# US/Foreign Tax Implications When Spouse Works Remote



## tdm51 (Jan 8, 2021)

Hello,

Tried to search for this but was unable to find. I will be moving to Denmark on a work visa, my wife will be joining me and also will have a visa as a spouse. While I start work in February, my wife was planning on continuing to work for her US employer while in Denmark. I would not plan on claiming any exclusions her US taxes, but would the Danish government be aware of her income, or would she owe taxes on this income to the danish government? My worry here is the Danish authorities not US as she will remain on US payroll.

Thanks for any help.


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## Bevdeforges (Nov 16, 2007)

What are the terms of her visa? Sometimes as a spouse accompanying a working spouse, the trailing spouse is not allowed to work. You need to check the terms of the visa she has been issued. But generally speaking, you are considered to be working in whatever country you are physically present in while doing the work - so no matter where the employer is located, your wife will be working in Denmark if she is telecommuting.

Working in Denmark means that she should be paying Danish taxes (like you) and she should be paying into the Danish social insurances (health care, retirement, etc.). Most US employers don't want to pay for "foreign" social insurance benefits, so I assume they will be keeping her on the US payroll. Which causes significant problems, since they will be withholding US taxes (Federal and State) plus US Social Security and whatever other benefits, which may or may not be usable if she is living in Denmark. While you can usually get the US Federal taxes refunded (taking the FEIE or the FTC for taxes paid in Denmark), most states are pretty unwilling to refund state tax withholdings, and you can't get US Social Security back.

If the US employer is not willing to put her on a Danish payroll (assuming they have one or the employer can register as a Danish employer with no physical presence in Denmark), she might be able to "freelance" (i.e. set up a small business where she bills her "employer" for her work and then settles the Danish taxes and social payments on her own) or she could look into using a "portage" service, where she works for the service, and they bill through to the US employer.


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## tdm51 (Jan 8, 2021)

Duplicate - sorry.


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## tdm51 (Jan 8, 2021)

Bevdeforges said:


> What are the terms of her visa? Sometimes as a spouse accompanying a working spouse, the trailing spouse is not allowed to work. You need to check the terms of the visa she has been issued. But generally speaking, you are considered to be working in whatever country you are physically present in while doing the work - so no matter where the employer is located, your wife will be working in Denmark if she is telecommuting.
> 
> Working in Denmark means that she should be paying Danish taxes (like you) and she should be paying into the Danish social insurances (health care, retirement, etc.). Most US employers don't want to pay for "foreign" social insurance benefits, so I assume they will be keeping her on the US payroll. Which causes significant problems, since they will be withholding US taxes (Federal and State) plus US Social Security and whatever other benefits, which may or may not be usable if she is living in Denmark. While you can usually get the US Federal taxes refunded (taking the FEIE or the FTC for taxes paid in Denmark), most states are pretty unwilling to refund state tax withholdings, and you can't get US Social Security back.
> 
> If the US employer is not willing to put her on a Danish payroll (assuming they have one or the employer can register as a Danish employer with no physical presence in Denmark), she might be able to "freelance" (i.e. set up a small business where she bills her "employer" for her work and then settles the Danish taxes and social payments on her own) or she could look into using a "portage" service, where she works for the service, and they bill through to the US employer.


They do have a Danish entity (large MNC bank) - the complication is they will most likely not support her working remote from Denmark as her role is very US based. Her working from Denmark is meant to be temporary (for only a couple of months to transition out.. this assignment for me came up a bit last minute and she does not want to burn bridges) not the duration of our stay in Denmark. My understanding of the visa is she would be permitted to work in Denmark - I am coming on the Pay Limit Scheme which from what my HR said would give her the ability to get work in Denmark. I am happy to bulk pay the taxes (and honestly im not looking for tax optimization here.. i understand we would take a bath on certain items). Does the Danish govt get notified of this income and tell us what we would owe or would we be disclosing the income?

Thanks!


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## Peasant (Aug 12, 2018)

Why not see if your company, or hers, knows of a good accountant in Denmark familiar with the needs of someone in your situation that could advise you.


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## tdm51 (Jan 8, 2021)

Peasant said:


> Why not see if your company, or hers, knows of a good accountant in Denmark familiar with the needs of someone in your situation that could advise you.


Already doing so - its been challenging to get a straight answer to be honest. Also not sure its worth mentioning, but im on a 1 year employment contract. My understanding is the test is 6 consecutive months (she wouldnt be working that long) or permanent residence (i will leave Denmark after 12 months). 

Appreciate all of the help.


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## Nononymous (Jul 12, 2011)

So the thing is, tax authorities in one country generally know nothing about income earned in another country, and immigration authorities generally know nothing about working remotely for a foreign employer. Even the purportedly omniscient IRS is pretty much blind to what US citizens get up to beyond its borders. This gives you a certain, um, freedom to be flexible about following all the rules.

If you are going for only one year, and your wife is only planning to work for a few months to transition out of a job, here's what I'd do:

File your taxes in Denmark and/or the US however it is that your employer has set this up.

From the Danish perspective, pretend that your wife does not work. From the US perspective, pretend that she never left. Just business as usual, she works a few more months until she quits, files her US taxes like she's living in the country, and everyone's happy.

If you decide to stay longer, or your wife finds a local job, then it's a bit more complicated. But if you are on temporary assignment and your wife is a trailing spouse who's only going to continue being employed for a short period of time, I think this is a can of worms you really don't want to open. It's pretty common for people in her situation to just work remotely and keep quiet about it and go home again and nobody is any the wiser.


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## Moulard (Feb 3, 2017)

Expanding on what Bev says,

Technically, the work she performs in Denmark would be considered Danish sourced, and Denmark would have the primary right to tax that income according to their domestic tax laws. She could either use the Foreign Earned Income Exclusion, or Foreign Tax Credits to offset the US tax liability.

As the two of you will be there for a year, she would be otherwise eligible for the Foreign Earned Income Exclusion and could submit IRS form 673 to claim an exemption from federal income tax withholding so as to avoid the cashflow issues that could result.

There is a totalisation agreement in place. While her employer has not techncially sent her to work in Denmark, as you will be there for less that 5 years, she can probably continue to contribute into US Social security - the remote working scenario is not covered in the agreement summary, but one could contact either SSA or National Social Security Agency of Denmark for clarity.

Sourcing rules for US states are different, and tend to be based on the location of the employer not the employee... and US states are not party to the tax treaty in any event. This means she would still have to pay state Income taxes. Danish tax law may allow her a credit on those taxes..

The issue of payroll taxes, permanent establishment etc can be an issue...but it is one that is hard to enforce when it is a single employee.


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## Bevdeforges (Nov 16, 2007)

OK, given that the remote working arrangement is temporary (i.e. only a few months), I agree with Nononymous that it probably is not worth fussing with. Particularly if you're likely to be returning to the US after a year or so. The Danish government will not know anything about her employment - though if it ever does come up, you just say "oops, sorry" and pay whatever penalties there might be for a small transgression like that.

Generally speaking, it's the "payroll taxes" (i.e. the social insurances) that are the thing they watch most carefully. And given that she isn't likely to be in a position to make use of the various social services over the longer term, chances are any issues can be resolved with little or no trouble.


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