29.402-1
Foreign fixed-price contracts
Always include the appropriate tax clause (52.229-6 or 52.229-7) in foreign fixed-price contracts exceeding the simplified acquisition threshold to ensure clear tax obligations.
Overview
FAR 29.402-1 addresses the inclusion of tax-related clauses in foreign fixed-price contracts. It requires contracting officers to insert specific clauses in solicitations and contracts that exceed the simplified acquisition threshold when the contract is to be performed wholly or partly in a foreign country. The clause to be used depends on whether the contract is with a foreign government or not. This ensures that tax obligations and responsibilities are clearly defined for contracts performed outside the United States, reducing the risk of disputes and ensuring compliance with applicable tax laws.
Key Rules
- Clause 52.229-6 Requirement
- Insert this clause in solicitations and contracts over the simplified acquisition threshold for fixed-price contracts performed wholly or partly in a foreign country, unless the contract is with a foreign government.
- Clause 52.229-7 Requirement
- Insert this clause in solicitations and contracts over the simplified acquisition threshold for fixed-price contracts with foreign governments.
Responsibilities
- Contracting Officers: Must determine the appropriate clause (52.229-6 or 52.229-7) based on contract type and parties, and ensure its inclusion in the solicitation and contract documents.
- Contractors: Must review and comply with the tax obligations and procedures outlined in the applicable clause.
- Agencies: Should oversee compliance with these requirements and provide guidance as needed.
Practical Implications
- This section ensures that tax liabilities are addressed up front in foreign fixed-price contracts, minimizing ambiguity and potential disputes.
- Contractors must be aware of which clause applies to their contract and understand the associated tax responsibilities.
- Common pitfalls include failing to include the correct clause or misunderstanding the contract's tax implications, which can lead to compliance issues or financial penalties.