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Tax Totalization Agreement

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. As a precautionary measure, it should be noted that the derogation is relatively rare and is invoked only in mandatory cases. There are no plans to give workers or employers the freedom to regularly choose coverage that contradicts normal contractual rules. Any agreement (with the exception of the agreement with Italy) provides an exception to the territorial rule, which aims to minimize disruptions in the career of workers whose employers temporarily send abroad. Under this exception for “self-employed workers,” a person temporarily transferred to work for the same employer in another country is covered only by the country from which he or she was seconded. A U.S. citizen or resident, for example, who is temporarily transferred by a U.S. employer to work in a contract country, remains covered by the U.S. program and is exempt from host country coverage. The worker and employer only pay contributions to the U.S. program. Under these agreements, double coverage and double dues (taxes) for the same work are abolished.

Agreements generally guarantee that you only pay social security contributions to one country. You can also write to this address if you want to propose negotiating new agreements with certain countries. In developing its negotiating plans, the SSA attaches considerable importance to the interests of workers and employers who will be affected by potential 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. Under these agreements, double coverage and double dues are abolished for the same work. As a general rule, under these agreements, you are only subject to social security contributions in the country where you work.

However, if you are temporarily sent to work in a foreign country and your salary would otherwise be subject to Social Security in the United States and that country, you can generally only remain covered by U.S. Social Security. One of the general beliefs about the U.S. agreements is that they allow dual-coverage workers or their employers to choose the system to which they will contribute. That is not the case. The agreements also do not change the basic rules for covering the social security legislation of the participating countries, such as those that define covered income or work. They simply free workers from coverage under the system of either country if, if not, their work falls into both regimes.