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Social security and taxes when posted from Canada to Germany
Learn all about the social security agreement (60-month rule), compulsory health insurance and double taxation.
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Pension coordination: How to remain in the Canada Pension Plan (CPP) for up to 60 months through the bilateral agreement.
Special case Quebec: What special considerations apply to secondments from the province of Quebec and the QPP.
Closing insurance gaps: Why Canadian Medicare does not apply in Germany and how compulsory health insurance is regulated.
Tax security: How the double taxation agreement (DTA) protects your company from multiple tax burdens.
1. What social security agreements exist between Canada and Germany?
2. Pension insurance for postings from Canada to Germany
3. Health and long-term care insurance for postings between Canada and Germany
4. Taxes on employee secondments from Canada to Germany
5. FAQ on postings from Canada
6. Conclusion: Posting from Canada
1. What social security agreements exist between Canada and Germany?
The central agreement between the Federal Republic of Germany and Canada entered into force in 1988 and primarily regulates the coordination of their pension systems . Its aim is to ensure that employment histories spanning both countries do not result in disadvantages regarding future pension payments. Since Canada is a federal state, there is also a special feature: in addition to the agreement with Canada as a whole, there is a separate, almost identical agreement with the province of Quebec, which administers its own pension system (QPP).
These agreements ensure that insurance periods from both countries can be combined to fulfill waiting periods. However, they do not cover all branches of social security. While pension insurance is comprehensively coordinated, areas such as unemployment or health insurance remain largely unaffected. For companies, this means they must individually assess what additional coverage is necessary for seconded employees to maintain their usual standard of living.
2. Pension insurance for postings from Canada to Germany
A key advantage of the existing agreements is the provision for temporary secondment from Canada to Germany. Employees sent to Germany by their Canadian employer for a limited period can remain in the Canadian pension system ( Canada Pension Plan or Quebec Pension Plan) for up to 60 months . This prevents mandatory transfer to the German pension insurance scheme and allows for continuous contributions in their home country. The necessary secondment certificate must be obtained in advance from the Canadian authorities (CRA or Retraite Québec) to prove exemption from mandatory German insurance.
A prerequisite for remaining in the Canadian system is that the employment relationship with the Canadian company continues and the work in Germany is limited in advance. Should the secondment exceed the five-year limit, an exemption agreement can be reviewed through the German Liaison Office for Statutory Health Insurance Abroad (DVKA) . Without a valid certificate, contributions to the German pension insurance scheme are due for both the employer and the employee , which can lead to a fragmentation of pension entitlements.
3. Health and long-term care insurance for postings between Canada and Germany
Since social security agreements do not cover health and long-term care insurance, Canadian expats posted to Germany are generally subject to German law. This means that they are usually required to have statutory health and long-term care insurance in Germany . The Canadian system ( Medicare ) does not provide coverage abroad, making seamless integration into the German system or adequate insurance coverage essential.
Companies and employees should exercise particular caution here: Since proof of continuous health insurance coverage is required for a visa (or residence permit) in Germany, the Canadian provincial health insurance system (e.g., MSP or OHIP) is insufficient. If the employee is exempt from mandatory insurance due to high income, they must take out comprehensive private health insurance that meets German legal requirements.
4. Taxes on employee secondments from Canada to Germany
There is also a tax treaty between Canada and Germany, which is very closely based on the OECD Model Tax Convention . This is typical for almost all agreements that Germany concludes with other industrialized nations. Nevertheless, as with any bilateral treaty, there are specific adjustments and "Canadian" or "German" peculiarities.
In principle, the following rules apply under tax law between Germany and Canada (international tax law):
Right to tax: Income from work or real estate is primarily taxed where the work is done or the property is located ( place of activity/location principle ).
Withholding tax cap: For dividends and interest, the source country (e.g. Canada) only withholds a reduced rate (usually 15% ), which is credited against the recipient's own tax in Germany.
Avoidance of double taxation: Germany prevents double taxation either by crediting the Canadian tax or by exempting the income (subject to progression).
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5. FAQ
Do I have to pay pension insurance contributions in Germany if I am posted from Canada?
Not necessarily. If the posting is limited in advance and does not exceed 60 months, you can remain in the Canadian system (CPP/QPP) upon application. This requires a posting certificate from the Canada Revenue Agency (CRA).
Is my Canadian Health Card (Medicare) also valid in Germany?
No. The social security agreement between Canada and Germany does not include health insurance. Employees posted abroad generally need to have statutory or private health insurance in Germany to demonstrate visa-compliant coverage.
What happens with assignments that last longer than 5 years?
After 60 months, insurance coverage is generally mandatory in the host country (Germany). In justified exceptional cases, an extension agreement can be arranged through the DVKA in Germany and the relevant Canadian authority.
Where do I pay taxes if I work in Germany but am employed in Canada?
According to the double taxation agreement (DTA), the right to tax primarily lies with the country of activity, Germany. However, there are exceptions (e.g., the 183-day rule) if certain conditions are met.
6. Conclusion
The secondment of skilled workers from Canada to Germany offers a reliable legal framework thanks to long-standing bilateral agreements, but it also presents some pitfalls in the details. While pension insurance is well-coordinated through the 60-month rule , health and unemployment insurance often pose a challenge, as they are not covered by the social security agreement. Early application for the secondment certificate and a precise tax review under the double taxation agreement are essential for companies to avoid compliance risks and unnecessary costs for both sides.
List of Sources (Paywall)
[1] Federal Ministry of Labour and Social Affairs (BMAS): Overview of the social security agreement between Germany and Canada.
[3] Canada Revenue Agency (CRA): CPT17 – Certificate of Coverage under the Canada Pension Plan Pursuant to Article 6 of the Agreement on Social Security between Canada and Germany.
[5] Retraite Québec: The Social Security Agreement with Germany: Coverage for seconded workers from Québec.