Social Security Totalization Agreement
What is Social Security Totalization Agreement?
A bilateral treaty between two countries that eliminates dual social security taxation and ensures workers qualify for benefits from one, and only one, country's social security system during an assignment.
Social security totalization agreements prevent employees and employers from paying social security contributions in two countries simultaneously during an international assignment. They also allow workers to combine periods of coverage in both countries when qualifying for benefits such as retirement pensions.
The United States has totalization agreements with more than 30 countries, and similar bilateral agreements exist between many other nations. The specific terms of each agreement determine which country's social security system applies, based on factors such as the duration of the assignment and the employee's nationality.
To benefit from a totalization agreement, the employer typically must obtain a Certificate of Coverage from the home country's social security authority. This certificate is then presented to the host country authorities as proof of exemption from local social security contributions.
Related Terms
Certificate of Coverage (CoC)
A document issued by a home country's social security authority confirming that a worker on assignment abroad remains covered under the home country system, preventing dual social security contributions.
Shadow Payroll
A payroll run in the host country solely for tax and social security compliance purposes, without actually paying the employee through that payroll. The employee continues to receive their salary via home country payroll.
Immigration Compliance
The process of ensuring that employees working abroad hold the correct visas, work permits, and authorizations required by host country law, and that all documentation remains current.