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NATO Personnel & US Tax

NATO Personnel & US Tax
Ines Zemelman, EA
25 March 2019

Ottawa Agreement & US Tax

Ottawa Agreement outlines taxation for NATO Personnel. However, this is mostly in the eyes of the 'host country'. For US persons, NATO Compensation is not exempt from U.S. Tax (except for Combat service)

  • The agreement provides tax exemption from the host country because NATO personnel are not considered residents of the receiving country, regardless of the length of stay. Whereas U.S. tax on worldwide income remains.
  • There is only one exception: military pay received for Combat Service is tax exempt.

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.

FEIE & NATO Personel

The Foreign earned income exclusion also has limitations because NATO personnel are not considered residents of the receiving country.

  • However, explicit disallowance of FEIE only applies to uniformed personnel (US Service members).
  • Civilians can claim the FEIE using the Physical Presence test as employees of the International Organization
  • Days you are in the United States under a NATO visa as a member of a force or civilian component to NATO are not counted towards US presence for the purpose of Physical Presence test qualification.
Ines Zemelman, EA
founder of Taxes for Expats