International social security agreements can be bilateral agreements concluded by two countries to coordinate their specific regulations, or multilateral agreements that allow several countries to coordinate parts of their social security regulations. An agreement between two countries that aims to protect the benefits and pension rights of a national of one country if he lives and works in the other country. Under certain conditions, an employee may be exempted from coverage in a contracting country, even if he or she has not been transferred there directly from the United States. For example, if a U.S. company sends an employee from its New York office to work in its Hong Kong office for 4 years, and then hires the employee in its London office for another 4 years, the employee may be exempt from UK social security coverage in the US and UK. Agreement. The exemption rule applies in such cases, provided that the employee was initially posted from the United States and remained under U.S. social security for the entire period prior to his or her secondment to the contracting country. Workers who are exempt from U.S. or foreign social security taxes under an agreement must document their exemption by obtaining a certificate of coverage from the country that continues to cover them. For example, an American worker temporarily posted to the UK would need a certificate of coverage issued by the SSA to prove their exemption from UK social security contributions. Conversely, a UK-based employee working temporarily in the US would need a certificate from UK authorities as proof of exemption from US Social Security tax.
Each agreement (with the exception of the agreement with Italy) contains an exception to the territoriality rule, which aims to minimize disruptions in the coverage of the careers of employees whose employers temporarily send them abroad. Under this exemption for “exempt workers”, a person who is temporarily transferred to another country for the same employer remains covered only by the country from which he or she was posted. For example, a U.S. citizen or resident who is temporarily transferred by a U.S. employer to work in a contracted country will continue to be covered by the U.S. program and will be exempt from coverage of the host country`s system. The employee and employer only pay contributions to the U.S. program. The double tax liability may also affect U.S. citizens and residents who work for foreign subsidiaries of U.S.
companies. This will likely be the case if a U.S. company has followed the common practice of entering into an agreement with the Treasury Department under Section 3121(l) of the Internal Revenue Code to provide social security coverage to U.S. citizens and residents employed by the subsidiary. In addition, U.S. citizens and residents who are self-employed outside the U.S. are often subject to a dual social security tax liability because they remain insured under the U.S. program even if they are not doing business in the United States.
As the largest recipient country, Canada has signed bilateral agreements with more than 50 countries. In addition, the aggregation of third countries for migrant workers will be made possible by the Member States of 9 of the 13 States and territories that have signed and ratified the CARICOM Convention [see multilateral agreements]. These include Antigua and Barbuda, Barbados, Dominica, Grenada, Jamaica, Saint Lucia, Saint Vincent and the Grenadines and Trinidad and Tobago. The agreement with Italy represents a departure from the other United States.