Double taxation may also apply to U.S. citizens and residents who work for foreign subsidiaries of U.S. companies. This is likely the case when a U.S. company has followed the usual practice of entering into an agreement with the Treasury, pursuant to Section 3121(l) of the Internal Income Code, in order to provide social security coverage to U.S. citizens and residents employed by the subsidiary. In addition, U.S. citizens and residents who are self-employed outside the U.S. are often subject to a dual social security requirement, as they remain insured under the U.S. program, even if they do not have a business activity in the United States.
Although the agreements with Belgium, France, Germany, Italy and Japan do not use the residence rule as the primary determinant of coverage of self-employment, each of them contains a provision guaranteeing that workers are insured and taxed in only one country. For more information on these agreements, click here on our website or by writing to the Social Security Administration (SSA) in the “Conclusion” section below. Workers who have shared their careers between the United States and a foreign country are sometimes not entitled to retirement, survivors` or disability benefits (pensions) from one or both countries because they have not worked long enough or recently enough to meet the minimum requirements. Under an agreement, these workers may be entitled to partially U.S. or foreign benefits based on combined or “added” coverage credits from both countries. The agreements also have positive effects on the profitability and competitive position of companies with foreign activities by reducing their operating costs abroad. Companies that have expatriate staff are encouraged to use these agreements to reduce their tax burden. To qualify for benefits in the United States Social Security Program, a worker must have earned enough work credits, known as coverage quarters, to meet certain “insured status requirements.” For example, a worker who reaches age 62 in 1991 or later typically needs 40 calendar quarters to be insured for old-age benefits. If a worker has some U.S.
coverage but is not sufficient to qualify for benefits, the SSA counts, under a tabling agreement, the periods of insurance that the worker has earned under a contracting country`s social security program. Similarly, a country that is a party to an agreement with the United States will consider a worker`s coverage under the U.S. program when necessary to qualify for that country`s social security benefits. If the combined credits in both countries allow the worker to meet the eligibility conditions, then a partial benefit may be paid depending on the share of the worker`s total career completed in the paying country. The target of all the U.S. The aggregation agreements aim to eliminate dual social and tax coverage, while maintaining coverage for as many workers as possible in the system of the country where they are probably most attached, both at work and after retirement. Each agreement aims to achieve this objective through a set of objective rules. Any alien who, under a totalization agreement, wishes to apply for exemption from U.S.
Social Security and Medicare taxes must obtain a certificate of coverage from the social security authority of their home country and submit that certificate of coverage to their employer in the United States according to the procedures set out in Income Procedures 80-56. 84-54 and Revenue Ruling 92-9. Another procedure is provided for in these revenue procedures for a foreigner who is unable to obtain a cover certificate from his country of origin. 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. . . .