An Israeli working in the US and getting paid from Germany

[Amir]

I am an Israeli researcher. I recently received a Marie Curie International Outgoing Fellowships for Career Development (IOF). This scholarship is funded by the EU research network, of which Israel is a part of. The scholarship is for one year in an American research institute and one year in a German one (Helmholtz Zentrum München). Since the scholarship is European, the contract is handled by the German research institution. Thus, I am effectively delegated by the German institute to the American one, although the funding doesn't actually come from Germany (they're just channeling it).

My problem is that the contract the German institute has given me is a standard German one, which requires me to pay taxes and social security in Germany although I am to work in the US. As I am not a German citizen, and do not have plans on staying there after the scholarship ends, I am not interested in such a contract (I would not be able to claim pension or unemployment there, even though I would be paying for that). Furthermore, such a contract creates complications with the health insurance (there's a mandatory German coverage, to which I will probably need to add an American one out of my own pocket - thus I will have to pay twice and be insured in both countries). I would rather just get the money directly and pay the American taxes and health care costs myself. An additional alternative would be that the money would be transferred to the American institution and that they would pay my salary and take care of the health insurance.

The people at the German institute firmly claim that none of these options are possible. However, I've caught them (more than once) misquoting from the German-American tax treaty, which makes me think they don't know what they're talking about. My impression is that they gave me this contract simply because it's easiest for them.

I was wondering if anyone knows what the German-American tax treaty actually says about this. I would appreciate any ideas anyone might have. For the life of me, I cannot understand why they don't simply transfer the money to the American research institute. It would be easier on everyone...

[Bevdeforges]

The issue at hand is that you actually have two separate treaties to worry about here. The social security stuff is handled by the US-German Social Security treaty U.S.-German Social Security Agreement while the tax issues are part of a separate tax treaty Germany - Tax Treaty Documents neither of which is a particularly gripping read.

Normally, I'd say that you should be paying regular German taxes and social insurances while you're working in Germany, and regular US taxes and social insurances while working in the US. There is a provision in the social security treaty whereby an employer can maintain your contributions to the home system while you're working abroad - but I've only ever seen that done in the case of Americans working overseas. Since Germany isn't your "home" system, I'm not sure that's even applicable. (Though if it is, there is a mechanism for you to get your retirement contributions refunded to you when you leave Germany. You have to ask around about it, but it's there.)

If you know where you are going to be while working in the US, you may want to check with the personnel department there to see how they normally handle situations like this.
Cheers,
Bev