VAT Handling for NATO Troop Suppliers in Germany
Germany was the front line of the Cold War in Europe for over 40 years. For this reason, Germany is still one of the main NATO locations in Europe. US troops in particular, as part of the NATO defense forces in Europe, are stationed in Germany.
At present the US Army and US Airforce has military bases in Spangdahlem, Baumholder, Landstuhl, Ramstein, Wiesbaden, Mannheim, Grafenwoehr, Ansbach, Hohenfels and Garmisch-Partenkirchen. In Germany, the US Army and US Airforce are supplied by entities from the United States (US), Australia, Canada and other European countries. Deliveries and services to US troops and NATO troops are subject to German VAT.
In the interest of common defense, the expenditure generated by the NATO sending states for the procurement of their foreign troops stationed in the Federal Republic of Germany shall not be subject to German sales tax (VAT).
This is achieved by means of a special VAT exemption (Art. 67 para. 3 NATO CTA) for services rendered to the foreign troops stationed in Germany and foreign troops stationed in the country and subordinated to the sending states.
The VAT exemption under Art. 67 (3) NATO CTA is a special provision outside the VAT Act: it has priority over the general VAT exemptions under Sec. 4 UStG.
As a result, the deduction of input tax for tax-exempt transactions is not excluded (Section 15 (2) sentence 1 no. 1 UStG, Section 15 (3) no. 1 letter a UStG; cf. Section 15.13. para. 5 sentence 3 UStAE; BMF, letter dated 04.11.2015, File No. III C 2 – S 7304/15/10001, Call No. 145728).
The VAT exemption is granted for supplies to parties of the North Atlantic Treaty, beneficiary transactions and those made to NATO troops stationed in the country and their civilian entourage.
The following supplies and other services that are exempt from VAT are
• effected directly to the troops and the civilian entourage for military or official purposes, or
• intended for private use or consumption by members of the troops, the civilian entourage or their dependents (= authorized persons).
WW+KN has been handling the German VAT affairs for several US troop services providers and suppliers for more than 15 years. Both WW+KN offices are located near US military bases which was one of the reasons for focussing on this challenging VAT topic.
Furthermore, we can offer to provide special payroll services for US troop suppliers in Germany.