YEL & U.S. self-employment tax
YEL & U.S. self-employment tax
Self-employed Americans living permanently in foreign countries are usually eligible for the U.S. foreign earned income exclusion; nevertheless, they must pay the U.S. self-employment tax. The SE tax is 15.3%. Here in Finland is the comparable YEL tax of 23.7%. The problem is that expatriates are likely to end up having to pay social security taxes in both countries if they are self-employed. That is 39%, even before paying income taxes! In the verolaskuri, it asks if I am "mualla kuin Suomessa vakuutettu." Does this mean I can get out of paying TyEL, or even YEL for that matter? Am I really required to pay YEL in Finland if I am already paying the U.S. self-employment tax?
Last edited by heyzeuss on Thu Aug 13, 2015 9:49 am, edited 1 time in total.
Re: YEL & U.S. self-employment tax
Europeans get a bit upset when social security contributions are called taxes. You are contributing towards your own pension. If you keep using the 'tax' word, people start getting confused.
As far as I know, if you are living in Finland and registered as an entrepreneur, then you have to pay YEL. I don't think the bilateral tax agreements between the US and Finland cover social security contributions.
If you are in Helsinki, I suggest you go to this place : http://www.intofinland.fi/en/contact and you can ask all your tax/social security questions in one place (in English) face-to-face and get answers directly from Vero and KELA
As far as I know, if you are living in Finland and registered as an entrepreneur, then you have to pay YEL. I don't think the bilateral tax agreements between the US and Finland cover social security contributions.
If you are in Helsinki, I suggest you go to this place : http://www.intofinland.fi/en/contact and you can ask all your tax/social security questions in one place (in English) face-to-face and get answers directly from Vero and KELA
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planetSunshine
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Re: YEL & U.S. self-employment tax
Rosamunda, you'll have to forgive us Americans 
Perhaps it's due to our politicians' imaginative use of the english language, but social security is consistently referred to as a tax in the US, even by the United States Internal Revenue Service which is the official government entity which collects our social security "tax". That aside, I definitely see your point.
heyzeuss, I'm in a very similar situation as you. I have just arrived and I am setting up a consultant business. My understanding of the situation is that most likely the bilateral tax treaty between the USA and Finland will state that you will only pay YEL in Finland. You will have to get a "Certificate of Coverage" to present to the US-IRS in order to prove your coverage.
It's better that you understand the details yourself than trust my interpretations. I'm just "some guy on the internet". This is a very useful link I found which describes the treaty in fairly understandable terms, and in depth: http://socialsecurity.gov/international ... nland.html
I came across the information while I was going over "IRS Pub 54", which I've found very useful as it covers many of the different US tax situations for US citizens abroad: http://www.irs.gov/pub/irs-pdf/p54.pdf
Perhaps it's due to our politicians' imaginative use of the english language, but social security is consistently referred to as a tax in the US, even by the United States Internal Revenue Service which is the official government entity which collects our social security "tax". That aside, I definitely see your point.heyzeuss, I'm in a very similar situation as you. I have just arrived and I am setting up a consultant business. My understanding of the situation is that most likely the bilateral tax treaty between the USA and Finland will state that you will only pay YEL in Finland. You will have to get a "Certificate of Coverage" to present to the US-IRS in order to prove your coverage.
It's better that you understand the details yourself than trust my interpretations. I'm just "some guy on the internet". This is a very useful link I found which describes the treaty in fairly understandable terms, and in depth: http://socialsecurity.gov/international ... nland.html
I came across the information while I was going over "IRS Pub 54", which I've found very useful as it covers many of the different US tax situations for US citizens abroad: http://www.irs.gov/pub/irs-pdf/p54.pdf