Do I pay tax twice as an American living in Denmark?
Short answer: Not usually on the same income taxed the same way, thanks to the US–Denmark tax treaty and the US foreign tax credit, but genuine double cost is common where the two countries tax different things at different times — lagerbeskatning on unrealised fund gains, PFIC rules, and the researcher scheme's reduced Danish rate are the usual sources.
Written and reviewed by Anthony Walsh, Selanis. Last reviewed 2026-10-09.
Why it works this way
The treaty generally allocates taxing rights and the foreign tax credit mechanism is supposed to prevent the same income being taxed in full twice. Where both countries agree on what is taxed and when, the system works roughly as intended for a US citizen living in Denmark.
The real cost comes from mismatches, not from the treaty failing outright. Danish lagerbeskatning taxes unrealised fund gains annually; the US generally does not tax until a sale. A Danish tax paid on a gain the US has not yet recognised often cannot be credited that year, creating a timing-driven double cost even though it is not strictly double taxation of the identical event.
The researcher tax scheme's reduced flat Danish rate similarly reduces the foreign tax credit generated, which can increase the net US tax due on the same salary compared with paying ordinary, higher Danish tax.
Social Security and Danish social contributions are governed by the separate US–Denmark totalization agreement, which assigns coverage to one country at a time for the programs it covers and prevents double contributions on the same wages [1](https://www.ssa.gov/international/Agreement_Pamphlets/denmark.html).
The expensive mistake: Treating 'there's a treaty' as meaning tax is automatically matched
The treaty prevents double taxation on paper far better than the mismatched timing of lagerbeskatning, PFIC rules and the researcher scheme prevent it in practice. The gap between the two is where a planner's work actually matters.
What to do
- Map every income and gain source against both tax systems' timing rules — Lagerbeskatning, PFIC accounting and ordinary realisation rules all apply to different pieces of the same portfolio.
- Request a certificate of coverage before relying on totalization — The exemption from double social contributions is not automatic — it has to be applied for.
- Re-run the researcher scheme comparison with current-year US rates — The flat-rate trade-off changes as US brackets and your income mix change year to year.