How Do Totalization Agreements Work

Other exceptions to the territoriality rule apply to the self-employed. Of these, the two most common are the transferred self-employed rule and the residence rule.3 The transferred self-employed rule provides, like the rule described above, that a self-employed person who temporarily transfers his or her employment from one country to another remains insured under the laws of the country from which he or she was transferred.4 The residence rule generally states that: that the laws of the country in which the person resides cover exclusively his self-employment, regardless of the duration of this stay. The United States has agreements with several countries, called tabination agreements, to avoid double taxation of income with respect to social security taxes. These agreements should be taken into consideration when it is established whether a foreigner is subject to U.S. Social Security/Medicare tax or whether a U.S. national or resident alien is subject to the social security taxes of a foreign country. The agreements allow SSA to add up U.S. and foreign coverage credits only if the worker has at least six-quarters of U.S. coverage. Similarly, a person may require minimum coverage under the foreign system for having attributed U.S. coverage to meeting foreign benefit eligibility requirements. Aggregation agreements tolerate derogations from the above-mentioned rules for determining the social security scheme of a given worker. If both countries agree to make an exception for a single worker, the country that has agreed to cover the worker in question shall cover that worker accordingly.

An example of an exception would be to extend a short-term stay in a country by a few months beyond the maximum period of five years provided for the application of the self-employed rule. An agreement could be reached between the two countries to ignore the additional three months the worker spent abroad. This would prevent the worker concerned from being subject to taxes from the country where he works. Instead, that worker would continue to be subject to the social security scheme of his country of origin. [9] The provisions to remove double coverage for workers are similar in all U.S. agreements. Each sets a basic rule that refers to a worker`s place of employment. Under this fundamental “rule of territoriality,” an employee who would otherwise be covered by both the U.S.

system and a foreign system is subject exclusively to the coverage laws of the country in which he or she works. If you have any questions about international social security conventions, call the Social Security Administration`s Office of International Programs at 410-965-3322 or 410-965-7306. However, please do not call these numbers if you wish to inquire about an individual entitlement to benefits. International social security agreements, often referred to as “totalization agreements,” have two main purposes. First, they eliminate double taxation of social security, the situation that occurs when a worker from one country works in another country and has to pay social security taxes to both countries with the same income. . . .