The purpose of a Totalization agreement is generally to ensure that international employee falls under one social system only (home or host country), avoiding double social tax liabilities during the tax return preparation process or during your regular payroll cycle.
Signed in 2015, this agreement will enter into effect October 1, 2018. This Brazil and US totalization agreement will in general lower the assignment cost for any affected assignee.
Main Features of the Agreement:
The agreement covers the Old age, survivors and disability in Brazil and in US.
It doesn’t include the FGTS.
Unlike most agreements, Brazil requires employees to have a local contract. You must apply a Certificate of Coverage to remain covered in your home country social system and exempted to pay social taxes in your host country for 5 years.
The coverage starts after the agreement is in effect. Prior periods will not be considered for eligibility to apply for a certificate of coverage.
Actions to take:
Companies with global employees assigned between US and Brazil should evaluate how this agreement may affect their current and future social tax cost. Planning and Execution are key to successful cost control here. After the tax return preparation is completed, the result of the annual tax reconciliation or tax equalization may provide a pleasant result when all social tax planning are implemented accordingly.
Individuals contractors and self-employed engaged in US/Brazil activities should also consider evaluating their position to lessen their social tax cost.
If you need any additional information related to Taxes for Expats, income tax return preparation or any tax services, contact your CPA at Whin Global at info@whinglobal.com
The full document of this Social Security Totalization Agreement is available at the US Social Security Administration website in English and Portuguese.
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