TN 7 (10-16)
RS 02002.355 Self-Employment Rule under the Agreement with Hungary
A. Introduction to the self-employment rule
Work activity that the U.S. considers self-employment under U.S. Social Security law often qualifies as self-employment under Hungarian law. Under the agreement, a self-employed worker is generally subject to only the laws of the country in which the worker performs the work. However, the agreement provides for an exception if a person transfers his or her self-employment activity from one country to the other for five years or less. In this case, the self-employment activity remains subject to the social security laws of the country from which the worker transferred the activity and exempt from social security coverage and taxation in the other country.
B. Process to establish exemption from paying U.S. Social Security self-employment taxes
A self-employed U.S. citizen, who is subject only to Hungarian social security taxes and contributions under the agreement, must take the following actions to prove his or her exemption from U.S. Social Security self-employment tax:
request a certificate of coverage from the Hungarian authorities; and
attach a photocopy of the Hungarian certificate of coverage to his or her U.S. tax return every year.
For more information about the Hungarian certificate of coverage, see RS 02002.375.