Self-employment while living abroad comes with exciting opportunities but also unique challenges. From understanding tax obligations in multiple jurisdictions to setting up your business structure and managing healthcare options, there’s a lot to navigate. Here’s what you need to know to stay compliant and thrive as a self-employed expat.

What is the U.S. self-employment tax?

U.S. citizens and permanent residents living abroad are generally subject to self-employment tax (15.3%) on net earnings, regardless of their residence. This tax covers Social Security (12.4%) and Medicare (2.9%).

1. Foreign Earned Income Exclusion (FEIE)

The FEIE is a provision in the U.S. tax code that allows qualifying expatriates to exclude a portion of their foreign-earned income from U.S. federal income tax. In 2025, the exclusion limit is over $130,000, meaning that if you qualify, you can exclude up to this amount from your taxable income. However, it's important to note that the FEIE only applies to earned income—such as self-employment income—and does not cover passive income sources like dividends, rental income, or capital gains.

2. Totalization Agreements

The U.S. has totalization agreements with several countries to prevent double payment of social security taxes. If your host country has one, you may be able to avail yourself of the agreement to avoid paying self-employment taxes twice.

3. Deductible Business Expenses

As a self-employed individual, you can deduct expenses like office costs, travel, and professional services. Keep detailed records to support your claims in case of an audit.

4. Business Structure

Determine how you will operate in the host country. Each structure has implications for taxes, liability, and reporting requirements in both countries.

5. Local Tax Obligations

• Income Taxes: Be aware of local tax laws and filing deadlines in your host country.
• VAT/GST: Some countries require self-employed individuals to register for and remit value-added tax (VAT) or goods and services tax (GST).

6. Currency and Banking

• Set up a local bank account to simplify transactions in your host country.
• Consider exchange rate fluctuations when managing income and expenses.

7. Retirement Planning

Without employer-sponsored retirement plans, you'll need to set up and contribute to your own accounts, discuss with your U.S. and host country advisors your options.

8. Compliance and Reporting

• FBAR: If you have more than $10,000 in foreign accounts, you must file a Foreign Bank Account Report (FBAR).

Wondering if your reporting is up to par? We can help.