1 The same applies to workers whose employer temporarily transfers them to a company that has an agreement with the Ministry of Finance under Section 3121 (l) of the internal income code. These companies are generally referred to as “affiliates” and must pay U.S. Social Security taxes on behalf of all U.S. citizens or residents employed by that subsidiary abroad. 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. The general principle of all totalisation agreements is that a worker, if equal, must pay taxes and should only be covered by the social security system of the country in which he works. This simple rule is called the territorial rule, that is, the territory in which a person works determines his or her tax debt. All other coverage provisions for totalization agreements are exceptions to this general rule.
Additional special provisions generally apply to seafarers, cabin crew, diplomats, government employees and persons whose employers are not directly transferred from one total country to another, but from one country of totalization to a third country before moving on to the other totalization country. If necessary, totality partner countries may also agree on specific exceptions for individual workers or entire workers. However, for the United States to accept a specific exception, two fundamental principles must be respected: the person must be registered in a single country and the person must retain coverage in the country to which he or she will most likely be most economically attached. Examples of frequent coverage situations can be found in Appendix A. Workers who have shared their careers between the United States and a foreign country may not be eligible for pension, survival or disability insurance (pensions) benefits from one or both countries because they have not worked long or recently to meet the minimum legal requirements. Under an agreement, these workers may benefit from partially U.S. or foreign benefits on the basis of combined or “totalized” coverage credits from both countries. 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. Also keep in mind all social security totalization agreements between the United States and your country of residence. In countries where they exist, you may end up paying the government of your host country or the United States. This depends on a number of factors that are clear for each totalization agreement. Despite the fact that the agreements aim to allocate social security to the country where the worker is most attached, unusual situations occasionally arise, where strict enforcement of the rules of agreement would result in unusual or unjustified results. For this reason, each agreement contains a provision allowing the authorities of both countries to grant exemptions from the normal rules if both parties agree. An exception could be granted, for example, if the foreign award of a U.S. citizen was unexpectedly extended by a few months beyond the 5-year limit under the self-employed rule. In this case, the worker could benefit from ongoing U.S. coverage for the additional period. In order to provide the tax authorities of a host country with proof that a worker is exempt from paying that country`s social security taxes, he (or his employer) must keep and, if necessary, present a certificate of coverage.