How is my 401(k) or IRA taxed if I live in Denmark?
Short answer: A 401(k) or traditional IRA can generally stay invested while you are Danish tax resident, with Denmark typically taxing distributions as income when taken rather than taxing the account annually, provided the account is recognised as a qualifying pension arrangement. Roth IRA treatment is less settled, and the underlying investments inside a self-directed IRA brokerage account need checking for PFIC exposure just like any other holding.
Written and reviewed by Anthony Walsh, Selanis. Last reviewed 2026-10-09.
Why it works this way
The US–Denmark income tax treaty, in force since 2000 and amended by a 2006 protocol, contains pension and social security provisions designed to prevent the kind of mismatch that would tax a US retirement account annually in Denmark [1](https://www.irs.gov/pub/irs-trty/dentech.pdf). Properly claimed, this generally means the 401(k) or IRA balance itself is not subject to Danish wealth-style annual taxation purely for being held, and distributions are taxed when received rather than as they accrue.
Whether a particular account qualifies for that treatment is not automatic — it depends on the account being recognised as a genuine retirement arrangement under the treaty, and Danish authorities and your Danish tax adviser need the position argued and documented, not assumed.
The underlying investments matter separately from the wrapper. If a 401(k) or IRA is self-directed and holds non-US funds, those funds can still raise PFIC-adjacent questions depending on how the account and its holdings are characterised, though the pension wrapper itself is the primary line of defence most people rely on.
A 2025 competent authority arrangement between the US and Danish tax authorities clarifies which pension entities qualify as a 'pension fund' for treaty benefit purposes, underlining that this is a live, administratively managed area rather than a settled, static rule [2](https://www.irs.gov/pub/irs-lbi/denmark-caa-pension-plans-tax-treaty-benefits-2025.pdf).
Roth accounts are a separate question. Denmark has no domestic concept directly equivalent to a Roth, and whether a Roth is treated as exempt under the treaty's pension article or taxed under ordinary Danish investment rules is a position that needs to be taken deliberately rather than assumed.
The expensive mistake: Assuming the treaty protection is automatic
The pension protection in the US–Denmark treaty generally has to be claimed and supported, not simply relied upon. Families who assume it applies without documenting the position risk a Danish tax authority challenge years later, once records are harder to reconstruct.
What to do
- Confirm your 401(k) or IRA custodian still accepts a Danish address — Several major US brokers restrict account activity once the address on file is outside the United States.
- Document the treaty pension position with your Danish and US advisers — Keep the plan documents and treaty analysis on file in case of a future review.
- Check what the account actually holds, not just its US tax wrapper — A self-directed account holding non-US funds can raise separate reporting questions distinct from the account's pension status.