Applicability of the law of the state of residence to the entire income of a self-employed person, even if parts of it are earned abroad

Facts

German national [H.] was mayor in Germany from 1981 to 1997. Since 2003, he has been resident in Switzerland and is registered as self-employed with the Compensation Fund of the Canton of St. Gallen. The Compensation Fund determined the personal contributions of [H.] for the years 2005 and 2006, taking into account his income from self-employment earned in Germany.

[H.] filed a complaint against these rulings and argued that his income from self-employment earned in Germany must be disregarded for the assessment of AHV contributions according to Art. 14e of Regulation (EEC) No. 1408/71, as he has held the status of a German civil servant for life since his former position as mayor.

Considerations

The Federal Court dismissed the complaint. It stated that Art. 14e of Regulation 1408/71 is only applicable to persons actively employed as civil servants. Since [H.] was no longer considered an active civil servant after leaving office, he did not fall under this special regulation.

Rather, according to Art. 14a(2) and Art. 14d(1) of Regulation 1408/71, the law of the state of residence, Switzerland, is applicable for the collection of contributions, according to which the entire income from self-employment, including that earned in Germany, must be taken into account.

Any potential reduction…