The "new" cross-border commuter: up to 50% mobile working abroad?

The Framework Agreement is valid for an initial period of five years and is then automatically renewed for a further five years.

What does “cross-border telework” mean?

The term "cross-border telework" cannot be equated with the German definition in the Workplace Ordinance ("ArbStättV"). According to section 2 (7) of the Workplace Ordinance, Tele workstations are display screen equipment workstations installed permanently by the employer in the employees’ private sphere.

The Framework Agreement defines "cross-border telework" as an activity that can be pursued from any location, is carried out in a Member State other than the one in which the employer's place of business is located and is based on information technology to remain connected to the employer's or business's working environment in order to fulfil the employee's tasks as assigned by the employer. The European definition is therefore much broader than the German definition and corresponds to our understanding of mobile work (cf. section 87 (1) no. 14 Works Constitution Act (“BetrVG”)).

Furthermore, it follows from the explanatory memorandum of the Framework Agreement that no end-to-end IT connection is required. Rather, employees should also be able to download their tasks and complete them offline.

Aim of the Framework Agreement

In principle, Regulation (EC) 883/2004 stipulates that the social security regulations of the employee's state of residence apply if the employee carries out a substantial part of his/her work there. Due to this, employees could previously only perform up to 25% of their work in the form of remote work in their state of residence.

However, according to Art. 16 (1) of Regulation (EC) 883/2004, an application for an exemption agreement can be made. This is a discretionary decision by the competent authorities of both states involved, so that no state may decide on this alone. The Framework Agreement is intended to facilitate a simplified exemption agreement according to Art. 16 (1) of Regulation (EC) 883/2004, which provides that the signatory states have agreed within the Framework Agreement to refrain from exercising their discretion and to approve the requested exemption agreement in any case, provided that (the following) conditions are met:

Conditions for the application of the framework agreement

1. The State of the employer's registered office and the State of residence of the employee must be different. The State of residence is always the State in which the employee habitually resides and in which the habitual centre of his interests is situated (cf. Art. 1 j) of Regulation (EC) 883/2004). Among other things, the family situation and the duration of residence are to be taken into account. According to the European definition, only one residence is possible at a time.
2. The State of residence and the State the employer's registered office must have signed the Framework Agreement. The following States have signed the Agreement: Austria, Belgium, Croatia, Czech Republic, Finland, France, Germany, Liechtenstein, Luxembourg, Malta, Norway, Poland, Portugal, Spain, Sweden, Switzerland, the Netherlands and Slovakia. The Agreement thus applies to all German neighbouring states except Denmark. However, it is still possible for all EU/EEA states to sign. In the event of a subsequent signature, the provisions of the Framework Agreement apply from the following month onwards.
3. The employee must perform work in the State of residence in the form of remote or mobile work using information technology.
4. No activity other than cross-border telework may be habitually pursued in the State of residence.
5. The employee must not habitually carry out his or her activities outside the State of residence or the State in which the employer is established (e.g., in a branch in another State).

Practical note: procedure/implementation

1. Application
   
   The new regulations of the Framework Agreement always require an application. If an employee wishes to work up to 49.99% in his or her country of residence and remain socially insured in the country where the employer is based, he or she must apply for this. Without an application, the employee must be covered by social security in his/her country of residence.
   
   
2. Competent authority
   
   The application for an exemption agreement must be made in the State whose social security law is to apply. The German Liaison Office for Health Insurance Abroad ("DVKA") is responsible if German social security law is to continue to apply. Persons who live in Germany and work remotely for their employer abroad must apply to the competent authority of the state in question if they wish to be subject to the social security legislation of that State.
   
   
3. Application deadline
   
   An application for an exemption agreement can be submitted as at 1 July 2023. It applies retroactively from 1 July 2023, provided it is submitted by 30 June 2024 and social security contributions have been paid continuously in Germany in this context. After 1 July 2024, an application can only be submitted retroactively for three months.
   
   
4. Requirements for an exemption agreement
   
   An exemption agreement is only granted if the agreement is in the interest of the employee, no third State is involved and the remote or mobile work in the State of residence accounts for between 25% and less than 50% of the total employment.
   
   The calculation is based on a forward-looking view. It is necessary to expect that in the course of the next twelve calendar months, periods of work in two EU Member States will follow each other with a certain regularity. A block distribution of work (e.g., five months at a time in the State of residence and seven months at a time in the employer's office) is permissible, provided that this work distributed in blocks will also occur in both States in the following year.
   
   According to the DVKA, occasional business trips to third countries are still possible and have no effect on the application of the Framework Agreement. However, it is not further explained how many business trips are possible in order to continue to be considered "occasional”.
   
   
5. A1 Certificate
   
   Provided that all requirements are met, the DVKA issues an A1 certificate, which contains binding proof of the applicable social security law. The A1 certificate can be concluded for a maximum of three years. An extension for a further three years is possible through a renewed application.

Conclusion

Overall, the Framework Agreement allows employers and employees more flexibility in dealing with mobile work abroad. Employees can work up to 105 days in their State of residence and still be covered by social security in the employer's State of residence. This gives employees more freedom to choose their place of residence. However, it should be noted, that the Framework Agreement only regulates matters of social security law. In the area of tax law, the limits of the double taxation agreements continue to apply. In addition, there is a risk that working from home establishes a permanent establishment abroad. This can lead to a limited tax liability of the company under foreign law. It therefore remains to be seen whether new regulations will follow in tax law.