Tax Treaties and Totalization Agreements
Tax Treaties
Tax treaties are agreements between the U.S. and certain other foreign countries, with the purpose of reducing or eliminating double taxation of your income by both countries. Over 60 countries have entered into tax treaties with the U.S. Most tax treaties allow U.S. citizens or residents to exempt all or part of their foreign-earned income from taxation by the foreign host country when they are only working there for a limited number of days insufficient to establish residency in that country. However, U.S. citizens and residents are usually required to include income from the foreign country on their U.S. Income Tax Return (tax treaty provisions take priority over the general provisions in the Internal Revenue Code).
Totalization Agreements
Totalization Agreements, which are separate and different from Tax Treaties, exist between the U.S. and 30 other countries with Social Pension Systems. Totalization Agreements prevent duplicate contributions to both U.S. Social Security and your resident country’s social pension system. However, these agreements preclude receiving full benefits from both countries. If you are a U.S. expatriate living & working outside the U.S., it is important to know whether the country you live in has a Totalization Agreement with the U.S. If you are self-employed, Totalization Agreements have different rules than those for employees.
Italy’s agreement with the U.S. has different rules involving nationality, than most of the other 29 countries with these agreements.
Our team can guide you regarding the rules these agreements present for both your tax matters and ultimate retirement financial security.
