TN 9 (09-90)

RS 02605.032 Coverage Provisions of U.S. Agreements

A. INTRODUCTION

Each totalization agreement includes coverage provisions which are designed to eliminate dual social security coverage and taxation for the same work under the U.S. and foreign systems.

  • Their general effect is to exclude from U.S coverage many persons who would otherwise be covered under the normal rules of title II.

  • As a result, many beneficiaries working in an agreement country are now subject to the FWT.

See RS 02001.000 for a detailed explanation of each agreement.

B. POLICY - SOFA

The U.S. has concluded Status of Forces Agreements (SOFA) with a number of foreign countries. A SOFA agreement may regulate the income and Social Security tax status of U.S. military personnel and their dependents, as well as U.S. civilian employees of the military and U.S. citizens who perform self-employment under contract to the military.

The provisions of a SOFA agreement may conflict with the coverage provisions of a totalization agreement, and the SOFA agreement rules may take precedence. If a beneficiary who would be exempt from U.S. coverage under the rules of a totalization agreement alleges that he/she is covered by U.S. Social Security as a result of a SOFA agreement, we refer the claim to DIPPA at the address in RS 02605.030.

C. POLICY - AGREEMENTS OTHER THAN ITALIAN AGREEMENT

1. Employment

  1. The "territoriality rule” provides that employment is covered only by the social security system of the country in which it is performed.

  2. Under this rule, many U.S. citizens and residents whose employment would otherwise be covered (e.g., because they work for an American employer) are excluded from U.S. coverage.

  3. As an exception to this rule, each agreement provides that certain individuals employed in one country may be covered by the other country:

    • U.S. citizens and residents who are transferred to a foreign country temporarily continue to be covered by the U.S. and are exempt from foreign coverage.

    • The transferred employees must obtain a certificate of coverage from SSA (issued by DIPPA).

    • The certificate proves that the person is covered by U.S Social Security and that he/she is exempt from coverage under the foreign system.

    • Anyone employed in an agreement country who is covered by the U.S. system should be able to produce a certificate issued by SSA.

2. Self-employment

  1. Generally, self-employment is covered by the country in which the person resides.

EXCEPTION: The agreements with Belgium, France, and Germany assign coverage to the country in which the work is performed. A person who is self-employed in one of these countries will normally be covered by that country's system. Only if he had transferred temporarily his business from the U.S. to the other country could the person be covered by the U.S.

  1. Usually, the residence rule and the territoriality rule have the same result — self-employed persons are covered by the foreign system and excluded from U.S. coverage.

  2. Any self-employed person in a foreign country covered by U.S. Social Security, either because he is a U.S. resident or, in the case of the German agreement, has transferred temporarily his business from the U.S., should be able to produ ce a certificate issued by SSA.

D. POLICY - AGREEMENT WITH ITALY

1. General

The territoriality rule applies to self-employment as well as to employment.

2. Special Rules

  1. U.S. citizens working in Italy who would be covered by the U.S. under the normal rules of title II remain covered by the U.S. regardless of how long they work in Italy.

  2. Italian nationals and dual U.S. - Italian nationals who would otherwise be covered by both U.S. and Italian social security may elect to be covered by one country and exempt from coverage by the other country. Thus, some Italian nationals who are also U.S. citizens or U.S. residents may be covered by the U.S. for their work in Italy.

  3. Workers in Italy who are covered by U.S. Social Security must obtain a U.S. certificate of coverage from SSA.