Government Contracts FAR Rule Would Add Two Clauses on Afghanistan Taxes
Tuesday, October 15, 2019

FAR Rule Would Add Two Clauses on Afghanistan Taxes

By Government Contracts Editorial Staff

The Department of Defense, General Services Administration, and National Aeronautics and Space Administration are proposing to amend the Federal Acquisition Regulation to add two new contract clauses notifying contractors of requirements relating to Afghanistan taxes or similar charges when contracts are being performed in Afghanistan. Agreements established in 2014 with the Islamic Republic of Afghanistan exempt the United States and the North Atlantic Treaty Organization Forces, and their contractors, from liability for Afghanistan taxes and similar charges, such as customs, duties, fees.

U.S. Clause. Proposed FAR 52.229-XX, Taxes—Foreign Contracts in Afghanistan, would be used in all solicitations and contracts contemplating performance in Afghanistan. It exempts the U.S., and its contractors and subcontractors (other than those that are Afghan legal entities or residents), from paying any tax or similar charge assessed on activities associated with contracts within Afghanistan. The acquisition, importation, exportation, reexportation, transportation, and use of supplies and services in Afghanistan, by or on behalf of the U.S., would also be exempt from any taxes, customs, duties, or similar charges in Afghanistan. Contractors would still be required to exclude any Afghan taxes, customs, duties, or similar charges from contract prices, other than those charged to Afghan legal entities or residents.

NATO Clause. A similar new clause, FAR 52.229-YY, Taxes—Foreign Contracts in Afghanistan (North Atlantic Treaty Organization Status of Forces Agreement), would be used in contracts and solicitations for performance in Afghanistan awarded on behalf of NATO. The clauses would apply to solicitations and contracts below the simplified acquisition threshold and to commercial items acquisitions. The rule was opened at the request of DoD’s Regulatory Reform Task Force. Comments referencing FAR Case 2018-023 are due November 19, 2019. See ¶70,006.343 for the full text of the proposed rule.

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