29.402
Foreign contracts
FAR 29.402 ensures that government contracts performed outside the U.S. include the correct tax-related clauses to address both U.S. and foreign tax obligations.
Overview
FAR 29.402 outlines the requirements for including specific tax-related contract clauses in foreign contracts. It references four key areas: foreign fixed-price contracts, foreign cost-reimbursement contracts, taxes on certain foreign procurements, and taxes for contracts performed in Afghanistan. The section serves as a guide for contracting officers to ensure the correct clauses are inserted into contracts performed outside the United States, addressing tax obligations and compliance in foreign jurisdictions.
Key Rules
- Foreign Fixed-Price Contracts
- Requires inclusion of clauses addressing tax responsibilities for fixed-price contracts performed abroad.
- Foreign Cost-Reimbursement Contracts
- Mandates clauses that specify how taxes are handled in cost-reimbursement contracts overseas.
- Tax on Certain Foreign Procurements
- Addresses the imposition and handling of U.S. taxes on specific foreign procurements.
- Taxes—Foreign Contracts in Afghanistan
- Provides special requirements for contracts performed in Afghanistan, including unique tax considerations.
Responsibilities
- Contracting Officers: Must ensure the appropriate tax clauses are included in all applicable foreign contracts.
- Contractors: Must comply with the tax obligations and reporting requirements specified in the contract clauses.
- Agencies: Responsible for oversight and ensuring compliance with tax-related contract provisions in foreign procurements.
Practical Implications
- This section exists to ensure that U.S. government contracts performed abroad properly address tax liabilities and compliance with both U.S. and host country laws.
- It impacts daily contracting by requiring careful review and inclusion of the correct clauses, especially in complex or high-risk environments like Afghanistan.
- Common pitfalls include omission of required clauses, misunderstanding tax obligations, or failing to comply with local tax laws, which can result in penalties or contract disputes.