit and child benefit. The UWV implements schemes that only concern employees, providing coverage against unemployment, sickness and incapacity for work.