Under Article 7.3 of the Agreement, a person who performs self-employment in both the United States and France on an on-going basis is subject only to the laws of the country in which the person performs his or her principal activity.  Article 5.1 of the Administrative Arrangement establishes the criteria that will be used to determine where such a worker performs the “principal activity” for purposes of applying this provision of the Agreement.  Under Article 5.1, a self-employed person will generally be considered to perform his or her principal activity in the country in which he or she maintains a fixed base for more than 183 days during the fiscal year in question.

“Fixed base” is a concept used for determining liability for income tax on income derived from independent personal services under Article 14 of the U.S.-French income tax convention (Convention Between the United States of America and the French Republic with Respect to Taxes on Income and Property of July 28, 1967) (TIAS 6518), as amended by Protocols of October 12, 1978, and January 17, 1984.  In determining the location of a self-employed person’s fixed base, therefore, the person, as well as the U.S. and French social Security agencies, will be able to look to the tax convention.  Although the tax convention does not define “fixed base,” the Internal Revenue Service (IRS), in determining the income tax liability of self-employed persons, has generally interpreted the term to be similar to “permanent establishment,” which is defined in Article 4 of the convention.  For purposes of the convention, a permanent establishment generally means “a fixed place of business through which a resident of one of the Contracting States engages in industrial or commercial activity.”  Subject to certain specified exclusions, the term includes a seat of management, branch, office, factory, workshop, warehouse, mine, quarry, or other place of extraction of natural resources, or a building site or construction or assembly project which exists for more than 12 months.  Although “permanent establishment” is defined in the tax convention only with respect to industrial or commercial activities, IRS has also referred to the term in order to determine the tax liability of self-employed persons engaged in liberal professions (e.g., physicians, attorneys and performing artists).

If a person who is self-employed in both the United States and France maintains a fixed base in both countries for more than 183 days during the fiscal year, or does not maintain a fixed base in either country for more than 183 days during the fiscal year, the person will be subject to the social security coverage laws of the country in which he or she is physically present for the greater number of days.

Article 5.1 of the Administrative Arrangement also authorizes the U.S. and French social security agencies to exchange relevant information if necessary to determine the number of days a person has maintained a fixed base or been physically present in each country.