Can U.S. Employment Be Counted Towards a Pension in Ukraine?

Ukraine and the United States have cooperated in many areas for decades, including social security and pension reform. For example, on 13 May 1997, the governments of Ukraine and the United States signed a Memorandum of Understanding concerning cooperation under a programme aimed at reforming Ukraine’s pension system. Such cooperation contributed to the development and modernisation of the Ukrainian pension system.

However, cooperation in the field of pension reform should be distinguished from an international social security agreement governing individual pension rights. In the absence of an applicable agreement between Ukraine and the United States providing for the aggregation or mutual recognition of insurance periods, periods of employment and social insurance accumulated in the United States are not automatically counted towards the insurance record required for a Ukrainian pension. Likewise, Ukrainian insurance periods are not automatically taken into account when determining entitlement to U.S. Social Security benefits.

Therefore, a person who has worked in both Ukraine and the United States should separately determine whether they meet the pension eligibility requirements of each country. In particular, employment in the United States may give rise to entitlement under the U.S. Social Security system if the person has accumulated the required coverage, while periods of employment in Ukraine are assessed under Ukrainian pension legislation.

A separate issue concerns the taxation of pension income. Ukraine and the United States have concluded a Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital. The Convention contains specific provisions governing the taxation of pensions, social security payments and certain other forms of retirement income.

When determining how a particular pension is taxed, it is necessary to consider the type of payment, the country from which it is paid, the recipient’s tax residence and the specific provisions of the Convention applicable to that category of income.

It is therefore important to distinguish between pension entitlement and pension taxation. A double taxation convention does not establish a mechanism for combining Ukrainian and U.S. insurance records. Its purpose is primarily to determine the taxation rights of the two countries and prevent the same income from being taxed contrary to the rules established by the Convention.

For Ukrainians who have worked in the United States and later intend to apply for a pension in Ukraine, it is advisable to analyse their Ukrainian and U.S. insurance records separately and determine whether they have acquired independent pension rights in each country. The applicable international agreements and national pension legislation should be checked at the time of the pension application.