[Federal Register Volume 85, Number 206 (Friday, October 23, 2020)]
[Rules and Regulations]
[Pages 67623-67626]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-21700]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 12, 29, and 52

[FAC 2021-02; FAR Case 2018-023; Item VI; Docket No. FAR-2018-0023, 
Sequence No. 1]
RIN 9000-AN81


Federal Acquisition Regulation: Taxes--Foreign Contracts in 
Afghanistan

AGENCY: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: DoD, GSA, and NASA are issuing a final rule amending the 
Federal Acquisition Regulation (FAR) to add two new clauses that notify

[[Page 67624]]

contractors of requirements relating to Afghanistan taxes or similar 
charges when contracts are being performed in Afghanistan.

DATES: Effective: November 23, 2020.

FOR FURTHER INFORMATION CONTACT: Mr. Kevin Funk, Procurement Analyst, 
at 202-357-5805 or [email protected] for clarification of content. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat Division at 202-501-4755. Please cite FAC 2021-
02, FAR Case 2018-023.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA published a proposed rule on September 20, 2019, 
at 84 FR 49502, to add two new clauses that notify contractors of 
requirements relating to Afghanistan taxes or similar charges when 
contracts are being performed in Afghanistan. A correction to the 
proposed rule was published on October 15, 2019, at 84 FR 55109, to 
correct the regulation identifier number.
    Agreements established with the Islamic Republic of Afghanistan 
exempt the United States Forces and the North Atlantic Treaty 
Organization (NATO) Forces, and their contractors from liability for 
Afghanistan taxes and similar charges (e.g., customs, duties, fees).
    The Security and Defense Cooperation Agreement (the Agreement) 
between the Islamic Republic of Afghanistan and the United States of 
America was signed on September 30, 2014, and entered into force on 
January 1, 2015. The Agreement exempts the United States Forces from 
paying any tax or similar charge assessed by the Government of 
Afghanistan within Afghanistan. The Agreement exempts United States 
contractors and subcontractors (other than those that are Afghan legal 
entities or residents) from paying any tax or similar charges assessed 
by the Government of Afghanistan within Afghanistan on their activities 
relating to or on behalf of the United States Forces under a contract 
or subcontract with or in support of United States Forces. The 
Agreement also exempts the acquisition, importation, exportation, 
reexportation, transportation, and use of supplies and services in 
Afghanistan, by or on behalf of the United States Forces, from any 
taxes, customs, duties, fees, or similar charges in Afghanistan.
    The Status of Forces Agreement (SOFA) between NATO and the Islamic 
Republic of Afghanistan was issued on September 30, 2014, and entered 
into force on January 1, 2015. The SOFA exempts NATO Forces (other than 
those that are Afghan legal entities or residents) from paying any tax 
or similar charge assessed by the Government of Afghanistan within 
Afghanistan. The SOFA exempts NATO contractors and subcontractors 
(other than those that are Afghan legal entities or residents) from 
paying any tax or similar charge assessed by the Government of 
Afghanistan within Afghanistan on their activities relating to or on 
behalf of NATO Forces under a contract or subcontract with or in 
support of NATO Forces. The SOFA also exempts the acquisition, 
importation, exportation, reexportation, transportation, and use of 
supplies and services in Afghanistan from all Afghan taxes, customs, 
duties, fees, or similar charges.
    This rule adds two new clauses that notify contractors of 
requirements relating to Afghanistan taxes or similar charges when 
certain contracts are being performed in Afghanistan. Since both 
agreements are currently effective for contractors operating in 
Afghanistan, this rule is only notifying contractors about the 
exemptions from liability for Afghanistan taxes, customs, duties, fees 
or similar charges. The rule is not adding any new requirements for 
contractors, however, it is providing unified guidance for contractors 
performing in Afghanistan.
    No public comments were submitted in response to the proposed rule. 
However, the rule was updated to clarify that both clauses only exempt 
taxes or similar charges assessed by the Government of Afghanistan.

II. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold (SAT) and for Commercial Items, Including Commercially 
Available Off-the-Shelf (COTS) Items

    This rule creates two new clauses: (1) FAR 52.229-13, Taxes--
Foreign Contracts in Afghanistan, and (2) FAR 52.229-14, Taxes--Foreign 
Contracts in Afghanistan (North Atlantic Treaty Organization Status of 
Forces Agreement). The objective of the rule is to notify U.S. 
Government contractors that certain contracts performed in Afghanistan 
are exempt from payment liability for Afghan taxes, customs, duties, 
fees or similar charges pursuant to the Agreement and SOFA.
    DoD, GSA, and NASA are applying these two clauses to applicable 
solicitations and contracts below the SAT and to the acquisition of 
commercial items, including COTS items, as defined at FAR 2.101. This 
rule clarifies the application of requirements relating to treatment of 
Afghan taxes, customs, duties, fees or similar charges for contracts 
performed in Afghanistan. Not applying these clauses to contracts below 
the SAT and for the acquisition of commercial items, including COTS 
items, would exclude contracts intended to be covered by this rule and 
undermine the overarching purpose of the rule for providing guidance to 
all applicable contractors. Consequently, DoD, GSA, and NASA are 
applying the rule to applicable contracts below the SAT and for the 
acquisition of applicable commercial items, including COTS items.

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 rule is not a significant regulatory action and, therefore, is 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. Executive Order 13771

    This rule is not subject to E.O. 13771, because this rule is not a 
significant regulatory action under E.O. 12866.

V. Regulatory Flexibility Act

    DoD, GSA, and NASA have prepared a Final Regulatory Flexibility 
Analysis (FRFA) consistent with the Regulatory Flexibility Act, 5 
U.S.C. 601, et seq. The FRFA is summarized as follows:

    DoD, GSA, and NASA are issuing a final rule amending the Federal 
Acquisition Regulation (FAR) to add two new clauses that notify 
contractors of requirements relating to Afghanistan taxes, customs, 
duties, fees, or similar charges when certain contracts are being 
performed in Afghanistan.
    The Agreement between the Islamic Republic of Afghanistan and 
the U.S. Government exempts the U.S. Forces, and their contractors 
and subcontractors (other than those that are Afghan legal entities 
or residents), from paying any tax or similar charge assessed on 
activities associated with contracts performed within Afghanistan.
    The Status of Forces Agreement (SOFA) between the North Atlantic 
Treaty Organization (NATO) and the Islamic Republic of Afghanistan 
exempts NATO Forces and their contractors and subcontractors (other 
than those that are Afghan legal entities or residents) from paying 
any tax or similar charge assessed within Afghanistan.

[[Page 67625]]

    The objective is to notify contractors of both the Agreement and 
SOFA to clarify how they apply to contracts performed in 
Afghanistan.
    There were no issues raised by the public in response to the 
Initial Regulatory Flexibility Analysis provided in the proposed 
rule.
    According to data in the Federal Procurement Data System, the 
Government awarded an annual average of 4,277 contracts for fiscal 
years 2017 and 2018 with the principal place of performance in 
Afghanistan to 444 unique contractors annually, of which 488 
contracts were awarded annually to 110 unique small businesses (23 
percent). There was an average of 488 contracts with the principal 
place of performance in Afghanistan awarded annually to small 
businesses in fiscal years 2017 and 2018. There was an average of 
3,789 contracts with the principal place of performance in 
Afghanistan awarded annually to large businesses. The number of 
potential subcontractors to which the clause would flow down was 
calculated by using a ratio of 1:3, subcontractors per prime 
contract (4,277 annual prime contracts). This equates to 1,426 
subcontractors, of which DoD, GSA, and NASA estimate that 75 percent 
would be small entities (i.e., 1,069). The total number of prime 
contractor and subcontractor small businesses impacted annually is 
1,577.
    The final rule does not include additional reporting, record 
keeping requirements, or other compliance requirements.
    There are no available alternatives to the final rule to 
accomplish the desired objective of the statute.
    We do not expect this final rule to have a significant economic 
impact on a substantial number of small entities, because the rule 
is not implementing any new requirements with which small entities 
must comply. Also, small entities will benefit from having one 
governmentwide clause that identifies the current requirements 
relating to Afghanistan taxes or similar charges when contracts are 
being performed in Afghanistan.

    Interested parties may obtain a copy of the FRFA from the 
Regulatory Secretariat Division. The Regulatory Secretariat Division 
has submitted a copy of the FRFA to the Chief Counsel for Advocacy of 
the Small Business Administration.

VI. Paperwork Reduction Act

    This rule does not contain any 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 12, 29, and 52

    Government procurement.

William F. Clark
Director, Office of Government-wide Acquisition Policy, Office of 
Acquisition Policy, Office of Government-wide Policy.
    Therefore, DoD, GSA, and NASA amend 48 CFR parts 12, 29, and 52 as 
set forth below:

0
1. The authority citation for 48 CFR parts 12, 29, and 52 continues to 
read as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51 
U.S.C. 20113.

PART 12--ACQUISITION OF COMMERCIAL ITEMS

0
2. Amend section 12.301 by redesignating paragraph (d)(13) as paragraph 
(d)(15) and adding a new paragraph (d)(13) and paragraph (d)(14) to 
read as follows:


12.301   Solicitation provisions and contract clauses for the 
acquisition of commercial items.

* * * * *
    (d) * * *
    (13) Insert the clause at 52.229-13, Taxes--Foreign Contracts in 
Afghanistan, as prescribed in 29.402-4(a).
    (14) Insert the clause at 52.229-14, Taxes--Foreign Contracts in 
Afghanistan (North Atlantic Treaty Organization Status of Forces 
Agreement), as prescribed in 29.402-4(b).
* * * * *

PART 29--TAXES

0
3. Add section 29.001 to read as follows:


29.001   Definitions.

    As used in this part--
    North Atlantic Treaty Organization (NATO) Forces means the Members 
of the Force, Members of the Civilian Component, NATO Personnel and all 
property, equipment, and materiel of NATO, NATO Member States, and 
Operational Partners present in the territory of Afghanistan.
    U.S. Forces means the entity comprising the members of the force 
and of the civilian component, and all property, equipment, and 
materiel of the United States Armed Forces present in the territory of 
Afghanistan.

0
4. Add section 29.402-4 to read as follows:


29.402-4   Taxes--Foreign Contracts in Afghanistan.

    (a) Use the clause at 52.229-13, Taxes--Foreign Contracts in 
Afghanistan, in solicitations and contracts with performance in 
Afghanistan awarded by or on behalf of U.S. Forces, unless the clause 
at 52.229-14 is used.
    (b) Use the clause at 52.229-14, Taxes--Foreign Contracts in 
Afghanistan (North Atlantic Treaty Organization Status of Forces 
Agreement), instead of the clause at 52.229-13, Taxes--Foreign 
Contracts in Afghanistan, in solicitations and contracts with 
performance in Afghanistan awarded on behalf of or in support of the 
North Atlantic Treaty Organization (NATO), which are governed by the 
NATO Status of Forces Agreement (SOFA).

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
5. Add sections 52.229-13 and 52.229-14 to read as follows:


52.229-13  Taxes--Foreign Contracts in Afghanistan.

    As prescribed in 29.402-4(a), use the following clause:

Taxes--Foreign Contracts in Afghanistan (Nov 2020)

    (a) Definition. U.S. Forces, as used in this clause, means the 
entity comprising the members of the force and of the civilian 
component, and all property, equipment, and materiel of the United 
States Armed Forces present in the territory of Afghanistan.
    (b) Tax exemption. This acquisition is covered by the Security 
and Defense Cooperation Agreement (the Agreement) between the 
Islamic Republic of Afghanistan (Afghanistan) and the United States 
of America signed on September 30, 2014, and entered into force on 
January 1, 2015.
    (1) The Agreement exempts the United States Government, and its 
contractors and subcontractors (other than those that are Afghan 
legal entities or residents), from paying any tax or similar charge 
assessed by the Government of Afghanistan on activities associated 
with this contract within Afghanistan if the activities are on 
behalf of or in support of U.S. Forces. The Agreement also exempts 
the acquisition, importation, exportation, reexportation, 
transportation, and use of supplies and services in Afghanistan, on 
behalf of or in support of U.S. Forces, from any taxes, customs, 
duties, fees, or similar charges imposed by the Government of 
Afghanistan.
    (2) The Contractor shall exclude any Afghan taxes, customs, 
duties, fees, or similar charges from the contract price, other than 
those charged to Afghan legal entities or residents.
    (3) The Agreement does not exempt Afghan employees of Government 
contractors and subcontractors from Afghan tax laws. To the

[[Page 67626]]

extent required by Afghan law, the Contractor shall withhold tax 
from the wages of these employees and remit those payments to the 
appropriate Afghan taxing authority. These withholdings are an 
individual's liability, not a tax against the Contractor.
    (c) Subcontracts. The Contractor shall include the substance of 
this clause, including this paragraph (c), in all subcontracts, 
including subcontracts for commercial items.

    (End of clause)


52.229-14   Taxes--Foreign Contracts in Afghanistan (North Atlantic 
Treaty Organization Status of Forces Agreement).

    As prescribed in 29.402-4(b), use the following clause:

Taxes--Foreign Contracts in Afghanistan (North Atlantic Treaty 
Organization Status of Forces Agreement) (Nov 2020)

    (a) Definition. North Atlantic Treaty Organization (NATO) 
Forces, as used in this clause, means the Members of the Force, 
Members of the Civilian Component, NATO Personnel and all property, 
equipment, and materiel of NATO, NATO Member States, and Operational 
Partners present in the territory of Afghanistan.
    (b) Tax exemption. This acquisition is covered by the Status of 
Forces Agreement (SOFA) entered into between NATO and the Islamic 
Republic of Afghanistan (Afghanistan) issued on September 30, 2014, 
and entered into force on January 1, 2015.
    (1) The SOFA exempts NATO Forces and its contractors and 
subcontractors (other than those that are Afghan legal entities or 
residents) from paying any tax or similar charge assessed by the 
Government of Afghanistan within Afghanistan if the activities are 
on behalf of or in support of NATO Forces. The SOFA also exempts the 
acquisition, importation, exportation, reexportation, 
transportation, and use of supplies and services in Afghanistan on 
behalf of or in support of NATO Forces from all Afghan taxes, 
customs, duties, fees, or similar charges.
    (2) The Contractor shall exclude any Afghan taxes, customs, 
duties, fees or similar charges from the contract price, other than 
those charged to Afghan legal entities or residents.
    (3) Afghan citizens employed by NATO 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 remit those withholdings to the 
appropriate Afghan taxing authority. These withholdings are an 
individual's liability, not a tax against the Contractor.
    (c) Subcontracts. The Contractor shall include the substance of 
this clause, including this paragraph (c), in all subcontracts 
including subcontracts for commercial items.

    (End of clause)

[FR Doc. 2020-21700 Filed 10-22-20; 8:45 am]
 BILLING CODE 6820-EP-P