USA Poland Social SecurityAgreement

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Maja Rudnicka
7 lat temu
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1 Warszawa, USA Poland Social SecurityAgreement Totalization Agreement in force from 1 March 2009 KPMG Tax M.Michna sp.k. Łukasz Grzejdziak

2 Main Purposes of Totalization Agreement Elimination dual Social Security coverage when employee of one country works in another country and is requird to pay social security contributions in both countries on the same earnings Filling gap in benefit protection for employees when employee divides their career between the United States and another country 1

3 Elimination of Potential Dual Coverage People who work outside USA may be covered under the systems of two countries simultanously for the same work. Both countries may potentially require payment of contributions on the same income. In Poland dual coverage issue has not arose in the past, as employment contract concluded in USA was not subject to Polish social insurance even if work was performed in Poland. The individual working for US employer remained outside the Polish ZUS system. Before USA-Poland totalization treaty was concluded, an individual employed by US employer was subject to social insurance only in USA 2

4 Individuals/Parties Affected by the Agreement US employees seconded to work in Poland working for US employer or Polish affiliate company Polish employees seconded to work in USA Self employed individuals working in other country Family members of the individuals mentioned above Employer of the assignee Before the agreement, employees, employers and self employed individuals could be required to pay social insurance contributions in USA and Poland for the same work and earnings 3

5 Equal Treatment of Individuals Polish or US individuals are equally treated in any country when the social insurance coverage is determined or the right to social insurance benefits is judged., Polish or US social insurance legislation is applied in the same way to the individuals from both countries, Agrement is applied to the individuals covered regardless of their citizenship. It may be applied to Polish and US citizens, but also to citizens of third countries or with no citizenship Social insurance institutions of both countries treats foreign individuals in the same manner as local individuals 4

6 Equal Treatment of Social Security Events Social security events that have influance on the right to particular social insurance benefit, its reduction or waiving that took place on the territory of one country are considered in the same way as it was on the territory of another country, In case if any formal procedure is triggered by the specific turning point, such an action may be undertaken on the territory of another country (eg. termination of employment when pension is claimed, accidents at work, sickness ) 5

7 Principles of Social Insurance Territoriality rule: An assignee should be subject to social insurance coverage in the country where employment contract is performed: American assigne working in Poland should be covered by Polish ZUS system. Polish employee working in USA should be subject to US system The individuals may not ellect the system to which they contribute Agreement includes exception to the territoriality rule designed to minimise disruptions in the career of employees on temporary assignment 6

8 Special Exception for Employees Detached worker exception: An individual who is temporary transferred to work for the same employer in another country remains covered only by the country from which he or she has been sent (USA or Poland) The detached-worker rule applies to employees whose assignment in the host country is expected to last maximum 5 years This rule may also be applied to individuals who are not seconded from USA or Poland but are reassigned from other countries by employer US assignees are exmpt from Polish social insurance if they are employed by US entity or Polish affiliated company The relevant certificate of coverage has to be acquired 7

9 Exception for self - employed Self employed individuals are required to pay contributions only in the country of their residence At present american residents sole traders, partners, freelancers are required to pay social insurance only in USA during 5 years of relocation It is not intende to give individuals freedom to elect coverage in conflict with normal agreements rule The relevant certificate of coverage has to be acquired 8

10 Special Exception May be applied in unusual situation when strict application of the agreement is not possible The authorities of both countries may grant exception to the normal rules if both sides formally agree Example: assignment was unexpectedly extended for few months beyond 5 year limit This possibility is intended to use occasionally and provides long lasting administrative procedure 9

11 Certificate of coverage USA/PL 1 An individuals who are exempt from Polish social insurance must document their exemption by obtaining certificate of coverage from USA authorities (USA/PL1). In case of assginment from Poland to USA the certificate (PL/USA1) may be obtained in ZUS office Certificate includes: Information concerning insured person Information concerning the employer or self employment (registration numbers) Information concerning place of secondment Relevant article of the agreement Authority that issues certificate Period of validity- max 5 years In some non-standard cases authorities may agree special treatment 10

12 Exceptional case: payment in both countries In some cases contributions are payable in both countries Example: American assignee working in Poland acquires USA/PL 1 and concludes separate employment contract with Polish employer that is not affiliate with US company. Salary received under Polish contract will be subject to ZUS contributions 11

13 Totalization Benefits Employees who have divided their careers into two countries sometimes fail to qualify for retirement, survivors or disability benefits from one or both countries because they have not worked long enough or recently enough to meet minimum eligibility requirements Under an agreement the individuals may qualify for benefits based on combined periods of insurance from both countries Partial benefit may be paid based on proportion of insurance periods In Poland periods are combined only in case of benefits that depend on period of insurance (eg. pensions from old ZUS system) 12

14 Totalization Benefits Periods of insurance in other country shorter than 12 months are not considered In new Polish pension system; pension depends on contributions collected but not period of insurance therefore periods of insurance in USA are not considered, Family members of US pensioners living in Poland may receive benefits from US system The benefits acquired from one system may be transferred to the individuals leaving in other country with no additional restrictions Application for benefits may be addressed to the authorities of both countries 13

15 Action points For US entities that seconded employees working in Poland: Analyze the impact of the agreement Acquire USA/PL1 certificate in USA Possible need to pay Polish ZUS contributions For the eligible individuals: submit application to appropriate authorities provide relevant documentation concerning periods of insurance 14

16 KPMG KPMG International International Executive Executive Services Services Questions? NEED ASSISTANCE? NEED ASSISTANCE? Łukasz Grzejdziak Marek Szulejewski lgrzejdziak@kpmg.pl mszulejewski@kpmg.pl 15

17 Contact Details KPMG Tax Sp. z o.o. International Executive Services Chlodna 51, XVI floor Warszawa, Poland secretary: facsimile: tax@kpmg.pl 16

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