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Q: I am a U.S. Department of the Army civilian employee stationed in Kaiserslautern and married to a German. Can the Germans tax the pay I receive from the U.S. government?
A: Article X, paragraph 1, of the NATO Status of Forces Agreement shields your U.S. government income from German taxation if and as long as you are solely in Germany because of your U.S. government job. You are not considered to be an ordinary resident of Germany for tax purposes just because you are stationed here. However, there are two scenarios under which the tax protections afforded by the NATO SOFA can be unilaterally chipped away by the German authorities:
• If you file a German tax return in a married filing joint status, in German “Zusammenveranlagung,” your signature on the return will be seen as an express request by you to be treated as an ordinary resident for German tax purposes, and as a consequence, all of your worldwide income will have to be reported on your German tax return. The German Finance Office, in German “Finanzamt,” will normally ask for your W-2. Although you may have inadvertently filed jointly because you didn’t understand what you were signing or because you were talked into it, neither is an acceptable defense.
• The German Finanzamt may also probe into your true reasons for being in Germany, looking for criteria like being married to a German, owning a house in Germany, having your kids attend German schools and/or having simply been in Germany for too long. In such a case, you will bear the full burden of proof to demonstrate that you have been, were and still are ready and able to leave Germany. In German, this is called a “Rueckkehrwille,” or “intent to return” to the U.S. Germany’s Constitutional Court already ruled in 2010 that merely being here under government orders is no defense and is considered insufficient proof of intent to return.
Germany’s Supreme Federal Tax Court, in German “Bundesfinanzgerichtshof” or BFH, in Munich recently confirmed once more the German Finance Offices’ encroachment on SOFA rights. It unanimously upheld the full burden of proof standard, allowing the finance offices to win by simply creating plausible alternatives while diminishing the chances you will be able to make persuasive counterarguments. If you think it is easy to prove your intent to return, you might find these examples from recent cases shocking:
• You argue that you bought your house as an investment and don’t like having to deal with landlords, but the finance office will contend it was bought in order to create a permanent long-term home for your German family, as the German cultural concept is to build for generational settlement.
• You argue that you send your kids to an international school in Germany so they can switch to an international school at your next duty station, but the finance office will contend that such an international education is for the general benefit of your children and no indication of your intent to return to the U.S.
• You point out that you just accepted a job back in continental U.S. as proof of your intent to return, but the finance office will contend that you merely applied because of their investigation and lacked any prior voluntary intent to return.
Increased interest by the German tax authorities in the pay of Americans stationed in Germany is a disturbing trend, which unfortunately is getting worse instead of better. If your spouse files his or her German taxes and asks for your W-2 or if you receive a questionnaire from the German Finance Office asking about your ties to Germany as opposed to your stateside ties, you would be well-advised to make an appointment to see a German attorney by calling 483-8848 or
0631-411-8848.
Editor’s note: This article is for general information only and does not constitute legal advice or create an attorney-client relationship. You should always consult an attorney for specific legal questions.
