1. We have at several occasions find that Estonia has written A1-certificate (E101) for workers that are employed in an Estonian company working in Sweden even though the requirement are not fulfilled. The latest example is the Estonian company with name Baltic Trio. The company has, year after year, 98-99 percent of its turnover in Sweden, but Estonia has given A1-certificates to the companies workers. According to EU-roules a company needs to have 25 percent of the turnover to get A1-certificates to the workers. Why does not Estonia follow the EU regulations?
Issuing A1 certificate lies within the competence of Social Insurance Board (SIB) who acts in accordance with EU rules, namely EU Regulations on social security coordination no 883/2004 and 987/2009. Regulation 883/2004 art 12(1) stipulates that in case of „posting“ workers can still be subject to the posting State provided that the employers „normally carry out its activities in that State“. Implementation Regulation 987/2009 art 14 (a) specifies the meaning of words „which normally carries out its activities“. According to that provision those words refer to an employer that normally performs substantial activities, other than purely internal management activities, in the territory of that MS in which it is established, taking into account all criteria characterising its activities. The relevant criteria must be suited to the specific characteristics of each employer and the real nature of its activities. Those are the rules, according to which each case has to be analysed individually and it is always the discretionary decision of the Authority competent for issuing A1. As those rules are rather broad in its nature, the Administrative Commission for the coordinatsion of social security systems has adopted the decision A2 of 12 June 2009 concerning the implementation of art 12 of Reg 883/2004. Point one of this decision states that „in order, where necessary and in cases of doubt, to determine whether an employer ordinarily performs substantial activities in the territory of the Member State in which he/she is established, the competent institution in the latter is required to examine all the criteria characterising the activities carried on by that employer, including the place where the undertaking has its registered office and administration, the number of administrative staff working in the Member State in which it is established and in the other Member State, the place where posted workers are recruited and the place where the majority of contracts with clients are concluded, the law applicable to the contracts concluded by the undertaking with its workers, on the one hand, and with its clients, on the other hand, the turnover during an appropriately typical period in each Member State concerned and the number of contracts performed in the sending State. This is not an exhaustive list, as the criteria should be adapted to each specific case and take account of the nature of the activities carried out by the undertaking in the State in which it is established.“ Moreover European Commission has published „a manual“ to help MS to implement those rules mentioned above. Practical guide of the application of those rules can be found on CION website:( Click here)
Pages 8-9 give a list of the criteria to help the assessment. However it is also repeated, that this is not an exhaustive list, as the criteria should be adapted to each specific case. The turnover of the company is merely one of those criteria. It is also added as an example that turnover of approximately 25% of total turnover in the posting State could be a sufficient indicator, but cases where turnover is under 25% would warrant greater scrutiny. Thus 25% of the turnover is not a „rule“ stipulated in the Regulation. It is one criteria in the practical quide which also states that all criteria have to be viewed together when making the assessment. Estonian SIB is checking different criteria stated in the decision A2 and practical guide including the turnover. In addition principles of good governance are also followed and there is the obligation of citizens and employers to provide accurate and timely information which they verify with their signature. According to the information provided by the Social Insurance Board, in the specific case of Baltic Trio OÜ, not all the workers are „posted“ . Approximatly . of them are working in two States and carry out substantive part of their activity in Estonia. In cases of „posting“ in order to assess the „substantial part of the activity“ in accordance to the Regulation the Baltic Trio OÜ filled in the A1 application and declared that 20% of their turnover are in EE and 80% in SE. As most of the turnover is in SE, the Social Insurance Board assessed other criteria as well like state of registration of the company and placement of the Board; State of Members of the Board; State of recruitment of workers; the applicable law of working relationships (contracts); the State of concluding the contracts with clients and the number of contracts. Moreover this particular complany has operated on the market over 10 years and social security contributions has always been paid in a proper manner. Besides Swedish competent authority for issuing A1 has received copies of all A1 formes issued by SIB in particular case and have not contested them.
2. Does not Estonia check the information that the companies provide? Before the A1- certificate is written and after the A1-certificate? Is it not required that the company shall show an annual report for example?
Estonian Social Insurance Board is checking all the information provided in the application of A1 provided by the applicant before issuing the A1. Moreover a special aftercheck is being performed after issuing A1 as thoroughly as possible. All applicants are obliged to notify the Social Insurance Board of changes in working relationships during the validity of A1. Social Insurance Board has access to the information that VAT has been declared and paid in Estonia and also the company’s annual report.
3. What is Estonias demand on a company before A1-certificate is given? What rules does apply in Estonia?
It is rules of abovementioned EU Regulations which apply to all MS, not national legislation, as those rules are directly applicable. Estonian SIB follows those rules as described above. The certificate A1 is issued only if the neccessary criteria is met. The supplementary documentation is provided by the applicant if necessary.
4. Has Estonia have problems with bribery in such cases?
As far as we know – no.
5. Is it known by the responsible in the government that A1-certificates are given even though the requirements are not full filled?
Issuing A1 is the discretionary decision of Social Insurance Board who has sufficient competence to deal with the task.
6. Something else that you would like to point out in this matter?
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7. What do you think will be the result if the social security is paid in such cases in Estonia instead of Sweden?
It is one of the basic rules of coordination that the legislation of only one MS applies in social security cross – border cases. It is true that it is not always an easy task to establish the State of applicable legislation. If it is Estonia, we have to provide also the social security benefits and healthcare to those persons. In cases of health care even if a person lives in Sweden, it is Estonian Health Insurance Fund who pays the bills for healthcare provided in Sweden.
Stoppafusket sent new questions to Estonia. And here are the answers:
1. You write that it is not a rule to have a 25 percents turnover in the state where the company is established. You have valued other thing before Estonia issued A1-certificates. According to Baltic Trios annual report, and to the audit performed by the Swedish Tax Agency, the company has 98-99 percents turnover in Sweden. What is the factors that make Estonia think that 1-2 percents turnover is enough to be able to post workers in Sweden?
Estonian SIB assessed following criteria when making a decision on issuing A1:
the place where the posting undertaking has its registered office and its Board – Estonia;
the number of Board Members of the posting undertaking present in the posting State and in the State of employment – 3 in EE and 2 abroad;
the place of recruitment of the posted worker – Estonia;
the place where contracts with clients are concluded – 50% in Estonia and 50% abroad;
the law applicable to the contracts signed by the posting undertaking with its workers – Estonia;
according to the annual report of 2013 the turnover in Estonia was 7-8%. We have to specify that we have started to have access to the annual reports only in 2014. the length of time an undertaking is established in the posting Member State – since 2007;
2. You state that Baltic Trio has declared that the company have 20 percent turnover in Estonia. You say that you make after-check on the information that is given. How is it possible that you have not discover that Baltic Trio has almost 100 percent business in Sweden. That is clearly written in the annual reports, year after year. So why does Estonia continued to write A1-certificate and not following the EU-regulations?
The assessment was made based on abovelisted criteria.
3. You also write that this company has had its business for 10 years and paid everything that it shall, social security contributions, taxes and so on – in Estonia. What does Estonia think that Sweden thinks about that? That an Estonian company during ten years has been conducting business in Sweden, without that taxes has been paid and that the company employes get A1-certificate and that the social security contribution is not paid in Sweden.
If Swedish competent institution have different opinion (Försäkringskassan) they should notify Estonian SIB.
4. You have also issued A1-certificate for workers that normally works in two or more states. I guess this is not for the same employer, as Baltic Trio just have its business in Sweden.
75% of all forms issued are posting cases and 25% are the forms linked with working in two Member States.