New Swedish-Japanese social security convention on pensions

What is a social security convention?
Sweden has concluded social security conventions with a number of states worldwide. The purpose and effect of a social security convention is to ensure that an individual is covered by social security, also when working in one or multiple states outside of his/her home state. Within the European Union, regulation 883/2004 stipulates the terms. For non-EU states, Sweden has bilaterally entered into social security conventions, so called “convention countries”.

When is the convention with Japan entering into force?
The convention, which mainly concerns the treatment of pensions, was signed by both states on 11 April 2019.

Subsequently, on 1 June 2021, the Swedish Government sent a bill to the Swedish Parliament, requesting its approval of the convention. If the Swedish Parliament approves the bill, the convention will be applicable as Swedish internal law.

The convention will enter into force after three months has passed from when both of the states announce that the convention has been approved by their respective parliament.

What is the content of the convention with Japan?
The convention between Japan in Sweden only covers the pension part of the social security system. Regarding other parts of social security (such as child benefits and parental allowance), internal law in the respective state should be applied.

An important part of the convention, is that both states are obliged to consider periods spent in the other state, when assessing whether an individual fulfils the requirement for certain state pension schemes. For Swedish nationals, this means that an individual’s stay in Japan can be considered when assessing the right to receive Swedish supplementary pension (Sw: “tilläggspension”).

This type of provision is called a totalization-provision, which can also be applied in relation to if a person suffers an accident in one of the countries, and later wants to be compensated by relevant social security insurances in the other state. Applied to a Swedish context, this means that an individual can suffer an accident while working in Japan, and later be entitled to Swedish sickness compensation (Sw: sjukersättning), and activity compensation (Sw: aktivitetsersättning).

What other effect will the convention have?
Moreover, the treaty will imply that businesses will at a lower degree risk to be required to pay double social security fees (this only applies to the pension part of such) since the treaty stipulates that social security fees, in respect of pension, shall only be paid in one of the states. This means, for example, that Swedish nationals can remain in the Swedish social security system up to five years (for pension purposes), if they are posted to Japan.

In practice, this means that reduced social security fees will be due in both states.

Japan is Sweden’s second largest trade partner in Asia. During the last few years, it is clear that the bonds between the Swedish and Japanese economies have grown stronger. Therefore, this treaty is an important step on simplifying trade between the two countries, both for individuals and for businesses.

Please do not hesitate in contacting our GMS-group, if you have further questions, or if you are in need of consultation.

Anders Lagerholm
Partner, Global Mobility Services
Felix Schöttle
Global Mobility Services