The Foreign Earned Income Exclusion has no effect on self-employment tax. A self-employed American in Denmark can exclude every krone of income from US income tax and still owe the IRS 15.30% on it.

The totalization agreement between the two countries is the rule that removes that tax, by placing you in Danish social security instead. It works through one document, and the IRS expects to see it every year.

For employees this is quiet plumbing: a Danish employer’s payroll puts you in the Danish system and you never think about it. For the self-employed it can be a five-figure bill.

The agreement covers two Danish programs and all of US Social Security

The agreement isn’t symmetrical. According to SSA’s pamphlet on the US-Denmark agreement, the United States puts its whole contributory system into the deal, and Denmark puts in two programs.

That asymmetry has a consequence. Danish social security taxes also fund unemployment, sickness, maternity, medical, work accident and family allowance benefits, and workers the agreement exempts from Danish coverage generally can’t draw on them.

Danish taxes outside the two pension programs aren’t part of the deal either. AM-bidrag, at 8 %, isn’t one of the two programs the agreement lists, so on SSA’s description of its scope a certificate doesn’t switch it off.

The FEIE leaves self-employment tax untouched

The Foreign Earned Income Exclusion (FEIE) lets you exclude up to USD 132,900 of foreign earned income from US federal income tax, according to the IRS’s page on figuring the exclusion. Self-employment tax is a separate tax with separate rules, and only income tax responds to Form 2555.

The IRS says as much in its guidance on self-employment tax for businesses abroad: you count all your self-employment income when figuring net earnings, excluded or not.

Self-employment tax runs at 15.30% of net earnings: 12.40% for Social Security and 2.90% for Medicare. The Social Security part stops at the annual wage base of USD 184,500, and the Medicare part has no ceiling.

So a self-employed American in Denmark can file a US return showing zero federal income tax and still owe several thousand dollars.

Which country covers you

Coverage is assigned by rule, so you can’t pick the cheaper system.

The self-employed rule deserves a second read. SSA says self-employed workers are generally covered and taxed only by the country where they reside, so a US citizen living in Copenhagen who invoices only American clients still falls under Danish coverage. Where the clients sit doesn’t enter into it.

The reverse assignment runs on a shorter clock. Employees sent from Denmark to the United States keep Danish coverage for 3 years or less, against 5 years or less in the other direction.

The certificate of coverage is the whole mechanism

The exemption rests on a certificate of coverage. Without one, nothing in your file shows the IRS why your Schedule C income carries no self-employment tax.

If Denmark covers you, you request the certificate by post from Udbetaling Danmark, International Pension & Social Security, Kongens Vænge 8, DK-3400 Hillerød, and SSA’s pamphlet lists no online route for the Danish side. The request covers your name, dates and places of birth, citizenship, residence, US Social Security number, CPR number (the Danish civil registration number), the nature of your self-employment, and your business addresses in both countries.

If you’re a US employer’s detached worker, your employer requests the US certificate from SSA instead, and SSA lets employers file that request online.

Ask for the certificate when the Danish work starts, not when the return is due. SSA tells self-employed workers to attach a copy to their US tax return every year, and the IRS asks for a photocopy attached to Form 1040 with “Exempt, see attached statement” written on the self-employment tax line. Employers keep their copies in case of an IRS audit and send them to the IRS only if asked.

If Denmark won’t issue a certificate, the IRS says you can ask SSA for a statement that your income isn’t covered by US Social Security.

Whether your particular mix of Danish and US work fits the assignment rules is a question about your facts, and a wrong answer is far harder to unwind than a right one. This is the point where a US tax preparer with IRS credentials, an enrolled agent or CPA found through the IRS’s public directory of credentialed return preparers, earns the fee.

If you do end up owing the IRS, you’ll be sending dollars out of a kroner account, and the exchange-rate margin on a five-figure payment adds up. Wise (partnerlink/reklamelink) shows its fee and rate before you send, which makes your bank’s quote easy to check against.

Clean books matter more than usual here, because the same numbers have to satisfy two tax authorities that define profit differently. Billy (partnerlink/reklamelink) runs in full English, which makes reconciling a Danish overskud (profit) against a US Schedule C less painful than doing it in a Danish-only interface.

What you give up by being exempt

Exemption cuts both ways, and the saving is only half the picture.

The second row is the real trade-off for long-term residents. You need 40 credits, roughly 10 years of work, to qualify for a US retirement benefit on your own record, according to SSA’s page on how credits work. In 2026, one credit takes USD 1,890 of covered earnings, with 4 available per year.

Ten exempt years at the Aarhus freelancer’s level avoid roughly USD 127,000 of self-employment tax and add no credits toward those 40. For someone planning to stay in Denmark for a decade or more, saving 15.30% annually is usually still the better answer, but it carries a retirement-side cost worth pricing in rather than discovering at retirement.

If you’re a US employer’s detached worker exempted from the Danish side, the first row deserves a hard look before you arrive. SSA’s pamphlet says you and your employer may want to arrange alternative benefit protection, which in practice usually means private cover for what Danish contributions would otherwise have funded.

How Danish and US credits combine

The agreement’s second job is filling gaps for people who split a career across both countries.

If you lack enough US credits for a regular benefit, Danish credits can count toward qualifying, provided you’ve earned at least 6 US credits (about 1½ years of work) on your own. If you already qualify on US credits alone, Denmark’s aren’t counted. Credits never transfer: they stay on each country’s record, and each country pays its own benefit under its own rules.

Two Denmark-specific points matter.

Folkepension gets easier to qualify for. SSA’s pamphlet describes the usual Danish rule for a non-national as 10 years of residence, 5 of them immediately before entitlement.

Under the agreement a US national can qualify with 3 years of residence plus at least 1 year of work in Denmark, and the pamphlet doesn’t say what counts as that year of work, so ask Udbetaling Danmark before relying on self-employment years to meet it.

ATP doesn’t need the agreement. One month of ATP coverage is enough to qualify for an ATP benefit, so US credits never count toward it. Employees pay ATP automatically, while for the self-employed it’s voluntary, and Virk’s page for self-employed members (in Danish) sets the entry conditions: 3 years of earlier ATP membership, contributions equal to 3 years’ payments, and your own business.

A newly arrived freelancer usually can’t meet those conditions, which makes ATP something that builds mainly for people who were Danish employees first. For those who qualify, ATP Livslang Pension costs DKK 297 a month, billed quarterly.

Medicare sits outside all of this. SSA says it can’t count your Danish credits to establish entitlement to free Medicare hospital insurance, though they can count toward retirement, disability and survivors benefits.

The WEP repeal changed the retirement math

Until 2024, drawing a foreign pension could cut your US Social Security benefit through the Windfall Elimination Provision (WEP). SSA’s operating guidance on WEP and foreign pensions says that for a pension from a totalization country, the cut applied only if you also received a regular US benefit not based on the agreement.

The Social Security Fairness Act, signed on 5 January 2025, repealed both WEP and the Government Pension Offset for benefits payable from January 2024.

SSA’s country pamphlets haven’t kept up. The Denmark pamphlet was last certified in 2019, still illustrates credits with a 2022 figure of USD 1,410, and still frames Danish pension rules around age 65, while folkepensionsalder (the state pension age) is now 67. It remains the right source for the coverage rules, and its figures need checking against current pages.

Official sources

• Social Security Administration: US-Denmark Social Security agreement pamphlet (in English)
• Internal Revenue Service: Self-employment tax for businesses abroad (in English)
• Internal Revenue Service: Figuring the foreign earned income exclusion (in English)
• Social Security Administration: How you earn Social Security credits (in English)
• Social Security Administration: Program Operations Manual entry on WEP and foreign pensions (in English)
• Virk: ATP Livslang Pension for self-employed members (in Danish)