Columbia and/or its employees may incur foreign payroll taxes for work abroad. These may include taxes for:
→ Social security or comparable pension or benefits plans
→ National health care;
→ Unemployment insurance;
→ Workers’ compensation;
→ Housing funds;
→ Severance funds; and
→ Other taxes.
In most countries, each tax is calculated as a percentage of gross income (up to a defined ceiling). Each tax may be “employee-paid” (reducing net income), “employer-paid” (increasing employment cost), or a hybrid.
Unless they are employed by a separate host-country entity, U.S. citizens or permanent residents working overseas are typically subject to U.S. FICA taxes (i.e. social security and Medicare) instead of, or in addition to, host-country payroll taxes.
A small number of countries have so-called “totalization agreements” with the U.S., which clarify social security tax requirements for cross-border employees. Where no totalization agreement exists, it may be necessary to pay social security taxes in more than one jurisdiction.
For additional information on these agreements refer to the U.S. Social Security Administration’s website International Programs and Resources.