Americans in Denmark who start or own a company often discover the US tax obligations attached to that ownership only after the fact.
The Danish side of things is relatively straightforward: an ApS pays 22% corporate tax on its profits, and distributions to shareholders are taxed as dividend income. The US side is a different matter entirely.
Owning a foreign corporation as a US person triggers a separate layer of IRS reporting and, in many cases, immediate US taxation on income the company has not even distributed.
This guide explains what Form 5471 requires, when US tax applies on ApS income, and what Danish corporate taxes do and do not offset on the US return.
Key Summary: US Tax Implications of Owning a Danish Aps
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Every American who owns 10% or more of a Danish ApS must file Form 5471 with the IRS every year, even if the company had zero income and even if they owe no US tax.
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If your ApS qualifies as a Controlled Foreign Corporation, the IRS can tax you on company profits you never took out, under rules called Subpart F and Net CFC Tested Income (formerly GILTI).
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The penalty for missing Form 5471 starts at $10,000 per year and can reach $60,000 per form. It applies even when the company made no money.
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Denmark taxes ApS profits at 22%. That Danish corporate tax can often be used to reduce or eliminate the US tax on the same income, but only if the return is structured correctly.
What is a Danish ApS?
An ApS (Anpartsselskab) is a Danish private limited liability company, the Danish equivalent of a US LLC or UK Ltd. It is the most common business structure in Denmark, used by freelancers, consultants, small business owners, and startups.
Key features of the ApS relevant to US owners:
- Minimum share capital of DKK 20,000 (reduced from DKK 40,000 in early 2025)
- Limited liability: shareholders are not personally responsible for company debts
- Taxed at a flat 22% corporate income tax rate in Denmark
- Profits can be retained inside the company or distributed as dividends
- Non-residents can be sole shareholders and directors, no Danish residency required
For most purposes, the ApS is a separate legal entity from its owners. For US tax purposes, that separation matters enormously, and it comes with obligations most owners are not warned about when they set up the company.
Form 5471: The Filing Requirement Most Americans Miss
Form 5471 (Information Return of US Persons With Respect to Certain Foreign Corporations) is an IRS information return required when a US person owns a meaningful stake in a foreign corporation. It is not a tax payment form, it is a disclosure form. But failing to file it carries severe penalties.
Who Must File Form 5471?
As a US citizen or green card holder owning a Danish ApS, you are required to file Form 5471 if you fall into one of the IRS filing categories. The most common ones for Americans in Denmark are:
Category 4: A US person who controls a foreign corporation, meaning they own more than 50% of the shares by vote or value.
Category 5: A US shareholder (owning 10% or more) of a Controlled Foreign Corporation, where US shareholders collectively own more than 50%.
For most Americans who are the sole owner of their Danish ApS, both categories apply simultaneously.
What the Form 5471 Covers
Form 5471 is a comprehensive financial disclosure. It requires:
- A balance sheet for the ApS
- A profit and loss statement
- Details of transactions between the company and its US shareholders
- Information on the company’s income broken down by type
- Calculations for Subpart F income and GILTI or Net CFC Tested Income (if applicable)
The form is filed as an attachment to the owner’s personal US tax return (Form 1040) and is due on the same date, April 15, with the standard expat extension to June 15 and the option to extend to October 15.
Form 5471 Penalty
The base penalty for failing to file Form 5471 is $10,000 per form per year. If the failure continues after IRS notification, an additional $10,000 per month applies, up to a maximum of $50,000 per form. In practice, total penalties can reach $60,000 for a single missed filing year.
These penalties apply even if the ApS had zero revenue and zero profit. The obligation to file is triggered by ownership, not by income.
Controlled Foreign Corporation Status: When It Applies to Your ApS
A Controlled Foreign Corporation (CFC) is a foreign corporation where US shareholders, each owning 10% or more, collectively own more than 50% of the shares by vote or value.
If you are an American and the sole owner of your Danish ApS, your company is automatically a CFC. If you own 51% or more alongside other shareholders, it is still a CFC. The CFC classification is what triggers the most significant US tax consequences.
Once an ApS is classified as a CFC, two anti-deferral regimes become relevant: Subpart F and Net CFC Tested Income (NCTI).
Subpart F Income: Taxed Now, Not Later
Subpart F is a set of IRS rules that require US shareholders of a CFC to pay US tax on certain categories of passive income in the year it is earned by the company, regardless of whether the company distributed any money.
Subpart F income includes:
- Interest and dividends earned by the company
- Rents and royalties from unrelated parties
- Gains from the sale of property that produces passive income
- Income from transactions with related parties
For an American running an ApS that actively earns service income, designs products, or provides consulting, the operating income itself typically does not fall under Subpart F.
The concern is when the company holds cash in Danish bank accounts generating interest, or holds investments that produce passive income. That portion is taxable to the US owner immediately.
US Expat Tax Services for Danish ApS Owners
We specialize in US expat tax compliance for Americans living in Denmark, including Form 5471 reporting. Get clarity on how your ApS income is taxed in the US.
GILTI to Net CFC Tested Income (NCTI): What Changed in 2026
Prior to 2026, the anti-deferral regime for active CFC income was called GILTI (Global Intangible Low-Taxed Income).
Starting with tax years beginning after December 31, 2025, the One Big Beautiful Bill Act (signed July 4, 2025) renamed GILTI to Net CFC Tested Income, or NCTI, and changed how it is calculated.
The core concept remains the same: active income earned by the CFC that is not already caught by Subpart F is included in the US shareholder’s taxable income in the year earned, even without a distribution.
What Changed Under NCTI (2026 Onward)
| GILTI (Through 2025) | NCTI (2026 and Beyond) | |
| QBAI exclusion (10% of tangible assets) | Included, reduced taxable income | Eliminated |
| Section 250 deduction | 50% | 40% |
| Effective US tax rate (individual) | ~10.5% | ~12.6% |
| Foreign tax credit haircut | 20% (80% creditable) | 10% (90% creditable) |
The elimination of the QBAI exclusion means there is no longer a deduction for the company’s tangible assets.
More income is now subject to the NCTI inclusion. However, the improvement in foreign tax credit mechanics (90% creditable rather than 80%) partially offsets this for ApS owners paying 22% Danish corporate tax.
How Danish Corporate Tax Interacts With US Tax
Denmark taxes ApS profits at 22%. The US taxes GILTI inclusions at the individual shareholder level, at an effective rate of around 12.6%. That gap is what makes the foreign tax credit work in most cases, but the offset is not automatic.
How the foreign tax credit applies to GILTI:
- Starting in 2026, 90% of the Danish corporate tax paid on the ApS’s income is creditable against the US GILTI liability
- For an ApS paying 22% Danish corporate tax, that produces roughly 19.8 percentage points of creditable foreign tax
- That figure typically exceeds the ~12.6% effective US GILTI rate, meaning most Americans running an active ApS will owe little to nothing on GILTI after the credit
For most Americans operating an ApS with primarily active business income, the Danish corporate tax is sufficient to eliminate the US GILTI liability, provided the foreign tax credit is applied correctly.
That last part matters. The credit calculation depends on accurate Form 5471 reporting, correct Schedule I-1 figures, and a properly completed Form 8992. Errors in any of these can reduce or eliminate the credit entirely.
The Salary vs. Dividend Question
One of the most common planning questions for American ApS owners is whether to take income as a salary or as a dividend distribution. The answer has different implications on both the Danish and US sides.
Taking a Salary
A salary paid from the ApS to the owner is deductible for the company in Denmark, reducing the 22% corporate tax base.
The salary is taxed at Danish personal income rates on the owner’s side, which can reach 55.9%. On the US return, the salary is Danish-sourced employment income, and the Foreign Tax Credit for Danish personal income taxes typically wipes out the US liability.
US Tax on Danish ApS
If your Danish ApS is a Controlled Foreign Corporation (CFC), you may owe US tax on undistributed profits under Subpart F and GILTI. We help you apply these rules correctly and maximize Danish tax credits.
Taking Dividends
Dividends are paid from after-tax ApS profits, meaning the company has already paid 22% Danish corporate tax. The shareholder then pays Danish dividend tax: 27% on the first DKK 79,400 and 42% above that.
On the US return, dividends from an ApS that is a CFC are generally not taxed again if the income was already included under NCTI, due to the previously taxed earnings and profits rules. However, this requires the NCTI to have been correctly reported in prior years.
There is no universal answer on which approach is more tax-efficient. It depends on the owner’s total income, Danish tax bracket, whether the NCTI credit fully offsets the US liability, and how much income is retained in the company versus distributed. This is one of the areas where working with a specialist who understands both systems produces the most meaningful savings.
Other Reporting Obligations for ApS Owners
Owning an ApS triggers additional US reporting obligations beyond Form 5471.
FBAR
If the ApS holds cash in Danish bank accounts and you have signatory authority over those accounts, those accounts may be reportable on your personal FBAR (FinCEN Form 114) if the combined balance exceeded $10,000 at any point during the year.
Ownership of the company does not automatically create an FBAR obligation, but signatory authority over the company’s bank accounts typically does.
Form 8938 (FATCA)
If your ownership stake in the ApS is classified as a specified foreign financial asset, its value may count toward the Form 8938 reporting threshold.
For single Americans living abroad, the threshold is $200,000 at year-end or $300,000 at any point. An ApS with significant retained earnings or assets can push a shareholder above this threshold.
Form 5472
If the ApS has transactions with a related US entity, Form 5472 may also be required. This is less common for individual American owners of a single ApS but is relevant for those with more complex cross-border structures.
Common Situations and Their US Tax Implications
| Situation | US Tax Implication |
| Sole American owner of a Danish ApS | CFC status applies; Form 5471 required annually |
| ApS has zero revenue for the year | Form 5471 still required; $10,000 penalty for non-filing |
| ApS earns active consulting or service income | NCTI applies; Danish corporate tax typically covers US liability |
| ApS holds cash in Danish bank accounts earning interest | Subpart F income; taxable to US owner immediately |
| American distributes salary from the ApS | Taxed as Danish employment income; Foreign Tax Credit applies |
| American takes dividends from the ApS | Danish withholding applies; previously-taxed income rules may prevent double US taxation |
| American owns less than 10% of a Danish company | Form 5471 generally not required; different reporting rules apply |
