Defense Federal Acquisition Regulation Supplement: Taxes-Foreign Contracts in Afghanistan (DFARS Case 2014-D003), 81467-81470 [2015-32870]
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Federal Register / Vol. 80, No. 250 / Wednesday, December 30, 2015 / Rules and Regulations
• Is not a ‘‘significant regulatory
action’’ subject to review by the Office
of Management and Budget under
Executive Orders 12866 (58 FR 51735,
October 4, 1993) and 13563 (76 FR 3821,
January 21, 2011);
• Does not impose an information
collection burden under the provisions
of the Paperwork Reduction Act (44
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• Is certified as not having a
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• Does not have Federalism
implications as specified in Executive
Order 13132 (64 FR 43255, August 10,
1999);
• Is not an economically significant
regulatory action based on health or
safety risks subject to Executive Order
13045 (62 FR 19885, April 23, 1997);
• Is not a significant regulatory action
subject to Executive Order 13211 (66 FR
28355, May 22, 2001);
• Is not subject to requirements of
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practicable and legally permissible
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tribal implications as specified by
Executive Order 13175 (65 FR 67249,
November 9, 2000), because it merely
makes a determination based on air
quality data.
The Congressional Review Act, 5
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This action is not a ‘‘major rule’’ as
defined by 5 U.S.C. 804(2).
Under section 307(b)(1) of the Clean
Air Act, petitions for judicial review of
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List of Subjects in 40 CFR Part 52
Environmental protection, Air
pollution control, Incorporation by
reference, Intergovernmental relations,
Ozone, Reporting and recordkeeping
requirements, Volatile organic
compounds.
Dated: December 15, 2015.
Ron Curry,
Regional Administrator, Region 6.
40 CFR part 52 is amended as follows:
PART 52—APPROVAL AND
PROMULGATION OF
IMPLEMENTATION PLANS
1. The authority citation for part 52
continues to read as follows:
■
Authority: 42 U.S.C. 7401 et seq.
Subpart SS—Texas
2. Section 52.2275 is amended by
adding paragraph (k) to read as follows:
■
§ 52.2275 Control strategy and
regulations: Ozone.
*
*
*
*
*
(k) Determination of Attainment.
Effective January 29, 2016 the EPA has
determined that the Houston-GalvestonBrazoria 8-hour ozone nonattainment
area has attained the 1997 ozone
standard. Under the provisions of the
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requirements for this area to submit an
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State Implementation Plans related to
attainment of the 1997 ozone NAAQS
for so long as the area continues to
attain the 1997 ozone NAAQS.
[FR Doc. 2015–32752 Filed 12–29–15; 8:45 am]
BILLING CODE 6560–50–P
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81467
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations
System
48 CFR Parts 212, 229, and 252
[Docket DARS–2014–0046]
RIN 0750–AI26
Defense Federal Acquisition
Regulation Supplement: Taxes—
Foreign Contracts in Afghanistan
(DFARS Case 2014–D003)
Defense Acquisition
Regulations System, Department of
Defense (DoD).
ACTION: Final rule.
AGENCY:
DoD is issuing a final rule
amending the Defense Federal
Acquisition Regulation Supplement
(DFARS) to notify contractors of
requirements relating to Afghanistan
taxes for contracts performed in
Afghanistan.
DATES: Effective December 30, 2015.
FOR FURTHER INFORMATION CONTACT: Ms.
Julie Hammond, telephone 571–372–
6174.
SUPPLEMENTARY INFORMATION:
SUMMARY:
I. Background
DoD published a proposed rule in the
Federal Register at 79 FR 35715 on June
24, 2014, to revise the DFARS to add
two new clauses that notify contractors
of requirements relating to Afghanistan
taxes when contracts are being
performed in Afghanistan. Three
respondents submitted public
comments in response to the proposed
rule.
II. Discussion and Analysis
DoD reviewed the public comments in
the development of the final rule. A
discussion of the comments is provided
below:
A. Summary of Significant Changes
From the Proposed Rule
The final rule amends DFARS clause
252.229–7014, Taxes—Foreign
Contracts in Afghanistan, to reference
the bilateral security agreement entitled
‘‘The Security and Defense Cooperation
Agreement between the Islamic
Republic of Afghanistan and the United
States of America’’ signed on September
30, 2014. The reference to the bilateral
security agreement replaces the
reference to the prior Agreement entered
into between the United States and
Afghanistan on May 28, 2003, regarding
the ‘‘Status of United States Military
and Civilian Personnel of the U.S.
Department of Defense Present in
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Federal Register / Vol. 80, No. 250 / Wednesday, December 30, 2015 / Rules and Regulations
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 791
and 93, dated December 12, 2002, and
May 28, 2003, respectively). The clause
is also amended to change ‘‘Government
of the United States of America’’ to the
‘‘Department of Defense’’ to more
accurately represent the new agreement.
The final rule also amends DFARS
clause 252.229–7015, Taxes—Foreign
Contracts in Afghanistan (North Atlantic
Treaty Organization Status of Forces
Agreement), to reference the North
Atlantic Treaty Organization (NATO)
Status of Forces Agreement (SOFA)
signed on September 30, 2014, instead
of the Military Technical Agreement
(MTA) entered into between the NATO
International Security Assistance Force
(ISAF) and Interim Administration of
Afghanistan in April 2002. As a result
of the new SOFA, the reference to the
2011 NATO ISAF Letter of
Interpretation that modified the MTA’s
tax exemption is also removed,
including the language allowing
contractors to include taxes on profits
earned by local contractors in the
contract price.
The final rule also clarifies at DFARS
212.301 that the clauses apply to
solicitations and contracts using FAR
part 12 procedures for the acquisition of
commercial items.
B. Analysis of Public Comments
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1. Taxes in Afghanistan
Comment: A respondent commented
that the Afghan Ministry of Forces
interprets Diplomatic Note (DN) 202 to
apply only to prime contractors, while
industry practice is to treat
subcontractors in Afghanistan as subject
to taxation. The respondent asked how
DoD will enforce paragraph (b) of
DFARS clause 252.225–7014, which
exempts subcontractors from any taxes
assessed in Afghanistan in accordance
with DN 202.
Response: The final rule has been
updated to reference the new bilateral
security agreement between the United
States and Afghanistan signed on
September 30, 2014. Article 17.3 of the
new agreement states that United States
subcontractors shall not be liable to pay
any tax assessed by the government of
Afghanistan within the territory of
Afghanistan on their activities under a
contract or subcontract with, or in
support of, United States Forces.
Comment: A respondent
recommended Afghan contractors not be
allowed to include Afghan tax on profits
earned from NATO ISAF contracts in
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accordance with DFARS clause
252.225–7015(d). Another respondent
asked about DoD’s expectations
regarding documentation of the price
markup for Afghan income taxes as part
of the contract price and whether
United States Government contractors
will be required to refund the United
States Government if the Afghan
contractors do not owe income taxes
due to losses.
Response: The language that allowed
contractors to include Afghan taxes on
profits earned by local contractors in the
contract price is removed from the final
rule.
Comment: One respondent suggested
that clauses, similar to those included in
the proposed rule, be added to
specifically address and make the rule
equally applicable to local Afghan
contractors, vendors, and landlords.
Response: The final rule has been
updated to reference the new bilateral
security agreement. Article 17.3 of the
new agreement states that United States
contractors that are Afghan entities shall
not be exempt from corporate profits tax
that may be assessed by the Afghanistan
government within the territory of
Afghanistan on income received due to
their status as United States contractors.
2. Bilateral Security Agreement
III. 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)
DFARS 252.229–7014, Taxes—Foreign
Contracts in Afghanistan, and (2)
DFARS 252.229–7015, Taxes—Foreign
Contracts in Afghanistan (North Atlantic
Treaty Organization Status of Forces
Agreement). The objective of the rule is
to exempt DoD contracts performed in
Afghanistan from payment liability for
Afghan taxes pursuant to the bilateral
security agreement entitled ‘‘The
Security and Defense Cooperation
Agreement between the Islamic
Republic of Afghanistan and the United
States of America’’ signed on September
30, 2014, and the North Atlantic Treaty
Organization (NATO) Status of Forces
Agreement (SOFA) signed on September
30, 2014.
DoD is applying these two clauses to
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
taxes for contracts performed in
Afghanistan. Not applying this guidance
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. Consequently, DoD
is applying the rule to contracts below
the SAT and for the acquisition of
commercial items, including COTS
items.
Comment: A respondent commented
that clarifying language is needed in the
pending bilateral security agreement
between the United States and
Afghanistan to affirm that all nonAfghan national employees working on
DoD contracts are tax exempt and will
not be treated as Afghan residents.
Response: This comment concerns the
content of the bilateral security
agreement, which is outside the scope of
this rule.
Comment: Two respondents requested
that implementation of the proposed
rule be delayed until resolution is
reached between the United States and
the Afghanistan government in a
bilateral security agreement. If
implementation of the rule is not
delayed, one respondent requested that
the proposed rule be revised to allow
contracting officers to relieve defense
contractors and subcontractors of the
risks and responsibilities when denied a
tax exemption by the Afghan Ministry of
Finance.
Response: A resolution has been
reached between the United States and
the Afghanistan government in a
bilateral security agreement. The final
rule has been updated to reference the
new bilateral security agreement.
3. General
Comment: A respondent stated that
the new tax law may limit the amount
of contractors willing to work for the
United States Government and may hurt
future business relations between
Afghanistan and the United States.
Response: This comment concerns
Afghanistan tax law and is outside the
scope of this rule.
Comment: A respondent
recommended that the United States
Government reduce costs by minimizing
the use of military personnel and
employing more Afghans.
Response: The comment is outside the
scope of this rule.
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IV. 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,
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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.
V. Regulatory Flexibility Act
A final regulatory flexibility analysis
has been prepared consistent with the
Regulatory Flexibility Act, 5 U.S.C. 601,
et seq., and is summarized as follows:
DoD is amending the Defense Federal
Acquisition Regulation Supplement
(DFARS) to add two new clauses in
order to notify DoD contractors of
requirements relating to Afghanistan
taxes when DoD contracts are being
performed in Afghanistan. The clause at
DFARS 252.229–7014, Taxes-Foreign
Contracts in Afghanistan, will be
required to be included in solicitations
and contracts, including solicitations
and contracts using FAR part 12
procedures for the acquisition of
commercial items, with performance in
Afghanistan, unless the clause at
252.229–7015 is used. The clause at
DFARS 252.229–7015, Taxes-Foreign
Contracts in Afghanistan (North Atlantic
Treaty Organization Status of Forces
Agreement), will be required to be
included in all solicitations and
contracts, including solicitations and
contracts using FAR part 12 procedures
for the acquisition of commercial items,
with performance in Afghanistan
awarded on behalf of NATO, which are
governed by the NATO Status of Forces
Agreement, if approval from the
Director, Defense Procurement and
Acquisition Policy, Office of the Under
Secretary of Defense for Acquisitions,
Technology, and Logistics, is obtained
prior to each use.
No comments were received from the
public relative to the initial regulatory
flexibility analysis.
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 merely
provides notice of the tax exemption for
DoD contracts where performance is in
Afghanistan. According to data in the
Federal Procurement Data System, a
total of thirty-five small business
vendors received contract awards where
performance was in Afghanistan during
fiscal year 2015.
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There are no new projected reporting,
recordkeeping, or other compliance
requirements projected for this rule.
There are no known significant
alternatives to the rule. The impact of
this rule on small business is not
expected to be significant.
VI. Paperwork Reduction Act
The 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 212,
229, and 252
Government procurement.
Jennifer L. Hawes,
Editor, Defense Acquisition Regulations
System.
Therefore, 48 CFR parts 212, 229, and
252 are amended as follows:
■ 1. The authority citation for 48 CFR
parts 212, 229, and 252 continue to read
as follows:
Authority: 41 U.S.C. 1303 and CFR chapter
1.
PART 212—ACQUISITION OF
COMMERCIAL ITEMS
212.301 Solicitation provisions and
contract clauses for acquisition of
commercial items.
*
*
*
*
*
(f) * * *
(xiii) Part 229—Taxes.
(A) Use the clause at 252.229–7014,
Taxes—Foreign Contracts in
Afghanistan, as prescribed at 229.402–
70(k).
(B) Use the clause at 252.229–7015,
Taxes—Foreign Contracts in
Afghanistan (North Atlantic Treaty
Organization Status of Forces
Agreement), as prescribed at 229.402–
70(l).
*
*
*
*
*
PART 229—TAXES
3. In section 229.402–70, revise the
section heading and add new
paragraphs (k) and (l) to read as follows:
■
Additional provisions and
*
*
*
*
*
(k) Use the clause at 252.229–7014,
Taxes—Foreign Contracts in
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Afghanistan, in solicitations and
contracts, including solicitations and
contracts using FAR part 12 procedures
for the acquisition of commercial items,
with performance in Afghanistan,
unless the clause at 252.229–7015 is
used.
(l) Use the clause at 252.229–7015,
Taxes—Foreign Contracts in
Afghanistan (North Atlantic Treaty
Organization Status of Forces
Agreement), instead of the clause at
252.229–7014, Taxes—Foreign
Contracts in Afghanistan, in
solicitations and contracts, including
solicitations and contracts using FAR
part 12 procedures for the acquisition of
commercial items, with performance in
Afghanistan awarded on behalf of the
North Atlantic Treaty Organization
(NATO), which are governed by the
NATO Status of Forces Agreement
(SOFA), 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
4. Add sections 252.229–7014 and
252.229–7015 to read as follows:
■
2. Amend section 212.301 by—
a. Redesignating paragraphs (f)(xiii)
through (xix) as (f)(xiv) through (xx);
and
■ b. Adding a new paragraph (f)(xiii).
The addition reads as follows:
■
■
229.402–70
clauses.
81469
252.229–7014
Afghanistan.
Taxes—Foreign Contracts in
As prescribed in 229.402–70(k), use
the following clause:
Taxes—Foreign Contracts in Afghanistan
(DEC 2015)
(a) This acquisition is covered by the
Security and Defense Cooperation Agreement
(the Agreement) between the Islamic
Republic of Afghanistan and the United
States of America signed on September 30,
2014, and entered into force on January 1,
2015.
(b) The Agreement exempts the
Department of Defense (DoD), and its
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
this contract within Afghanistan. The
Agreement also exempts the acquisition,
importation, exportation, reexportation,
transportation, and use of supplies and
services in Afghanistan, by or on behalf of
DoD, from any taxes, customs, duties, fees, or
similar charges in Afghanistan.
(c) 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.
(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
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Federal Register / Vol. 80, No. 250 / Wednesday, December 30, 2015 / Rules and Regulations
of these employees and 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)
252.229–7015 Taxes—Foreign Contracts in
Afghanistan (North Atlantic Treaty
Organization Status of Forces Agreement).
As prescribed in 229.402–70(l), use
the following clause:
Taxes—Foreign Contracts in Afghanistan
(North Atlantic Treaty Organization Status
of Forces Agreement) (DEC 2015)
(a) This acquisition is covered by the
Status of Forces Agreement (SOFA) entered
into between the North Atlantic Treaty
Organization (NATO) and the Islamic
Republic of Afghanistan issued on September
30, 2014, and entered into force on January
1, 2015.
(b) 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 within Afghanistan. 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.
(c) The Contractor shall exclude any
Afghan taxes, customs, duties, fees or similar
charges from the contract price, other than
those that are Afghan legal entities or
residents.
(d) 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 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. 2015–32870 Filed 12–29–15; 8:45 am]
ACTION:
Final rule.
DoD is issuing a final rule
amending the Defense Federal
Acquisition Regulation Supplement
(DFARS) to incorporate increased
thresholds for application of the World
Trade Organization Government
Procurement Agreement and the Free
Trade Agreements, as determined by the
United States Trade Representative.
SUMMARY:
DATES:
Effective: January 1, 2016.
Ms.
Amy G. Williams, telephone 571–372–
6106.
FOR FURTHER INFORMATION CONTACT:
BILLING CODE 5001–06–P
SUPPLEMENTARY INFORMATION:
DEPARTMENT OF DEFENSE
I. Background
Defense Acquisition Regulations
System
Every two years, the trade agreements
thresholds are escalated according to a
predetermined formula set forth in the
agreements. The United States Trade
Representative has specified the
following new thresholds in the Federal
Register (80 FR 77694, December 15,
2015):
48 CFR Parts 225 and 252
[Docket DARS–2015–0066]
RIN 0750–AI79
Defense Federal Acquisition
Regulation Supplement: Trade
Agreements Thresholds (DFARS Case
2016–D003)
Defense Acquisition
Regulations System, Department of
Defense (DoD).
AGENCY:
Supply contract
(equal to or
exceeding)
Trade agreement
WTO GPA ........................................................................................................................................................
FTAs:
Australia FTA ............................................................................................................................................
Bahrain FTA .............................................................................................................................................
CAFTA–DR (Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua) ...
Chile FTA ..................................................................................................................................................
Colombia FTA ...........................................................................................................................................
Korea FTA ................................................................................................................................................
Morocco FTA ............................................................................................................................................
NAFTA
—Canada ..........................................................................................................................................
—Mexico ............................................................................................................................................
Panama FTA ............................................................................................................................................
Peru FTA ..................................................................................................................................................
Singapore FTA .........................................................................................................................................
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II. Discussion and Analysis
This final rule implements the new
thresholds in DFARS part 225, Foreign
Contracting, for sections that include
trade agreements thresholds (i.e.,
225.1101, 225.7017–3, 225.7017–4, and
225.7503). Additionally, the rule
updates clauses 252.225–7017,
Photovoltaic Devices, and 252.225–
7018, Photovoltaic Devices—Certificate,
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16:09 Dec 29, 2015
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with conforming changes. A minor
technical amendment corrects cross
references at 225.1101(10)(i) and
paragraphs (b)(1)(i) and (ii) of the clause
at 252.225–7018.
III. Publication of This Final Rule for
Public Comment Is Not Required by
Statute
The statute that applies to the
publication of the Federal Acquisition
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Construction
contract
(equal to or
exceeding)
191,000
7,358,000
77,533
191,000
77,533
77,533
77,533
100,000
191,000
7,358,000
10,079,365
7,358,000
7,358,000
7,358,000
7,358,000
7,358,000
25,000
77,533
191,000
191,000
77,533
10,079,365
10,079,365
7,358,000
7,358,000
7,358,000
Regulation (FAR) is 41. U.S.C. entitled
‘‘Publication of Proposed Regulations.’’
Paragraph (a)(1) of the statute requires
that a procurement policy, regulation,
procedure or form (including an
amendment or modification thereof)
must be published for public comment
if it relates to the expenditure of
appropriated funds, and has either a
significant effect beyond the internal
operating procedures of the agency
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]]>Agencies
[Federal Register Volume 80, Number 250 (Wednesday, December 30, 2015)]
[Rules and Regulations]
[Pages 81467-81470]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32870]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
Defense Acquisition Regulations System
48 CFR Parts 212, 229, and 252
[Docket DARS-2014-0046]
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: Final rule.
-----------------------------------------------------------------------
SUMMARY: DoD is issuing a final rule amending the Defense Federal
Acquisition Regulation Supplement (DFARS) to notify contractors of
requirements relating to Afghanistan taxes for contracts performed in
Afghanistan.
DATES: Effective December 30, 2015.
FOR FURTHER INFORMATION CONTACT: Ms. Julie Hammond, telephone 571-372-
6174.
SUPPLEMENTARY INFORMATION:
I. Background
DoD published a proposed rule in the Federal Register at 79 FR
35715 on June 24, 2014, to revise the DFARS to add two new clauses that
notify contractors of requirements relating to Afghanistan taxes when
contracts are being performed in Afghanistan. Three respondents
submitted public comments in response to the proposed rule.
II. Discussion and Analysis
DoD reviewed the public comments in the development of the final
rule. A discussion of the comments is provided below:
A. Summary of Significant Changes From the Proposed Rule
The final rule amends DFARS clause 252.229-7014, Taxes--Foreign
Contracts in Afghanistan, to reference the bilateral security agreement
entitled ``The Security and Defense Cooperation Agreement between the
Islamic Republic of Afghanistan and the United States of America''
signed on September 30, 2014. The reference to the bilateral security
agreement replaces the reference to the prior Agreement entered into
between the United States and Afghanistan on May 28, 2003, regarding
the ``Status of United States Military and Civilian Personnel of the
U.S. Department of Defense Present in
[[Page 81468]]
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 791 and 93, dated December 12, 2002,
and May 28, 2003, respectively). The clause is also amended to change
``Government of the United States of America'' to the ``Department of
Defense'' to more accurately represent the new agreement.
The final rule also amends DFARS clause 252.229-7015, Taxes--
Foreign Contracts in Afghanistan (North Atlantic Treaty Organization
Status of Forces Agreement), to reference the North Atlantic Treaty
Organization (NATO) Status of Forces Agreement (SOFA) signed on
September 30, 2014, instead of the Military Technical Agreement (MTA)
entered into between the NATO International Security Assistance Force
(ISAF) and Interim Administration of Afghanistan in April 2002. As a
result of the new SOFA, the reference to the 2011 NATO ISAF Letter of
Interpretation that modified the MTA's tax exemption is also removed,
including the language allowing contractors to include taxes on profits
earned by local contractors in the contract price.
The final rule also clarifies at DFARS 212.301 that the clauses
apply to solicitations and contracts using FAR part 12 procedures for
the acquisition of commercial items.
B. Analysis of Public Comments
1. Taxes in Afghanistan
Comment: A respondent commented that the Afghan Ministry of Forces
interprets Diplomatic Note (DN) 202 to apply only to prime contractors,
while industry practice is to treat subcontractors in Afghanistan as
subject to taxation. The respondent asked how DoD will enforce
paragraph (b) of DFARS clause 252.225-7014, which exempts
subcontractors from any taxes assessed in Afghanistan in accordance
with DN 202.
Response: The final rule has been updated to reference the new
bilateral security agreement between the United States and Afghanistan
signed on September 30, 2014. Article 17.3 of the new agreement states
that United States subcontractors shall not be liable to pay any tax
assessed by the government of Afghanistan within the territory of
Afghanistan on their activities under a contract or subcontract with,
or in support of, United States Forces.
Comment: A respondent recommended Afghan contractors not be allowed
to include Afghan tax on profits earned from NATO ISAF contracts in
accordance with DFARS clause 252.225-7015(d). Another respondent asked
about DoD's expectations regarding documentation of the price markup
for Afghan income taxes as part of the contract price and whether
United States Government contractors will be required to refund the
United States Government if the Afghan contractors do not owe income
taxes due to losses.
Response: The language that allowed contractors to include Afghan
taxes on profits earned by local contractors in the contract price is
removed from the final rule.
2. Bilateral Security Agreement
Comment: A respondent commented that clarifying language is needed
in the pending bilateral security agreement between the United States
and Afghanistan to affirm that all non-Afghan national employees
working on DoD contracts are tax exempt and will not be treated as
Afghan residents.
Response: This comment concerns the content of the bilateral
security agreement, which is outside the scope of this rule.
Comment: Two respondents requested that implementation of the
proposed rule be delayed until resolution is reached between the United
States and the Afghanistan government in a bilateral security
agreement. If implementation of the rule is not delayed, one respondent
requested that the proposed rule be revised to allow contracting
officers to relieve defense contractors and subcontractors of the risks
and responsibilities when denied a tax exemption by the Afghan Ministry
of Finance.
Response: A resolution has been reached between the United States
and the Afghanistan government in a bilateral security agreement. The
final rule has been updated to reference the new bilateral security
agreement.
3. General
Comment: A respondent stated that the new tax law may limit the
amount of contractors willing to work for the United States Government
and may hurt future business relations between Afghanistan and the
United States.
Response: This comment concerns Afghanistan tax law and is outside
the scope of this rule.
Comment: A respondent recommended that the United States Government
reduce costs by minimizing the use of military personnel and employing
more Afghans.
Response: The comment is outside the scope of this rule.
Comment: One respondent suggested that clauses, similar to those
included in the proposed rule, be added to specifically address and
make the rule equally applicable to local Afghan contractors, vendors,
and landlords.
Response: The final rule has been updated to reference the new
bilateral security agreement. Article 17.3 of the new agreement states
that United States contractors that are Afghan entities shall not be
exempt from corporate profits tax that may be assessed by the
Afghanistan government within the territory of Afghanistan on income
received due to their status as United States contractors.
III. 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) DFARS 252.229-7014, Taxes--
Foreign Contracts in Afghanistan, and (2) DFARS 252.229-7015, Taxes--
Foreign Contracts in Afghanistan (North Atlantic Treaty Organization
Status of Forces Agreement). The objective of the rule is to exempt DoD
contracts performed in Afghanistan from payment liability for Afghan
taxes pursuant to the bilateral security agreement entitled ``The
Security and Defense Cooperation Agreement between the Islamic Republic
of Afghanistan and the United States of America'' signed on September
30, 2014, and the North Atlantic Treaty Organization (NATO) Status of
Forces Agreement (SOFA) signed on September 30, 2014.
DoD is applying these two clauses to 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 taxes for
contracts performed in Afghanistan. Not applying this guidance 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.
Consequently, DoD is applying the rule to contracts below the SAT and
for the acquisition of commercial items, including COTS items.
IV. 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,
[[Page 81469]]
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.
V. Regulatory Flexibility Act
A final regulatory flexibility analysis has been prepared
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq.,
and is summarized as follows:
DoD is amending the Defense Federal Acquisition Regulation
Supplement (DFARS) to add two new clauses in order to notify DoD
contractors of requirements relating to Afghanistan taxes when DoD
contracts are being performed in Afghanistan. The clause at DFARS
252.229-7014, Taxes-Foreign Contracts in Afghanistan, will be required
to be included in solicitations and contracts, including solicitations
and contracts using FAR part 12 procedures for the acquisition of
commercial items, with performance in Afghanistan, unless the clause at
252.229-7015 is used. The clause at DFARS 252.229-7015, Taxes-Foreign
Contracts in Afghanistan (North Atlantic Treaty Organization Status of
Forces Agreement), will be required to be included in all solicitations
and contracts, including solicitations and contracts using FAR part 12
procedures for the acquisition of commercial items, with performance in
Afghanistan awarded on behalf of NATO, which are governed by the NATO
Status of Forces Agreement, if approval from the Director, Defense
Procurement and Acquisition Policy, Office of the Under Secretary of
Defense for Acquisitions, Technology, and Logistics, is obtained prior
to each use.
No comments were received from the public relative to the initial
regulatory flexibility analysis.
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 merely provides notice of the tax exemption for DoD
contracts where performance is in Afghanistan. According to data in the
Federal Procurement Data System, a total of thirty-five small business
vendors received contract awards where performance was in Afghanistan
during fiscal year 2015.
There are no new projected reporting, recordkeeping, or other
compliance requirements projected for this rule.
There are no known significant alternatives to the rule. The impact
of this rule on small business is not expected to be significant.
VI. Paperwork Reduction Act
The 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 212, 229, and 252
Government procurement.
Jennifer L. Hawes,
Editor, Defense Acquisition Regulations System.
Therefore, 48 CFR parts 212, 229, and 252 are amended as follows:
0
1. The authority citation for 48 CFR parts 212, 229, and 252 continue
to read as follows:
Authority: 41 U.S.C. 1303 and CFR chapter 1.
PART 212--ACQUISITION OF COMMERCIAL ITEMS
0
2. Amend section 212.301 by--
0
a. Redesignating paragraphs (f)(xiii) through (xix) as (f)(xiv) through
(xx); and
0
b. Adding a new paragraph (f)(xiii).
The addition reads as follows:
212.301 Solicitation provisions and contract clauses for acquisition
of commercial items.
* * * * *
(f) * * *
(xiii) Part 229--Taxes.
(A) Use the clause at 252.229-7014, Taxes--Foreign Contracts in
Afghanistan, as prescribed at 229.402-70(k).
(B) Use the clause at 252.229-7015, Taxes--Foreign Contracts in
Afghanistan (North Atlantic Treaty Organization Status of Forces
Agreement), as prescribed at 229.402-70(l).
* * * * *
PART 229--TAXES
0
3. In section 229.402-70, revise the section heading and add new
paragraphs (k) and (l) to read as follows:
229.402-70 Additional provisions and clauses.
* * * * *
(k) Use the clause at 252.229-7014, Taxes--Foreign Contracts in
Afghanistan, in solicitations and contracts, including solicitations
and contracts using FAR part 12 procedures for the acquisition of
commercial items, with performance in Afghanistan, unless the clause at
252.229-7015 is used.
(l) Use the clause at 252.229-7015, Taxes--Foreign Contracts in
Afghanistan (North Atlantic Treaty Organization Status of Forces
Agreement), instead of the clause at 252.229-7014, Taxes--Foreign
Contracts in Afghanistan, in solicitations and contracts, including
solicitations and contracts using FAR part 12 procedures for the
acquisition of commercial items, with performance in Afghanistan
awarded on behalf of the North Atlantic Treaty Organization (NATO),
which are governed by the NATO Status of Forces Agreement (SOFA), 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
4. Add sections 252.229-7014 and 252.229-7015 to read as follows:
252.229-7014 Taxes--Foreign Contracts in Afghanistan.
As prescribed in 229.402-70(k), use the following clause:
Taxes--Foreign Contracts in Afghanistan (DEC 2015)
(a) This acquisition is covered by the Security and Defense
Cooperation Agreement (the Agreement) between the Islamic Republic
of Afghanistan and the United States of America signed on September
30, 2014, and entered into force on January 1, 2015.
(b) The Agreement exempts the Department of Defense (DoD), and
its 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 this contract within
Afghanistan. The Agreement also exempts the acquisition,
importation, exportation, reexportation, transportation, and use of
supplies and services in Afghanistan, by or on behalf of DoD, from
any taxes, customs, duties, fees, or similar charges in Afghanistan.
(c) 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.
(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
[[Page 81470]]
of these employees and 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)
252.229-7015 Taxes--Foreign Contracts in Afghanistan (North Atlantic
Treaty Organization Status of Forces Agreement).
As prescribed in 229.402-70(l), use the following clause:
Taxes--Foreign Contracts in Afghanistan (North Atlantic Treaty
Organization Status of Forces Agreement) (DEC 2015)
(a) This acquisition is covered by the Status of Forces
Agreement (SOFA) entered into between the North Atlantic Treaty
Organization (NATO) and the Islamic Republic of Afghanistan issued
on September 30, 2014, and entered into force on January 1, 2015.
(b) 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 within
Afghanistan. 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.
(c) The Contractor shall exclude any Afghan taxes, customs,
duties, fees or similar charges from the contract price, other than
those that are Afghan legal entities or residents.
(d) 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
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. 2015-32870 Filed 12-29-15; 8:45 am]
BILLING CODE 5001-06-P
