52.229-11
Tax on Certain Foreign Procurements—Notice and Representation
Foreign offerors must disclose their status and submit IRS Form W-14 to claim exemption from the 2% excise tax on certain federal procurement payments, or risk full withholding.
Overview
FAR 52.229-11 requires offerors to disclose whether they are foreign persons and, if so, to address the 2% excise tax imposed on certain federal procurement payments to foreign entities under 26 U.S.C. 5000C. The provision mandates that foreign offerors submit IRS Form W-14 to claim any exemption or reduced rate from this tax, and clarifies that tax disputes are handled by the IRS, not through contract administration. The clause also outlines definitions, exemption procedures, and the consequences of failing to submit required documentation.
Key Rules
- Disclosure of Foreign Status
- Offerors must represent whether they are a foreign person as defined by the regulation.
- 2% Excise Tax on Foreign Payments
- A 2% tax applies to specified federal procurement payments to foreign persons unless an exemption is claimed and substantiated.
- Exemption Process
- Foreign offerors may claim exemptions or reduced rates using IRS Form W-14, which must be submitted with the offer.
- Contract Clause Inclusion
- If the offeror is a foreign person, FAR 52.229-12 will be included in the contract, and withholding will be based on the submitted documentation.
- IRS Jurisdiction
- All disputes and audits regarding the tax are handled by the IRS, not the contracting agency.
Responsibilities
- Contracting Officers: Ensure the provision is included in solicitations, verify receipt of IRS Form W-14, and apply withholding as required.
- Contractors: Accurately represent foreign status, submit IRS Form W-14 if claiming exemption, and understand tax implications.
- Agencies: Withhold the 2% tax unless proper exemption documentation is provided; refer tax disputes to the IRS.
Practical Implications
- This provision ensures compliance with federal tax law on foreign procurements and prevents improper payments. Contractors must be diligent in their representations and timely in submitting IRS Form W-14 to avoid unnecessary withholding. Failure to comply can result in automatic tax withholding and potential audit by the IRS.