The $150,000 Oversight
A mid-sized tech firm once called me with what sounded like a routine payroll and benefits question.
They’d sent an American engineer to Japan and wanted to be sure they were handling taxes correctly.
I asked a single question: “Did you request a Certificate of Coverage under the U.S., Japan Totalization Agreement?”
Silence.
The price of that pause? Roughly $150,000 in avoidable social-security taxes, and it was still climbing.
This wasn’t an incompetent company. It was a smart team with a blind spot that shows up everywhere I look in global mobility. Even experienced HR and finance groups miss this step, and it costs them tens or hundreds of thousands of dollars per assignment.
What Totalization Agreements Actually Do
Totalization Agreements are bilateral Social Security treaties. Their job is simple: stop double taxation and keep workers eligible for benefits in both systems.
When an American employee works abroad, both governments want their slice. The U.S. wants FICA; the host country wants its version of social-security contributions. Without an agreement, everyone pays twice. With one, the employee and employer normally keep paying into just the home system.
As of 2025, the United States has 30 such agreements — with countries like Australia, Belgium, Brazil, Canada, France, Germany, Italy, Japan, South Korea, Spain, Sweden, the U.K., and others.
Still missing are some of the world’s largest markets: China, India, Mexico, Singapore, and Hong Kong. That absence makes planning even more critical.
What Happens When You Miss It
Let’s put numbers to it.
Example 1 – U.S. employee in Germany
A software engineer earns $150,000 and spends three years in Munich.
Without a Certificate of Coverage:
U.S. FICA ≈ 15.3 % (7.65 % each for employee and employer)
German pension-insurance ≈ 18.6 % each, plus other social charges above that
Combined effective rate easily tops 50 %
That’s about $78,000 a year, $236,000 over three years.
With a valid Certificate of Coverage, only U.S. FICA applies, about $23,000 a year.
Savings: roughly $160,000 per assignment.
Example 2 – U.S. executive in France
A marketing VP earns $200,000 and spends four years in Paris.
French employer contributions run around 40–45 % of salary; employee contributions add 20–23 %, depending on ceilings.
Combined with U.S. FICA, the total burden can hit 60 % of pay.
With a Certificate of Coverage, those French contributions are waived.
Result: about $360,000 saved over four years, and no messy refund requests later.
These aren’t scare tactics. They’re real-world examples of what happens when HR and payroll skip a fifteen-minute form.
How It Works
1 – Who Qualifies
If a U.S. employee is temporarily assigned (typically five years or less) to a country with an agreement, they remain covered by U.S. Social Security and are exempt from the host’s system.
Some treaties allow extensions, but the five-year window is the standard starting point.
2 – The Certificate of Coverage
This is the proof. The Social Security Administration issues it, confirming that the worker is already covered under U.S. Social Security. Presenting that certificate tells the host authorities, “We’ve got this one; no local contributions needed.”
3 – Who Pays What
The employee and employer keep paying normal U.S. FICA.
They do not pay host-country social-security taxes.
The employee continues accruing U.S. benefits as if they’d never left.
4 – Self-Employed Individuals
Totalization Agreements also cover the self-employed.
In many cases, an American consultant or business owner abroad can request a Certificate of Coverage and pay into only one system, which one depends on the specific treaty. The point is to avoid paying both.
Applying Is Easier Than Most People Think
- Confirm eligibility.
The host country must have an agreement with the U.S., the assignment must be temporary, and the worker must remain on a U.S. payroll or be self-employed in the U.S.
- Apply online.
Go to opts.ssa.gov
Enter employee data, employer EIN, assignment dates, and destination.
The form takes maybe 20 minutes.
- Wait for approval.
The SSA typically processes requests within a few weeks. There’s no fee, but it’s wise to file 60–90 days before departure.
- Provide the certificate.
Send it to your local HR or payroll team abroad so they can document the exemption.
If you prefer paper, SSA still accepts mailed or faxed requests through its International Programs office
Where Companies Go Wrong
- They apply too late.
You can’t rely on retroactive fixes; refunds abroad are a nightmare.
- They assume coverage is automatic.
Having an agreement in place isn’t enough, the Certificate of Coverage must exist.
- They lose track of expiration dates.
Most certificates expire at five years. Miss that, and you owe back contributions.
- They mislabel permanent relocations as “temporary.”
Once a move is permanent, local coverage applies.
- They forget third-country nationals.
Coverage depends on which system the employee is in at assignment start, not citizenship.
A German national working in the U.S. and sent to France may still qualify under the U.S.–France agreement.
When There’s No Agreement
Assignments to China, India, Mexico, Singapore, or Hong Kong still face dual social-security taxation. There’s no treaty relief yet.
Some countries allow short-term or special exemptions, but these are country-specific — not the familiar 183-day income-tax rule. Plan assignments carefully, model the costs, and decide whether to rotate staff, hire locally, or just budget for the extra payroll load.
Strategic Uses Beyond Compliance
Cost modeling: Knowing when Totalization applies can shift the math on whether to send an assignee or hire locally.
Assignment duration: Design rotations around the five-year mark instead of stumbling into extra contributions.
Talent negotiations: Explaining this up front builds trust and can be a meaningful financial perk.
Retirement clarity: Employees keep their U.S. Social Security record intact a quiet but powerful retention tool.
Building It Into Your Mobility Playbook
Every outbound assignment should trigger a short checklist:
Is there a Totalization Agreement with the host country?
Is the role truly temporary and within the treaty’s time limit?
Who files the Certificate of Coverage and when?
Has the certificate been presented to the host authorities?
Are payroll systems aligned to reflect the exemption?
In smaller firms, one person should own this process. In larger ones, it sits naturally within the Global Mobility or Payroll Compliance team.
Choosing the Right Advisors
- When you hire outside support, ask direct questions:
- How do you track Certificates of Coverage across assignments?
- What’s your process when an assignment exceeds the treaty’s time limit?
- How do you handle countries without agreements?
- Can you show a case where you saved a client money through proper Totalization use?
- If they stumble, find someone who can answer confidently.
The Easiest Money You’ll Ever Save
International tax is usually complicated. This isn’t.
Request one free document, hand it to the host payroll team, and you can save six figures per assignee.
That’s not aggressive tax planning, that’s just being competent.
The tech company I mentioned earlier eventually built a routine process: pre-assignment checklists, online applications, and certificate tracking. On their next twelve assignments, they saved about $150,000.
You can do the same. All it takes is knowing the rule, and using it.
About Global Mobility Adviser
We design smarter mobility programs, train the people who run them, and connect the partners who make them work.