In accordance with the law of the European Union (EU) citizens of a country Member State of the EU have the right to freedom of movement and work within the Community without a work permit being required for that. Nevertheless, citizens of Croatia constitute the exception to whom temporary restrictions on the freedom to work within the Community still exist. In order to put this right into effect, the national social security systems of the EU Member States have been coordinated by Council Regulation (EEC) No 1408/71 and Council Regulation (EEC) No. 574/72, laying down the procedure for its implementation. As of 1 May 2010 new coordinated Regulations in the sphere of social security are in force, being Regulation (EC) No 883/2004 and Regulation (EC) No 987/2009 which regulate the procedure for its implementation. In accordance with the principle of single applicable, affirmed in the new Regulations, a person pursuing an activity as an employed or self-employed person in a Member State shall be subject to the legislation of that Member State. Regulation No 883/2004 determines as applicable the legislation of the Member State where the insurance installments are due, including those for activities and income coming from other Member States. Special rules pertaining to employed and self- employed persons temporary posted in another Member State are introduced in Title II of the Regulation. These rules stipulate that employed and self- employed persons continue to be subject to the legislation of the posting country. In particular, Art.12 (1) of Regulation (EC) No 883/2004 states that a person who pursues an activity as an employed person in a Member State on behalf of an employer which normally carries out its activities there and who is posted by that employer to another Member State to perform work on that employer's behalf shall continue to be subject to the legislation of the first Member State, provided that the anticipated duration of such work does not exceed twenty-four months and that he is not sent to replace another person. This special rule is applicable only if the duration provided does not exceed twenty-four months, as stated in paragraph 2 of the article. Interpretation No 20-15-103 from 11 March 2011 regarding the issuance of attestation A1 for posting of workers in Germany of the National Revenue Agency clarifies the conditions for the application of the legislation. The Interpretation lists the following mandatory requirements:
- The posted person shall be subjected to the legislation of the posting state by reason of him carrying out an activity as an employed person on behalf of the employer who is posting him;
- The posting employer shall carry out his activity usually on the territory of the posting state;
- Maintaining of direct relation between the employer and the posted person; 4
- The anticipated duration of work shall not exceed 24 months;
- The posted person shall not be sent to replace another person.
As regards to the second requirement, Interpretation No 20-15-103 of the National Revenue Agency clarifies that the posting employer shall usually carry out his activity on the territory of this Member State. In order to establish whether a said employed usually carries out his activity on the territory of a said state, certain criteria are applied to the particular case. Among these criteria are the place where the posting undertaking has its registered office and administration; the number of persons employed in the said state, whereby the presence of only administrative staff on the territory of the posting country does not meet the requirement; the place of conclusion of the employment contracts and the employment law applicable to them; the realized total turnover achieved by the undertaking for the previous 12 months in comparison with the turnover realized on the territory of the said state; the place where the majority of contracts with clients are concluded; the length of time an undertaking is established in the posting Member State. In terms of the second requirement mentioned above regarding the realized total turnover on the territory of the Member State of the posting undertaking, lack of such turnover excludes carrying out of activity on the territory of the posting state. On the other hand, the Interpretation of the National Revenue Agency adds that such realized turnover in the posting Member State amounting to 25% of the total turnover realized would be a sufficient indicator. In accordance with art.14 (10) of Regulation No 987/2009, the anticipated future state during the following 12 calendar months is also taken into consideration. For the application of the legislation of the posting Member State in cases of art. 12 (1) of the Regulation No 883/2004, issuance of attestation A1 for applicable legislation on the basis of arts. 88- 90 from the National Tax and Social- Insurance Procedure Code, is required. According to art. 89 of the Code the document shall be issued on a request by the person concerned, submitted to the competent territorial directorate by electronic means or dispatched through a licensed or registered postal operator. The request is submitted in an approved form. It is required that the evidence necessary for the issuance of the document is attached to the request. Provided that the relevant procedure for the submission of the request has been followed, art. 90 stipulates issuance of the document within seven days after receipt of the request, unless a shorter time limit is provided for, or where the request is submitted to another territorial directorate in which case the period for the issuance of the attestation is 14 days, after the receipt of the request. The attestation shall be received at the territorial directorate where the request has been submitted or alternatively at an exact address in case of such address has been indicated by the person concerned. The document issued certifies that for a period of 24 months, indicated therein, the posted in another Member State of the EU person continues to be subject to the Bulgarian legislation. If after a verification of the data and analysis of the concrete factual situation it is determined that the requirements mandatory for the issuance of attestation A1 are not present, the competent revenue institution may issue a reasoned refusal for the issuance of attestation of A1. According to art.91 of the Code, the refusal to issue the requested document shall be communicated within 7 days after the issuance of the said refusal, whereby non- pronouncement in due time on a request shall be presumed as a tacit refusal. According to arts. 92 – 97 of the Act, administrative and judicial appeal of the refusal are possible, whereby a decision of the administrative court is final. As Interpretation No 20-15-103 of the National Revenue Agency specifies, attestation A1 does not constitute a work permit within the EU and refusal for its issuance does not mean that the employing undertaking cannot post the person concerned to work on his behalf on the territory of another Member State. Rather, it means that this person concerned cannot remain subject to the Bulgarian legislation. As a result, the main rule in art.11 (3) (a) of Regulation No 883/2004 becomes applicable. In practice, that means that the legislation of the Member State in which the employed or self- employed person carries out his activity and its social- insurance system would be applicable to him. In such cases, there are consequences for the posting undertakings. According to art.21 of Regulation No 987/2009, an employer who has his registered office or place of business outside the competent Member State shall fulfil all the obligations laid down by the legislation applicable to his employees, notably the obligation to pay the contributions provided for by that legislation, as if had his registered office or place of business in the competent Member State. The Regulation stipulates that an agreement between the employer and the employee according to which the latter would fulfil the employer’s obligations on his behalf as regards the payment of contributions. In case of such agreement, the employer is obliged to send notice of the agreement to the competent institution of that Member State.