EU companies have no right to be exempted from paying German social insurance contributions
Germany is not obliged to enter into exemption agreements for employees from foreign companies in order for them to gain a competitive edge from paying lower social insurance contributions in the country of origin.
MS – 09/2017
Companies from other EU countries are not entitled to an exemption agreement in order to avoid paying higher social security contributions in Germany for workers who have been working there for many years. This was the decision made by the Federal Social Court on 16 August 2017 in a last instance of appeal made by a Polish company against the German Liaison Office for Health Insurance Abroad of the GKV-Spitzenverband (DVKA).
A Polish company has employed workers in Germany over a longer period of time. However, the company did not wish to pay the significantly higher German social insurance contributions and applied in Poland for an exemption for its workers. The DVKA rejected the proposals put forward by the Polish Social Insurance Institution (ZUS).
This decision was confirmed by the supreme judge of the Federal Social Court. Otherwise, lower social insurance contribution through an extension of foreign legislation would have given the Polish company a competitive advantage over other companies active in Germany who are subject to the German social security system. This is not a sufficient reason for having an exemption agreement. Avoiding (higher) social security contributions does not reflect the purpose of the Regulation on the coordination of social security systems (Article 17 VO (EEC) No 1408/71.
Rather, people who work in a particular Member State are subject to the legislation of that Member State. This also includes social security provisions of this Member State in terms of legislation regarding insurance contributions and benefits.
Further information on the Court’s decision can be found here (German only).