When Social Security and Medicare Taxes Apply Outside of the United States

In general, U.S. social security and Medicare taxes continue to apply to wages for services you perform as an employee outside of the United States if one of the following applies:

  • You are working for an American employer which includes:
    • 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, American Samoa, or the Commonwealth of the Northern Mariana Islands (with respect to the CNMI, refer to Revenue Ruling 80-167).
  • You perform the services on or in connection with an American vessel or aircraft 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 bilateral social security agreement (also known as a Totalization Agreement), and the agreement provides that your foreign employment is subject to U.S. social security and Medicare taxes.
  • You are working for a foreign affiliate of an American employer under a voluntary agreement between the American employer and the U.S. Treasury Department. 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 excluded from your income because it was provided for the convenience of your employer.

Totalization Agreements

Under a Totalization Agreement, dual coverage and dual contributions (taxes) for the same work are eliminated. The agreements generally ensure that you pay social security taxes to only one country.

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