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 prevent double taxation are the Foreign Earned Income Exclusion (FEIE, up to $130,000 for 2025 under IRC §911) and the Foreign Tax Credit.
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 penalty-free path back for non-willful taxpayers.
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. North Korea does not have a conventional capital gains tax system due to severe restrictions on private property ownership.
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 taxes. This tax, which covers Social Security and Medicare, is calculated on net earnings of $400 or more.
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. They can use the Foreign Earned Income Exclusion (FEIE), which is projected to be around $130,000 for 2025, to exclude their entire salary from U.S. income tax. As a result, they would owe no U.S. income tax on their 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. They can use the FEIE to exclude the $80,000 from U.S. income tax. However, the FEIE does not apply to self-employment tax. Because there is no totalization agreement, they owe U.S. self-employment tax on the full amount. The tax is calculated as $80,000 x 0.9235 x 0.153, which equals approximately $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. Because the balance does not exceed the $200,000 end-of-year threshold for a single person living abroad, they would not be required to file Form 8938 (FATCA) with their tax return.
Common mistakes for Americans in North Korea
- Engaging in any financial transaction with North Korea without first confirming its legality under U.S. sanctions and obtaining a license from OFAC if required.
- Assuming a tax treaty exists to reduce or eliminate U.S. tax.
- Using the Foreign Earned Income Exclusion to try and reduce or eliminate U.S. self-employment tax.
- Believing a social security totalization agreement is in place to avoid double social security tax for self-employed individuals.
- Failing to file an FBAR (FinCEN Form 114) for North Korean or other foreign financial accounts if the aggregate value exceeds $10,000.
- Ignoring complex reporting for licensed investments, such as Form 5471 for a Controlled Foreign Corporation (CFC) or Form 8621 for a Passive Foreign Investment Company (PFIC).
- Assuming that because North Korea has a limited tax system, there are no U.S. filing obligations.
- Attempting to claim a Foreign Tax Credit for taxes not actually paid to the North Korean government.
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 is liable for the full U.S. self-employment tax. The Foreign Earned Income Exclusion does not reduce this tax.
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 allows you to exclude foreign-earned wages or self-employment income from U.S. income tax. The FTC allows you to reduce your U.S. income tax liability by the amount of income taxes you have paid to a foreign government. You generally cannot use both for the same dollar of income.
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
- US Treasury, North Korea Sanctions (verified 2026-06-07)
- IRS, United States Income Tax Treaties - A to Z (verified 2026-06-07)
- Social Security Administration, International Agreements (verified 2026-06-07)
Last reviewed .
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