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      A ruling by the Court of Justice of the European Union (CJEU) provides legal certainty that the threshold for determining “substantial work” in the worker’s country of residence can only be established by a quantifiable calculation of working time and/or remuneration.  Furthermore, the CJEU clarifies that the assessment of substantial work is forward-looking over the next 12 months.  This is important for determining the applicable social security rules in a multi-state work situation.

      On 4 September 2025, the CJEU ruled in case C-203/24 Hakamp1 that, for workers who work simultaneously or alternately in two or more countries (multi-state workers), the calculation of the 25-percent threshold may only take into account working time and/or remuneration.  Other circumstances, such as the country of residence, may not be considered. 

      WHY THIS MATTERS

      The CJEU ruling removes ambiguity and harmonizes the approach to social security coverage for multi-state workers by clarifying that substantial work must be based exclusively on quantifiable criteria: working time and/or remuneration.  No other criteria may be taken into account.

      Companies whose employees work in multiple EU/EEA countries must make sure they accurately track working time and earnings in each country, as these figures will determine employees’ social security coverage when they do not reside in the same country where the employer is established. 

      The Case in Brief

      Case C-203/24 Hakamp concerns a resident of the Netherlands, who worked as a skipper for a Liechtenstein-based employer, performing his duties in the Netherlands, Belgium, and Germany during 2016.

      The Dutch Social Security Institution (Sociale Verzekeringsbank, SVB) determined that Dutch social security legislation applied to the employee, arguing he performed a "substantial part" of his work in the Netherlands. In the calculation of the substantial work, the SVB did not only take account of the log-books that showed that work in the Netherlands amounted to 22-24 percent, but also took account of other factors (like residence, vessel registration, employer location).  The employee objected to the decision by the SVB and argued that other factors should not be considered in the calculation of substantial work in the country of residence.

      Ruling

      • The CJEU ruled that only working time and/or remuneration should be considered when determining if a substantial part of work is performed in the member state of residence.  Other circumstances (such as residence, vessel registration, employer location, etc.) must not be taken into account. 
      • The threshold for a "substantial part" is at least 25 percent of the employee's total working time and/or remuneration in the state of residence.  The assessment must be based on the expected situation in the following 12 calendar months from when the employee begins working in two or more member states.  If the 25-percent threshold is not met, the applicable social security law is that of the member state where the employer is established.
      • Responsible authorities for social security in EU member states do not have discretion to adopt their own interpretations for how substantial work is calculated. 

      KPMG INSIGHTS

      The ruling emphasizes that social security authorities in the EU must strictly adhere to the legal requirement that the calculation of “substantial work” when multiple states are concerned is based solely on working time and/or remuneration.  Local authorities cannot apply their own interpretations that deviate from this requirement. 

      KPMG can assist with compliance reviews, process optimization, and support in the preparation of A1 certificate applications for social security coverage.

      Employers may consider such steps as:

      • Auditing current tracking and reporting of working time and remuneration for mobile employees.
      • If necessary, updating internal policies and systems to reflect the clarified requirements for the calculation of substantial work.
      • Seeking expert advice for complex cross-border employment situations where employees who work in multiple EU/EEA countries must make sure they accurately track working time and earnings in each country, as these figures will determine employees’ social security coverage when they do not reside in the same country where the employer is established. 
      FOOTNOTE:

      1  Court of Justice of the European Union: Case 203/24 Hakamp, 4 September 2025, on the InfoCuria website.

      Contacts

      Daida Hadzic
      Daida Hadzic

      Director, Washington National Tax – Global Mobility Services

      KPMG in the U.S.

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      The above information is not intended to be “written advice concerning one or more federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230 as the content of this document is issued for general informational purposes only.

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