HR and tax alert | July 2015

Brazil and US sign social security agreement

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Executive summary

The Social Security Totalization Agreement (the “Agreement”) between Brazil and United States of America was signed on 30 June 2015.

It is worth mentioning, however, that the Agreement above is not yet in force. The Agreement will enter into force on the first day of the third month following the official diplomatic exchange of the ratification documents. No exact date can be given at this point, but this is expected in the following months.

The purpose of the Agreement is to ensure that employees and their employers fall under one country’s social security law (Brazil or USA), avoiding instances of double social security liability arising.  Under the Agreement, individuals assigned between Brazil or United States of America may remain within their home country social security scheme, provided the conditions of the Agreement are met.

The Agreement addresses the transfer of pension benefits and equality of treatment of individuals covered by the relevant legislation of both countries.

Key features

Benefits covered

The Agreement applies to the following benefits:

  • Brazil
    • Old age, survivors and disability.
  • United States of America
    • Old age, survivors and disability.

Local Brazilian Contracts

Brazil presently requires all assignees to have a local employment contract. This has created an issue in other Social Security Agreements Brazil has entered into. For instance some clients have had difficulties with obtaining Certificates of Coverage in Germany for assignments to Brazil under the Germany/Brazil agreement.

The text of the Brazil/USA social security agreement suggests this issue may not arise, but this will only be confirmed after the conclusion of the administrative arrangement by both countries.

Secondments and Certificates of Coverage

Employees seconded between Brazil and United States can remain covered by the social security scheme of their home country via a Certificate of Coverage (“CoC”) for a period of up to 5 years. This coverage can be requested again only after six months of absence from the host country territory.

Totalization of periods of coverage

The insurance periods completed under the social security scheme of one country, will be taken into account to determine the right to benefits in the other country. Benefits will be accorded in relation to the insurance periods completed in each country.

Transitional rules

Any insurance period performed by employees in one of the two countries prior to when the agreement comes into force will not be taken into consideration for determining the eligibility for a CoC.

Next steps

Companies with employees seconded between Brazil and USA should review how this Agreement might affect current and future social security liabilities and costs after entering into force as per its ratification.

In particular, employers should:

  • Review the terms of planned assignments to ensure they will be eligible for coverage under the Agreement, and the impact this will have on assignment costs.
  • Where relevant for both current and future assignments, be prepared to start the process of applying for certificates of coverage from the appropriate authorities.
  • Review current payroll withholding processes to ensure payments are correct following the introduction of the Agreement.
  • Consider any communication to employees affected by the Agreement.
  • Review the impact the introduction of the Agreement will have on existing secondment policies.

EYG no. DN0872

For additional information with respect to this alert, please contact the following:

International Social Security Services

Brazil