A person whose earnings from self-employment would otherwise be subject to compulsory coverage in both the United States and Portugal is subject to only the laws of the country of which he or she is a resident.

Since this rule only applies to U.S. or Portuguese residents, it would not affect a dually covered worker who resides in a third country (e.g., a self-employed U.S. citizen who works in Portugal but resides in Spain). For this reason the special exception provision of the agreement will eliminate dual coverage for such a worker.

A person may sometimes work in an activity that one country considers self-employment and the other country considers employment. If this creates dual social security coverage, the agreement provides that:

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  If the person resides in the country that considers him or her to be self-employed, he or she will have coverage under the laws of that country; and

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  If the person resides in the country that considers him or her to be an employee, he or she will have coverage based on the rules for employees discussed; see RS 02001.560 - RS 02001.565.

A self-employed U.S. citizen, who is subject only to Portuguese social security taxes and contributions under the agreement and is exempt from paying Self-Employment Contributions Act (SECA) tax, must still file a U.S. tax return every year. To show that the self-employment earnings are exempt from U.S. Social Security self-employment tax, the individual must do the following:

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  Indicate on Schedule SE that the earnings are exempt under the agreement; and

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  Request a certificate of coverage from the Portuguese authorities; and

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  Attach a photocopy of the Portuguese certificate of coverage to his or her U.S. tax return every year (refer to RS 02002.750) as proof of the exemption.