Regulation 883/2004 is the main instrument dealing with the coordination of social security systems within the European Economic Area. One of its most important chapters concerns the determination of applicable social security legislation in cases with a cross-border element.
In this field, Belgian social security legislation with regard to self-employed persons has recently been scrutinised by the European Court of Justice (hereafter referred to as the ‘ECJ’). The judgment relates to Regulation 1408/71, the predecessor of the current regulation.
The ECJ’s judgment
The ECJ ruled that Belgian social security legislation’s irrebuttable presumption of self-employment is incompatible with the aforementioned EU legislation if it concerns company directors managing the company from another country (1).
Due to this presumption, Belgian company directors are automatically deemed to be engaged in a self-employed activity in Belgium and are thus subject to the Belgian self-employed social security scheme. This principle also applies if the person concerned is unremunerated.
In its judgment concerning a case brought forward by Partena ASBL, the ECJ made it very clear that despite the Member States’ competence to qualify an activity as an ‘employed activity’ or a ‘self-employed activity’, the concept of the ‘location of an activity’ is a matter for EU law. The ECJ defines ‘location of an activity’ as the place where, in practical terms and according to everyday language, the person concerned carries out actions connected with that activity.
The ECJ accepted the irrebuttable presumption’s function in preventing social security fraud, which consists of artificially relocating directors’ activities of companies established in Belgium, thereby eluding the Belgian social security scheme. However, by making the presumption irrebuttable, the concerned national legislation goes further than is strictly necessary in meeting the legitimate objective of combating fraud. Given that the presumption in Belgian legislation leaves no room to prove the factual situation, it is incompatible with EU law.
Implications for Belgian company directors
Although, at this point, Belgian legislation still needs to be adapted, persons who are presumed to carry out a professional activity as a self-employed person in Belgium have to be able to prove that the location of their activity as a director of a Belgian company is actually in another Member State. If the person concerned is able to prove this, no social security contributions as a self-employed person will be due in Belgium.
Belgian companies with directors who do not perform activities on Belgian territory but manage the company from abroad should note this development and review the situation of directors who currently pay social security contributions within the Belgian social security scheme for self-employed persons (RSVZ).
