TN 2 (10-08)
RS 02002.135 Self-Employment Rule Under the Agreement with Denmark
Generally, a work activity that is considered to be self-employment under U.S. Social Security law is also considered to be self-employment under Danish law. In certain cases, however, a person may be engaged in an activity that is considered self-employment by one country and employment by the other country. For example, under U.S. law, ordained ministers and members of the board of directors of a corporation are considered self-employed. Under Danish law they may be considered employees. The following subsections explain how coverage is determined in each situation.
B. Policy on the self-employment rule to apply
1. Activity is self-employment in both countries
If the work activity is considered self-employment by both countries, the worker is covered only by the country of which he or she is a resident.
2. Activity is self-employment in only one country
If the work activity is considered self-employment under the laws of one country and employment under the laws of the other country, the worker’s coverage is determined as follows:
A worker who is a resident of the country that considers the activity to be self-employment is covered under the laws of that country.
A worker who is not a resident of the country that considers the activity to be self-employment, his or her coverage is determined under the laws of the other country.
C. Process documenting exemption from paying U.S. Social Security self-employment taxes
A self-employed U.S. citizen who is subject only to Danish law under the agreement and is exempt from paying Social Security self-employment (SECA) tax must still file a U.S. tax return every year. When preparing the income tax return, the worker should show that the earnings are exempt under the agreement and attach a photocopy of the certificate of coverage issued by the Danish authorities as proof of the exemption.
RS 02002.145, Certificates of Coverage Under the Agreement with Denmark