A general misunderstanding about the U.S. agreements is that they allow doubly covered workers or their employers to choose the system to which they will contribute. This is not the case. In addition, the agreements do not alter the basic rules for covering the social security legislation of the participating countries, such as. B those that define covered income or covered work. They exempt workers from coverage under the scheme of either country only if, otherwise, their work was covered by both schemes. Since the 1970s, U.S. negotiators have entered into bilateral agreements with 28 major trading partners to coordinate social security and benefit plans for people who live and work in more than one country during their working lives. They are known as “totalization” agreements and resemble operating and structural contracts and are legally classified as agreements between Congress and the executive branch in accordance with the law.
The agreements have three main objectives: to enable the elimination of double taxation of income, the protection of benefits for workers who have shared their careers between the United States and another country, and the full payment of benefits to residents of both countries. This article briefly describes the totalization agreements, tells their story, and examines the proposals for modernization and improvement. To prove to the tax authorities of a host country that a worker is exempt from paying that country`s social security taxes, he or she must keep a certificate of coverage (or his employer) and present it if necessary. The certificate is a document issued by the country whose laws continue to apply to that person in accordance with the rules of the agreement. The agreements define the bodies responsible for issuing such certificates in each country. Although social security agreements vary in terms of coverage, their intent is similar depending on the terms agreed by the two signatories. The main objective of such an agreement is to eliminate the double social security contributions incurred when a worker from one country works in another country and is required to pay social security contributions to both countries whose income is the same. Additional special rules generally apply to seafarers, flight crews, diplomats, government employees and persons whose employers have not transferred them directly from one tabinized country to another, but from one tabinated country to a third country before a subsequent transfer to the other tabination country. The partner countries of aggregation may also agree, by mutual agreement, on specific derogations for individual workers or entire classes of workers.
However, for the United States to accept a particular exception, two fundamental principles must be respected: the person must be insured in only one country and the person must retain coverage in the country with which he or she will most likely have the greatest economic connection. Examples of frequent coverage situations are available in Appendix A. The self-employed rule in U.S. agreements generally applies to employees whose operations in the host country are expected to last 5 years or less. The 5-year limit for leave for the self-employed is much longer than the limit normally provided for in agreements concluded by other countries. Aggregation agreements are slightly different from tax treaties. Totalization agreements are comprehensive tax treaties that are adopted to eliminate double taxation of Social Security and Medicare taxes in the United States. .