Government Contracts Final FAR Rule Addresses Afghan Taxes
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Thursday, November 19, 2020

Final FAR Rule Addresses Afghan Taxes

By Government Contracts Editorial Staff

The final rule associated with FAR Case 2018-023 adds two new contract clauses notifying contractors of requirements relating to Afghanistan taxes or similar charges when contracts are 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, and fees. New clause FAR 52.229-19, Taxes—Foreign Contracts in Afghanistan, prescribed in new FAR 29.402-4, will 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. Contractors are still required to exclude any Afghan taxes, customs, duties, or similar charges from contract prices, other than those charged to Afghan legal entities or residents. A similar new clause, FAR 52.229-14, Taxes—Foreign Contracts in Afghanistan (North Atlantic Treaty Organization Status of Forces Agreement), will be used in contracts and solicitations for performance in Afghanistan awarded on behalf of NATO. The clauses apply to solicitations and contracts below the simplified acquisition threshold and to commercial items acquisitions (see FAR 12.301). The rule adds the definitions of “North Atlantic Treaty Organization (NATO)” and “U.S. Forces” at new FAR 29.001. The final rule updates the proposed rule (¶70,006.343) to clarify that both clauses only exempt taxes or similar charges assessed by the Afghanistan government.

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