Social security is an international concept and a mandatory benefit in most countries, giving coverage to and thereby automatically taxing any worker earning income in that country. When an employee accepts an international assignment, double taxation may occur, since most home countries require their citizens to pay social security tax on all income, regardless of where the income was earned. To alleviate this burden from the employee and from an employer who has a policy of tax-equalizing its expatriates, the United States has entered into bilateral international social security agreements with 20 countries, referred to as “totalization agreements,” which allow for an exemption of the social security tax in either the home or host country for defined periods of time.

When a worker is ready to retire, most countries require that an employee have a minimum number of years paid into their systems to qualify to receive benefits. If a worker has spent a large portion of his or her working years in another country, he or she might not meet the minimum requirements of his or her country’s system, or that of another country he or she paid into. Therefore, the agreements also “totalize” the employee’s working years by combining all years worked in agreement countries and using that total to help meet any country’s minimum requirements.

Please Note: This material is provided as general information and is not a substitute for legal or other professional advice. Contact the Knowledge Center for more information.

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