First of all, thank you for your service and protecting all of us. We certainly prefer learning English in Germany rather than being forced to familiarize ourselves with Russian – at least the ones of us not so pauper at mind do!
Not too long ago Germany thought they could tax US pay from people who are in Germany under SOFA. Mind-boggling enough to begin with, they thought they could do this based on a baloney interpretation of Art. X of NATO-SOFA to where you would need to have an “intent to return” to the US – at least leave Germany – in order to enjoy tax protection under the stationing agreement. However, if you had an LN spouse, kids in the German system or owned real estate in Germany your chances of proving that intent to return were next to nil.
We are extremely proud to have published a professional article in late 2022 that spoke out in no uncertain terms against this interpretation and practice. About eight months later the German Treasury issued a directive where they accepted and implemented our key take-aways verbatim. This ended the practice of going after US personnel based on their ties to Germany for good.
While this is good news with regards to having your bread-and-butte pay protected, there are other aspects, which are not so clear yet, but on which we also have a very unmistakable take!
First, sometimes a tax office might want to deny SOFA protection all the way, arguing you were an “ordinarily resident” at some point. Do not take this likely, if they manage to take your SOFA status away, there is not protection at all. However, we have a few tricks up our sleeve as to whether they actually can do this – after all, SOFA serves no tax purposes! Regardless, it is easier to prove that you never were an ordinarily resident, which requires some in-depth research into your time in Germany, and we have done this a few times before.
Second, if you are not a member of the force but civilian component, depending on your family history a tax office might want to launch a probe into whether you actually aren’t German. This is quite a move, because it really leaves the tax world and makes it an issue of citizenship law. However, it is key to use any plausible cause or room for doubt to speak against any German citizenship, since the SOFA demands you need to actually be (!) German, rather than be considered, or can be treated as such.
Other aspects pertain to the application of the above-mentioned “intent to return”, starting with the questions as to whether this is even a legitimate read. Yes, we know, the German Tax Surpreme Court has developed it, but when looking at everything there was to look at with regards to the interpretation of SOFA in our 2022 article, serious doubts arose on our end, as to whether this concept couldn’t be seriously challenged.
On the (proper) application of the intent to return hinges your German filing status and the inclusion of other (non-NATO) income.
So, overall, SOFA still grants probably the largest protection from German taxation out of all international agreements. However, if you have a malevolent (or ambitious) tax office, you still might need to do some serious brawling to tell them to back off. We are happy to brawl on your behalf, as we have done this successfully quite a few times before. We do this in a cordial but determined fashion and we like to think our professional attitude about disputed tax questions has helped us succeed where others did not.
Please let us know if your tax office has started asking “weird” questions about your SOFA status – we are happy to nip things in the butt before they get out of hand.
