If you are self-employed and living in a country that has a totalization agreement with the United States, your social security contributions go to one country rather than two. Thirty-one agreements are in force. Live somewhere without one and US self-employment tax of 15.3 percent applies on top of whatever the local system charges.
| Country | Agreement in force since | Covers a self-employed resident | US self-employment tax |
|---|---|---|---|
| Portugal | 1 August 1989 | Portugal | None, with a Portuguese certificate |
| Spain | 1 April 1988 | Spain | None, with a Spanish certificate |
| Switzerland | 1 August 2014 | Switzerland | None, with a Swiss certificate |
| Japan | 1 October 2005 | Japan | None, with a Japanese certificate |
| Mexico | No agreement | Both systems can apply | 15.3 percent of 92.35 percent of net earnings |
| Costa Rica | No agreement | Both systems can apply | 15.3 percent of 92.35 percent of net earnings |
What a totalization agreement does
It stops one piece of work being charged by two social security systems. The Social Security Administration describes the basic rule as a territoriality rule: a worker who would otherwise be covered by both systems “remains subject exclusively to the coverage laws of the country in which he or she is working.” For the self-employed, most agreements read that as the country of residence.
The US side of it is statutory. Section 1401(c) of the Internal Revenue Code provides that while an agreement made under section 233 of the Social Security Act is in effect, self-employment income is exempt from self-employment tax to the extent that it is subject under the agreement exclusively to the foreign system. The agreement decides which system; the Code then removes the US tax.
One distinction does most of the damage in practice. The five-year detached-worker rule that people quote at each other is an employee rule: SSA states that it “generally applies to employees whose assignments in the host country are expected to last 5 years or less.” A self-employed American is not a detached worker, and reading the employee rule as though it governed a freelance practice produces the wrong answer in both directions.
Which countries have one in 2026
Thirty-one, as of 30 September 2026. Romania is the newest: its agreement was signed on 23 March 2023 and entered into force on 1 September 2026, the first addition since Iceland and Slovenia in 2019. The full list on SSA’s status page runs:
- Australia, Austria, Belgium, Brazil, Canada, Chile, Czech Republic, Denmark, Finland, France
- Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Netherlands
- Norway, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, Switzerland
- United Kingdom, Uruguay
What matters as much is who is absent. Mexico, Costa Rica, China, India, Thailand and the United Arab Emirates are not on that list, and no country in Africa is. An American freelancer in Mexico City is in the position the agreements exist to prevent: liable to the US system on the same earnings the Mexican system can reach.
Which country covers you when you are self-employed
Residence, in most cases. IRS Publication 54 states the general rule in one line: “As a general rule, self-employed persons who are subject to dual taxation will only be covered by the social security system of the country where they reside.” SSA says the same in the individual agreement pamphlets. Portugal, Spain and Switzerland each assign a self-employed resident to their own system, and Japan assigns a self-employed worker who works only in Japan to Japanese coverage.
Not every agreement is built that way. SSA notes that some instead let a self-employed worker move the activity from one country to the other for a temporary period. Romania’s agreement is one of those: Article 7 keeps a person normally self-employed in one state under that state’s law where the relocation is not expected to exceed five years. The country’s own agreement text settles it, not the general rule.
Where the agreement does apply, it removes the whole of the tax and not merely the retirement half. Section 1401(c) exempts self-employment income from “the taxes imposed by this section”, and that section imposes both the 12.4 percent old-age, survivors and disability charge and the 2.9 percent hospital insurance charge. There is no version of the exemption that leaves Medicare behind.
What the tax costs where no agreement applies
15.3 percent, charged on 92.35 percent of net earnings, from the first $400. Section 1401 sets 12.4 percent for old-age, survivors and disability insurance and 2.9 percent for hospital insurance. Schedule SE applies the 92.35 percent factor, which is the deduction section 1402(a)(12) allows in place of the employer half an employee never pays.
The 12.4 percent stops at the contribution and benefit base, which SSA has set at $184,500 for 2026, up from $176,100 for 2025. The 2.9 percent does not stop. A further 0.9 percent applies to self-employment income above $250,000 on a joint return and above $200,000 otherwise. Section 1402(b)(2) leaves net earnings of less than $400 for the year outside the tax entirely.
Wages come off the base before the self-employment income does. Section 1402(b)(1) measures the 12.4 percent ceiling as the contribution and benefit base minus the wages paid to the individual in the same year, so an American with a salaried job and a side practice reaches the $184,500 ceiling on the combined figure rather than twice over. The 2.9 percent still runs on everything.
Why the foreign earned income exclusion does not touch it
The exclusion reduces income tax and nothing else. Section 1402(a)(11) says that in working out net earnings from self-employment “the exclusion from gross income provided by section 911(a)(1) shall not apply.” The IRS worked example is a consultant abroad with $95,000 of foreign earned income, $27,000 of business deductions and $68,000 of net profit, who pays self-employment tax on the full $68,000.
That is the most expensive misreading in the whole expat filing set. On the IRS figures, an American who owes no US income tax at all still owes about $9,600 of self-employment tax on the same earnings, and the foreign tax credit does not reach it either, because it is a credit against income tax.
How the exemption is claimed on the return
Ask the foreign agency for a certificate of coverage, attach a photocopy to Form 1040 for every year the exemption applies, and print “Exempt, see attached statement” on the self-employment tax line, which is Part II, line 4 of Schedule 2. Those are the IRS instructions in full. There is no separate election and no form that replaces the certificate.
The certificate comes from whichever country’s system covers the work. Portugal issues it through the regional center of the social security system where the person is registered. Spain issues it through the provincial office of the General Treasury of Social Security. Both ask for the same details:
- Full name, date and place of birth, citizenship and country of permanent residence
- The US and the foreign social security numbers
- The nature of the self-employment and the dates the activity was or will be carried on
- The name and address of the trade or business in both countries
Where the foreign country will not issue a certificate, the IRS position is to request a statement from SSA instead, confirming that the income is not covered by the US system, and to attach that.
When the certificate runs the other way
It runs the other way when the agreement assigns the work to the United States. Publication 54 says to request that certificate from SSA’s Office of Earnings and International Operations, online at SSA.gov/international/CoC_link.html, and it is the certificate that establishes the exemption from the foreign country’s contribution. A self-employed person who has moved the activity abroad temporarily is the common case.
What an agreement does for the benefit record
It lets coverage in the two countries be added together, so a short record in either can still produce a pension. SSA sets the floor for a totalized US benefit at six credits: “you must have earned at least six credits (generally one and one-half years of work) under the U.S. system.” Six credits on their own would earn nothing.
Paying into the country you live in is therefore not money lost to the US record. The years count toward that country’s pension, and where an agreement applies the two periods of coverage can be combined to reach entitlement in either country. That is the half of a totalization agreement most people never read, and it is the half that pays.
Sources
- Social Security Administration — Status of Totalization Agreements — https://www.ssa.gov/international/status.html — checked 30 September 2026
- Social Security Administration — International Agreements — agreement descriptions — https://www.ssa.gov/international/agreement_descriptions.html — checked 30 September 2026
- Social Security Administration — U.S.-Romania Social Security Agreement — https://www.ssa.gov/international/Agreement_Texts/romania.html — checked 30 September 2026
- Social Security Administration — Agreement Between the United States and Portugal — https://www.ssa.gov/international/Agreement_Pamphlets/portugal.html — checked 30 September 2026
- Social Security Administration — Agreement Between the United States and Spain — https://www.ssa.gov/international/Agreement_Pamphlets/spain.html — checked 30 September 2026
- Social Security Administration — Agreement Between the United States and Switzerland — https://www.ssa.gov/international/Agreement_Pamphlets/switzrld.html — checked 30 September 2026
- Social Security Administration — Agreement Between the United States and Japan — https://www.ssa.gov/international/Agreement_Pamphlets/japan.html — checked 30 September 2026
- Social Security Administration, Office of the Chief Actuary — Contribution and Benefit Base — https://www.ssa.gov/oact/cola/cbb.html — checked 30 September 2026
- Internal Revenue Service — Self-employment tax for businesses abroad — https://www.irs.gov/individuals/international-taxpayers/self-employment-tax-for-businesses-abroad — checked 30 September 2026
- Internal Revenue Service — Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad (12-2025) — https://www.irs.gov/pub/irs-pdf/p54.pdf — checked 30 September 2026
- Office of the Law Revision Counsel — 26 U.S.C. §1401 — Rate of tax — https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section1401&num=0&edition=prelim — checked 30 September 2026
- Office of the Law Revision Counsel — 26 U.S.C. §1402 — Definitions — https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section1402&num=0&edition=prelim — checked 30 September 2026
Common questions
- Do I still pay US self-employment tax if I live in Portugal or Spain?
- No, where the agreement assigns you to the local system. SSA assigns a self-employed worker who resides in Portugal to Portuguese coverage and one who resides in Spain to Spanish coverage, and section 1401(c) then exempts that income from US self-employment tax. The exemption is not automatic on the return — it rests on a certificate of coverage from the local agency.
- Which countries have a totalization agreement with the United States?
- Thirty-one, as of 30 September 2026: Australia, Austria, Belgium, Brazil, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Netherlands, Norway, Poland, Portugal, Romania, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, the United Kingdom and Uruguay. Romania is the newest, in force since 1 September 2026.
- Does the foreign earned income exclusion cancel self-employment tax?
- No. Section 1402(a)(11) states that the section 911 exclusion does not apply when net earnings from self-employment are worked out, so the exclusion reduces income tax and leaves self-employment tax untouched. The IRS example is a consultant with $95,000 of foreign earned income and $68,000 of net profit who pays self-employment tax on the whole $68,000.
- Can the foreign tax credit offset self-employment tax?
- No. The foreign tax credit is a credit against income tax, and self-employment tax sits in a separate chapter of the Internal Revenue Code. Foreign social security contributions paid in a country with no totalization agreement therefore reduce neither the US self-employment tax nor the earnings it is charged on. Only an agreement removes the US charge.
- What happens if I am self-employed in Mexico or Costa Rica?
- Neither country appears on SSA’s list of agreements in force, so both systems can reach the same earnings. US self-employment tax applies in full at 15.3 percent of 92.35 percent of net earnings, alongside whatever the local system charges, and nothing in the US return offsets the local contribution. China, India, Thailand and the United Arab Emirates are in the same position.
- How is the exemption claimed on a US tax return?
- Three steps. Obtain a certificate of coverage from the foreign agency, attach a photocopy to Form 1040 for every year the exemption applies, and print “Exempt, see attached statement” on the self-employment tax line, which is Part II, line 4 of Schedule 2. There is no separate election and no form that replaces the certificate.
- How much is US self-employment tax in 2026?
- 15.3 percent, charged on 92.35 percent of net earnings. That is 12.4 percent for old-age, survivors and disability insurance plus 2.9 percent for hospital insurance. The 12.4 percent stops at the contribution and benefit base, which SSA has set at $184,500 for 2026, up from $176,100. The 2.9 percent runs on everything.
- Is there a minimum before self-employment tax applies at all?
- $400 of net earnings for the year. Section 1402(b)(2) leaves net earnings from self-employment of less than $400 outside the definition of self-employment income altogether, and the IRS states the same threshold for Americans abroad. Once net earnings reach $400 the tax applies to all of them, not only to the excess.
- Does the five-year detached worker rule cover a freelancer?
- No. SSA describes the detached-worker rule as one that generally applies to employees whose assignments in the host country are expected to last five years or less. A self-employed American is covered by a different provision, usually the residence rule. Some agreements, Romania’s among them, carry their own five-year test for a temporary move of a self-employed activity.
- Does the exemption cover the Medicare portion as well as Social Security?
- Yes. Section 1401(c) exempts self-employment income from “the taxes imposed by this section”, and section 1401 imposes both the 12.4 percent old-age, survivors and disability charge and the 2.9 percent hospital insurance charge. Where an agreement assigns the work to a foreign system, both go. There is no partial version of the exemption.
- Do contributions I pay abroad count toward a US Social Security benefit?
- They can, where an agreement applies. The agreements let periods of coverage in the two countries be added together, so a short record in either can still produce a pension. SSA sets the floor for a totalized US benefit at six credits, generally a year and a half of US work — a record that would earn nothing on its own.
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