Tax Guide for US Military in Italy: The SOFA Agreement

In this article we will analyze what are the tax implications of being a Member of US Military Forces or a Civilian Component who serves in Italy.
The general rules of tax residence implied by the Convention against double taxation between Italy and the US do not apply completely for US Military personnel abroad, as they have a special tax treatment, defined by the Status of Force Agreement - SOFA, for certain US sourced incomes.
Let's see how it works.

What is the SOFA?

The Status of Force Agreement (SOFA) Agreement is a multirateral North Atlantic Treaty (NATO) that was approved by the President if the United Stateson July  24, 1953, and that entered into force on August 23, 1953.
The SOFA Agreement has the purpose of dealing with all the juridical aspects of a Member of US Forces or Civilian Component being sent in Italy to serve.

What is important for us are the fiscal aspects of these official duties.
SOFA Agreements applies to these two categories:


Definitions of Member of US Forces and Civilian Component.

1. MEMBER OF FORCES is a category that includes "the personnel belonging to the Land, Sea or Air Armed Forces of one of Contracting Party (of the NATO Alliance), in our case the United States, when in the Territory of another Contracting Party, in our case Italy, in connection with their official duties". 

2. CIVILIAN COMPONENTS is a category that includes "the Civilian Personnel accompanying a Force of a Contracting Party, and who are NOT:

- Stateless persons;
- National of any State which is not a Party of the NATO;
- Persons ordinarily resident in the State in which the Force is located (Italy)".

There is a third category that is important to understand as it's similar to the Civilian Components one, but has a different definition:

3. CIVILIAN PERSONNEL (in the specific meaning) is a category that includes "these personnel in addition to the Civilian Components of a Force, who are closely affiliated with the United States Army Forces and under their authority, but not employed directly by them, on the condition that the presence of such persons in Italy is recognized by both Goverments as necessary in connection with the functioning of the installations".
These persons are:

A) Employees of other US Government Departments;

B) Essential personnel of the USO (United Services Organization), Schools, Post Exchanges, Commissaries, Youth Development and Educational Support Organizations, Religious Support Groups, Soldier, Sailor, Airmen and Marine Mutual Aid Societies, Military Banking facilities and Credit Unions and the Red Cross.

C) Technical Representatives (TR)of firms having special relations with the United States Armed Forces, when such persons come to Italy for other than temporary visits.
We will analyze in the next article this group (Technical Representatives) and their fiscal treatment.

The category"Civilian Personnel" is not mentioned inside the SOFA Agreement, but comes out from the so called "Shell Agreement".
The terms "Civilian Personnel" can be intended in two different meaning:
"CIVILIAN PERSONNEL" in its broader meaning includes both Categories 2 and 3, that means both the "Civilian Components" and the "Civilian Personnel" in its specific meaning.
"CIVILIAN PERSONNEL" in its specific meaning refers only to the persons who belong to this third category.

4. DEPENDANTS OF THE 3 ABOVE MENTIONED CATEGORIES is a category that includes all the dependants, like children, spouses and parents: these dependants have the same fiscal treatment of the person they depend on, whenever this person is included in one of the 3 above mentioned categories.

The tax treatment of US Military in Italy.

To understand the fiscal treatment of the US Military Forces and Civilian Personnel in Italy we must refer to Art. 10 of the SOFA:

"Art. 10.
Paragraph 1. part 1.
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.

Paragraph 1. part 2.
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.

Paragraph 2.
Nothing in this Article shall prevent taxation of a member of a force or civilian component with respect to any profitable enterprise, other than his employment as such member, in which he may engage in the receiving State, and, except as regards his salary and emoluments and the tangible movable property referred to in paragraph I, nothing in this Article shall prevent taxation to which, even if regarded as having his residence or domicile outside the territory of the receiving State, such a member is liable under the law of that State."

Paragraph 1, part 1, of art. 10 of SOFA means that whenever the income tax of a certain State depends on the tax residence, like it's for Italy (see art. 4 of the Convention against double taxation between Italy and the US), the 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.
This clearly means that the days passed by a US Member of Forces or a Civilian Component in the Italian Territory is neutralized for the purposes of art. 4 of the Convention, and the indications that we have given in our previous articles are not valid for US Members of Forces or a Civilian Components.

Our previous articles are the following:

The important condition highlighted by this provision is that the person must be in Italy SOLELY and SPECIFICALLY for the reason of serving in the US Forces or as Civilian Component.

Obviously, after this neutralization, this person cannot be qualified as "Tax Resident" in Italy, even if he/she spends more than 183 days in Italy during the calendar year. This implies that the SOFA Agreement is a "Special Law" that overrules the provisions of art. 4 of the Convention.
The fact that the person doesn't become Tax Resident in Italy means that:
he/she will be qualified as NON TAX RESIDENT for Italian fiscal purposes;
- he/she doesn't have to report (nor tax) any American sourced income in Italy;
- he/she doesn't have to report any asset or investment in the US to the Agenzia delle Entrate.
Obviously the incomes of Member of US Forces or Civilian Components are qualified as American sourced income.

Part 2 of Paragraph 1 of art. 10 specifies that the Member of US Forces or Civilian Components are exempt from income tax in the Receiving State (Italy) for emoluments and salaries connected with their service in the US Forces or as Civilian Components.
This provision seems not necessary considering that the first part of Paragraph 1 already had sterilized tax residency, avoiding the Italian taxation of American source income.
But there is a meaning of this provision. Let's take a look at the following example.

Example: the Civilian Component who remains in Italy after retiring.

Suppose that a Member of US Forces or a Civilian Component has retired on March 3 2023 but he/she has decide to remain in Italy after the retirement.
Suppose also that he/she has found another part-time job outside the Military.
What is the fiscal situation on this case?

The days spent from 1 January 2023 to 3 March 2023 are neutralized, as said before, but, after that, the person has decided to remain in Italy, and will spend more than 183 days during 2023. Thus he/she will become fiscal resident in Italy. 
This implies, for the general rules indicated in the Convention and the Worldwide taxation principle that Italy is allowed to tax also the American sourced income, as his/her salary from the Civilian Component Job. In this specific case, the neutralization of the first part of Paragraph 1 of art. 10 is not enough, as the person will exit his/her specific status of Civilian Component as soon as he/she will retire. This is the reason why the second part of paragraph 1 is important: even in this particular example, the salary as Civilian Component for 2023 (1 January - 3 March) is exempt from taxation in Italy.

What if the Member of Force or Civilian Component has an Italian sourced income?

In this case, we have to consider Paragraph 2 of art. 10: it's clear that the status of NON-RESIDENT in Italy implies that the Member of Forces or Civilian Component who has bought an apartment in Italy and receives a rent on it, must report it in the Italian tax return and tax it as every other Non-Resident.
Also, he/she will have to report this income in his/her American Tax Return.


1) Our section of posts tagged with the keyword "TAXES IN ITALY" that you can find at the following link:

2) The following posts:

This article is in Italian but can be translated: use the icon at the top of the left sidebar.


If you need more information you can send an email to:

or make a phone call to the following number:

+39 0444 322987

Enrico Povolo