[Federal Register Volume 79, Number 121 (Tuesday, June 24, 2014)]
[Proposed Rules]
[Pages 35715-35717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14595]


-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 229 and 252

RIN 0750-AI26


Defense Federal Acquisition Regulation Supplement: Taxes--Foreign 
Contracts in Afghanistan (DFARS Case 2014-D003)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to notify contractors of requirements 
relating to Afghan taxes.

DATES: Comment Date: Comments on the proposed rule should be submitted 
in writing to the address shown below on or before August 25, 2014, to 
be considered in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2014-D003, using 
any of the following methods:
    [cir] Regulations.gov: http://www.regulations.gov. Submit comments 
via the Federal eRulemaking portal by entering ``DFARS Case 2014-D003'' 
under the heading ``Enter keyword or ID'' and selecting ``Search.'' 
Select the link ``Submit a Comment'' that corresponds with ``DFARS Case 
2014-D003.'' Follow the instructions provided at the ``Submit a 
Comment'' screen. Please include your name, company name (if any), and 
``DFARS Case 2014-D003'' on your attached document.
    [cir] Email: [email protected]. Include DFARS Case 2014-D003 in 
the subject line of the message.
    [cir] Fax: 571-372-6094.
    [cir] Mail: Defense Acquisition Regulations System, Attn: Ms. 
Jennifer Hawes, OUSD(AT&L)DPAP/DARS, Room 3B941, 3060 Defense Pentagon, 
Washington, DC 20301-3060.
    Comments received generally will be posted without change to http://www.regulations.gov, including any personal information provided. To 
confirm receipt of your comment(s), please check http://www.regulations.gov, approximately two to three days after submission 
to verify posting (except allow 30 days for posting of comments 
submitted by mail).

FOR FURTHER INFORMATION CONTACT: Ms. Jennifer Hawes, telephone 571-372-
6115.

[[Page 35716]]


SUPPLEMENTARY INFORMATION:

I. Background

    DoD is proposing to revise the DFARS to add two new clauses to 
notify contractors of requirements relating to Afghan taxes for 
contracts performed in Afghanistan.

II. Discussion and Analysis

    Agreements established between the United States (U.S.) Forces and 
the Afghanistan government exempt U.S. contractors from paying 
liability for Afghan taxes. The two clauses included in the proposed 
rule, which implement the tax exemptions, are as follows:
     DFARS 252.229-70XX, Taxes-Foreign Contracts in 
Afghanistan, would be required to be included in all solicitations and 
contracts with performance in Afghanistan, unless the clause at 
252.229-70YY is used. The Agreement regarding the U.S. Forces and 
Afghanistan also exempts the acquisition, importation, exportation, and 
use of articles and services in the Republic of Afghanistan by or on 
behalf of the Government of the United States of America in 
implementing this agreement from any taxes, customs, duties, or similar 
charges in Afghanistan, and contractors shall exclude any Afghan taxes, 
customs, duties, or similar charges from contract prices.
     DFARS 252.229-70YY, Taxes-Foreign Contracts in Afghanistan 
(Military Technical Agreement), would be required to be included in all 
solicitations and contracts with performance in Afghanistan awarded on 
behalf of NATO if approval from the Director, Defense Procurement and 
Acquisition Policy, Office of the Under Secretary of Defense for 
Acquisition, Technology, and Logistics, is obtained prior to each use.

III. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

    DoD does not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because this rule applies to requirements for taxes to be paid under 
contracts that are performed in Afghanistan. However, an initial 
regulatory flexibility analysis has been performed and is summarized as 
follows.
    This rule proposes to amend the DFARS by incorporating DFARS clause 
252.229-70XX, Taxes-Foreign Contracts in Afghanistan, to be used in all 
solicitations and contracts with performance in Afghanistan, unless 
DFARS clause 252.229-70YY is used. This rule also includes DFARS clause 
252.229-70YY, Taxes-Foreign Contracts in Afghanistan (Military 
Technical Agreement), to be used in all solicitations and contracts 
with performance in Afghanistan awarded on behalf of NATO, which are 
governed by the Military Technical Agreement, and upon approval of the 
Director, Defense Procurement and Acquisition Policy, Office of the 
Under Secretary of Defense for Acquisition, Technology, and Logistics.
    DoD does not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities because this 
rule addresses requirements for taxes under contracts performed in 
Afghanistan. The proposed rule does not duplicate, overlap, or conflict 
with any other Federal rules.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C. 610 (DFARS Case 2014-D003), in 
correspondence.

V. Paperwork Reduction Act

    The rule does not contain information collection requirements that 
require the approval of the Office of Management and Budget under the 
Paperwork Reduction Act (44 U.S.C. chapter 35).

List of Subjects in 48 CFR Parts 229 and 252

    Government procurement.

Amy G. Williams,
Deputy, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 229 and 252 are proposed to be amended as 
follows:

0
1. The authority citation for parts 229 and 252 continues to read as 
follows:

    Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.

PART 229--TAXES

0
2. Amend section 229.402-70 by adding paragraphs (k) and (l) to read as 
follows:


229.402-70  Additional provisions and clauses.

* * * * *
    (k) Use the clause at 252.229-70XX, Taxes--Foreign Contracts in 
Afghanistan, in all solicitations and contracts with performance in 
Afghanistan, unless the clause at 252.229-70YY is used.
    (l) Use the clause at 252.229-70YY, Taxes--Foreign Contracts in 
Afghanistan (Military Technical Agreement), in all solicitations and 
contracts with performance in Afghanistan awarded on behalf of NATO, 
which are governed by the Military Technical Agreement, if approval 
from the Director, Defense Procurement and Acquisition Policy, Office 
of the Under Secretary of Defense for Acquisition, Technology, and 
Logistics, has been obtained prior to each use.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
3. Add section 252.229-70XX to read as follows:


252.229-70XX  Taxes--Foreign Contracts in Afghanistan.

    As prescribed in 229.402-70(k), use the following clause:

TAXES--FOREIGN CONTRACTS IN AFGHANISTAN (DATE)

    (a) This acquisition is covered by the Agreement regarding the 
Status of United States Military and Civilian Personnel of the U.S. 
Department of Defense Present in Afghanistan with Cooperative 
Efforts in Response to Terrorism, Humanitarian and Civic Assistance, 
Military Training and Exercises, and other Activities, entered into 
between the United States and Afghanistan, which was concluded by an 
exchange of diplomatic notes (U.S. Embassy Kabul note No. 202, dated 
September 26, 2002; Afghanistan Ministry of Foreign Affairs notes

[[Page 35717]]

791 and 93, dated December 12, 2002, and May 28, 2003, 
respectively), and entered into force on May 28, 2003.
    (b) The Agreement exempts the Government of the United States of 
America and its contractors, subcontractors, and contractor 
personnel from paying any tax or similar charge assessed within 
Afghanistan. The Agreement also exempts the acquisition, 
importation, exportation, and use of articles and services in the 
Republic of Afghanistan by or on behalf of the Government of the 
United States of America in implementing this agreement from any 
taxes, customs, duties, or similar charges in Afghanistan.
    (c) The Contractor shall exclude any Afghan taxes, customs, 
duties, or similar charges from the contract price.
    (d) The Agreement does not exempt Afghan employees of DoD 
contractors and subcontractors from Afghan tax laws. To the extent 
required by Afghan law, the Contractor shall withhold tax from the 
wages of these employees and to remit those payments to the 
appropriate Afghanistan taxing authority. These withholdings are an 
individual's liability, not a tax against the Contractor.
    (e) The Contractor shall include the substance of this clause, 
including this paragraph (e), in all subcontracts, including 
subcontracts for commercial items.

(End of clause)

0
4. Add section 252.229-70YY to read as follows:


252.229-70YY  Taxes--Foreign Contracts in Afghanistan (Military 
Technical Agreement).

    As prescribed in 229.402-70(l), use the following clause:

TAXES--FOREIGN CONTRACTS IN AFGHANISTAN (MILITARY TECHNICAL AGREEMENT) 
(DATE)

    (a) This acquisition is covered by the Military Technical 
Agreement (MTA) entered into between the International Security 
Assistance Forces (ISAF) and Interim Administration of Afghanistan 
in April 2002 and the 2011 Letter of Interpretation issued on March 
9, 2011.
    (b) The MTA establishes the basic rules and exempts NATO/ISAF 
and its contractors and subcontractors from paying any tax or 
similar charge assessed within Afghanistan. The MTA also exempts the 
acquisition, importation, exportation and use of supplies and 
services in Afghanistan from all Afghan taxes, fees, duties or other 
form of revenue generation.
    (c) The Contractor shall exclude any Afghan taxes, customs 
duties or similar charges from its contract price, except as 
modified in paragraph (d) of this clause.
    (d) The ISAF 2011 Letter of Interpretation modified the MTA's 
tax exemption effective March 21, 2011.
    (1) Local contractors are subject to tax for profits earned from 
NATO/ISAF contracts or subcontract and may include that tax in its 
contract price. The goods, materials, and supplies acquired and the 
services provided by local contractors for the use of NATO/ISAF, 
NATO member states, and non-NATO member states participating in the 
ISAF remain exempt from other taxes, duties, sales or other taxes, 
import fees, or fees of any kind. The Contractor may include the tax 
on profits in the contract price.
    (2) Afghan citizens employed by NATO/ISAF contractors and 
subcontractors are subject to Afghan tax laws. To the extent 
required by Afghan law, the Contractor shall withhold tax from the 
wages of these employees and to remit those withholdings to the 
Afghanistan Revenue Department. These withholdings are an 
individual's liability, not a tax against the Contractor.
    (e) The Contractor shall include the substance of this clause, 
including this paragraph (e), in all subcontracts including 
subcontracts for commercial items.


(End of clause)

[FR Doc. 2014-14595 Filed 6-23-14; 8:45 am]
BILLING CODE 5001-06-P