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US expat tax for Americans in North Korea

US federal tax, FBAR, and FATCA obligations for U.S. citizens and green-card holders living in North Korea. General information.

For U.S. citizens and residents, navigating taxes related to North Korea (DPRK) is dominated by U.S. sanctions, which severely restrict financial activities. As there is no U.S.-North Korea income tax treaty or totalization agreement, double-tax relief relies solely on standard provisions like the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC).

US filing basics every American abroad must know

US citizens and green-card holders are taxed on worldwide income wherever they live, and usually must file Form 1040 once gross income exceeds the IRS threshold ($15,750 for single filers, $31,500 for married filing jointly, and $23,625 for head of household for 2025), even when no tax is ultimately due. The tools that reduce double taxation are the Foreign Earned Income Exclusion (FEIE, up to $130,000 for 2025 under IRC §911) and the Foreign Tax Credit. Neither is automatic. The FEIE requires a tax home in a foreign country plus either the bona fide residence test or 330 full days abroad in a 12-month period, and it reaches earned income only. The Foreign Tax Credit is figured separately for each income category under IRC §904 and is capped at the US tax on the foreign income in that category, so it reduces double taxation without guaranteeing that none remains.

Two reporting rules catch most filers in North Korea: the FBAR (FinCEN Form 114), required when foreign financial accounts exceed $10,000 in aggregate at any point in the year, and Form 8938 (FATCA) for specified foreign assets above the applicable threshold. Both can carry penalties even when no tax is owed. If you are behind, the Streamlined Filing Compliance Procedures are the usual path back for non-willful taxpayers. They run on two tracks: the foreign track carries no offshore penalty but requires meeting the program's non-residency test, and the domestic track carries a 5% offshore penalty but works through amended returns, so it does not fit someone who never filed at all. Tax and interest on the catch-up years are owed whichever route applies.

US tax treaty with North Korea

There is no income tax treaty between the United States and North Korea. U.S. persons cannot use treaty provisions to reduce withholding or reallocate taxing rights. Any relief from double taxation on income earned in North Korea must be sought through domestic U.S. tax law, primarily the Foreign Earned Income Exclusion and the Foreign Tax Credit. Crucially, all financial interactions are governed by the extensive U.S. sanctions program administered by the Office of Foreign Assets Control (OFAC), which generally prohibits transactions without a specific license.

North Korean Pensions and US Tax

North Korea's state-run system provides minimal support to the elderly and is not a formal retirement savings vehicle in the Western sense. These payments are reportedly of negligible value and are more akin to social welfare than a pension. There are no private retirement or investment programs available for foreigners.

For U.S. reporting purposes, the primary concern would be disclosure. Any personal foreign financial accounts, regardless of where they are held, would be subject to reporting on FinCEN Form 114 (FBAR) and Form 8938 (FATCA) if the aggregate value exceeds the respective reporting thresholds.

Investments, property, and capital gains in North Korea

U.S. law, through sanctions administered by the Office of Foreign Assets Control (OFAC), broadly prohibits direct or indirect investment by U.S. persons in North Korea without a specific government license. This is the most critical factor for any U.S. person considering assets related to the DPRK.

In the highly unlikely event a U.S. person were licensed to hold an interest in a North Korean entity, that entity would almost certainly be classified as either a Controlled Foreign Corporation (CFC) or a Passive Foreign Investment Company (PFIC). This would trigger complex and burdensome U.S. reporting requirements, such as Form 5471 or Form 8621, and could lead to current U.S. tax on undistributed foreign income under anti-deferral regimes like Subpart F or GILTI. CFC status is not set by any one holding: it needs US shareholders who each own at least 10% to together own more than half the company by vote or by value.

Self-employment and companies in North Korea

There is no U.S.-North Korea totalization agreement to coordinate social security coverage. Consequently, a self-employed U.S. citizen or green-card holder working in North Korea is fully liable for U.S. self-employment tax. It is owed once net earnings from self-employment reach $400 or more, and it runs at 15.3% on 92.35% of those net earnings, with the 12.4% Social Security portion applying only up to the wage base ($176,100 for 2025) and the 2.9% Medicare portion uncapped, plus a further 0.9% Additional Medicare Tax on combined Medicare-taxed wages and self-employment income above $200,000 for a single, head-of-household or qualifying-surviving-spouse filer, $250,000 for a joint return, and $125,000 for married filing separately.

The Foreign Earned Income Exclusion (FEIE) cannot be used to reduce income subject to self-employment tax. A U.S. person cannot obtain a Certificate of Coverage to claim an exemption and may be required to pay into both the U.S. system and any local North Korean system, if applicable.

Worked examples

Licensed Aid Worker on Local Payroll (2025)

A U.S. citizen works for an international aid organization in Pyongyang under a specific OFAC license. Their salary is $95,000 for tax year 2025. The Foreign Earned Income Exclusion (FEIE) is $130,000 for 2025, so it covers the whole salary, but only if their tax home is in North Korea and they meet either the bona fide residence test or the 330-day physical presence test. Where both conditions hold, no U.S. income tax is left on those wages. However, they must still file a U.S. tax return to claim the exclusion and must also file an FBAR if the total value of their foreign bank accounts exceeds $10,000 at any point during the year.

Licensed Self-Employed Journalist (2025)

A U.S. journalist operates as a self-employed contractor in North Korea, having obtained the necessary OFAC license. They have net earnings of $80,000 in 2025. If their tax home is in North Korea and they meet the bona fide residence or 330-day test, the FEIE excludes the $80,000 from U.S. income tax. The FEIE does not touch self-employment tax. Because there is no totalization agreement, they owe it in full: $80,000 x 0.9235 = $73,880 of net earnings, which is below the 2025 Social Security wage base of $176,100, so the whole 15.3% applies, about $11,304. This amount must be paid to the IRS regardless of any local taxes paid.

U.S. Person with a Foreign Bank Account (2025)

A U.S. citizen inherited a foreign bank account in a neighboring country that was previously used for licensed transactions related to North Korea. The account holds the equivalent of $75,000. For U.S. tax purposes, the primary issue is reporting. Because the account balance is over $10,000, the individual must file a FinCEN Form 114 (FBAR) each year. Form 8938 has two prongs for a single filer living abroad, more than $200,000 on the last day of the year or more than $300,000 at any time during it, and $75,000 clears neither, so no Form 8938 is due on these facts.

Common mistakes for Americans in North Korea

North Korea tax FAQ

Is there a U.S.-North Korea tax treaty?

No. There is no income tax treaty between the United States and North Korea. U.S. citizens must rely on provisions within the U.S. Internal Revenue Code, such as the Foreign Earned Income Exclusion and the Foreign Tax Credit, for any relief from double taxation.

Can a U.S. person legally work or invest in North Korea?

Generally, no. U.S. sanctions administered by the Treasury Department's Office of Foreign Assets Control (OFAC) broadly prohibit most financial transactions, including employment and investment, by U.S. persons involving North Korea. Any such activity requires a specific license from OFAC, and engaging in unlicensed activities carries severe penalties.

If I'm self-employed in North Korea, do I owe U.S. Social Security and Medicare taxes?

Yes. There is no totalization agreement between the U.S. and North Korea. Therefore, a self-employed U.S. person with net earnings of $400 or more owes U.S. self-employment tax at 15.3% on 92.35% of those net earnings, with the 12.4% Social Security portion stopping at the wage base ($176,100 for 2025) and the 2.9% Medicare portion uncapped. Neither the Foreign Earned Income Exclusion nor the Foreign Tax Credit reduces it.

How can I avoid being taxed on the same income by both the U.S. and North Korea?

The two primary tools are the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC). The FEIE excludes foreign-earned wages or self-employment income from U.S. income tax, but only if your tax home is in the foreign country and you meet either the bona fide residence test or the 330-day physical presence test. The FTC credits foreign income taxes actually paid or accrued, subject to a separate limitation for each Form 1116 income category, so a credit in one category cannot reduce U.S. tax in another and unused credits carry back one year and forward ten. You generally cannot use both for the same dollar of income, and neither reduces self-employment tax.

Do I need to report a bank account in North Korea to the U.S. government?

Yes, if reporting thresholds are met. The U.S. requires reporting of worldwide financial assets. If the aggregate value of all your foreign financial accounts (including any in North Korea) exceeds $10,000 at any time during the year, you must file a FinCEN Form 114 (FBAR). Higher thresholds may also trigger a requirement to file Form 8938 (FATCA).

What is a Controlled Foreign Corporation (CFC) or PFIC in the context of North Korea?

In the rare, licensed situation where a U.S. person owns part of a North Korean company, it would likely be a CFC or a Passive Foreign Investment Company (PFIC). These are U.S. anti-tax-deferral classifications that can result in immediate U.S. taxation of the company's income on the owner's personal return and require extensive reporting on forms like 5471 or 8621.

What is the most important U.S. compliance issue related to North Korea?

The single most critical issue is compliance with the U.S. sanctions program. Before any financial activity is contemplated, a U.S. person must understand and adhere to the regulations enforced by the Office of Foreign Assets Control (OFAC). Violations can lead to severe civil and criminal penalties, far outweighing any potential tax issues.

Can I get a Certificate of Coverage to avoid U.S. self-employment tax?

No. Certificates of Coverage are issued only for countries that have a social security (totalization) agreement with the United States. Since no such agreement exists with North Korea, it is impossible to get a certificate to exempt earnings from U.S. self-employment tax.

Sources and last reviewed

Reviewed by Ilya Fayerman, Esq. (NY Bar) on

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