Social Security and the US-Portugal totalization agreement

For many Americans in Portugal, a US Social Security check is the foundation of the household budget. For others, the question is the opposite: if I work in Portugal, which country's social security system do I pay into? The US and Portugal have a social security agreement, called a totalization agreement, that answers both. This guide explains it using the Social Security Administration's own descriptions.

The agreement in brief

The SSA lists the US-Portugal agreement as signed on 30 March 1988 and in effect since 1 August 1989. Totalization agreements do two things:

• eliminate dual coverage, so the same work is not taxed by both social security systems;
• fill gaps in benefit protection, by letting each country count credits earned in the other when you do not have enough to qualify on your own.

On the Portuguese side, the SSA says the agreement covers the general system of old-age, survivors and disability insurance and special systems for categories such as self-employed people, bank employees, clergy, agricultural workers and domestic employees. It does not cover the system for civil servants.

Working in Portugal: which system do you pay?

### Self-employed people

The SSA states the rule simply:

• self-employed workers who reside in the United States are assigned US coverage;
• self-employed workers who reside in Portugal are assigned Portuguese coverage.

So an American freelancer living in Portugal on a D8 or D2 pays into Portuguese social security, and can be exempt from US self-employment tax on the same income. To establish the exemption, the SSA says to write to the regional centre of the Portuguese social security system where you are registered and pay contributions, giving:

• your full name, date and place of birth, citizenship and country of permanent residence;
• your US and Portuguese social security numbers;
• the nature of your self-employment activity and the dates;
• the name and address of your business in both countries.

You then attach a photocopy of the certificate to your US income tax return each year as proof of the exemption. Without it, the IRS expects US self-employment tax.

This matters because, as the IRS points out, the foreign earned income exclusion does not reduce self-employment tax. The totalization certificate is what does.

### Employees sent on temporary assignment

The agreement also lets employees on temporary assignment stay in their home system. The SSA's pamphlet describes the Portuguese certificate (form P/USA 1), which a Portuguese employer requests for a worker sent temporarily to the US. US employers sending staff to Portugal request the equivalent US certificate from SSA. Employers should keep certificates in case of an IRS audit.

### A warning about gaps

The SSA notes that workers exempted from Portuguese coverage under the agreement pay no Portuguese social security taxes for other programs, such as sickness, maternity, occupational injury, unemployment and family allowances, and generally cannot receive those benefits. If you are exempt, consider other protection.

### What Portuguese contributions look like

gov.pt explains that employees in Portugal contribute 11 percent of gross salary, withheld by the employer, and that self-employed workers pay their own contributions between the 10th and 20th of the month after the month they relate to. Some self-employed workers qualify for exemptions.

Qualifying for benefits with credits from both countries

If you split your working life between the two countries, the agreement can help you qualify. The SSA explains:

• US benefits: if you lack enough US credits for a regular benefit, the US can count Portuguese credits to pay a partial US benefit, but only if you have at least six US credits (about a year and a half of work). If you already qualify on US credits alone, Portuguese credits are not counted.
• Portuguese benefits: Portugal can count US credits to help you qualify, provided you have at least 12 months of coverage under the Portuguese system.

The SSA's comparison table summarises Portugal's own rules: old-age benefits payable at age 66 and 4 months with 15 years of coverage, according to the pamphlet. Portugal's pensionable age is periodically adjusted, so confirm the current age with Segurança Social before relying on it.

The same pamphlet summarises Portugal's disability and survivor rules. A Portuguese disability benefit is payable under retirement age if you are permanently unable to earn more than one-third of your prior earnings because of a non-work-related injury or illness, and you need at least five years of credits, with no recent credits required. A Portuguese widow's benefit is payable at any age, but if she is under 35 it is paid for only five years unless she is disabled or caring for a dependent child. A widower must have been 65, or totally and permanently disabled, when the spouse died.

Each country pays its own benefit. US payments come from the US Treasury monthly for the previous month, and Portuguese payments are made early each month for the preceding month.

Receiving US Social Security in Portugal

Not every country can receive US benefits without limits. The SSA's Payments Abroad Screening Tool tells you whether retirement, disability or survivor payments continue indefinitely in a given country, stop after six consecutive calendar months, or face country-specific restrictions. Run it for Portugal using your own details before you move, and keep SSA informed of your foreign address.

Applying for benefits from Portugal

According to the SSA, if you live in Portugal you can apply for US or Portuguese benefits by contacting:

• the Federal Benefits Unit at the US Embassy in Lisbon, Avenida das Forças Armadas, 1600 Lisbon; or
• any Portuguese social security office.

From the US, you can visit or write any Social Security office, call 1-800-772-1213, or complete form SSA-2490-BK. Documents you may need include both social security numbers, proof of age, evidence of recent US earnings, and information about your Portuguese coverage.

For Portuguese programs, the SSA points to the Instituto da Segurança Social, Avenida 5 de Outubro 175, 1069-451 Lisbon, and the website seg-social.pt.

Taxes on your Social Security in Portugal

Social Security is US-source income, and the US-Portugal income tax treaty, listed on the IRS treaty page, assigns taxing rights for pensions and social security. Once you are a Portuguese tax resident, you report worldwide income on the Portuguese return. Read the treaty article on social security payments before filing in either country, and use the foreign tax credit on the US return if both countries tax the same income.

Medicare does not travel

Medicare.gov states that Medicare usually does not cover health care while you travel outside the US, with narrow exceptions mostly tied to hospitals near the US border. Medicare Part D does not cover drugs bought abroad. Medicare supplement (Medigap) policies may cover emergency care while traveling outside the US. In Portugal, your care will come from the SNS once you are registered, or from private insurance.

Common questions

Do I pay US or Portuguese social security as a freelancer living in Portugal? Portuguese. The SSA states that under the agreement, self-employed workers who reside in Portugal are assigned Portuguese coverage. Get a certificate from Portuguese social security and attach a copy to your US return each year.

Can I receive my US Social Security in Portugal? Check the SSA Payments Abroad Screening Tool for Portugal. It shows whether payments continue indefinitely, stop after six months, or face restrictions in a given country.

Who helps with Social Security claims in Portugal? The Federal Benefits Unit at the US Embassy in Lisbon handles US benefit questions for people living in Portugal, according to the SSA.

Does Medicare pay for care in Portugal? Generally no. Medicare.gov says Medicare usually does not cover care outside the US, and Part D does not cover drugs bought abroad.