After a long wait, the Hungarian-Turkish social security agreement took effect as of 1 April 2018. The parties agreed upon the terms of the agreement some 3 years ago, but the last notification needed for the agreement to enter into force was only received in 2018.
Why are social security agreements a good idea?
International conventions override national regulations. They can provide exemption from contribution payments in Hungary for certain employment constructions, while in other cases they can guarantee a longer exemption period, for foreigners working in Hungary for example. They clarify the calculation of employment periods that are important in connection with pensions for employees working in both states, and certain agreements cover the insurance not just for posted employees, but also for the family members accompanying them.
Thanks to the Regulation on the Coordination of Social Security Systems, the European Union has long since had standard rules on workers moving between Member States. Based on this coordination regulation it can be decided which Member State is responsible for the insurance of an employee working internationally, and so ultimately, where they have to pay contributions. If you are insured in one Member State, you are able to use basic health services in another Member State – subject to the restrictions in the regulation of course.
As with all other similar social security arrangements, the Hungarian-Turkish social security agreement applies similar rules for Hungary and the third country, in this case Turkey, as are applied in the “established” and efficient system between European Union Member States.
Situation without international agreement
Foreigners working in Hungary can be exempt from paying contributions not just based on international agreements, but also on the strength of Hungarian rules. Under the Hungarian system, foreign employees are exempt, i.e. they do not become insured in Hungary, if:
- they are posted to work in Hungary for a period not exceeding 2 years,
- at least 3 years has elapsed since the end of their last posting,
- their employer is a foreign company,
- they are a citizen of a third country,
- they are considered a non-resident in Hungary from a social security perspective.
If any of the afore-mentioned conditions are not met, for example if the posted employee concludes a local employment contract too, or less than 3 years has passed since their last posting, then they become insured in Hungary.
Key points of Hungarian-Turkish social security agreement
The basic principle underlying the Hungarian-Turkish social security agreement is that the laws of the country where the employee is in gainful employment must be applied. So as a general rule, a Hungarian working in Turkey for example is obliged to pay Turkish contributions.
Special rules apply to postings that do not exceed 24 months. In this case, the agreement “keeps” the posted employee in the social security system of the posting country. The 24-month exemption can be extended once, but the period of the whole posting may not exceed 5 years (60 months). Hence if a Turkish employee is sent to Hungary by a Turkish employer to work on its behalf for eighteen months, the person remains insured in Turkey. One key requirement for the exemption is that the posted individual cannot arrive to take the place of another posted employee.
Article 12 of the agreement provides an opportunity for the employer and employee to submit a joint – exemption-related – request, essentially in any case. This must be submitted to the authority whose regulations the parties want to be applied. Exemption is granted provided the person remains subject to the social security system of one of the countries, which must be proven with a certificate from the competent authority in that country.
To our understanding, this article enables exemption to be requested in the case of special employment structures too for example. During a posting it can happen that the host company signs a local employment agreement with the posted individual as well. In this case and based on the exemption provisions the posted employee can no longer be exempted; however, a request can be submitted based on Article 12 and the exemption will apply if approved by the authorities.
In accordance with the Hungarian-Turkish social security agreement the insurance periods spent while working in Hungary and in Turkey have to be added up.
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