As an expat, it is essential to understand how tax treaties and totalization agreements will affect your tax situation. A tax treaty is an agreement between the United States and a foreign country that provides facilities for those who would otherwise be taxable in both countries. As a U.S. citizen or green card holder, you are subject to global income taxation. If you are tax resident in a foreign country, tax treaties and totalization agreements could bring you significant financial benefits. Before we delve deeply into the technical details, let`s first take a look at the difference between these two people, because they involve American people, who understand only U.S. citizens and resident aliens. These exceptions, based on the country of nationality or nationality of the worker, are provisions of the Social Security Act. In most cases, totalization agreements expand the ability of benefits to be nsogability based on their residence. When a person is qualified for a social security benefit in the United States on the basis of cumulative coverage in the U.S.
and abroad under a totalization agreement, the amount of the U.S. benefit payable is only proportional to the periods of coverage earned in the United States. Similarly, the partner country pays a partially or proportionately paid benefit when combined coverage entitles you to a claim. It is therefore possible for a person to enjoy an overall benefit from an agreement of one of the two countries or both countries if he meets all the conditions applicable to the claim. The provisions for calculating benefits used in the United States are uniform in all totalization agreements, as required by law in provisions 42 U.S.C. Determining a proportional amount of U.S. benefits as part of a totalization agreement is a three-step process. A totalization agreement is an agreement between two countries that prevents double social security contributions for the same income. At this point, the United States has active totalization agreements with 24 countries. To find out which countries have reached an agreement with the United States, take a look at the IRS list of social security conventions. You will see that they are most often related to developed countries and not to emerging countries. In 1973, the Minister of Health, Education and Welfare, Caspar Weinberger, and his Italian counterpart signed the first U.S.
totalization agreement. Although the Italian government quickly ratified the agreement as a treaty, Congress had not yet adopted an approval status; That is why the United States has not been able to implement the agreement. After much deliberation, Congress passed amendments to the Social Security Act in 1977, which contained an approval status allowing the agreement with Italy to enter into force.12 To date, the United States has entered into total agreements with 28 countries. Three other agreements have been signed, but they are not yet in force. A list of all totalization agreements is listed in Appendix C. Social security rates and caps (or ceilings) vary from country to country. The graph includes contribution amounts for employees and employers, percentage amounts of gross salary and marginal social security rate for a number of gross wages.