TN 1 (09-05)
RS 02002.085 Self-Employment Rule under the Agreement with Japan
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.
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.
RS 02002.095. Certificates of coverage under the Agreement with Japan