25.1003
Tax on certain foreign procurements
FAR 25.1003 alerts contracting professionals to a special tax on certain foreign procurements and directs them to FAR 29.204 and IRS regulations for compliance details.
Overview
FAR 25.1003 directs contracting professionals to FAR 29.204 for detailed requirements regarding the tax on certain foreign procurements, as mandated by the James Zadroga 9/11 Health and Compensation Act of 2010 (26 U.S.C. 5000C). This section serves as a cross-reference, ensuring that contractors and contracting officers are aware of the tax's applicability to specific foreign procurements and the need to comply with related IRS regulations (26 CFR 1.5000C-1 through 1.5000C-7). The tax generally applies to payments made by the U.S. government to foreign persons for goods or services provided outside the United States, subject to certain exceptions and thresholds outlined in the referenced regulations.
Key Rules
- Reference to Tax Requirements
- Contracting professionals must consult FAR 29.204 and IRS regulations for compliance with the foreign procurement tax.
- Statutory and Regulatory Basis
- The tax is imposed under the James Zadroga 9/11 Health and Compensation Act and implemented through IRS regulations.
Responsibilities
- Contracting Officers: Ensure solicitations and contracts involving foreign procurements comply with tax requirements and reference the appropriate clauses.
- Contractors: Determine if their contracts are subject to the tax and comply with any reporting or payment obligations.
- Agencies: Oversee compliance and provide guidance on the application of the tax to foreign procurements.
Practical Implications
- This section exists to alert contracting professionals to the existence of a special tax on certain foreign procurements and to direct them to the detailed requirements.
- It impacts contract formation and administration for foreign vendors and contracts performed outside the U.S.
- Common pitfalls include failing to identify when the tax applies or omitting required clauses and notifications.