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      The Council of the European Union published proposed changes to the EU rules on social security1 and, on 7 July 2026, the European Parliament formally adopted these revisions.2 The social security revisions will now need to be formally adopted by the Council of the European Union before they can proceed to implementation.

      The revisions are far-reaching and include amendments to: the coordination rules that determine which country is responsible for social security in cross-border working situations, updates to chapters dealing with social security, and changes to administrative procedures and cooperation between authorities in the EU member states.

      This alert focuses on the proposed changes affecting employees working in two or more member states (multi-state workers).

      For coverage of proposed revisions of rules and procedures for posted workers see KPMG Flash Alert 2026-120. 

      WHY THIS MATTERS

      Although the substantive changes to the multi‑state working rules are relatively limited, they are highly relevant for businesses with cross‑border workforces. The clarification that determinations of applicable social security legislation can remain valid for up to 24 months – and that A1 certificates may be issued for that period – gives employers more predictability and can reduce the renewal burden for commuters, regional roles, and cross‑border sales staff.

      The forthcoming elaboration on “registered office” and “place of business” for multi-state working is likely to affect groups relying on light‑footprint entities and may change which member state is treated as competent for social security, with cost and compliance implications.

      Unlike posting, the revised multi‑state rules do not introduce prior notification requirements or specific sanctions for failure to obtain an A1. With the new framework and extended A1 validity, it is sensible for employers to review their current population now, clarify which arrangements are posting versus multi‑state working, and test whether existing A1 positions and employer‑location assumptions remain defensible.

      Revised social security rules for multi-state working

      The legal rules on social security for multi-state workers are set out in Article 13 of Regulation (EC) No 883/2004 on coordination of social security systems. This provision determines which member state is responsible for social security coverage when an employee (or a self-employed person) works in two or more member states (multi-state working).

      Article 13 covers several situations, including cases where the employer is established in one member state and the employee resides in another, as well as situations involving multiple employment relationships in different cross-border working arrangements.

      Substantive rules – key changes to the rules for multi-state working

      1. Article 13 will be extended with a new section that determines applicable legislation for social security in a situation where an individual receives unemployment benefits in one member state while working in another. In such cases, the social security rules of the member state paying the unemployment benefits will apply, meaning that the employer must comply with the social security legislation of that member state.

        A typical example is a cross-border situation where an individual receives (often supplementary) unemployment benefits in one member state while working part-time in another. In practice, the legislation of the member state paying the unemployment benefits was already applied in these cases, but this approach is now explicitly confirmed in the provision on multi-state working.

      2. Another cross-border, multi-state working scenario covered by the rules is where an individual resides outside of the EU but works as a multi-state worker in the two or more member states. In such cases, the member state in which the individual carries out most of their activities is deemed to be their “country of residence” for social security purposes, and the applicable legislation is determined on that basis.

        However, this approach leaves several questions unanswered, such as: What happens if the individual works roughly the same amount of time in two or more member states? What occurs if the member state in which the major part of the activities is performed changes, particularly if this happens frequently? How should proof be provided and assessed, including how will related administrative processes be organized and monitored?

      3. Lastly, the substantive changes include a clarification of the concept of “employer” and “place of business” for multi-state workers. It is now specified that the registered office or place of business refers to the location where the company’s essential decisions are made and where the functions of its central administration are carried out. To determine the registered office or place of business, all relevant elements must be assessed.

      This clarification is intended to prevent letter-box companies from being treated as the relevant place of business when determining which member state is competent for social security purposes. At the same time, it may affect branches of foreign companies and holding companies, which often do not meet these criteria. Further details on the practical implications are expected in the updated EU Practical Guide on the Applicable Legislation,3 which is unofficially anticipated in 2027.  

      Procedural – key changes to the rules for multi-state working

      1. The application for an A1 certificate for social security coverage for multi-state workers must be initiated in the employee’s member state of residence, regardless of whether that member state’s legislation ultimately applies. Previously, the procedure referred only to the individual notifying the authorities of work in two or more member states. It is now clarified that the employer may also submit the application.

        In practice, this change will only affect the few member states that interpreted the previous wording strictly and allowed A1 applications for multi-state workers to be submitted only by employees or on their behalf. In some of these countries, the current practice is that the employee must sign the application form before it can be submitted, and it is reasonable to expect such signature requirements to be phased out.

      2. Furthermore, the assessment of work in two or more member states must be based on the situation projected for the following 12 calendar months. This means that an A1 certificate can be issued for a period of up to 12 months at a time.

      The amended wording clarifies that the determination of the applicable legislation for work in two or more member states applies for a maximum period of 24 months, after which the applicable legislation must be reassessed in light of the employee’s actual situation. This means that the A1 certificate can be issued for 24 months at a time.

      In practice, to reduce administrative burden, some member states with high volumes of A1 applications have already been issuing A1 certificates for multi‑state workers for periods of up to two years. The new provision, while insisting that each assessment is based on the following 12 months, effectively allows this practice to continue, provided that the overall determination does not exceed 24 months without a reassessment.

      KPMG INSIGHTS

      From a business perspective, these changes reinforce the need for a more deliberate strategy around cross‑border social security rather than treating A1s as a purely administrative step.

      For organisations with a sizeable population of commuters, regional roles, or other multi‑state workers, the possibility of issuing A1 certificates for up to 24 months creates an opportunity to streamline processes and reduce renewal cycles. However, it also raises the bar for getting the initial assessment right, particularly where employees work in complex patterns across several member states.

      The new rule for non‑EU resident multi‑state workers and the forthcoming clarification of “registered office” and “place of business” mean that group structures and reporting lines may directly influence which member state is competent for social security. Employers may wish to test whether their existing entity structures, contractual arrangements, and HR documentation support the desired social security outcome.

      The introduction of a prior A1 application requirement for posting – together with additional administrative consequences if an A1 is not requested before deployment – will likely make multi‑state working a relatively more attractive route in some cases. This increases the importance of correctly classifying situations as posting or multi‑state working and avoiding “re‑labelling” arrangements solely for administrative convenience or cost reasons.

      In practical terms, many organisations could benefit from:

      • mapping their existing multi‑state population and separating these cases from postings,
      • reviewing their current approach to A1s (who applies, when, and on what basis), and
      • stress‑testing their employer location and residence assumptions against the revised rules.

      Targeted reviews of higher‑risk or higher‑cost populations can help identify misalignments early and allow time to adjust policies, processes, or structures ahead of implementation.

      Court rulings sharpen the “substantial activity” test for multi‑state workers

      Although not part of the current legislative revisions, recent Court of Justice of the European Union case law remains highly relevant when applying both the existing and future rules on multi‑state working.

      In Case C‑743/23, GKV – Spitzenverband, the Court held that when determining whether “substantial activity” is performed in a member state, all working time must be taken into account on a global basis. This confirms that employers cannot limit the assessment to selected roles, contracts, or parts of an employee’s activity; the full picture of working time and/or remuneration must be considered.

      In Case C‑203/24, Hakamp, the Court further clarified that only objective criteria (such as working time and/or remuneration) may be used when calculating substantial activity. Subjective elements – for example, where management would “like” the center of activity to be – are not relevant.

      Together, these decisions reinforce that any assessment of substantial activity for multi‑state workers must be comprehensive, fact‑based, and grounded in verifiable data. Employers should consider confirming that their tracking of time, remuneration, and activity patterns is robust enough to support such assessments under both current and revised rules.

      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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