US Taxes for American Entrepreneurs in Europe: A Guide

Entrepreneurship in Europe as a US person means running one business inside two tax systems that were not designed to meet. The employee questions of this series - treaties, pensions, reporting - all still apply; the entrepreneur adds self-employment tax, social security assignment, and an information-return stack that exists whether or not the business makes money.

This article is aimed at US citizens and green-card holders in France, Switzerland, Portugal or the Netherlands who are self-employed, founding, or already running a business - and at those weighing the leap. It works at existence level: it names each US rule and form with its source and puts the structural decisions where they belong, with a US tax professional and the local adviser working together. It recommends no entity, no election and no country.

This article describes how United States federal tax law and the relevant income tax treaties and totalization agreements apply to US persons. It summarises French, Swiss, Portuguese and Dutch rules only as published by each country's tax and social security authorities, for context, and is not French, Swiss, Portuguese or Dutch tax, legal or succession advice - those questions belong with a professional qualified in the relevant country.

Self-employment tax follows the citizen

The IRS states the starting point without qualification: "If you are a self-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad." The tax itself is IRC §1401 - 12.4% for old-age, survivors and disability insurance plus 2.9% for Medicare on self-employment income, with a 0.9% Additional Medicare Tax above statutory thresholds.

The base is defined by IRC §1402: net earnings from self-employment - the gross income from the trade or business less deductions - with self-employment tax due once net earnings reach $400 for the year, computed on Schedule SE (Form 1040). And the statute closes the door many founders expect to walk through: §1402(a)(11) provides that in computing that base "the exclusion from gross income provided by section 911(a)(1)shall not apply." The IRS repeats it in plain terms: you must count all self-employment income "even if all, or a portion of, gross income was excluded because of the foreign earned income exclusion."

The foreign earned income exclusion still matters to a founder - it can reduce the income tax on self-employment earnings, at $132,900 for 2026 on Form 2555 - but it operates on the income tax only. The two levies part company on the same return: one modelling exercise for the income tax, an entirely separate answer for self-employment tax, and itis the second one the next section can actually change.

The totalization exemption: one system, one certificate

What can displace US self-employment tax is not an exclusion but an assignment. Each of the four countries has a totalization agreement with the United States; where it assigns a self-employed person to the foreign system, the IRS route is documentary - obtain a certificate of coverage from the foreign agency, "attach a photocopy of the certificate or statement to your Form 1040 each year you are exempt" and "print 'Exempt, see attached statement' on the line for self-employment tax."

Which system gets you is the agreement's own rule, and the four agreements do not share one. As the Social Security Administration's pamphlets state them, the Swiss, Portuguese and Dutch agreements assign a self-employed worker to the country of residence. The French agreement assigns by where the work is performed - with principal activity deciding for work in both countries and a two-year rule for a temporarily transferred business activity. A founder operating across borders should treat the assignment question as open until the certificate answers it.

The assignment has a retirement dimension as well as a tax one: contributions build rights in the system that covers you, and the totalization articles later let each country count the other's periods for eligibility - the mobility article in this series covers those mechanics. For the entrepreneur the planning habit is simple: keep every certificate, and revisit the assignment whenever the business, or your residence, crosses a border.

{{INSET-CTA-1}}

The foreign-entity reporting stack, named

Once the business takes corporate or partnership form outside the United States, US information reporting attaches to the structure itself. None of the forms below is a tax bill; each is an annual disclosure with its own instructions, and which ones apply - and in which filer category - is exactly what a US tax professional determines from the structure's facts.

‍

Two practical notes. First, this article deliberately quotes no penalty figures for the entity forms: the numbers vary by form and circumstance, and the useful planning fact is simpler - the stack exists, and it is cheaper to design for it than to discover it. Second, the pieces interact: Form 8938's instructions provide duplication relief for assets reported on Forms 3520, 5471, 8621 and 8865, while their value still counts toward its thresholds - one more reason the stack is assembled by a professional rather than form by form.

It bears saying plainly that these are information returns: they attach to the existence and ownership of the structure, not to its profitability, and a start-up year with no revenue can still be a filing year on the US side. That is not a reason to avoid a structure the business genuinely needs - it is a reason to know the filing calendar the structure creates before choosing it, and to price the professional preparation of the stack into the business plan from the first year.

Why entity choice is a two-professional decision

Behind the information returns sits substantive law that this article names once and leaves alone: the income inclusion under IRC §951A (net CFC tested income - until 2026 generally known as global intangible low-taxed income, GILTI), under which a US shareholder of a controlled foreign corporation includes amounts in gross income under rules with real consequences for how a European operating company is owned. Its mechanics are the US professional's territory, and no part of them is summarised here.

That is the deeper reason every structuring question in this lane is presented as a joint question. The local form of the business — a French SARL or micro-entrepreneur status, a Swiss GmbH, a Portuguese unipessoal, a Dutch BV - is chosen under local company, tax and social security law, with a local professional: an expert-comptable or avocatin France, a Treuhänder or Steuerberater in Switzerland, a contabilistacertificado or advogado in Portugal, a belastingadviseur in the Netherlands. What that form means on the US side — corporation, disregarded entity or partnership, and everything that follows - is the US tax professional's determination. The two answers are made together or they are made wrong.

The financial-planning consequence runs through everything else in this series: an entrepreneur's savings capacity, retirement vehicles and reporting stack all key off decisions made at formation. The time to put both professionals in one conversation is before the registry filing, not the first April afterwards.

The founder's personal planning does not pause

Everything the accumulation article in this series says about an American employee in Europe applies unchanged to the founder - and two of its points bite harder here. IRA eligibility still requires taxable compensation, so a founder who excludes earnings under the foreign earned income exclusion faces the same "exclude or contribute" modelling question, now with self-employment income in the mix.

And the passive foreign investment company rules do not stop at the business's front door: surplus cash a company or founder invests through European funds raises the same IRC §1297 tests as any personal portfolio, per-shareholder and per-fund. Where profits should accumulate - inside the company, in personal US accounts, in a local vehicle - is a question that touches §951A, the PFIC rules, local tax and the family's plans at once. It is, again, the joint conversation; the accumulation article carries the personal half of the map.

Lifecycle events reopen every answer above. Taking on a partner can change the entity's US classification; moving your residence can change which totalization agreement - and which assignment rule - covers you; selling the business raises questions this series leaves entirely to the professionals. The planning habit that serves founders is the same one throughout this library: put the change in front of both advisers before it happens, with the current certificate, the current structure diagram and the current account list on the table.