FAR 29.402-1—Foreign fixed-price contracts.
Plain-English Summary
FAR 29.402-1 tells contracting officers which tax clauses must be included in solicitations and contracts for fixed-price work performed in foreign countries or with foreign governments. It covers two specific clauses: FAR 52.229-6, Taxes-Foreign Fixed-Price Contracts, for fixed-price contracts expected to exceed the simplified acquisition threshold when performance will occur wholly or partly in a foreign country; and FAR 52.229-7, Taxes-Fixed-Price Contracts with Foreign Governments, for fixed-price contracts expected to exceed the simplified acquisition threshold when the contemplated contract is with a foreign government. The section exists to allocate responsibility for foreign taxes and to make sure the contract language addresses how those taxes will be handled in pricing and administration. In practice, this means the contracting officer must identify whether the work will be performed overseas, whether a foreign government is the counterparty, and whether the acquisition exceeds the simplified acquisition threshold before selecting the correct clause. The rule is important because foreign tax exposure can materially affect contract price, contractor risk, and post-award administration.
Key Rules
Use 52.229-6 for foreign performance
When a fixed-price contract is contemplated and performance will occur wholly or partly in a foreign country, the contracting officer must insert FAR 52.229-6, Taxes-Foreign Fixed-Price Contracts, if the contract is expected to exceed the simplified acquisition threshold. This clause applies unless the contract is expected to be with a foreign government.
Use 52.229-7 for foreign governments
When a fixed-price contract with a foreign government is contemplated and the contract is expected to exceed the simplified acquisition threshold, the contracting officer must insert FAR 52.229-7, Taxes-Fixed-Price Contracts with Foreign Governments. This clause is the specific clause for foreign-government counterparties and displaces the general foreign-performance clause in that situation.
Threshold matters
These clause prescriptions apply only when the solicitation or contract is expected to exceed the simplified acquisition threshold. If the acquisition does not exceed that threshold, this section does not require insertion of either clause.
Fixed-price only
This section applies only when a fixed-price contract is contemplated. It does not prescribe these clauses for other contract types under this rule.
Foreign country performance trigger
For 52.229-6, the trigger is performance wholly or partly in a foreign country. Even partial performance overseas is enough to require the clause, so the contracting officer must look at where the work will actually be done, not just where the contractor is located.
Responsibilities
Contracting Officer
Determine whether the acquisition is fixed-price, whether it is expected to exceed the simplified acquisition threshold, whether performance will occur wholly or partly in a foreign country, and whether the contemplated counterparty is a foreign government. Based on that determination, insert FAR 52.229-6 or FAR 52.229-7 as required.
Agency
Support accurate acquisition planning by identifying foreign performance requirements, anticipated counterparties, and any tax-related considerations that may affect solicitation and contract structure.
Contractor
Review the applicable tax clause, account for foreign tax exposure in pricing and performance planning, and comply with the contract’s tax-related requirements during performance.
Practical Implications
Contracting officers should make the clause decision early, because foreign tax treatment can affect pricing, proposal assumptions, and negotiations.
A common pitfall is overlooking partial overseas performance; even limited work in a foreign country can trigger 52.229-6 if the other conditions are met.
Another frequent mistake is using the general foreign-performance clause when the contract is actually with a foreign government; FAR 52.229-7 is the specific clause for that situation.
Contractors should not assume foreign taxes are automatically reimbursable in a fixed-price contract; the applicable clause controls how tax liability and adjustments are handled.
Careful market research and acquisition planning are essential, especially for overseas logistics, installation, testing, or support work that may create foreign tax exposure.
Official Regulatory Text
(a) The contracting officer shall insert the clause at 52.229-6 , Taxes-Foreign Fixed-Price Contracts, in solicitations and contracts expected to exceed the simplified acquisition threshold when a fixed-price contract is contemplated and the contract is to be performed wholly or partly in a foreign country, unless it is contemplated that the contract will be with a foreign government. (b) The contracting officer shall insert the clause at 52.229-7 , Taxes-Fixed-Price Contracts with Foreign Governments, in solicitations and contracts that exceed the simplified acquisition threshold when a fixed-price contract with a foreign government is contemplated.