Tax Relief for personnel under Status Forces Agreement
As a service member, civilian employee or family member, personnel on orders and falling under the Status of Forces Agreement (see related article on Page 16) are eligible for a variety of tax relief. This can be quite a break and provides a significant savings as taxes in Germany can be much higher than many Americans may be used to.
Value Added Tax
The first and most common form of tax relief is from the tax known as the Value Added Tax. The VAT is a tax imposed by Germany on a wide variety of goods bought or sold in Germany. While amounts can vary for certain items, most retail goods are taxed at 19 percent. This tax is already calculated into the advertised price of retail goods, so the amount on the price tag includes the tax, and is what most customers pay for the item at the register. Those eligible for tax relief can save significant money from the advertised price by taking steps to have the tax removed through VAT forms available at the Stuttgart VAT Office located Building 2915, Panzer Kaserne.
Purchases €2,499 and below
For purchases less than €2,500 net price (after applying the VAT form to remove the Value Added Tax), a simple VAT form NF-1 is used. This form consists of several layers of carbon copy worksheets that the customer and the retailer fill out together. The customer keeps the top two pages of the form (pink and white) and the retailer or vendor keeps the remaining pages of the form. Customers then reconcile the forms by providing the white copy to the VAT office while keeping the pink copy for their own records. Retailers are not required to accept the form or offer tax relief, but many do. Typically retailers near military installations are more familiar with the forms, while those farther away from a U.S. military population are less so, if at all. For retailers who have not used the form before, the VAT Office offers an information sheet in German that explains the retailer’s use of the form.
These forms can be purchased at the VAT office for $5 per NF-1 form, and each sponsor may only have 10 open VAT forms out at any one time. VAT forms are “closed” by reconciling the white copy as described above. VAT forms can be used for most goods and services that fall under the €2,500 limit, but there are some things for which they cannot be used.
The VAT forms cannot be used for costs related to buying or selling real estate, or for the purchase of automobiles that will not be registered in the U.S. Army in Europe vehicle registration system. They also cannot be used for any items used in a commercial activity, such as a home business. VAT forms cannot be used for long-term utility or telephone and Internet contracts; however, there is a program for relief of certain taxes related to utilities that will be discussed later. Finally, VAT forms are not to be used to provide tax relief to personnel not entitled to VAT relief.
VAT relief for purchases of €2,500 or more
For purchases over €2,499, consumers must get a VAT form specific to that individual purchase ($65 for a NF-2 VAT form). There are more restrictions on these VAT forms, and there is a process that must be followed correctly or the consumer may end up not being able to get tax relief for the purchase in question. Most importantly, before making any legal commitment to purchase an item over €2,500, contact the VAT Office to start the process. These forms cannot be used after the purchase has been made or ordered, and in most cases, the purchase is actually made by the buyer in conjunction with the servicing VAT Office. Family and Morale, Welfare and Recreation Services must actually be named on the purchase documents (they may be listed as ‘FMWR services’). Those considering large purchases should contact the VAT office for more information, prior to making a purchase.
Utilities Tax Avoidance Program
In addition to relief from retail VAT, some personnel may be eligible for tax relief from utility taxes through the Utility Tax Avoidance Program. Enrollment in this program may be mandatory for some personnel receiving housing or living quarters allowances and can save enrollees significant money over the course of several years. The UTAP office has established relationships with most of the regional service providers, and can help customers enroll in the program. There is a fee of $99 for enrollment. The application form should be filled out ahead of time and is available for download at http://stuttgart.armymwr.com/europe/stuttgart/programs/utap.
Use of VAT forms is a privilege extended to personnel under the SOFA, but there are restrictions on the use of VAT forms. To avoid losing VAT relief privileges, avoid the following prohibited practices:
- Using an un-priced purchase order (NF-1) for any amount of €2,500 or more.
- Using an un-priced (NF-1) or priced (NF-2) purchase order that has an issue date after the designated agent (customer) “order date,” vendor’s delivery date, or date of invoice (A VAT form must be obtained prior to initiating/ordering a service or buying an item).
- Splitting the amount between two un-priced (NF-1) purchase orders to avoid using a priced (NF-2) purchase order for an amount of €2,500 or more.
- Purchasing goods or services that benefit ineligible persons.
- Buying used automobiles, repair parts or services for resale. This activity is considered “trading in the commercial sector” and is illegal, regardless of who buys the automobile, parts or service.
- Buying items for resale or other commercial purposes. This activity is considered “trading in the commercial sector” and is illegal in conjunction with tax relief, regardless of who buys the items or services offered.
- Buying new or used automobiles from German vendors for registration in the German (or other non-U.S. Forces) vehicle registration system (Kfz-Zulassung).
- Using VAT forms for costs related to buying or selling real estate.
- Using VAT forms for construction, renovation or home repair costing €2,500 or more without IMCOM-Europe approval, and for unauthorized repairs or renovations below €2,500.
- Using VAT forms for utilities or telecommunication services based on long-term contracts.
- Making other purchases that are prohibited by AE Regulation 215-6/ USAFE Instruction 34-102.
- Returning VAT forms that are not completed properly (for example, amount in Box 4, signature in Boxes 7 or 10, dates in Boxes 8 or 11, Box 12, Box 13).
- Using an expired VAT form (VAT forms are valid for two years from the date of purchase).