Totalization Agreement Social Security Administration

The agreements also have a positive effect on the profitability and competitive position of companies operating abroad by reducing their business costs abroad. Companies with staff stationed abroad are encouraged to use these agreements to reduce their tax burden. Upon entering into a totalization agreement, the United States and a partner country agree to coordinate social security and performance bonus rules for people who have worked in both countries during their working lives. Totalization agreements have three main objectives. First, double taxation of social security is abolished when a worker and his employer are required to pay social security contributions to two countries with the same income. Second, they help fill the gaps in coverage records for people who have divided their careers between two countries by combining or spending the coverage periods earned in each country. Finally, the totalization agreements allow benefits to be paid in full to residents of both countries. Although these three objectives do not constitute all totalization agreements, they are by far the most visible and have the most impact on businesses and workers. All totalization agreements have certain characteristics, but the complexity and variation of the social security laws of our partner countries make each agreement unique.

 1 The same applies to workers whose employer temporarily transfers them to a company that has an agreement with the Ministry of Finance under Section 3121 (l) of the internal income code. These companies are generally referred to as « affiliates » and must pay U.S. Social Security taxes on behalf of all U.S. citizens or residents employed by that subsidiary abroad. There are many nations around the world – Singapore and South Africa, for example – that do not participate in totalization agreements with other countries. The explanation for this point varies from country to country. The lack of agreement is usually due to one of the possible reasons: the United States currently has totalization agreements with the following countries: the United States has not immediately begun to conclude similar social security agreements; Instead, it entered into a series of friendship, trade and shipping (FCN) contracts with close allies and trading partners. Many fcn contracts provide that each country treats the nationals of the other country as it treats its own nationals when they are entitled to social benefits.11 However, it soon became clear that these FCN contracts did not adequately protect the social benefits rights of American emigrants and that many American workers sent abroad and their employers were forced to pay double social security contributions for the same income.

Only covered by a foreign country. If the worker is a foreigner who wishes to apply for exemption from U.S. Social Security and Medicare taxes on the basis of a totalization agreement, he must obtain a certificate of coverage from the social security authority of his country of origin and present such proof of insurance to his employer in the United States, in accordance with procedures 80-56, 84-54 and 92-9.