Moving to the USA from Denmark: tax, social security, your company, pensions and visas

A move from Denmark to the United States touches your Danish tax liability, your shares, your pension and your company long before you board the plane. This guide walks you through the Danish rules on leaving, the treaty and social security agreement with the US, and the visa routes open to Danish citizens. Read it before you sell, let or sign anything.

How your Danish tax residence ends

Danish full tax liability rests on two tests: you have a dwelling (bopæl) in Denmark, or you stay in Denmark for at least 6 months, short holiday trips abroad included. Nationality plays a role only in narrow cases, such as Danish citizens on Danish-based ships and staff posted abroad by the Danish state, regions or municipalities. Being Danish does not by itself keep you taxable.

Whether your liability ends on departure turns on your home. In practice the decisive factor is continued access to a year-round dwelling (helårsbolig), and keeping one is normally enough to keep you fully liable unless you intended to settle abroad permanently. Skattestyrelsen states that full liability as a rule ends only when the home is sold, the lease is terminated, or the home is let for at least 3 years on a lease the owner cannot terminate (the 3-year rule). A holiday home used only for holidays does not in principle count as a dwelling.

Deregistering from the population register does not by itself end liability; your actual housing situation decides. Without a Danish dwelling, you become fully liable again if a stay in Denmark reaches 6 months. If you end up fully liable in both Denmark and the US at the same time, the treaty decides.

Your departure checklist:

• Notify your municipality before you leave through the borger.dk self-service Anmeld flytning til udlandet; your new address can be added later. Stays abroad over 6 months must always be reported as a move abroad.
• Call Skattestyrelsen on 72 22 28 92 one week after you have deregistered and physically left, so it can decide on your tax liability.
• File form 04.029 on your dwelling only if Skattestyrelsen asks for it.
• File a final return (oplysningsskema) covering the period from the end of your last income year to the end of liability: due 1 May of the following year if you only receive a tax assessment notice, otherwise 1 July.
• Keep a NemKonto (a foreign account can be registered) so tax refunds can reach you.

Danish exit tax on shares and other assets

When your Danish tax liability ends for any reason other than death, exit taxation applies, asset by asset. For many founders and investors, shares are the big item.

• Shares: under aktieavancebeskatningsloven § 38, gains and losses are treated as realised when Danish taxing rights end. This applies only if the total market value is DKK 100,000 or more (or you hold special share types), and each spouse has their own threshold.
• The 7-in-10 rule: as a rule, the share exit tax applies only if you were liable to Danish tax for periods totalling at least 7 years within the 10 years before liability ended.
• Treaty residence: the tax is also triggered if you become resident in another state under a tax treaty and Denmark can no longer tax the shares, even if you keep a Danish home.
• Other assets: claims and financial contracts under kursgevinstloven § 37 are treated as realised with the same DKK 100,000 minimum; business assets and other assets that would be taxed on a sale are deemed sold at market value (kildeskatteloven § 10); crypto-asset holdings are deemed sold at market value on the day liability ends.

You can defer payment (henstand), but only for shares taxed on the realisation principle; for shares taxed on the mark-to-market principle the tax is paid on departure. Deferral requires that you file your departure information and a holding statement (beholdningsoversigt) on time, and it requires adequate security when you move to a country outside the Nordic assistance convention of 1989 and the EU recovery directive 2010/24/EU, which is the position for a move to the United States.

The deferred amount falls due as dividends are paid and shares are sold, if your new country taxes less than Denmark. If you move back to Denmark still holding the shares, the balance lapses.

The Denmark-United States income tax treaty

The Denmark-United States income tax convention was signed on 19 August 1999, entered into force on 31 March 2000 and took effect for withholding taxes from 1 May 2000 and for other taxes from 1 January 2001. An amending protocol signed on 2 May 2006 entered into force on 28 December 2007; Skattestyrelsen records its effect from 1 February 2008 for withholding taxes and 1 January 2008 for other taxes. The IRS lists general effective dates of 1 January 2001 for the treaty and 1 January 2008 for the protocol.

Tie-breaker. If you are resident in both countries, you are resident where you have a permanent home. With a home in both, it is where your personal and economic relations are closer (centre of vital interests), then habitual abode, nationality and finally mutual agreement. Under the saving clause, each country otherwise keeps taxing its own residents and citizens, and a former citizen or long-term resident may be taxed under the law of the country concerned for ten years after losing that status.

Dividends. The source country may tax dividends at:

Pensions. Pension distributions, periodic or lump sum, are taxable only in the country where the paying scheme is established. On the Danish side this covers tax-approved schemes under Part I of the Pension Taxation Act. Social security payments are taxable only in the paying country, and annuities only in your country of residence. These pension and social security rules apply despite the saving clause. Denmark relieves double taxation of its residents by crediting US tax, capped at the Danish tax on that income.

Social security: the US-Denmark totalization agreement

The United States-Denmark Agreement on Social Security was signed on 13 June 2007 and has been effective since 1 October 2008. It decides which country's system you pay into and helps you keep benefit rights earned in both.

• Posted workers: if you live and work in Denmark and a Danish employer sends you to the US, you stay only under Danish social security law if the assignment is not expected to exceed three years. In the other direction the limit is five years. Your exemption from US Social Security contributions is proven by a certificate of coverage, requested from Udbetaling Danmark, International Pension & Social Security, Hillerød.
• Self-employed: you are covered only by the system of the country where you reside, so once you live in Texas you are in the US system.
• Non-residents: unless the agreement provides otherwise, a person who does not reside in Denmark is not subject to Danish social security laws.
• Exempted workers: if you are exempted from Danish coverage, you pay no Danish social security taxes for the other Danish programmes either and generally cannot receive those benefits.

On the Danish side the agreement covers folkepension and ATP. The US totalizes: with at least six US quarters of coverage, your Danish coverage and Danish residence periods with work count towards a pro rata US benefit. US credits are not counted for ATP, which can be earned with as little as one month of coverage.

Health cover changes too. When you register a move to work outside the EU, Switzerland and the EEA, you are no longer socially insured from Denmark, and your yellow health card no longer covers treatment while visiting Denmark. borger.dk points to local public schemes or private health insurance in the new country.

Keeping your Danish company with a US subsidiary

Many of our Danish clients keep their ApS or A/S and open a US company beneath it. The Danish rules on dividends and CFC taxation decide how well that structure works.

Dividends to the Danish parent. Dividends a Danish company receives from a foreign company are excluded from its taxable income when it is the beneficial owner and the shares are subsidiary or group shares. Subsidiary shares require a holding of at least 10% of the share capital, and the foreign subsidiary must be liable to corporate tax without exemption in its home state, with an information-exchange obligation towards Denmark. Article 26 of the US treaty meets that information limb. The exemption does not apply to the extent the paying company deducts the distribution. On the US side, the treaty caps withholding at 5% for a company holding at least 10% and exempts dividends to a company holding 80% or more of the votes for 12 months that meets a named limitation-on-benefits test.

CFC rules. Your Danish company is a parent if it, alone or with related persons, controls more than 50% of the votes, capital or profit. CFC taxation applies only if the subsidiary's CFC income (passive items such as interest, financial gains, income from intangibles, dividends, share gains, financial leasing, insurance, banking and invoicing income) exceeds one third of its total taxable income. The test does not look at the subsidiary's tax rate, so a US corporation's 21% federal rate does not by itself keep it outside. A US C corporation with mainly operating income is outside the rule. Where CFC income is included, the parent gets a reduction for the subsidiary's taxes.

LLC or corporation. In binding ruling SKM2013.361.SR the Tax Council confirmed that a US LLC was fiscally transparent under Danish rules, a ruling on its facts, as classification follows Danish entity criteria. Under the treaty, income through a transparent entity is treated as a resident's income to the extent that state taxes it as such. The choice of entity therefore shapes your Danish tax position from day one.

Danish pensions and retirement savings when you move

Folkepension abroad. Danish law makes residence in Denmark a condition for social pension, with exceptions for Danish citizens. The social security agreement opens the door for the US: under Article 8(7), the basic amount (grundbeløb) of folkepension and the anticipatory pension are payable to covered persons, including nationals of either country, who reside in the United States. borger.dk states that for agreement countries outside the EU/EEA, a Danish citizen can take the pension abroad after living at least 3 years in Denmark between age 15 and the award. The pension supplement (pensionstillæg) can be kept only for residence in the EU/EEA, Switzerland or the United Kingdom. A full folkepension requires residence in Denmark for at least 9/10 of the period from age 15 to pension age; otherwise it is reduced pro rata.

• Tell Udbetaling Danmark about your move; it decides which parts of the pension can be paid abroad.
• If you do not meet the conditions, apply for a dispensation before you leave Denmark.
• Personal supplements, heating supplement and the elderly cheque are not paid automatically after a move abroad and must be applied for.
• ATP Livslang Pension can be claimed from abroad, from Danish state pension age.

Tax on Danish pensions in the US. Folkepension and disability pension paid to a US resident can be taxed only in Denmark, and so can Danish private and occupational pensions under the treaty's source-state rule. As a non-resident you pay Danish tax on them at an average rate, because you belong to no Danish municipality. Where the treaty gives the taxing right to your country of residence, you apply for Danish exemption on form 01.016. Cashing in a kapitalpension, aldersforsikring, aldersopsparing or supplementary lump sum triggers a Danish duty on the whole amount for which a deduction was given. The PAL tax on pension-fund returns is not due once you are no longer fully liable; you apply for exemption on form 07.058.

Clawback of deductions. If, in the 5 years before departure (10 for major shareholders), more than 20% of your salary went into an employer-administered life-annuity scheme or ratepension, contributions can be clawed back (efterbeskatning, pensionsbeskatningsloven §§ 19 A to 19 E).

Visas for Danish citizens: E-1, E-2 and the Visa Waiver Program

Denmark is a treaty country for both treaty visas: E-1 (treaty trader) since 30 July 1961 and E-2 (treaty investor) since 10 December 2008. For Danish founders who want to run their own business in Texas, the E-2 is often the natural route.

Any reciprocity fee is charged in addition to the MRV application fee. Denmark is also a Visa Waiver Program country, with VWP travel since 1 October 1991, which suits scouting trips before you file a visa application.

Book a consultation or ask for the firm's free potential analysis, and Mount Bonnell Advisors will map your Danish exit, your company structure and your visa route in one plan.