Absolutely, and while there a few really tricky aspects (please see this article), most aspects boil down to the question of whether you are in Germany with an intent to return or not. Yes, this used to be a headache for US personnel in the Ramstein/Kaiserslautern area, but we helped kill this beast and now only the following needs to be considered.
In general U.S. Government pay under NATO SOFA is completely free from German taxation. The same applies to employees of Non-German Non Commercial Organizations, Non-German Commercial Enterprises or Technical Experts servicing the US Forces, who have NATO status
U.S. Personnel with “intent to return” will not face German taxation on SOFA employment-derived income; however, other German generated income can be considered for tax purposes in accordance with the US-German tax treaty. When looking at the tax treaty the term resident has a different meaning than it does under SOFA and is geared towards just physical presence.
U.S. Personnel without “intent to return” to the U.S. will also not face German taxation on SOFA employment-derived income; however, other worldwide income can be considered for tax purposes by Germany – which comes with a particularly bad surprise when looking at certain Social security benefits, retirement plan payout or a US job which you are working remotely from Germany. On the other hand, most freelancers and HBB owners (please see this article) are aware of taxation being a risk or are being made aware of through their installations.
Therefore, U.S. personnel who have income derived from non-SOFA-related jobs should be able any time, to prove their intent to return (i.e., that they are in Germany solely because of their SOFA job). This is particularly hard to show, when German spouses are involved. Also, German tax offices may send out questionnaires in order to assess one’s intent to remain in Germany, which includes questions about marriage to a German national, children attending German school, property in Germany or other ties to German “social life”.
We understand that the “intent to return” is a very subjective concept and we are convinced that the German tax system is not in compliance with SOFA in the way it uses it. We are therefore happy to work on your “intent to return” to secure your most beneficial tax position while in Germany under SOFA!
