In the case of employees, certificates issued by Germany must be kept in your employer`s files in the event of an IRS audit. Neither you nor your employer are required to provide a copy of the certificate to the IRS except upon request. On the other hand, self-employed workers must attach a copy of the German certificate to their US income tax return each year as proof of the US exemption from social tax (self-employment). This decision is crucial because the self-employed are generally subject to about 15% of self-employment tax when they file their U.S. tax returns. The United States has signed tabulation agreements with many countries to avoid double taxation of Social Security on the same income. The U.S.-Germany tabulation agreement is intended to provide guidelines for deciding whether a person in the U.S. or Germany should be subject to Social Security tax. If you have your habitual residence in another country – with the exception of a country of the European Union or the countries iceland, Liechtenstein, Norway and Switzerland or one of the other countries with which Germany has signed a social security agreement – the same restrictions apply as for the contracting countries. American expats are often all too familiar with the concept of double taxation. This is a hot topic that is at the forefront of many discussions about working abroad, and rightly so. The exclusion of income earned abroad and the foreign tax credit are available to mitigate or eliminate double income tax on wages earned by U.S.
citizens in a foreign country, but what about the Social Security tax on that income? If you are an American expat living and working in Germany, you should familiarize yourself with the totalization agreement between the United States and Germany. The Withdrawal Agreement provides for a transition period until 31 December 2020, which can be extended once by one year or two years if the UK and the EU agree on this by 30 June 2020. During the transition period, the United Kingdom will continue to be subject to European law and therefore to social security coordination rules under European law. For insured persons who are entitled to a pension for the first time or who are entitled to a pension until the age of 31. December 2020 or for people who are already receiving a pension, so there will be no change. If you are applying for a U.S. Social Security exemption, your employer must apply for a certificate of coverage or Form D/USA 101 from the local German health insurance company that collects your German social taxes. The following information is required to apply for an exemption: The social security agreement mainly benefits nationals of the signatory countries of the agreement.
However, according to the agreement, they may also benefit other persons who are not nationals of the contracting country concerned. If you have your habitual residence in a country with which Germany has a social security agreement, restrictions may also apply. Very low pensions are an exception to this rule. In these cases, European law and some agreements make it possible to cover periods of insurance from other countries if this means that a certain minimum number of months of insurance (e.g. B less than one year) is not reached. Once you have determined where you should pay social tax, you will need to receive a certificate of coverage issued by that country to serve as proof of exemption from social tax on the same income in the other country. The term «European law» refers to all the regulations adopted at European level in the field of social security. These are mainly the EU and the UK, which have expressed their willingness to review their mutual relations in the course of 2020 for the transition period. The development of future social security relations remains to be seen. With which countries has Germany signed social security agreements? If you are an employee applying for an exemption from German social security, your employer must apply to the social security authority for a certificate of coverage or a FORM USA/D 101. This procedure can be carried out either by mail or on the Social Security website. The Federal Republic of Germany currently has reciprocal social security agreements with 20 countries.
These agreements essentially regulate the acquisition of pension rights and the payment of pensions in the respective countries. If you are self-employed and only work in the United States, or if you move your business to Germany for five years or less, you will continue to pay Social Security taxes in the United States. If you are self-employed and only work in Germany or relocate your company to the United States for five years or less, you contribute to the German social security system. For the period after the end of the transition period, the Withdrawal Agreement also provides for provisional protection in the field of social security and the protection of the legitimate expectations of persons who have previously had a transnational link with the United Kingdom and the EU Member States. With the aim of regulating relations between them in the field of social security, a European law on pension insurance has been created for people who work or have worked in different European countries during their working lives. It aims to ensure that they suffer as few disadvantages as possible in the field of social security. If you have accumulated periods of insurance in a country with which the Federal Republic of Germany does not have a social security agreement, you must contact the responsible foreign insurance agency yourself. .