German tax authorities reported to be imposing German taxation on US military personnel stationed in Germany


This post draws heavily from the reporting of John VanDiver who has written a number of articles in Stripes. His most recent article is here:

“You don’t want to be chased and harassed by a government office. It is scary,” said Melissa Howell, the spouse of a U.S. soldier who is being targeted by a tax office in Germany’s Landstuhl area. “I don’t know how they expect people to come up with that money.”

Howell, a German who lives with her American husband and children, said she ran into trouble in June when she went to file her taxes at the local finance office.

She said she was interrogated about her husband and told to fill out a questionnaire that probed information about his employment.

She then received a letter ordering her to hand over her husband’s W-2 and other tax forms.

“I did it because I didn’t know. I found out that

was a mistake,” she said.

After that, she got a phone call from the tax office, saying that their case was getting handed over to a case manager who handles “American-German couples.”

As reported by John VanDiver in Stripes – July 27, 2020 – ‘Harassed’ by German tax offices, more US military families face financial threats

Certain US Soldiers In Germany Targeted By German Tax Authorities For Taxes On Their Military Wages – Reminiscent Of The “Oh My God Moment

Many Americans abroad have experienced the “Oh My God Moment.” This is the moment that they learn that they are targeted by the USA – a country that they don’t live in – for taxes on their non-US source income. Well, it appears that for some, the shoe is now on the other foot. Germany is apparently targeting certain US soldiers – stationed in Germany – for taxes on their US military pay! The US claim is NOT based on any connection with the United States (other than circumstances of birth). At least (to its credit), Germany’s claim is based on a connection to Germany that makes these US soldiers “tax residents” of Germany. Therefore, the “moment” may be the same. But, the justification for taxation is not he same. To put it simply: Germany is claiming that when the circumstances of a US soldier’s stay in Germany ceases to be “solely” for military service AND their factual circumstances meet the test for tax residency in Germany, they are are subject to German taxation.


In an ongoing story, that is certain to be of interest to Americans abroad, Germany has begun treating certain US Military Personnel as tax residents of Germany. In other words, Germany is imposing tax (and apparently penalties) on the income earned by US military personnel stationed in Germany. The starting point is that US Forces in Germany (and other countries) are governed by the SOFA (“Status Of Forces Agreement”) agreement. Among other things, the SOFA agreement exempts US service personnel from being treated as tax residents of the country where they are serving. In simple terms: As long as the individual serviceman meets the conditions in the SOFA agreement, he/she would NOT be treated as a tax resident of Germany.

The provisions of the NATO SOFA are unremarkable. What is remarkable is that Germany appears to be the first country, to determine that certain US Military Personnel, are not entitled to use SOFA as a “shield” against being treated as a tax resident and therefore subject to taxation.

The background and context of the SOFA agreement

The formation of NATO contemplated that the members of the Armed Forces of one country would be stationed in other countries. For example, over the years there have been Canadian troops stationed in Germany. There are currently US troops in Germany, the Uk, Japan, etc.

As a result, the SOFA (“Status Of Forces Agreement”) was created. The purpose was to define the conditions under which the troops from one country would be physically present in the NATO partner country. The agreement was originally created in 1951. The terms of the treaty are here.

The SOFA agreement includes Article X which deals with the issue of taxation.

Article X

Where the legal incidence of any form of taxation in the receiving State depends upon residence or domicile, periods during which a member of a force or civilian component is in the territory of that State by reason solely of his being a member of such force or civilian component shall not be considered as periods of residence therein, or as creating a change of residence or domicile, for the purposes of such taxation. Members of a force or civilian component shall be exempt from taxation in the receiving State on the salary and emoluments paid to them as such members by the sending State or on any tangible movable property the presence of which in the receiving State is due solely to their temporary presence there.

Nothing in this Article shall prevent taxation of a member of a force or civilian component with respect to any profitable enterprise, other than his employment as such member, in which he may engage in the receiving State, and, except as regards his salary and emoluments and the tangible movable property referred to in paragraph I, nothing in this Article shall prevent taxation to which, even if regarded as having his residence or domicile outside the territory of the receiving State, such a member is liable under the law of that State.

Nothing in this Article shall apply to ‘duty’ as defined in paragraph 12 of Article XI.

For the purposes of this Article the term ‘member of a force’ shall not include any person who is a national of the receiving State.

(Note the citizenship-based exception at the end. Included as a “saving clause” of sort?)

A reading of this provision reveals:

– that the individual is exempt from host country taxation during periods when a member of a force or civilian component is in the territory of that State;

– by reason solely of his being a member of such force or civilian component;

– the fact of being stationed in Germany shall not be considered as periods of residence therein, or as creating a change of residence or domicile, for the purposes of such taxation (in the receiving state).

But, the exemption from taxation applies only to:

– his employment as such member, in which he may engage in the receiving State …

Otherwise, the member is taxable by the receiving state.

Interestingly the United States has a supplementary SOFA agreement with Germany. Article 67 of he Supplementary appears to affirm Article X of the general SOFA agreement and specifically states in part:

Article 67

1. A force shall not be subject to taxation in respect of matters falling exclusively within
the scope of its official activities nor in respect of property devoted to such activities.
This shall, however, not apply in respect of taxes which may arise from commercial
trading by the force in the German economy or in respect of property devoted to this

(It is not clear to me how this relates to Article X of the original SOFA agreement. That said, it appears that Article 67, if read in isolation, could be used to justify the claim that, there are NO CIRCUMSTANCES that would allow Germany to impose taxation on US military pay!)

However, Article X of the SOFA agreement is alive and well. What does it mean?

US Tax Court Interpretation Of SOFA Article X

In the 2012 US Tax Court decision in Harrison v. Commissioner, the court carefully considered the applicability of SOFA Article X to a Green Card Holder employed by the German Government and concluded that she was NOT entitled to the benefits of SOFA Article X. (She was taxable by the United States.) This indicates that the US Tax Court will interpret Article X precisely and will limit its scope accordingly. As a result, it is reasonable for the German tax authorities to interpret Article X precisely and limit its scope accordingly.

How the German tax authorities appear to be interpreting Article X

The series of articles by John Vandiver published here, here, here and here the issue becomes clear. The issue is as follows:

Article X protects US military personnel from German taxation ONLY to the extent that the individual is in Germany “by reason solely of his being a member of such force”. Notice that the test is that the individual must be “in” Germany SOLELY by reason of being a member of Armed Forces.

As reported by Mr. Vandiver:

Service members who already pay U.S. taxes and do little more than extend their tours in some cases face being charged tens of thousands of dollars in German taxes, military families and German officials have said. Others are being pursued after local tax authorities determine someone is married to a German, owns property, sends a child to a German school or does anything else they say denotes “special ties” to the country.

To what extent do facts that include:

– having a German spouse

– sending children to German schools

– owning German property

suggest the individual is NOT in Germany solely by reason of being a member of the Armed Forces? This appears to be the issue and point of contention.

It will be interesting to see how it is resolved. Mr. Vandiver’s articles describe the issue:

From The German Perspective As:


At the center of the problem is the claim by some German authorities that SOFA tax protections are void if a person is in Germany for reasons other than just their military job.

Being married to a German, extending tours, owning property or sending children to German schools are among the factors that have been used by German officials to build tax liability cases.

To avoid taxes, a person must prove “a willingness to return” to the U.S., even though tax authorities have continued to pursue cases against some people after they returned stateside.

From The American Perspective As:

“The aim of this engagement, and any necessary follow-up engagements, is to secure the appropriate tax exemptions for U.S. personnel covered under the SOFA and its supplementary agreements,” former Acting Defense Secretary Christopher Miller wrote in a Jan. 7 letter to Rep. Mike Kelly, R-Pa.

“We believe that some German tax authorities have adopted an incorrect interpretation of the NATO Status of Forces Agreement (SOFA), resulting in the improper taxation of some US personnel,” Miller wrote

But, taxation by two countries does not necessarily mean double taxation

If Germany is correct and these US military personnel do NOT have the benefit of Article X of the SOFA agreement and Article 67 of the US Germany Supplementary agreement, then:

These US military personnel become (like millions of Americans abroad) tax residents of both Germany and the United States. Clearly US military pay is US source income.


If Germany is imposing income taxation on US military pay, then the US tax paid (state and federal) should be available as a tax credit to offset any German tax owing on that same income.

Q. Why is this likely to be of interest to Americans abroad?

A. Although this is the result of the SOFA agreement, when one views the big picture:

One sees that The United States is claiming that Germany cannot impose tax on Americans on German soil, while at the same time, the United States imposes tax on certain Germans living on German soil.

John Richardson – Follow me on Twitter @Expatriationlaw


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