Introducing a foreign tax exemption. To find that a worker`s wages are subject to U.S. Social Security and Medicare taxes, but are exempt from the foreign social security tax, the employer must obtain a “U.S. coverage certificate” from the SSA. To establish that a foreign worker`s wages are exempt from U.S. Social Security and Medicare taxes under a totalization agreement, the worker or employer should receive a statement from a social security officer or agency in the foreign country. 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. A totalization agreement is an agreement between two countries that prevents double social security contributions for the same income. At this point, the United States has active totalization agreements with 24 countries.
To find out which countries have reached an agreement with the United States, take a look at the IRS list of social security conventions. You will see that they are most often related to developed countries and not to emerging countries. A list of countries with which the United States currently has totalization agreements and copies of these agreements can be accessed under U.S. international social security agreements. Agreements to coordinate social protection across national borders have been commonplace in Western Europe for decades. This is followed by a list of the agreements reached by the United States and the effective date of each. Some of these agreements were then revised; The date indicated is the date on which the original agreement came into force. In 1973, the Minister of Health, Education and Welfare, Caspar Weinberger, and his Italian counterpart signed the first U.S. totalization agreement. Although the Italian government quickly ratified the agreement as a treaty, Congress had not yet adopted an approval status; That is why the United States has not been able to implement the agreement. After much deliberation, Congress passed amendments to the Social Security Act in 1977, which contained an authorisation statute allowing the agreement with Italy to enter into force12 Totalization agreements, also known as bilateral agreements, remove 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 both 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.