HomeResourcesAudit Database Project Compliance RecommendationsHost Country RequirementsDevelop Negotiation Points for Tax Exemptions for USAID-Funded Property - ADS 155.3.2

Develop Negotiation Points for Tax Exemptions for USAID-Funded Property - ADS 155.3.2

USAID operates its programs under a technical cooperation agreement that the Governments of the United States and [...]. The agreement offers customs duties exemption privileges to USAID and the Department of State staff but does not provide tax protection to implementers of U.S. Government programs.

Accordingly, implementers have no protections from payment of local taxes, customs duties, or levies. Although Automated Directives System 155.3.2, “Tax Exemptions,” sets forth USAID’s general policy that USAID assistance should be exempt from host government taxes and customs duties, the policy is not self-executing. The policy states that operating units must negotiate exemptions with a host government to include exemption clauses in bilateral agreements, strategic objectives grant agreements, and other agreements.

Historically, the U.S. Congress has expressed concern that U.S. assistance in developing country populations not be diverted to the treasuries of foreign governments - GAO, “Foreign Assistance: USAID and the Department of State Are Beginning to Implement Prohibition on Taxation of Aid”.

Since value-added taxes are revenues based on local purchases sometimes valued at millions of dollars, these tax payments decrease the availability of scarce resources for program activities.

General Recommendations

  • In cooperation with the regional legal advisor, develop written procedures for negotiations to protect USAID-funded property from being subjected to taxes and customs duties imposed by the host country government.
  • In cooperation with its Regional Contracting Office, develop written procedures for incurring costs for taxes and customs duties imposed by the host country government.

SOURCE: AUDIT REPORT NO. 6-268-10-006-P August 24, 2010

The recommendations are derived from audit reports of the Office of the Inspector General. The source refers to the audit report, which is available on this site as part of the Audit Database Project: an educational tool for compliance with USAID regulations.  Please see the disclaimer of this site before using recommendations.

Tags: Host Country Requirements
 
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