Working abroad in another country, whether a temporary or extended assignment, can be an appealing and rewarding endeavor. There are many things to consider, such as lodging location and expenses, learning a language, cost of everyday living and even how to obtain the right to drive a vehicle.
But one thing that often gets overlooked is taxes. Is there an existing agreement between your native country and the foreign country which you are to be working where you are not be taxed for Social Security/Medicare type taxes by both countries on the income you are to be earning? If you decide you want to stay permanently in the foreign country, is there a path where your income earned in the foreign country, can go toward earning Social Security credits which can lead to benefits?
The U. S. has international Social Security agreements, or better known as totalization agreements, in place with 30 different countries that can help minimize possible social security double taxation. These agreements and their details need to be considered when a noncitizen is contemplating working in the U.S., and whether or not the individual is subject to U.S. Social Security/Medicare tax or conversely if a U.S. citizen working in another country is subject to social security program taxes of another country, in which they are seeking employment.
In some totalization agreements, if a noncitizen works in the U.S. for an extended period of time and there is a totalization agreement in place, the worker may be qualified to earn U.S. Social Security benefits. If the worker decides to return to their native country to live, in order to receive a U.S. Social Security benefit, they may have stay in the U.S. for a period of time each year to be eligible to receive those benefits. It’s important to note that not all totalization agreements may have this stipulation. The agreements can all be different from each other, making it vital that you know how each works prior to accepting employment in that country and how it affects you while you are employed and what stipulations need to be followed if benefits are available, after you terminate your employment.
If you work on a W2 employee basis in the United States, you may have a human resources department that can help you with this information. It is also a good idea to take that information and call the Social Security Administration in the U.S. and validate that information. Once you have this information it is equally important to call the social security equivalent department of your home country and have it validated there as well. Get written documentation from all parties involved for your records. If you are self- employed and are seeking employment in another country and you don’t have a human resources department to help obtain totalization information, it is especially important that you are aware of any agreement, if there is one in place or not, and its details since you are representing yourself.
The U.S. is currently working on additional totalization agreements with other countries. The last country added to the list was Iceland in 2019. Getting both countries to agree on details can be difficult and political climates in certain geographic regions can be an obstacle. Once the agreement is made it will be added to the Social Security website.
For more information on totalization agreements, you can visit the Social Security Administration website, contact a law firm specializing in international taxation, or contact a Registered Social Security Analyst, like Kevin, who will help in any way he can.
