Section 5000C of the Internal Revenue Code (the Code) was added by the James Zadroga 9-11 Health and Compensation Act of 2010 (the Act) on January 2, 2011. This new provision imposes a 2 percent excise tax on “Federal procurement payments” made to foreign persons. A “specified Federal procurement payment” is any payment made pursuant to a contract with the U.S. Government for the provision of goods or services, provided that the goods are not manufactured or produced and the services are not provided in any country that is not a party to an international procurement agreement with the United States. The tax will be collected through withholding by the U.S. Government as payor.
It is generally understood that the “international procurement agreement” referenced in the law is the World Trade Organization’s Agreement on Government Procurement. The members of that agreement include the member states of the European Union, Canada, Taiwan, Hong Kong, Japan, Republic of Korea, and others. Many countries in and surrounding the Middle East, including Afghanistan, Iraq, and Kuwait, are not parties to the agreement, however.
Please see full Alert below for further information.
Please see full publication below for more information.
