IV.   Social Security

In many cases, foreign earned income of US citizens is subject to US social security or self-employment tax. If subject to these taxes, there is no foreign earned income exclusion relating thereto. However, in some unusual cases foreign trading gross receipts, could reduce the amount of social security.

US employer (e.g. branch of a US corporation operating outside the USA)
• employer is required to withhold and employee to pay their share, unless pay is subject to foreign payroll withholding.

Foreign employer being subsidiary of US corporation
•If an election is made to provide for social security withholding, employer pays, otherwise, employee is required to pay portion for employer and employee.

Foreign corporation [outside USA] (including foreign corporations owned by US expatriates and foreign governments)
•no social security obligations

Self-employed individual
•self-employed must pay self-employment tax

Typically, double tax treaties do not cover Social Security taxes. These are usually covered by "Totalization Agreements." The existence of such agreements must be checked on a country by country basis.

Note: Branches of US corporations locally employing US citizens are required to withhold US income and social security taxes. There are no similar requirements to withhold social security on resident or nonresident aliens working outside the U.S. A U.S. taxpayer working outside the U.S. for a foreign employer does not fall under the requirements of social security withholding tax. If the foreign employer is a foreign entity of a U.S. parent, an agreement between the U.S. entity and the IRS can be arranged to provide for social security withholding tax for all U.S. citizens and resident aliens employed by the foreign entity.