Publication 54 |
2001 Tax Year |
Social Security & Medicare Taxes
Social security and Medicare taxes may apply to wages paid to an
employee regardless of where the services are performed.
General Information
In general, U.S. social security and Medicare taxes do not apply to
wages for services you perform as an employee outside of the United
States unless one of the following exceptions applies.
- You perform the services on or in connection with an
American vessel or aircraft (defined later) and
either:
- You entered into your employment contract within the United
States, or
- The vessel or aircraft touches at a U.S. port while you are
employed on it.
- You are working in one of the countries with which the
United States has entered into a binational social security
agreement (discussed later).
- You are working for an American employer (defined
later).
- You are working for a foreign affiliate (defined
later) of an American employer under a voluntary agreement entered
into between the American employer and the U.S. Treasury Department.
American vessel or aircraft.
An American vessel is any vessel documented or numbered under the
laws of the United States and any other vessel whose crew is employed
solely by one or more U.S. citizens, residents, or corporations. An
American aircraft is an aircraft registered under the laws of the
United States.
American employer.
An American employer includes any of the following employers.
- The U.S. Government or any of its instrumentalities.
- An individual who is a resident of the United States.
- A partnership of which at least two-thirds of the partners
are U.S. residents.
- A trust of which all the trustees are U.S. residents.
- A corporation organized under the laws of the United States,
any U.S. state, or the District of Columbia, Puerto Rico, the Virgin
Islands, Guam, or American Samoa.
Foreign affiliate.
A foreign affiliate of an American employer is any foreign entity
in which the American employer has at least a 10% interest, directly
or through one or more entities. For a corporation, the 10% interest
must be in its voting stock. For any other entity, the 10% interest
must be in its profits.
Form 2032, Contract Coverage Under Title II of the Social
Security Act,
is used by American employers to
extend social security coverage to U.S. citizens and residents working
abroad for foreign affiliates of the American employers. Coverage
under an agreement in effect on or after June 15, 1989, cannot be
terminated.
Excludable meals and lodging.
Social security tax does not apply to the value of meals and
lodging provided to you for the convenience of your employer and
excluded from your income.
Binational Social Security(Totalization) Agreements
The United States has entered into agreements with several foreign
countries to coordinate social security coverage and taxation of
workers who are employed in those countries. These agreements are
commonly referred to as totalization agreements and are in effect with
the following countries.
Austria |
Luxembourg |
Belgium |
Netherlands |
Canada |
Norway |
Finland |
Portugal |
France |
South Korea |
Germany |
Spain |
Greece |
Sweden |
Ireland |
Switzerland |
Italy |
United Kingdom |
Under these agreements, dual coverage and dual contributions
(taxes) for the same work are eliminated. The agreements generally
make sure that you pay social security taxes to only one country.
Generally, under these agreements, you will only be subject to
social security taxes in the country where you are working. However,
if you are temporarily sent to work in a foreign country and your pay
would otherwise be subject to social security taxes in both the United
States and that country, you generally can remain covered only by U.S.
social security. You can get more information on any specific
agreement by contacting the United States Social Security
Administration. If you have access to the Internet, you can get more
information at:
http://www.ssa.gov/international
Covered by U.S. only.
|
If your pay in a foreign country is subject only to U.S. social
security tax and is exempt from foreign social security tax, your
employer should get a certificate of compliance from the:
U.S. Social Security Administration
Office of International Programs
P.O. Box 17775
Baltimore, MD 21235. |
Covered by foreign country only.
If you are permanently working in a foreign country with which the
United States has a social security agreement and, under the
agreement, your pay is exempt from U.S. social security tax, you or
your employer should get a statement from the authorized official or
agency of the foreign country verifying that your pay is subject to
social security coverage in that country.
If the authorities of the foreign country will not issue such a
statement, either you or your employer should get a statement from the
U.S. Social Security Administration, Office of International Programs,
at the above address. The statement should indicate that your wages
are not covered by the U.S. social security system.
This statement should be kept by your employer because it
establishes that your pay is exempt from U.S. social security tax.
Only wages paid on or after the effective date of the totalization
agreement can be exempt from U.S. social security tax.
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