Tax Treaty?

[LilyJ 1,258]

My husband has his interview in a couple weeks (world situation allowing) but we want to make sure we’ll be right on how he pays his taxes when he gets here. I know Denmark and the US have a tax treaty but I can’t for the life of me understand it. Once he becomes an LPR, who does he owe taxes to? Only the US? Or does he still have to pay taxes to Denmark as well? If so, how much? And how? Maybe I’m overthinking it but it’s confusing 

[DELETEME1234 208]

8 minutes ago, LilyJ said:

My husband has his interview in a couple weeks (world situation allowing) but we want to make sure we’ll be right on how he pays his taxes when he gets here. I know Denmark and the US have a tax treaty but I can’t for the life of me understand it. Once he becomes an LPR, who does he owe taxes to? Only the US? Or does he still have to pay taxes to Denmark as well? If so, how much? And how? Maybe I’m overthinking it but it’s confusing 

I don't know the specific agreement between the US and Denmark, but in general the rule of thumb is that the jurisdiction in which you reside has a stronger claim and the other jurisdiction will respect that. Sometimes there's a transitional year that complicates things (e.g. a lot of EU countries, will have you pay pro rated taxes based on the months that you lived in the EU country), but in general it's a pretty straightforward matter, especially since other countries (not US) typically don't require you to file taxes if you haven't lived in that country. 

 

You'll have to contact the Danish tax agency to see how they tie up emigration. He probably owes taxes pro rated till the day he wrote himself out of the Danish civil registry. 

[xyz12345 260]

14 hours ago, LilyJ said:

My husband has his interview in a couple weeks (world situation allowing) but we want to make sure we’ll be right on how he pays his taxes when he gets here. I know Denmark and the US have a tax treaty but I can’t for the life of me understand it. Once he becomes an LPR, who does he owe taxes to? Only the US? Or does he still have to pay taxes to Denmark as well? If so, how much? And how? Maybe I’m overthinking it but it’s confusing 

He cannot use the tax treaty anyway because he's going to be a US LPR. imo the usual filing of tax return in denmark for duration until departure for the US plus the regular US tax return (married filing jointly or married filing separately) for remainder of the year.

[Tesco 71]

You'll be taxed by the U.S on your worldwide income. If you need to pay tax to your home country, (unsure if Denmark is resident based), then you'll file a 1116 to the IRS, which is for tax credit, as paid to the Danish tax authorities. 

[US-UK 32]

On 3/17/2020 at 7:22 AM, xyz12345 said:

He cannot use the tax treaty anyway because he's going to be a US LPR. 

As a general reminder, everyone should be wary of taking tax advice from a message board, especially when you see blanket statements like ‘the LPRs can’t use the tax treaty.’ It May not apply to the poster’s personal situation but it might for others. In the case of treaties, they can apply when an LPR must file dual returns as a result of certain dividends and interest on ex-US accounts, rental income on an ex-US property, certain trusts, or other sources of income. Talk to a dual qualified tax accountant (or at least one with some experience with this area of the law). 
 

 

[xyz12345 260]

33 minutes ago, US-UK said:

As a general reminder, everyone should be wary of taking tax advice from a message board, especially when you see blanket statements like ‘the LPRs can’t use the tax treaty.’ It May not apply to the poster’s personal situation but it might for others. In the case of treaties, they can apply when an LPR must file dual returns as a result of certain dividends and interest on ex-US accounts, rental income on an ex-US property, certain trusts, or other sources of income. Talk to a dual qualified tax accountant (or at least one with some experience with this area of the law). 
 

 

yup, advice from a random stranger on an online forum should be taken with a grain of salt, especially in cases like this. This is a case for a tax accountant anyway. Most of time I only see this kind...

 

https://controller.richmond.edu/payroll/international/residency.html

Resident Alien vs. Legal Permanent Resident

A person is a resident, for tax purposes, if the person is a Lawful Permanent Resident of the United States at any time during the calendar year. This is known as the "green card" test. A person is a Lawful Permanent Resident of the United States, at any time, if the person has been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant. This status is generally given if the U.S. Citizenship and Immigration Service (USCIS) has issued an alien registration card, also known as a "green card." A person continues to have resident status, under this test, unless it is voluntarily renounced and abandoned in writing to the USCIS, or the immigrant status is administratively terminated by the USCIS, or the immigrant status is judicially terminated by a U.S. federal court. If a person meets the green card test at anytime during the calendar year, but does not meet the substantial presence test for that year, the residency starting date is the first day on which the person is present in the United States as a Lawful Permanent Resident. However, an alien who has been present in the United States at any time during a calendar year as a Lawful Permanent Resident may choose to be treated as a resident alien for the entire calendar year.

Resident Alien For Tax Purposes

The IRS wants a person to be treated as an RA for tax purposes from their first day of presence in the year that they will pass the Substantial Presence Test (SPT.) The SPT determines when an NRA becomes an RA for tax purposes. Resident aliens can use the same filing statuses available to U.S. citizens. An RA can claim the same deductions allowed to U.S. citizens if they are a resident alien for the entire tax year.

 

 

 

 

[NikLR 13,230]

My husband and I filed MFS our first year living together so that I didnt have to claim my worldwide income.  

But you can definitely invest in an international tax accountant. 

[US-UK 32]

As I think you noted, none of that explanation precludes the need to potentially file in another country in addition to being a US tax resident, which is where the treaties come in. Some examples:

 

Scenario 1: Long Term Incentives (e.g., shares) awarded while a tax resident of Country A are now vesting. Country A has a claim on the income tax, despite the current US status, as the LTIs were awarded on their soil. Tax treaty is implicated.
 

Scenario 2: LPR retains a propert(ies) in Country B and rents it out, earning income in Country B and triggering a tax filing.  Tax treaty may be implicated.
 

Scenario 3: LPR is beneficiary of a Foreign Grantor Trust in Country B which must be reported to the US government and may be taxed on imputed interest income. Tax treaty must be considered.

[Tesco 71]

As a LPR you are obliged to report worldwide income to the IRS. Remember to also file FinCEN114 if you have over $10k in foreign assets, (aggregated) IRS form 8938 if you have over the threshold reporting amounts. 

[Georgia16 2,858]

There is a form he has to fill out and contact them with. They will then decide if he still has tax obligations in DK, limited tax obligations in DK or no tax obligations in DK. I got that for both my son and I and therefore we don't have to give any information to the danish government at all. 

He will also have to register at the folkeregister that he is moving out of DK.

[LilyJ 1,258]

On 6/16/2020 at 8:26 PM, Georgia16 said:

There is a form he has to fill out and contact them with. They will then decide if he still has tax obligations in DK, limited tax obligations in DK or no tax obligations in DK. I got that for both my son and I and therefore we don't have to give any information to the danish government at all. 

He will also have to register at the folkeregister that he is moving out of DK.

This is extremely helpful, thank you. Who should he contact and what is the form called if you can recall? And does he still have to report income to Denmark even if he does not owe taxes, similar to what the US does for citizens living abroad, or does he not have to worry about that at all if he owes nothing?