Some troops and Department of Defense civilians in Italy and Germany can sidestep taxes on utilities and pocket the savings — but for a price.
This isn’t an illicit tax-dodging scheme. The Army, Air Force and Navy all administer programs — approved by local governments — that allow their employees to forgo paying utility taxes to the host country.
For DOD identification cardholders in Germany and Italy who live on the economy, utility tax avoidance programs can shave hundreds, and sometimes thousands, of dollars annually from bills for water, electricity, oil and gas. There is no utility tax exemption program for those stationed in the United Kingdom.
In Germany, utility costs are billed on a prorated basis. A monthly fee is assessed and, if a customer pays more for the water or electricity he uses in a year, he will get a refund from the utility; if he uses more than what he paid for, he must pay the difference. For example, at the end of his first year in a German apartment, Tone Lawson, transcripts supervisor for University of Maryland University College in Heidelberg, was handed a bill for 250 euros for excess electricity usage.
“During the summer months when I could use my air conditioner, I always paid double during those months,” he said.
Lawson saved about 125 euros through the Army in Germany’s Utility Tax Avoidance Program that year, about half of his excess electricity usage. The savings were about twice the one-time $77 enrollment fee to get in the program.
“Believe me, I was happy,” he said.
But the programs don’t help everybody, said Denise Fesel, chief of funds control for U.S. Army Garrison Heidelberg. The Army’s Utility Tax Avoidance Program, or UTAP, falls under her office’s purview.
Fesel enrolled in UTAP when it was first offered in Heidelberg and found that, because her living quarters allowance covered the cost of her house and utilities, she didn’t get any money back — but somebody did.
“I’ve paid $77 to join the program, but the government sees the savings,” she said.
Troops who qualify for the utility and recurring maintenance benefit, which is part of the overseas housing allowance, don’t have to worry about their savings going to Uncle Sam.
Any part of the utility benefit troops don’t spend goes straight to their pockets. Those maxing out the benefit could save almost 800 euros a year in Germany.
Personnel stationed in Italy, where most customers receive monthly utility bills, can save even more.
“In Italy, taxing taxes is legal,” said Frederick Driscoll, manager of Vicenza’s tax relief office, which administers the Army’s Utility Tax Exemption Program, or UTEP.
Driscoll said 53.36 percent of a city gas bill is taxes, and personnel enrolled in UTEP get all of that back. Even after the tax exemption, gas bills there average more than $1,300 per year, he said.
Utility companies don’t have to participate in the tax exemption programs. But they might at some point.
“I will go out and negotiate any contract,” said Fesel. “That’s no guarantee that I’ll get it,” she said, noting that her office in Heidelberg can negotiate contracts with utilities anywhere in Germany.
To get with the program
Membership fees, rules and benefits vary considerably among the military’s various utility tax avoidance programs.
The Army’s Utility Tax Avoidance Program in Germany costs $77 to join. The Air Force version of the UTAP program in Germany requires a $35 one-time enrollment fee for pay grades below E-5 and GS-5, and $51 for everyone else.
In Italy, the Navy Exchange’s Tax-Free ENEL and the Army’s Utility Tax Exemption Program are more expensive, with monthly service charges of $7.50 and refundable deposits of about $200. The Navy program also requires an activation fee of about $60.
The Army and Air Force programs in Germany allow their members to move from one place to another without having to pay the enrollment fee again. Not so with Italy’s Navy Exchange program.
In Italy, the programs act as proxies for the utility companies, getting the bills from the Italian utilities, translating them into English and mailing the new bill to customers.
The UTAP programs in Germany act as liaisons between members and utilities, but since they don’t handle billing directly, members still get their bills in German.
In Germany, contact your local tax relief office for more information or call the Heidelberg tax relief office at DSN 370-1780.
For the Army’s tax exemption program in Italy, call the Vicenza tax relief office at DSN 634-7905. For the Navy Exchange’s Tax Free ENEL program in Naples, call customer service at DSN 629-4717.
— Matt Millham
