# Need help from foreign telecommuters working for US Co.



## bluedelphinium (Sep 25, 2014)

Up until this email I received from H&R Block, everything I've read says that WHERE you perform the work determines whether it is foreign. So the plan was: work in Denmark as a resident, perform work remotely for US company, pay taxes to Denmark, use the foreign income tax exclusion on US taxes. 

So I asked this question to an H&R Block Expat Taxes advisor and here is the response:

"If your income is derived from a US source it will not be considered foreign earned."

uh... WHAT!? I've not heard of anyone else describing it this way. Although, beneficial as US taxes are lower, I highly doubt Denmark will see it this way. 

Help!


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## Bevdeforges (Nov 16, 2007)

OK, but there is some disagreement over what constitutes a "US source" for income. Where the employer is located does not really determine the "source" of the income. If the employer is a US government agency, then that may well be the case - and the income is not subject to FEIE and all that good stuff.

But a private employer in the US may very well be able to pay you to work in Denmark and you will be considered to be working in Denmark. For starters, what sort of visa will you have for Denmark? Will it be one that permits you to work there? And will you be paying into the Danish social insurance system? 

The tricky part is, will you be paid as an employee (i.e. from the employer's payroll) and if so, will the employer be taking US withholdings? (Federal? State? US Social Security? ) Or will you be paid as a contractor and thus be responsible for setting up your own business entity in Denmark in order to properly register with the various payroll tax agencies and settle your social insurances and other business payments in Denmark?

One other thing to consider: if your US employer will be withholding state taxes, it may or may not be possible to claim them back. Some states don't recognize the FEIE at all and expect you to pay in-state taxes if you are maintaining some sort of residence there. And if you have US social security withheld, it may be next to impossible to get any of that back, though by living in Denmark, you are actually liable for the Danish social insurances. (You don't get to choose which system to pay into.)

You need to clarify your status with your US employer. Plus clarify your visa status in Denmark. 
Cheers,
Bev


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## bluedelphinium (Sep 25, 2014)

Bevdeforges said:


> OK, but there is some disagreement over what constitutes a "US source" for income. Where the employer is located does not really determine the "source" of the income. If the employer is a US government agency, then that may well be the case - and the income is not subject to FEIE and all that good stuff.


The income is not derived from a US Government Agency. 



Bevdeforges said:


> But a private employer in the US may very well be able to pay you to work in Denmark and you will be considered to be working in Denmark. For starters, what sort of visa will you have for Denmark? Will it be one that permits you to work there? And will you be paying into the Danish social insurance system?


My husband doesn't have a Visa. I'm an EU citizen (dual) and exercising my free movement rights which allow my spouse to work in any EU country (except my home EU country). We need to talk to a Danish tax expert as far as retirement contribution, but I don't think it's an issue. See my answer below on SS. As far as the other tax liabilities in Denmark, we are going to be contributing. 



Bevdeforges said:


> The tricky part is, will you be paid as an employee (i.e. from the employer's payroll) and if so, will the employer be taking US withholdings? (Federal? State? US Social Security? ) Or will you be paid as a contractor and thus be responsible for setting up your own business entity in Denmark in order to properly register with the various payroll tax agencies and settle your social insurances and other business payments in Denmark?


He's being paid as an employee and will have US withholding. We are aware we can get the Income tax back when we file our taxes. 



Bevdeforges said:


> One other thing to consider: if your US employer will be withholding state taxes, it may or may not be possible to claim them back. Some states don't recognize the FEIE at all and expect you to pay in-state taxes if you are maintaining some sort of residence there. And if you have US social security withheld, it may be next to impossible to get any of that back, though by living in Denmark, you are actually liable for the Danish social insurances. (You don't get to choose which system to pay into.)


This is also not a concern as TX does not have an income tax. We are not concerned with paying into the US SS program as Denmark has a Totalization Agreement with the US and we can still draw upon it in retirement. He will most likely not go over the 5 year limit on living in DK and paying SS to the US. If he did, we would have to restructure to a contractor situation and I doubt his employer would be interested in paying VAT. He would only be required to pay into the SS program in Denmark if he was working for a Danish employer. 

https://www.ssa.gov/international/Agreement_Pamphlets/denmark.html

As far as my original question, we have received a second email from H&R Block contradicting the first. The second email confirms what we had thought and you all indicated: that the income is foreign earned since the work is being performed in Denmark. 

Thanks for the help!


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## Bevdeforges (Nov 16, 2007)

Just one thing I would be careful about here. I'm not familiar with Denmark's interpretation of the EU rules about spouses of EU nationals, but in some EU countries, the non-EU spouse can't/won't get a residence permit until and unless the EU national spouse can show that they have the financial resources (or at least a source of income), a place for them to live and health insurance valid in Denmark. The regulation is supposed to be for the non-EU spouse to "join" their EU spouse - not for them to be the primary breadwinner.

As I said, Denmark may have a different take on this, but I know some EU countries can be quite picky about the status of the EU spouse before they'll issue the necessary residence permit.
Cheers,
Bev


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## bluedelphinium (Sep 25, 2014)

Bevdeforges said:


> Just one thing I would be careful about here. I'm not familiar with Denmark's interpretation of the EU rules about spouses of EU nationals, but in some EU countries, the non-EU spouse can't/won't get a residence permit until and unless the EU national spouse can show that they have the financial resources (or at least a source of income), a place for them to live and health insurance valid in Denmark. The regulation is supposed to be for the non-EU spouse to "join" their EU spouse - not for them to be the primary breadwinner.
> 
> As I said, Denmark may have a different take on this, but I know some EU countries can be quite picky about the status of the EU spouse before they'll issue the necessary residence permit.
> Cheers,
> Bev


If you've been reading my previous posts, we had considered moving to the UK where the rules are more tightly controlled for their own citizens. I had to meet an income requirement (which required me to have previously worked in the US for one year at the required salary and does not count my spouse's income), pay Visa fees for my husband and children, etc. etc. The same is true of Denmark and it's citizens as well (recently a high profile case of a Danish astrophysicist's wife not approved to reside in Denmark). Each EU country can more tightly control the immigration rules on it's own citizens but those rules do not apply to EU citizens of another country because they fall under the EU Directive. This is one of the reasons we are choosing to live outside the UK.

You are correct that in order to establish residency in Denmark, I must find a job within six months in order to obtain my residence certificate and that certificate is required for my husband to obtain his residence card. I'm planning to do just that. 

Appreciate the head's up though, I'm being very careful to follow the rules and avoid any 'gotchas'.


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## Bevdeforges (Nov 16, 2007)

OK - we've had a few go-rounds for people trying to move to France based on one of the spouses having EU (i.e. non-French) nationality so that the non-EU can work (or look for work) and although it varies from one prefecture to the next, some have been given some considerable hassle when trying to get a residence card. Hope all goes well for you - and do keep us posted.
Cheers,
Bev


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