Bilateral Social Security Agreements and How They Affect US Expat Tax Liability
Over the course of the previous few decades, it’s been becoming more and more commonplace for US Citizens and Green Cad Holders to relocate to and find work in other countries. Today, there are thousands of international employees who earn income from 2 or more countries that habitually tax their residents’ salaries for Social Security contributions. For some US Expats, this means that you’re paying into at least 2 different Social Security Systems from the same income; this is known as dual taxation or dual Social Security liability.
Dual taxation does not only pose financial problems for individual taxpayers, it also affects international companies, as well. When expats are assigned in another country, both their employers and the expats themselves are required to make Social Security contributions for the work performed and revenue earned in another territory. In many cases, this means that US based and foreign companies with multinational resources wind up paying Social Security contributions on their employees’ behalf in both their resident country an the country in which expats are working on foreign assignments.
Fortunately for many international taxpayers, the United States has been working with other countries since the latter part of the 1970’s to formulate agreements that minimize the level of dual taxation to which taxpayers and multinational employer had been subject in the past. These are known as Social Security Agreements, and they stipulate the country to which Social Security contributions should be made in various circumstances.
Below is a list of countries involved in an active Social Security Agreement with the United States and the year in which eah agreement was signed.
| Country | Entry into Force |
|---|---|
| Italy | November 1, 1978 |
| Germany | December 1, 1979 |
| Switzerland | November 1, 1980 |
| Belgium | July 1, 1984 |
| Norway | July 1, 1984 |
| Canada | August 1, 1984 |
| United Kingdom | January 1, 1985 |
| Sweden | January 1, 1987 |
| Spain | April 1, 1988 |
| France | July 1, 1988 |
| Portugal | August 1, 1989 |
| Netherlands | November 1, 1990 |
| Austria | November 1, 1991 |
| Finland | November 1, 1992 |
| Ireland | September 1, 1993 |
| Luxembourg | November 1, 1993 |
| Greece | September 1, 1994 |
| South Korea | April 1, 2001 |
| Chile | December 1, 2001 |
| Australia | October 1, 2002 |
| Japan | October 1, 2005 |
| Denmark | October 1, 2008 |
| Czech Republic | January 1, 2009 |
| Poland | March 1, 2009 |
| Slovak Republic | May 1, 2014 |
| Hungary | September 1, 2016 |
If you are living and working in or otherwise deriving income from one of the previously listed countries, make surethat you take the proper steps to benefit from the active Totalization Agreement between your host country and the United States.
In order to take advantage of the terms outlined in the Totalization Agreement(s) between the countries from which you earn income, you will need to acquire a certificate of coverage from he country designated to receive your Social Security contributions through the agreement. For example, if you are in a country in which the Totalization Agreement stipulates that you should contribute to your host country’s Social Security System, you will need to get a certificate of coverage from that country’s Social Security Office to prove to the United States that you are exempt from US Social Security withholding.
Does a Social Security Agreement Help Me If I'm Self-Employed?
Yes! Self-employed expats are protected from dual Social Security liability in countries with an active Totalization Agreement just like regular employees.
Understanding Social Security Agreements
Social Security Agreements can be extremely complicated and difficult for the average taxpayer to understand.
To get help sifting through the terms of your country’s Totalization Agreement, contact a qualified international tax attorney or call Taxes for Expats.