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U.S. and Spain Sign New Bilateral Agreement on Social Security: Key Takeaways and Impact

Has the new agreement already been enacted? 

At the moment, the new agreement’s enforcement remains in the pipeline. The governments of the United States and Spain are eager to enact the beneficial Totalization Agreement, advancing relations between both nations and offering more security for their respective citizens working abroad. However, the implementation process of such extensive international agreements often involves a complex and time-consuming procedure, requiring comprehensive review and approval by multiple parties within both governments. 

At this stage, while preparations are underway to launch the agreement, an official commencement date has yet to be announced. As these agreements are of high diplomatic importance, be assured that both governments are working tirelessly to facilitate the implementation process. Furthermore, these developments will be immediately communicated to the public, ensuring all potential beneficiaries are well informed. 

We understand this situation might create some uncertainty for those anticipating the benefits of such an agreement. However, it’s important to note that these agreements are designed to benefit workers and employers, ultimately fostering a more sustainable international working environment. Their enactment often requires delicacy, precision, and meticulous planning. We appreciate your patience as the United States and Spain work diligently towards securing a brighter future for their workers.

What are the key terms of the new Social Security Agreement between the U.S. and Spain?

First off, let’s understand that these Totalization Agreements are actually international contracts entered into by the US with other countries, 25 of them to be exact, including Spain. They are designed to avoid what’s known as ‘dual social security coverage’. This means that they aim to prevent you – as an employee working abroad – from paying social security taxes to two countries at once. It’s a system for your benefit that equally respects both, your pocket and international cooperation. 

These agreements apply the ‘Detached Worker Rule’, which is highly relevant to those of you temporarily reassigned to another country. Simply put, this rule stipulates that if your employer sends you off on a temporary assignment to a country under such agreement, you won’t have to worry about paying social security taxes to both countries. 

One of the main changes included in the new text affects, firstly, the calculation of Spanish Social Security pensions, which will be more beneficial. From now on, there will be two pension calculations. The first will be based solely on contributions in Spain, and the second will add the time contributed in the United States. Comparing the two calculations, the more favourable one will be paid.

On the other hand, the Agreement introduces improvements in the posting of self-employed workers and extends the period of posting, both for self-employed and employed workers, up to 5 years, extendable by 2 years in exceptional circumstances and subject to authorisation by the competent authority. 

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Future scenario for U.S. Digital Nomads in the framework of the new Bilateral Agreement 

Although the legal text has not yet been published, the new agreement should benefit US citizens wishing to apply for the Spanish Digital Nomad Visa by guaranteeing them the possibility of finally obtaining a certificate of coverage to maintain Social Security contributions in their home country. Under the current bilateral agreement signed in 1986 by both nations, US citizens in the process of obtaining the Spanish Digital Nomad Visa must register with Spanish social security in order to meet the eligibility criteria and obtain a favourable visa response. 

For US digital nomads who are employees of a company, the current bilateral agreement does not facilitate the visa procedure, as it does not cover remote workers who voluntarily decide to move to Spain and apply for the digital nomad visa. Lacking social security coverage, they are forced to involve the company in the process, as the latter must register expressly in Spain in order for the worker to be covered and pay their social security contributions, something that many companies have been reluctant to do.

The same applies to those who are self-employed, because of the impossibility of obtaining temporary coverage from their country of origin, they must undertake to register for social security in Spain and pay their contributions.

 Spain's Perspective: Benefits of the Social Security Agreement with U.S.

While the agreement is not yet in effect, it will ultimately bring several advantages to its residents, especially those in Spain, in the near future. The Totalization Agreement allows the combination of social security credits from both Spain and the United States to allow individuals to meet eligibility requirements for Spanish benefits. This means that Spanish citizens who have worked in the U.S will be able to count their contributed credits towards their eligibility for Spanish benefits, demonstrating a significant step towards global workforce fluidity in the future. 

Family and survivors’ benefits will become an important aspect of this agreement once enacted. Dependents of retired or disabled individuals, under the specifications of both U.S and Spanish law, will be able to receive benefits. Survivors’ benefits in Spain will be obtainable as a full benefit at age 65 or as a reduced benefit at any age, provided that the deceased worker was registered with the Spanish system at the time of their passing, and had made contributions of at least 500 days during the five year period leading up to their death or received a retirement or disability benefit at the time of death. 

Divorced survivors will also be covered under this agreement. In the United States, divorced surviving spouses will receive the same benefits as surviving spouses if the marriage lasted at least ten years. In Spain, the benefits for divorced surviving spouses will be aligned with those of surviving spouses, and will be proportional to the time the divorced surviving spouse lived with the worker.  

To understand the entire scope of Spain’s future benefits under this agreement, visit Spain’s Social Security website here

Ultimately, once in effect, this agreement will enhance the social security provisions between the two nations, preventing dual taxation with regards to Social Security and Medicare taxes and ensuring that each country, U.S. or Spain, pays its own benefit. U.S payments will be made by the Department of Treasury, while Spain will make monthly payouts for the preceding month.  

This impending agreement stands as a testament to the power of international cooperation, offering a model of how nations can potentially work together to protect and provide for their citizens, regardless of geographic boundaries.

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