Hi all,

This question came up in a previous thread but remained unaswered:
(https://www.askmehelpdesk.com/taxes/visa-switch-j1-f1-undo-claiming-tax-treaty-308508.html#post1649585)

I visited the US as a college student in the years 2006, 2007 and 2008 on two different J-1 visa (trainee/ research scholar). I got a minor compensation (>$5000/y) during 2007 and 2008 which was paid under income code 18. Due to the 2-year-maximum presence on the US-German treaty article 20(1), I claimed the treaty only for 2007 and paid US taxes in 2008.

After returning to Germany for 195 days, I became a grad student in the US in January 2009, now under a F-1 visa, and now paid through a stipend from the US university (income code 15).

I want to find out if I can claim the US-German treaty again, now under article 20(3).
Finance department of the university tells me that I cannot claim the treaty because they don't consider me as a german residence. Apparently I had to re-establish german tax residency (365d) before I can claim the treaty. They are now withholding taxes on my stipend.

I have two questions:

Does this requirement even exist in the treaty - where exactly would that be stated?
Where can I find an official statement on how long it takes to (re-)establish tax residency in Germany for treaty purposes?


My reading of the treaty is that only for a switch FROM article 20(3) TO article 20(1) one would need to re-establish residency.
Also, I am not an expert on german income taxes but a quick Google search yielded that one becomes german tax residence after 183 days!

Hope to hear from you!

I found additional information regarding this case but unfortunately still not resolving the problem:

Two IRS rulings (56-164, 77-242) state that one has to re-establish residency before claiming the same student article again (article 20(4) of the israel-US treaty) and before claiming the teaching article after having claimed the student article. In both cases, the IRS policy has been to consider 1 full year as necessary to re-establish residency.

http://www.irs.gov/pub/irs-wd/03-0217.pdf

I am still trying to find out if this rule also applies when I switch from the teaching article to the fellwoship article.
Furthermore it is unclear if the requirement to re-establish residency only applies if treaty benefits were claimed and could therefore be circumvented by refiling the earlier tax returns without claiming treaty benefits.

If we assume that the university's position is accurate, you would have to stay in Germany for one year. This is the time cited in the technical explanation of the U.S.-Germany Tax Treaty at the link below:

http://www.irs.gov/pub/irs-trty/germanyte07.pdf

However, in my opinion. Coming to the U.S. under a J-1 visa as a teacher/professor/researcher is different than coming as a student.

While both are covered under Article 20 of the original treaty, the teacher/professor/researcher is addressed under subparagraph 1, while the student is addressed under subparagraphs 2,3, and 4.

Further, the treaty specifically states that a person cannot claim benefits under subparagraph 1 if they previously claimed benefits under subparapgraphs 2, 3, or 4.

However, the reverse is NOT true, because it is NOT specifically cited in the tax treaty!

That being the case, you can file as a student, submitting Form 1040NR-EZ, Form 8843 and argue on Form 8833 that you are entitled to claim student status for at least three years, because the U.S.-German Tax Treaty does not specifically prohibit claiming the tax benefits of being a student after claiming the benefits of being a teacher/professor/researcher.