Note As shown in the table, an American worker employed in Norway can only be covered by U.S. Social Security if he or she works for a U.S. employer. A U.S. employer includes a company organized under U.S. or state law, a partnership if at least two-thirds of the partners are based in the United States, a person residing in the United States, or a fiduciary company if all directors are based in the United States. It is also a foreign subsidiary of a U.S. employer when the U.S. employer entered into an agreement with the Internal Revenue Service, pursuant to Section 3121 (l) of the Internal Revenue Code, to pay Social Security taxes for U.S. citizens and residents employed by the subsidiary. The provisions to eliminate dual coverage for workers are similar in all U.S. agreements. Each of them establishes a basic rule regarding the location of the employment of a workforce.
Under this basic “territorial rule,” a worker who would otherwise be covered by both the United States and a foreign regime is subject exclusively to the coverage laws of the country in which he or she works. The United States has agreements with several nations, the so-called totalization conventions, in order to avoid double taxation of income in relation to social contributions. These agreements must be taken into account in determining whether a foreigner is subject to the U.S. Social Security Tax/Medicare or whether a U.S. citizen or resident alien is subject to the social security taxes of a foreign country. As a precautionary measure, it should be noted that the derogation is relatively rare and is invoked only in mandatory cases. There are no plans to give workers or employers the freedom to regularly choose coverage that contradicts normal contractual rules. Workers who have shared their careers between the United States and a foreign country may not be entitled to pensions, survivor benefits or disability insurance (pensions) from one or both countries because they have not worked long or recently enough to meet minimum conditions. Under an agreement, these workers may benefit from partially U.S. or foreign benefits on the basis of combined or “totalized” coverage credits from both countries.
The agreements also have a positive effect on the profitability and competitive position of companies operating abroad by reducing their business costs abroad. Companies with staff stationed abroad are encouraged to use these agreements to reduce their tax burden.