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Mobility: tax alert

October 2016

Social Security Agreement between India and Japan comes into force with
effect from 1 October 2016
Executive summary should now be able to obtain a Certificate of Coverage (CoC) for
A Social Security Agreement between India and Japan was signed their employees who are on assignment between India and Japan,
on 16 November 2012 and has now come into force with effect to remain covered under the home country social security
from 1 October 2016. legislation and claim exemption from the host country social
security legislation.
The agreement allows for certificates of coverage to be issued
initially for up to five years provided the relevant conditions are For example, Japanese employees sent by a Japanese employer to
met. India with a CoC will be exempt from Indian Provident Fund
contributions, provided they continue to make contributions to the
Background Japanese social security system.
The purpose of the Agreement is to ensure that employees and
their employers fall under one countrys social security law (India or Under the terms of the Agreement, a CoC can be obtained for up to
Japan), avoiding instances of double social security liability. five years. This period may be extended upon agreement between
the competent authorities of the two countries.
Under the Agreement, employees assigned between India and
Japan may remain within their home country social security For employees who are already on assignment on the date when the
scheme, provided the specific conditions under the Agreement are Agreement comes into force (1 October 2016), the period of five
met. years will commence from the date of entry into force (1 October
India now has signed and operational Agreements with the following
17 countries: Belgium, Germany, Switzerland, Denmark, Payment of benefits abroad
Luxembourg, France, South Korea, Netherlands, Hungary, Sweden, Benefits under the Agreement are payable in either country India
Finland, Czech Republic, Norway, Austria, Canada, Australia and or Japan.
now Japan.
For example, a Japanese employee will be eligible to receive
Key features of the Agreement between India and Japan benefits from the Provident Fund Scheme, at their option, either in
Benefits covered an Indian bank account or a Japanese bank account.
As regards India, the Agreement applies to the following:
Employees Provident Funds Scheme, 1952. Totalization of period of coverage
Employees Pension Scheme, 1995. The period of contribution in one country will, where necessary and
Employees Deposit-Linked Insurance Scheme, 1976. subject to the provisions of the Agreement, be added to the period
of contribution in the other country for determining the eligibility of
As regards Japan, the Agreement applies, among others, to: benefits.
National pension; and
Employee's pension insurance. Benefits of the Agreement between India and Japan
For Japanese employees working in India:
Certificate of Coverage Exemption from social security contributions in India.
Subject to certain conditions, both Indian and Japanese employers Early withdrawal of contributions from the Provident Fund
EY | Assurance | Tax | Transactions | Advisory
Scheme on completion of an Indian assignment (if contributions made in India).
Eligibility for benefits from the Pension Scheme (if contributions made in India).
About EY
Eligibility to receive refunds from the Provident Fund Scheme directly into foreign bank
accounts. EY is a global leader in assurance, tax,
transaction and advisory services. The insights
For Indian employees working in Japan: and quality services we deliver help build trust
Exemption from social security contributions in Japan (however, contributions to the and confidence in the capital markets and in
Japanese health insurance plan are still required). economies the world over. We develop
Continue to be considered as local employees in India As per Indias social security
outstanding leaders who team to deliver on our
scheme, Indian employees who are not eligible for any host country social security
benefits are not classified as International Workers. This means that such Indian promises to all of our stakeholders. In so doing,
employees are not subject to restrictive provisions which apply for International Workers we play a critical role in building a better
like the requirement to contribute on full monthly pay and the requirement to make working world for our people, for our clients and
higher contributions to Pension Scheme. for our communities.

Next steps
Employers who have assigned employees between India and Japan should take steps to claim EY refers to the global organization, and may
the applicable benefits under the Agreement. refer to one or more, of the member firms of
Ernst & Young Global Limited, each of which is a
In particular, in respect of Japanese employees on assignment to India, the employers should separate legal entity. Ernst & Young Global
take a number of steps depending on the status of the assignment: Limited, a UK company limited by guarantee,
For employees currently on assignment:
does not provide services to clients. For more
Begin the process of applying for a Certificate of Coverage in Japan.
Stop contributing to Indian social security immediately from the effective date of the information about our organization, please visit
Certificate of Coverage.
Continue reporting the employees in Form IW-1 but as excluded employees.
After the end of the assignment, claim a withdrawal from Provident Fund and Ernst & Young LLP is a client-serving member
Pension Scheme (as applicable).
firm of Ernst & Young Global Limited operating
For employees who have left India after the end of an assignment:
Claim a lump-sum withdrawal from the Provident Fund. in the US.
Assess the eligibility to obtain benefits from the Pension Scheme and claim the
applicable benefits. 2016 EYGM Limited.
For employees who will go on assignment to India on or after 1 October 2016: All Rights Reserved.
Obtain a Certificate of Coverage in Japan prior to the start of an assignment in India.
EYG no. 03217-163GBL
Provide information for new expatriate employees in Form IW-1 as excluded
employees. ED None

Employers should also review the terms of the assignment to ensure they will be eligible for
coverage under the Agreement and mitigate any corporate tax exposure. This material has been prepared for general
informational purposes only and is not intended
Similarly, in respect of Indian employees on assignment to Japan, the employers should to be relied upon as accounting, tax, or other
obtain a Certificate of Coverage in India, claim exemption from contribution to Japan professional advice. Please refer to your
National Pension Scheme and claim the applicable benefits from Japan Pension Scheme. advisors for specific advice.
However, Indian employees who obtain a Certificate of Coverage in India are still required to
enroll into the Japanese Health Insurance System either through companys health insurance
union or the local jurisdiction.

International Social Security Services

Mike Kenyon
Tel: +44 (0)20 7951 2583

Gary Chandler
Tel: +44 (0)20 7951 1280

Sonu Iyer
Tel: +91 11 4363 3160

Amarpal S. Chadha
Tel: +91 80 6727 5000

Junya Kubota
Tel: +81 3 3509 1672

2 Mobility: tax alert