Construction or Renovation Tax Exemption
Purchasing Agent Arrangement
Tax exemption for the purchase of new construction or renovation materials and services by contractors for diplomatic and consular premises may be allowed when the requesting mission is obligated to the vendor for the purchase price and has title to all material and supplies. A separate Purchasing Agent Arrangement request must be made to the Department of State for each project.
The Office of Foreign Missions considers the Purchasing Agent Arrangement privilege to be derivative of the treaty privilege for tax-exemption for purchase by a mission of goods and services. Each mission enjoys tax-exemption on a reciprocal basis with the United States Government. Any adverse change in mission tax treatment towards the United States Government in the sending state may jeopardize Purchasing Agent Arrangements and mission privileges in the United States.
Before the Office of Foreign Missions will entertain a request for Purchasing Agent Arrangement privileges, the requesting Mission must provide official written confirmation that the Government of the sending state will grant reciprocal Purchasing Agent Arrangement privileges upon request of the U.S. Embassy. The Department expects that those countries that operate on a Value Added Tax system will grant either a zero-rating (i.e. relief for the U.S. Embassy, its contractors and subcontractors from the up-front payment of a VAT on all goods and services) or swift and complete reimbursement of payment of VAT in order to grant tax exemption in the United State in return.
The Department of State requests that the following information be submitted, if available, along with each request for a Purchasing Agent Arrangement:
- Name of the purchasing agent Contractor
- Name of the Subcontractor(s)
- Building Permit Number
- Expected start date
- Expected completion date and
- Estimated cost of the project
This information will enable the Department to certify to the appropriate tax authorities, as needed, that the specified Contractor is the purchasing agent for a specified project.