Teleworking between Czech Republic and Germany or Austria: changes in insurance system
The Czech Republic has concluded framework agreements with Germany and Austria concerning persons working remotely in the other country, i.e., teleworking. Both agreements are effective from 1 March 2023 and respond to current trends in working from home from abroad. The agreements increase the maximum scope of work for which an employee teleworking from another state can remain in the employer state’s insurance system.
According to general EU coordination rules, a Czech employer’s employee working from home in another EU/EEA member state is subject to the Czech insurance system if the scope of their work in the country of residence does not exceed the maximum limit of 25% of their total working hours or remuneration. Otherwise, such an employee shall be subject to the insurance regulations of the state of residence. For example, if an employee living in Germany works from home for a Czech employer for more than 25% of their working hours, they are subject to German insurance regulations. The Czech employer should thus verify their obligations in Germany (e.g., to register and to pay social security and health insurance premiums under German regulations into the German insurance scheme). According to the newly concluded framework agreements, it will be possible to apply a limit of up to 40% of working hours to keep an employee in the Czech insurance system.
What conditions need to be met?
The framework agreements apply to employees who work remotely (usually from home) for a Czech employer in Germany and Austria (or vice versa). The condition is that the employee has only one employer, that the work performed remotely has the same character as the work performed at the employer's registered office and is carried out through information technology. Thanks to these agreements, employees can remain in their employer's national insurance scheme if they work from home for up to 40% of their working hours and work the rest in the employer's country (i.e., not in other countries).
How to apply for an exemption?
The employee must apply to remain in their employer’s insurance scheme. If they fulfil the conditions of the framework agreement, they will be granted an exemption from the general EU coordination rules. Exemption applications shall be submitted with the relevant institution of the member state to whose regulations the employee concerned wishes to be subject. For the Czech Republic, this is the Czech Social Security Administration (CSSA). It will be possible to apply for an exemption for a period of up to two years into the future, even repeatedly.
If the employee carries out more than 40% of their work in the state of their residence, they are not covered by the framework agreements. However, they still have the right to apply for a general exemption under Article 16(1) of the EU regulation. However, there is no legal entitlement to such an exemption and the appropriate authorities of all member states concerned must agree to it.
An EU-wide agreement in preparation
Based on information available to us, similar agreements with other neighbouring countries (e.g., Slovakia and Poland) are not yet planned, as a framework agreement is being negotiated for all EU member states, allowing teleworking up to a maximum limit of 49.9%. The agreement is expected to enter into force on 1 July 2023.
Finally, please note that if a Czech company decides to allow its employee to work more from home from Austria or Germany (using the above agreements), it is always necessary to examine the related tax obligations that could arise for the Czech company in the given country (e.g., the obligation to keep payroll records, the risk of creating a permanent establishment, etc.).