What Is Social Security Totalization Agreement

Geschrieben am Donnerstag, April 15, 2021 | Kommentare: 0

Workers who have shared their careers between the United States and a foreign country may not be entitled to pensions, survivor benefits or disability insurance (pensions) from one or both countries because they have not worked long or recently enough to meet minimum conditions. Under an agreement, these workers may benefit from partially U.S. or foreign benefits on the basis of combined or „totalized“ coverage credits from both countries. 10 Although most agreements remove payment restrictions applicable to all residents of both countries, agreements with Austria, Belgium, Denmark, Germany, Sweden and Switzerland remove payment restrictions only for nationals of both countries or stateless persons and refugees residing in both countries. The United States has agreements with several nations, the so-called totalization conventions, in order to avoid double taxation of income in relation to social contributions. These agreements must be taken into account in determining whether a foreigner is subject to the U.S. Social Security Tax/Medicare or whether a U.S. citizen or resident alien is subject to the social security taxes of a foreign country. The single-family home rule in U.S. agreements generally applies to workers whose interventions in the host country are expected to last 5 years or less. The 5-year limit for leave for exempt workers is much longer than the limit normally set by agreements in other countries.

In order to eliminate the double taxation of taxes on social insurance and Medicare, the United States has entered into international agreements with 25 foreign countries (so-called „totalization agreements“). Totalization agreements exempt the federal Insurance Contributions Act (FICA) tax salaries, including social contributions and Medicare taxes, where a person`s income under a foreign country`s social security system is subject to similar taxes or charges for similar purposes. A similar exemption is due to taxes under the Employment Contributions Act (SECA). Totalization agreements, also known as bilateral agreements, eliminate dual social security (a situation that occurs when a person from one country works in another country and has to pay social security contributions to the two countries with the same income). Any totalization agreement contains rules that aim to allocate insurance coverage to a work force in a country where the workforce is more economically related. Agreements generally guarantee that the worker pays social security contributions to only one country, provided that the worker and the employer meet the procedural conditions of the agreement for obtaining an exemption from the other country`s social security contributions.

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