In order to provide the tax authorities of a host country with proof that a worker is exempt from paying that country`s social security taxes, he (or his employer) must keep and, if necessary, present a certificate of coverage. The certificate is a document issued by the country whose laws continue to apply to that person in accordance with the rules of the agreement. The agreements designate the agencies of each country responsible for issuing these certificates. 2 An exception to this rule is the agreement with Italy, which allows some transferred workers to choose the social security system to which they are subject. No other U.S. totalization agreement contains a similar rule. 3 An agreement can contain only one of these rules, not both. Thus, in the agreements, employment coverage is allocated either on the basis of a delegated activity or on the basis of place of residence. The FCN Treaty with Italy, which came into force in 1949 and amended in 1951, expressly invited the United States and the Italian Republic to begin negotiations for a bilateral social security agreement. Since there is no precedent in U.S. law or a specific authorization status, the means of concluding such an agreement were unclear. The conclusion of treaty agreements subjects them to the recommendation and approval clause of the U.S. Constitution and would require a two-thirds positive vote of the Senate in favor of ratification.
This was considered unenforceable and, when the FCN Treaty with Italy was ratified on 21 July 1953, the Senate adopted a resolution stipulating that all the resulting social security agreements “are concluded by the United States only in accordance with statutory provisions.” Upon entering into a totalization agreement, the United States and a partner country agree to coordinate social security and performance bonus rules for people who have worked in both countries during their working lives. Totalization agreements have three main objectives. First, double taxation of social security is abolished when a worker and his employer are required to pay social security contributions to two countries with the same income. Second, they help fill the gaps in coverage records for people who have divided their careers between two countries by combining or spending the coverage periods earned in each country. Finally, the totalization agreements allow benefits to be paid in full to residents of both countries. Although these three objectives do not constitute all totalization agreements, they are by far the most visible and have the most impact on businesses and workers. All totalization agreements have certain characteristics, but the complexity and variation of the social security laws of our partner countries make each agreement unique. Additional special provisions generally apply to seafarers, cabin crew, diplomats, government employees and persons whose employers are not directly transferred from one total country to another, but from one country of totalization to a third country before moving on to the other totalization country. If necessary, totality partner countries may also agree on specific exceptions for individual workers or entire workers. However, for the United States to accept a specific exception, two fundamental principles must be respected: the person must be registered in a single country and the person must retain coverage in the country to which he or she will most likely be most economically attached.