PROGRAM OPERATIONS MANUAL SYSTEMPart RS – Retirement and Survivors InsuranceChapter 020 – Coverage Under International AgreementsSubchapter 01 – International AgreementsTransmittal No. 52, 04/27/2023
Audience
Originating Component
ODEPPIN
Effective Date
Upon Receipt
Background
The Office of Data Exchange, Policy Publications, and International Negotiations is now responsible for negotiating and implementing bilateral Social Security agreements. Accordingly, we are revising existing Totalization POMS sections to account for new component names, addresses, and workload processes. We also updated these instructions to meet the Agency's plain language requirements.
Summary of Changes
RS 02001.550 U.S. Portuguese Agreement - Effective Date of Agreement
In addition to the specific changes listed below, we updated title. We edited the language (plain language), and made editorial and minor format changes.
Subsection A - We revised the heading, and updated the language.
Subsection B - We revised the heading, and updated the language.
RS 02001.555 Scope of U.S. Portuguese Agreement
RS 02001.560 General Coverage Rule for Employment - U.S. Portuguese Agreement
Subsection B - We revised edited the references.
RS 02001.565 Detached Worker Rule - U.S. Portuguese Agreement
Subsection C - We edited the heading, and updated the language.
Subsection D - We edited the title.
RS 02001.566 Rule for Crews of Ships or Aircraft - U.S. Portuguese Agreement
Subsection B - We revised the heading, and rearranged the reference.
RS 02001.567 Rule for Government Employees - U.S. Portuguese Agreement
Subsection C - Edited the references title, and reordered the text.
RS 02001.570 Coverage Rule for Self-Employment - U.S. Portuguese Agreement
The Totalization agreement with Portugal became effective on August 1, 1989.
Workers whose employment or self-employment would otherwise be covered by both the U.S. and Portuguese social security systems are covered and taxed by only one country's system beginning August 1, 1989. The agreement does not affect a worker's coverage prior to August 1, 1989.
If a worker had dually covered earnings before August 1, 1989, those earnings remain subject to social security taxation in both countries.
For the United States, the agreement applies only to the Retirement, Survivors, Disability, and Health Insurance (RSDHI) program’s Federal Insurance Contributions Act (FICA) taxes for employment and Self-Employment Contributions Act (SECA) taxes for self-employment, including the Medicare portion of these taxes, including the additional .09 percent applicable to high-earners. If an individual is exempt from U.S. Social Security coverage under this agreement, the employee or employer's share of the FICA tax is not due as long as the exemption is in effect. A self-employed person is exempt from paying SECA taxes (equivalent to the employee and employer shares of the FICA tax) for any period the exemption is effective.
The U.S. laws to which the Agreement applies are title II of the Social Security Act except section 226 (Medicare benefits), 226A (Medicare coverage for certain persons suffering from renal disease) and section 228 (special age-72 payments - Prouty benefits). Hospital insurance under Medicare has been excluded. It is understood, though not specified, that persons to whom the agreement applies who qualify independently for Medicare hospital insurance benefits would be entitled to receive such benefits.
For Portugal, the agreement applies to social security coverage and taxes under the general social security system and to the special occupational systems, except for the system covering civil servants. This includes not only the taxes to finance the retirement, survivors, and long-term disability benefits, but also the taxes that finance other Portuguese programs, such as sickness (temporary disability), maternity, occupational injury and disease, unemployment, and family allowances. If the agreement exempts a person from Portuguese social security coverage, he or she and his or her employer do not pay contributions under any of these programs.
Under the agreement, employment and self-employment are ordinarily subject to the coverage laws of only the country where the employee or self-employed person performs the work. A person working in employment that both countries would cover without the agreement will have coverage only under the laws of the country where he or she performs the work.
The agreement provides several exceptions to the territoriality rule to ensure that a worker's coverage is under the system of the country to which he or she has the greater attachment. The references cited below list these exceptions.
Exceptions to territoriality rule for employment and self-employment, see RS 02001.565 - RS 02001.567.
A detached worker is an employee sent by his or her employer in one country to work temporarily in the other country for the same employer or an affiliate of that employer.
Under the agreement, a detached worker remains subject only to the social security laws of the country from which the employer transferred the worker. However, the worker must meet all of the following conditions:
The employer/worker expects the period of employment in the host country to last 5 years or fewer. The 5-year period begins with the date the employment in the host country begins or August 1, 1989 (the effective date of the agreement), whichever is later;
and
The employment relationship existed before the employer transferred the worker from the home country; and
If an American employer sends an employee to that employer's affiliate in Portugal, there must be an agreement in effect between the American employer and the Internal Revenue Service (IRS) under Section 3121(l) of the Internal Revenue Code with respect to the affiliate. The 3121(l) agreement provides, among other things, for Social Security coverage for U.S. citizens and residents that the affiliate employs. In such cases, the employer must still obtain a certificate of coverage to establish the exemption from Portugal social security taxes.
NOTE: The detached worker rule applies even if an employer does not directly send the employee from one country to the other, but first assigns him or her to work in a third country.
The United States and Portugal can agree to extend the 5-year period, subject to the following conditions:
The employer or self-employed person must request the extension before the end of the initial 5-year period;
The extension will not exceed one year; and
Both countries agree to the extension.
RS 01901.070 Employment Outside the United States for a Foreign Affiliate or Subsidiary of an American Employer
A person employed as an officer or crew member on a ship or aircraft who would otherwise have dual coverage under the laws of both the United States and Portugal, shall be covered under the laws of the country in which he or she is a resident.
RS 01901.450 Coverage under International Totalization Agreements
GN 01702.230 Evidence of Residence
The Vienna Conventions on Diplomatic and Consular Relations usually exempt nationals of a country who work abroad in the diplomatic or consular services of their country from social security coverage and contributions under the laws of the host country unless that person specifically waives the exemption.
The Conventions, to which both the United States and Portugal are Parties, apply to:
Members of the staff of a diplomatic or consular mission, including the diplomatic, consular, administrative, and technical staffs; and
Dependents of members of those staffs; and
The domestic service staff of those missions; and
Under certain conditions, the private servant employees of members of such missions.
The agreement does not affect the coverage of U.S. or Portuguese Government employees to whom the Vienna Conventions apply. They remain exempt from coverage in the host country.
The agreement establishes the following rules for government employees not covered by the Vienna Conventions:
U.S. nationals employed by U.S. Government in Portugal - are subject to U.S. Social Security taxes and coverage laws only.
Portuguese national employed by Portuguese Government or a Portuguese government instrumentality in the United States are subject to Portuguese social security taxation and coverage laws only.
For purposes of applying this provision of the agreement, the phrase "U.S. Government employee" means employees of the Federal Government or any of its instrumentalities.
For purposes of applying this provision of the agreement, the phrase "Portuguese Government employee" means employees of Portugal.
RS 01802.050 U.S. citizens employed by foreign governments.
A person whose earnings from self-employment would otherwise be subject to compulsory coverage in both the United States and Portugal is subject to only the laws of the country of which he or she is a resident.
Since this rule only applies to U.S. or Portuguese residents, it would not affect a dually covered worker who resides in a third country (e.g., a self-employed U.S. citizen who works in Portugal but resides in Spain). For this reason the special exception provision of the agreement will eliminate dual coverage for such a worker.
A person may sometimes work in an activity that one country considers self-employment and the other country considers employment. If this creates dual social security coverage, the agreement provides that:
If the person resides in the country that considers him or her to be self-employed, he or she will have coverage under the laws of that country; and
If the person resides in the country that considers him or her to be an employee, he or she will have coverage based on the rules for employees discussed; see RS 02001.560 - RS 02001.565.
A self-employed U.S. citizen, who is subject only to Portuguese social security taxes and contributions under the agreement and is exempt from paying Self-Employment Contributions Act (SECA) tax, must still file a U.S. tax return every year. To show that the self-employment earnings are exempt from U.S. Social Security self-employment tax, the individual must do the following:
Indicate on Schedule SE that the earnings are exempt under the agreement; and
Request a certificate of coverage from the Portuguese authorities; and
Attach a photocopy of the Portuguese certificate of coverage to his or her U.S. tax return every year (refer to RS 02002.750) as proof of the exemption.