Totalization agreements are tax treaties that specifically aim to prevent the possibility of simultaneously paying social security contributions in two countries. The agreements work by assigning social security and therefore the tax obligation to a single country, as stipulated by the rules of each convention. These rules can vary considerably, but all agreements have some commonalities, such as the allocation of coverage, so that workers pay social security taxes to one or the other country, not both. SSA cooperates with representatives of its totalization partners throughout the negotiation process and after the agreement enters into force to ensure that workers are covered by the laws of the country to which they attach the greatest economic link. “The United States has agreements with several nations, the so-called totalization conventions, to avoid double taxation of income on social security contributions.” – the IRS These exceptions, based on the country of citizenship or the nationality of the worker, are provisions of the Social Security Act. In most cases, totalization agreements expand the ability of benefits to be nsogability based on their residence. The general principle of all totalisation agreements is that a worker, if equal, must pay taxes and should only be covered by the social security system of the country in which he works. This simple rule is called the territorial rule, that is, the territory in which a person works determines his or her tax debt. All other coverage provisions for totalization agreements are exceptions to this general rule. The theoretical calculation of salary is subject to the standard rules for calculating benefits. Wages are indexed for each year between the age of 22 and 61, and 5 years of dropout – those with the lowest indexed income – are deducted from the worker`s entire career, which is 40 years. The utility formula therefore takes into account 35 years of calculation. The sum of the indexed salary for each of the 35 years of calculation is divided by 420 (12 months × 35 years) to calculate the average indexed monthly salary (AIME) of the employee.
After indexation, the theoretical merit record of the hypothetical worker for all 35 years of calculation is $3,387,761.56; Dividing this amount by 420 gives a AIME of 8.066 USD. This table of contents is a navigation tool that is processed from the titles contained in the legal text of the documents of the federal register.