2 An exception to this rule is the agreement with Italy, which allows some transferred workers to choose the social security system to which they are subject. No other U.S. totalization agreement contains a similar rule. In addition to improving the social security of working workers, international social security agreements help ensure continuity of benefit protection for people who have received social security credits under the U.S. system and another country. When a U.S. employer sends a U.S. citizen or resident to work in a foreign country that does not have a totalization agreement with the U.S., the U.S. employer and worker are generally required to pay social security contributions in both countries. However, when a U.S. employer sends a U.S. citizen or resident to work in a foreign country with which the U.S.
has a totalization agreement, a double tax exemption is granted. In general, the totalisation agreements stipulate that 10 Although most agreements remove payment restrictions for all inhabitants of both countries, agreements with Austria, Belgium, Denmark, Germany, Sweden and Switzerland remove payment restrictions only for nationals of both countries or stateless persons and refugees residing in both countries. If you live abroad, you may have heard of agreements between the United States and your country, which are known as totalization agreements. You may also have heard that they are referred to as social security agreements. For American expats who live and work abroad, it is very important to know if the U.S. has a totalization agreement with your host country and the details of such an 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.
12 Meanwhile, the United States had also reached an agreement with West Germany, which was also on hold until the 1977 amendments were adopted. International social security agreements, often referred to as “totalization agreements,” have two main objectives. First, they remove the double taxation of social security, the situation that occurs when a worker from one country works in another country and is required to pay social security taxes to the two countries with the same incomes. Second, the agreements help fill gaps in benefit protection for workers who have shared their careers between the United States and another country. Since the 1970s, U.S. negotiators have entered into bilateral agreements with 28 major trading partners to coordinate social security coverage and social benefits for people living and working in more than one country. They are called “totalization agreements” and are similar in the function and structure of contracts and are legally considered to be executive agreements of Congress concluded in accordance with the law. The agreements have three main objectives: the elimination of double taxation of income, the granting of protection to workers who have shared their professional careers between the United States and another country, and the full payment of benefits to residents of both countries. This article briefly describes totalization agreements, tells their stories and discusses proposals to modernize and improve these agreements. The social security agreement between the United States and Hungary (“totalization agreement”) was signed on February 3, 2015 and came into force on September 1, 2016.