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intra-corporate transfers (ICTs), contractual service providers’ employees, contractual service providers (professionals), and business visitors.

This labour mobility of natural persons (also known as “Mode 4”) has been considered not only by GATS but also by other free trade agreements (i.e. NAFTA, CETA, and ASEAN) across the world. Accordingly, when we look closely at the different types of postings in corporate migration, we can identify the three most common immigration categories as

intra-corporate transfers (ICTs),
contractual service providers’ employees, and
business visitors.

Generally, these three immigration categories share the following characteristics:

• Employees maintain employment contract and salary with the sending employer during the duration of their assignment in the country where their client is based.
• Applications for these categories are exempt of quotas and labour market tests.
• Such assignments are considered to benefit corporate business globally.

However, while the mobility of ICTs and business visitors has been facilitated over the years and benefit from identifiable immigration/entry routes available due to GATS and other free trade agreement commitments – it is still challenging for contractual service providers to send employees to client sites in many countries. They face a myriad of issues, including the following.

Immigration routes are not always available for them or not clearly identified in many jurisdictions. They may be more restrictive, requiring labour market tests or high qualifications. Validity may be more limited in duration than ICT routes, and dependents may not be eligible to accompany the primary holder.
To avoid these issues many service providers, not having a commercial presence in the country receiving the provision of services, often decide to address the above immigration issues by simply setting up their own company in the country receiving their services.

The service provider may not be comfortable with using their clients as immigration sponsors. Even in jurisdictions where contractual service provider immigration routes are more beneficial, are well identified, and/or the company receiving the services (the client) can sponsor the work permit applications – many contractual service providers may still decide to set up their own company in order to sponsor ICT or local work permits for their employees.

Where the service provider has substantial activity and a large number of clients in a foreign country, setting up a company to have a commercial presence makes perfect sense. However, where the provision of service is of a short nature or limited to one client, setting up a company may create more problems than solutions. Therefore, it is key to educate contractual service providers and create awareness on the existence of immigration routes available to them globally. To that end, we recommend the following.

Encouraging them to use the existing immigration routes for contractual provision of services, where available, instead of setting up new companies in the countries receiving the services. This is because there are potential non-compliance risks for service providers when they set up companies without real activity in the country where they are providing a service. These entities may be considered by authorities to be “letterbox” companies – only used to sponsor intra-company work permit applications for employees who, in reality, will provide a service at the client site in that country.  In the European Union (EU), article 8 of EU Directive 2014/66 on intra-company transfers states among grounds for permit application refusal is establishing host entities for the main purpose of facilitating the entry of intra-corporate transferees. Further, EU Directive 2014/67 enforcing Directive 96/71 specifically aims to tackle the illegitimate use of letterbox companies.

Reminding the contractual service providers that the client or company receiving the services will have responsibility over any employee working at their premises. Even when their client would not sponsor the work permits for service providers’ employees, they may still be subsidiarily responsible for their employment conditions and salaries. Again, in the EU, this responsibility is stipulated in Directive 2014/67 (the “Enforcement Directive“) on posted workers and additional employment co-responsibilities of the company receiving the services may be laid down in national employment laws.

 

General Overview of Contractual Service Providers Work Permits

When it comes to contractual service providers’ work permits, we find essentially three different immigration models employed across all jurisdictions.

1. Countries with specific service providers’ immigration routes
   

   This model is used by several EU member states: Austria (Betriebsentsendung and Entsendebewilligung), France (détachés hors mobilité intragroupe), Ireland (contract for service permits), and Italy (Foreign Service Provider (Non-Affiliated Companies)) are a few examples. There is no need for contractual service providers to set up a company in these countries. Instead, the client receiving the service could act as sponsor to the work permit of the foreign service provider’s employees. Whenever there is a provision of service to these countries, these immigration categories should be used.

2. Countries offering the same immigration work permit category for both contractual service providers’ employees and ICTs

   Several other EU member states still share the same national scheme for ICTs (provided they do not qualify for the EU ICT) and contractual service providers’ employees: Spain, Belgium, Cyprus, Denmark, and Finland. This is also the case in most of South American countries. Both short- and long-term immigration routes are available for foreign assignees, regardless of whether they are ICTs or Contractual Service Providers’ employees. Again, according to this immigration model, the company receiving the service or the client can sponsor the work permits.

3. Countries who do not offer any specific long-term service provider work permit
   

   These countries only provide short-term business visitor visas for contractual services lasting up to six months. This immigration model, aiming to protect the internal labour market, is preferred by high volume Anglo-Saxon countries such as Canada, the United Kingdom, the United States, and Australia. Therefore, contractual service providers may only be able to provide long-term services (over six months) by setting up their own entity in these countries.
   

 

After Sales Work Activities

A special mention here is appropriate regarding after sales work activities. Even if considered to be provision of services of a short nature, these type of services may not require a work permit due to GATS or other free trade agreement commitments globally. After sales work is activity when service providers’ employees are sent to a foreign country in order to fulfil contractual obligations post-sale of short nature. Examples are repairs, installation, adjustment, disassembly, or training in connection with the purchase of equipment or machinery.

Fortunately, many countries across different regions allow after sales work through either specific short-term routes, tourist/business visas, or even visa-exempt provisions. As examples of short term routes: Thailand has an urgent work permit, Saudi Arabia offers a work visit visa, Taiwan has a contract fulfilment work permit, Colombia has the PIP-7 permit, and Brazil offers the NR3 authorization. China (M Visa), Turkey (AMS Visa), and South Africa (visitor’s visa 11(2)) provide for after sales work on tourist/business visas.

Non-EU contractual service providers may be able to send their non-EU employees for after sales work in the EU; in countries such as Italy and Denmark on Schengen visas or Schengen visa-exempt. Also, depending on nationality, some EU countries (such as Germany, Bulgaria and the Czech Republic) provide streamlined short term work permits.

 

NEXT MONTH: In Part 2, we examine the role of the important Vander Elst ruling in the provision of services in Europe.

 

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