One of the
frequently asked questions is whether a third-country national who has been
admitted to the territory of a Member State in the framework of an
intra-corporate transfer, may work on customer site.

The
question is often raised in the context of companies
whose controlled branches or subsidiaries, do not have a genuine economic activity
in the Member State of establishment.

The concept of
economic activity

Although
the ICT Directive is silent in regard to that concept, the European Court of
Justice has ruled on the characteristics of an “economic activity”:

·       –the
offering of goods or services on a given market.

·       –where
the activity could at least in principle be carried on by a private undertaking
in order to make profits.

It must be
ascertained whether the company established in the host MS, offers goods or
services on the EEA market.

A deeper
assessment would probably satisfy the meaning of “economic activity” in the
sense of the ICT Directive, can be carried out on grounds of “economic
necessity” (the “economic substance” doctrine applicable in tax law). Is the
company established in the host MS necessary from an economic perspective in
the overall corporate structure of the group? Where the very purpose of the
presence in the host MS is to facilitate immigration procedures, the response
should be negative.

A different
approach would be to apply by analogy the definition and criteria laid down by
Article 4 Directive 2014/67/EU, to determine whether an undertaking posting
workers genuinely performs substantial activities, other than purely internal
management and/or administrative activities. The ICT Directive precludes
establishment of host entities for the main purpose of facilitating the entry
of intra-corporate transferees. Such undertaking would perform only purely
internal management activities in the sense of Directive 2014/67/EU.

Work at customer site

It must be
first observed that the ICT Directive does not confer an automatic right to
work on customer site.

Pursuant to
Article 17 (c), the intra-corporate transferee has the right to exercise the
employment activity in any host entity belonging to the undertaking or the
group of undertakings, in the first MS.

Pursuant to
preamble 36, the directive “should not
prevent intra-corporate transferees from exercising specific
activities at the sites of clients within the Member State where the host
entity is established in accordance with the provisions applying in that Member
State with regard to such activities”.

The
provision contains two conditions and can be enforced only on grounds of
implementing national legislation. Provided that the national legislation is
silent, the provision is not directly applicable.

Preamble 24,
introduces two criteria restricting the application of the ICT Directive :

·        
where
the host entity was established for the main purpose of facilitating the entry
of intra-corporate transferees and/or

·        
the
host entity does not have a genuine
activity.

The
definitions of “manager”, “specialist” and “trainee employee” provided for by
Article 3, determine an intrinsic connection between the worker transferred and
the host entity (“the entity to which the
intra-corporate transferee is transferred”).

Articles 7
and 8 provide for the grounds for rejection, withdrawal or non-renewal of ICT
permits, and inter alia, determine the value of the restricting criteria above
referred to:

·        –where
the host entity was established for the main purpose of
facilitating the entry of intra-corporate transferees, MS shall reject an application,
withdraw or refuse to renew an ICT permit.

·        –where
the host entity does not have an economic activity, MS may reject an application, withdraw or refuse to renew an
ICT permit.

Lastly,
Article 23.7(b), provides for the possibility to impose sanctions against the
host company where “the intra-corporate
transferee permit or the permit for long-term mobility is used for purposes
other than those for which it was issued”.

Where
relevant, it is possible to bring material evidences stating that the host
entity, although does not have an economic activity, was not established for
the main purpose of facilitating the entry of intra-corporate transferees (e.g.
the host entity was established before the ICT Directive was proposed, in view
to facilitate contacts with customers located in Europe, facilitate financial
transactions in the EEA market etc).

However,
where the workers are transferred under the ICT Directive, with the view to
habitually working at customer site, the national competent authority and any
Court, will probably attach a little importance to such evidences.

In a recent
ruling (C-359/16), the ECJ has upheld the overriding value of the principle of
prohibition of fraud and abuse of rights:” The principle of prohibition of fraud and abuse of rights, expressed by
that case‑law, is a
general principle of EU law which individuals must comply with. The
application of EU legislation cannot be extended to cover transactions carried
out for the purpose of fraudulently or wrongfully obtaining advantages provided
for by EU law”

The ECJ has
recalled that “findings of fraud are to
be based on a consistent body of evidence that satisfies both an objective and
a subjective factor”.

Following
the ECJ’s reasoning, in the present case, the objective factor consists in the
fact that the conditions for obtaining the ICT permit are not met.

The transferee
must provide inter alia evidence that the host entity and the undertaking
established in a third country belong to the same undertaking or group of
undertakings. The host entity means the entity to which the worker is
transferred. Where the work is habitually carried out at the customer site, the
latter’s establishment represents the genuine host entity.

The
subjective factor corresponds to the intention of the sending company to
circumvent the conditions for the issue of the ICT permit, with a view to
obtaining the advantage attached to it.

The
fraudulent application for an ICT permit (or obtention of the latter), results
from a deliberate action (i.e. the misinterpretation of the real situation) and
from a deliberate omission (i.e. the concealment of relevant information), with
the intention of evading the conditions governing the application of the ICT
Directive.

Conclusion

Regardless
the reason for which the host company was established and the national
legislation that might authorise work on customer site and eventually disregard
the fact that the host entity does not have an economic activity, applicants
may not disregard the principle of prohibition of fraud and abuse of rights (a
general principle of EU law).  

Work on
customer site implies habitual activity carried out at the premises of the
company for which the ICT permit was applied for, and occasionally, specific
activities at the sites of clients in accordance with the provisions applying
in the host MS, with regard to such activities.

It can be
alleged that ICT permits fraudulently obtained, are non-declaratory in relation
to the rights associated to such permits.

 

 

This article is for informational purposes
only. Should you have any questions, please contact us ([email protected] ).