29.402-2
Foreign cost-reimbursement contracts
Contracting officers must include the appropriate tax clause in all foreign cost-reimbursement contracts to ensure clear tax obligations and compliance.
Overview
FAR 29.402-2 addresses the inclusion of specific tax-related clauses in foreign cost-reimbursement contracts. It directs contracting officers to insert the appropriate tax clause depending on whether the contract is with a foreign government or another entity, ensuring proper handling of taxes in contracts performed wholly or partly outside the United States. This section helps ensure that tax obligations and exemptions are clearly defined in the contract, reducing ambiguity and potential disputes regarding foreign taxes.
Key Rules
- Clause for Non-Government Foreign Contracts
- Insert FAR 52.229-8 (Taxes-Foreign Cost-Reimbursement Contracts) in solicitations and contracts for cost-reimbursement work performed wholly or partly in a foreign country, unless the contract is with a foreign government.
- Clause for Contracts with Foreign Governments
- Insert FAR 52.229-9 (Taxes-Cost-Reimbursement Contracts with Foreign Governments) when the contract is a cost-reimbursement type with a foreign government.
Responsibilities
- Contracting Officers: Must determine the nature of the foreign cost-reimbursement contract and insert the correct tax clause (52.229-8 or 52.229-9) in the solicitation and contract documents.
- Contractors: Must comply with the tax provisions as specified in the applicable clause included in their contract.
- Agencies: Ensure oversight and compliance with proper clause inclusion for foreign cost-reimbursement contracts.
Practical Implications
- This section ensures that tax responsibilities are clearly addressed in foreign cost-reimbursement contracts, minimizing the risk of tax-related disputes.
- Contractors should review which clause applies to their contract to understand their tax obligations or exemptions.
- Failure to include the correct clause can lead to compliance issues and potential financial liabilities for both the government and contractors.