Combat Zone

There are many opportunities for Expats working overseas. Unfortunately, not all Expat locations are in Rome, Hong Kong, Germany and other luxurious places. Many Expats find themselves on hostile and remote assignments.

Qualified Combat Zones

A combat zone is any area that has been designated by an Executive Order from the President of the United States in which the US Armed Forces are engaging or have engaged in combat. The Executive Order usually gives the beginning and ending dates of the Combat Zone designation. Below is an updated list of current Combat Zones:

Arabian Peninsula Area – By Executive Order 12744, the following locations were designated as a combat zone beginning January 17, 1991.

  • Persian Gulf
  • Red Sea
  • Gulf of Oman
  • The part of the Arabian Sea north of 10° North latitude and west of 68° East longitude
  • Gulf of Aden
  • The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates.

Afghanistan – By Executive Order 13239, Afghanistan was designated as a combat zone beginning September 19, 2001.

Kosovo Area – By Executive Order 13119 the following locations were designated as a combat zone and a qualified hazardous duty area beginning March 24, 1999.

  • Federal Republic of Yugoslavia (Serbia/Montegnegro)
  • Albania
  • Adriatic Sea
  • Ionian Sea (north of the 39th Parallel)

Qualified Hazardous Duty Area – Beginning November 21, 1995, a qualified hazardous duty area in the former Yugoslavia is treated as if it were a combat zone. The qualified hazardous duty area includes:

  • Bosnia and Herzegovina
  • Croatia
  • Macedonia

Other Combat Zones designated by the Department of Defense:

In support of Operation Enduring Freedom (Afghanistan combat zone):

  • Pakistan, Tajikistan, and Jordan, beginning September 19, 2001
  • Incirlik Air Base, Turkey, September 21, 2001 – December 31, 2005
  • Kyrgyzstan and Uzbekistan, beginning October 1, 2001
  • Philippines (only troops with orders referencing Operation Enduring Freedom), beginning January 9, 2002
  • Yemen, beginning April 10, 2002
  • Djibouti, beginning July 1, 2002
  • Somalia, beginning January 1, 2004

In support of Operation Iraqi Freedom (Arabian Peninsula Areas combat zone):

  • Turkey, January 1, 2003 – December 31, 2005
  • Israel, January 1, 2003 – July 31, 2003
  • The Mediterranean Sea east of 30° East longitude, March 19, 2003 – July 31, 2003
  • Jordan, beginning March 19, 2003
  • Egypt, March 19, 2003 – April 20, 2003

Civilian Contractor

Working overseas on a DOD or other USG contract may entail receiving official travel orders, military-like identification cards and commissary and PX privileges as well as military transportation. However, none of these benefits entitles Expats to the combat zone tax exclusion. Again, Expats will never qualify for the combat zone tax exclusion. That perk is reserved for enlisted and commissioned members of the US Armed Forces only.

There is no IRS memo, waiver or special request that will allow this. The only exclusion available to Expats working in combat zones and qualified hazardous duty areas is the foreign earned income exclusion. The only way an Expat can qualify for the exclusion when working in a combat zone or qualified hazardous duty area is by the presence test or bona fide residence test. (See IRS memo)

Summary

There is no combat zone tax exclusion. The only exclusion of income is the foreign earned income exclusion and is earned by qualifying for the presence test or bona fide residence test. If an Expat hears or thinks otherwise they should contact us immediately before losing the foreign earned income exclusion or bust presence test.