An agreement on the status of the armed forces, often called SOFA, is an agreement between a nation that hosts armed forces deployed in its country and the nation of those forces. Sometimes these agreements are part of a wider range of military agreements that include a broader security agreement. These agreements generally apply to U.S. citizens who work as military contractors outside the United States in countries, including, but not limited to Iraq, Afghanistan and South Korea. Why are military agreements important to expatriates? Because they can determine where military contractors should manage – and not. Maybe, but you will most likely need to use the physical presence test to claim exclusions from foreign income. The Status of Forces Agreements (SOFA) and similar agreements, such as multilateral defence agreements, provide for special tax exemptions, usually from the taxation by the host country of American persons. It is quite difficult to claim the bona fide resident test when it falls under a SOFA or similar agreement. After losing legal action in this regard, the IRS stopped the Rev.
72-497, in which she stated that a BFR application was possible. Qualification standards under the BFR appear to be higher in such a situation. For example, you should expect your family to be on the host site and not reside in the states. Previous interpretations of the IRS can be traced under The Rev. Mr. Rul. 68-553 and Rev. Mr. Rul. 69-449.
Status of Forces Agreements (SOFA) exists between some host and foreign countries that provide military assistance stationed in the host country. Some of these sofa agreements provide for the exclusion of U.S. citizens from taxation in host countries. By allowing the exclusion of the host country`s taxation under a SOFA agreement, you say that you “visit” and tell the IRS that you do not have a “tax home” abroad. Therefore, you may not be eligible for the exclusion of the host country tax and the FEIE on your U.S. foreign taxes. Yes and no. In general, military contractors will not pay foreign taxes on sites with SOFA agreements – but they are still responsible for U.S. taxes. Moreover, where a SOFA agreement prevents a military contractor from building foreign tax housing, it cannot be excluded from foreign income tax. In general, military contractors working abroad must follow the same rules as U.S. civilian citizens working abroad.
They must report all of their global income through their U.S. foreign taxes, they will likely be allowed to extend the maturity until mid-June, and they will be able to exclude some of their foreign income from U.S. taxes. However, it is important to recognize that there are strict differences between military contractors and military/military contractors. The latter may benefit from a number of tax advantages for which military contractors are not eligible. An exemption from income tax granted in a treaty or other international agreement (i.e.