Living in Denmark is an incredible experience for a number of reasons, including the friendly locals, the free, high-quality public services, the hygge, the charming culture, not to mention easy access to the rest of Europe. As an American expatriate living in Denmark though, what exactly do you need to know regarding filing U.S. expat (and Danish) taxes?

All U.S. citizens and green card holders who earn a minimum of around $10,000 (or just $400 for self-employed individuals) anywhere in the world are required to file a U.S. federal tax return and pay taxes to the IRS, regardless of where in the world they live or their income is generated.

The good news is if you are paying income tax in Denmark, there are various exclusions and exemptions available to prevent you paying tax on the same income to the IRS too.

U.S. taxes – what you need to know

If you earn over U.S. $10,000 (or just $400 of self-employment income), wherever the income originates in the world you have to file IRS form 1040. While any U.S. taxes due are still due by April 15th, expats get an automatic filing extension until June 15th, which can be extended further on request until October 15th.

If you have overseas assets worth over U.S. $200,000 per person, excluding your home if it is owned in your own name, you also have to file form 8938 to declare them.

If you had a total of at least U.S. $10,000 in one or more foreign bank and/or investment accounts at any time during the tax year, you also have to file FinCEN form 114, otherwise known as a Foreign Bank Account Report or FBAR.

If you pay income tax in Denmark, there are several exemptions that allow you to pay less or no U.S. income tax on the same income to the IRS. The main one is the Foreign Earned Income Exclusion, which lets you exclude the first around US $100,000 of foreign earned income from U.S. tax if you can prove that you are a Danish resident, and the Foreign Tax Credit, which gives you a $1 tax credit for every dollar of tax you’ve paid in Denmark. These exemptions can be combined if necessary. Remember though that even if you don’t owe any tax to the IRS, if your income is over U.S. $10,000 (or $400 if you’re self-employed) you still have to file a federal return.

The U.S. and Danish governments share taxpayer info, and Danish banks pass on U.S. account holders’ account info to the IRS, so it’s not worth not filing or omitting anything on your return. The penalties for incorrect or incomplete filing for expats are steep to say the least.

If you’re a US citizen, green card holder, or U.S./Danish dual citizen, and you have been living in Denmark but you didn’t know you had to file a U.S. tax return, don’t worry: there’s a program called the IRS Streamlined Procedure that allows you to catch up on your filing without paying any penalties. Don’t delay though, in case the IRS comes to you first.

Danish taxes – what you need to know

Danish residents are taxed on their worldwide income at up to 56.48%. This rate includes national taxes, local taxes, a labor market tax and a church tax.

Denmark has an expatriate scheme however which allows expatriates employed in Denmark and earning over around $9,000 a month to pay a flat 31.92% income tax for up to 5 years.

Foreigners living in Denmark are considered a resident for tax purposes if their home is in Denmark, or if they spend a period of 6 months in a year in Denmark. It doesn’t matter if you take holidays during this 6 month period.

The Danish tax year is the same as the U.S., which is to say the calendar year. Tax returns are due by May 1st if they receive a pre-printed tax statement from the Danish tax authority, or otherwise by July 1st. The Danish tax authority is called the Skatteministeriet.

We strongly recommend that if you have any doubts or questions about your tax situation as a U.S. expat living in Denmark that you contact a U.S. expat tax specialist.