TN 1 (09-05)

RS 02002.085 Self-Employment Rule under the Agreement with Japan

A. Policy

Under the agreement, individuals who are self-employed are generally subject only to the laws of the country in which their work is performed. However, an exception is provided if a person transfers his or her self-employment activity from one country to the other for 5 years or less. In that case, the self-employment remains subject to the Social Security laws of the country from which the activity was transferred and is exempt from Social Security coverage and taxation in the other country.

B. Process

A self-employed U.S. citizen who is subject only to Japanese law under the agreement and is exempt from paying Social Security self-employment (SECA) tax must still file a U.S. tax return every year. When preparing the income tax return, the worker should show that the earnings are exempt under the agreement and attach a photocopy of the certificate of coverage issued by the Japanese authorities as proof of the exemption.

C. Reference

RS 02002.095. Certificates of coverage under the Agreement with Japan

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RS 02002.085 - Self-Employment Rule under the Agreement with Japan - 09/27/2005
Batch run: 09/27/2005