Residency6 min read
Social security across borders: the bill a tax treaty doesn't cover
You checked the tax treaty. It says nothing about social security, because social security is governed by an entirely different set of agreements — and where none exists, two countries can both charge you in full.
There is a particular shape of surprise that arrives about eighteen months into a relocation. The income tax position was researched carefully, the treaty was read, the certificate was obtained — and then a demand appears for social contributions in a country the founder was confident they had left, or in the one they moved to, or in both.
Tax treaties do not cover social security. They cover taxes on income and capital, and social contributions are generally not treated as either. A completely correct income tax position tells you nothing about where your contributions are due.
A separate system, with separate agreements
Two frameworks do the coordinating, and which one applies to you depends entirely on the countries involved.
| Totalisation agreements | EU coordination | |
|---|---|---|
| Where | Bilateral, country to country. The US has roughly thirty | Across the EU, EEA and Switzerland |
| What it does | Prevents dual contribution liability and lets you aggregate periods for benefit eligibility | Same, plus a comprehensive rule allocating you to exactly one state |
| The document | Certificate of coverage, issued by the country whose system you remain in | A1 certificate, issued by the competent institution |
| Coverage | Patchy. Large parts of Asia, Africa and Latin America have no agreement with most countries | Comprehensive within the bloc |
| If none applies | Both countries can charge in full, with no relief | Not applicable inside the bloc |
The EU rule, because it is the clearest
Within the EU, EEA and Switzerland the governing principle is that you are subject to the legislation of one member state only, and there is a hierarchy that determines which.
- Employed in one state: that state's system, regardless of where you live.
- Self-employed in one state: that state's system.
- Working in two or more states: your state of residence, if you carry out a substantial part of the activity there. "Substantial" is assessed against a benchmark commonly taken as a quarter of working time or remuneration.
- Working in two or more states without substantial activity where you live: allocated by where the employer has its registered office, or for the self-employed, where the centre of interest of the activities lies.
- Posted temporarily to another state: you can remain in your home system for a defined maximum period, subject to conditions.
The artefact in every case is the A1 certificate. It is what you produce when another member state's institution asks why you are not contributing there, and it is issued in advance rather than argued about afterwards.
Cross-border remote work sat awkwardly in this framework for years, because a person living in one member state and teleworking for an employer in another could be pulled into their state of residence. A dedicated framework agreement introduced in 2023 lets signatory states agree that substantial teleworking from the residence state does not shift the allocation — but it applies only between states that signed it, and only on application. It is an opt-in, not a default.
The American trap
This one deserves its own section because it catches so many US founders abroad, and because it is caused by a reasonable misunderstanding of a genuinely useful relief.
The foreign earned income exclusion lets a qualifying US person exclude a substantial amount of foreign earned income from income tax. Founders reasonably conclude that a modest income abroad therefore attracts nothing.
The exclusion does not apply to self-employment tax. A self-employed US citizen abroad remains liable for the full self-employment charge — social security and Medicare combined — on net earnings, regardless of how much income tax the exclusion removed. On a mid-five-figure profit, that is a bill of several thousand dollars that the founder had budgeted as zero.
The relief that does apply is a totalisation agreement. If one exists with your country of residence and you are covered by that country's system, you obtain a certificate of coverage and are exempt from the US charge. If no agreement exists, you pay the US self-employment tax and whatever the local system charges.
Where founders actually get caught
- Moving to a country with no agreement. The list of countries with comprehensive networks is shorter than people assume, and much of the popular relocation map is thinly covered.
- Assuming the tax certificate covers it. A certificate of tax residence says nothing about contributions. They are different documents from different institutions.
- Not obtaining the A1 or certificate of coverage in advance. These are prospective documents. Applying after an institution has queried you is slower, and in some systems you cannot backdate the relief.
- Treating the company as the answer. Paying yourself through a foreign company does not remove contribution liability where you personally live and work; many systems look at the activity of the individual, not the payroll of the entity.
- Forgetting the benefit side. Contributions paid into three systems over fifteen years are not lost, but they are claimed separately, from three institutions, decades later. Nobody will find them for you.
What aggregation actually gives you
The word totalisation refers to the second function, which is the one founders undervalue because the payoff is thirty years out.
Most pension systems require a minimum contribution period before you qualify for anything at all. Split a career across four countries and you can end up below the threshold in every one of them, having paid throughout. Aggregation lets periods in one system count toward the qualifying condition in another — you still receive a proportionate amount from each, but you receive something rather than nothing.
That mechanism only works if there is a record. Which makes the boring advice the important advice: keep the certificates, keep the annual statements, and keep a note of which institution held you in which years.
The checklist
| Do this | When | |
|---|---|---|
| 1 | Check whether an agreement exists between the specific pair of countries | Before choosing the destination |
| 2 | Determine which system you fall into under its rules | Before the move |
| 3 | Apply for the A1 or certificate of coverage | In advance, not after a query |
| 4 | Register with the local system where that is the correct answer | On arrival |
| 5 | If US and self-employed, model the self-employment charge separately from income tax | Before assuming the exclusion solves it |
| 6 | Keep every certificate and annual statement | Permanently |
The cost of getting this wrong is rarely catastrophic, but it is unusually annoying: an assessment for a year you cannot revisit, in a system you thought you had left, for a charge no treaty relieves. It is also entirely avoidable with one document requested at the right time.
Residence, presence and the obligations attached to each
Contributions follow where you work and live, not where you incorporate. Founders 8 keeps both sides of that visible.
See the Personal OSFounders 8 does not provide tax advice. Tax residency depends on facts and rules specific to each jurisdiction — review your position with a qualified adviser.