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.
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.