Construction Law/Taxes FIDIC 1999 harmonized
I am working on a project based on FIDIC 1999 Bank harmonized edition.
ITB of Bid document states: (Not amended in Bid Data Sheet)
“14.6 All duties, taxes, and other levies payable by the Contractor under the Contract, or for any other cause, as of the date 28 days prior to the deadline for submission of bids, shall be included in the rates and prices and the total Bid Price submitted by the Bidder.”
General Conditions states
126.96.36.199 “Cost” means all expenditure reasonably incurred (or to be incurred) by the Contractor, whether on or off the Site, including overhead and similar charges, but does not include profit.
1.13 Compliance with Laws
(b) the Contractor shall give all notices, pay all taxes, duties and fees, and obtain all permits, licenses and approvals, as required by the Laws in relation to the execution and completion of the Works and the remedying of any defects; and the Contractor shall indemnify and hold the Employer harmless against and from the consequences of any failure to do so, unless the Contractor is impeded to accomplish these actions and shows evidence of its diligence.
14.1 The Contract Price
(b) the Contractor shall pay all taxes, duties and fees required to be paid by him under the Contract, and the Contract Price shall not be adjusted for any of these costs except as stated in Sub-Clause 13.7 [Adjustments for Changes in Legislation];
Now the issues/questions are:
(a) As per provisions of ITB and GC, it is assumed that the Contractor have built in the cost of any taxes in BOQ rates.
(b) Under Sub-Clause 14.1 (d) and Special provisions, the Contractor submitted price breakdown of some BOQ items and the breakup shows:
a. Contractor’s OH & Profit @ 25%
b. tax @ 6%
My question is, for any varied or additional work, the Contractor submitted breakdown of new rate, based on market rate as the BOQ rate was not available for this work, and included in his rate OH & Profit @ 25% and tax @ 6%. Should the addition of tax in the rate for such new work is justified?
1. Another issue is that Government changed the tax law during the currency of the project and now the deductions for tax are being made @ 7.5% instead of 6% at bid stage. The Contractor is claiming the difference of amount on account of GC 13.7. Does the Contractor’s claim have any merit?
2. Further question is, if the Contractor’s BOQ rates are inclusive of tax as per ITB and GC and as per GC 13.8 adjustment in cost of different indices like labor, cement, steel, contractor’s equipment etc., which corresponds to his BOQ rates, is being paid to him.
Now question is, what is justification of a claim regarding rise in tax rate under GC 13.7? Wouldn't the Contractor be compensated already in GC 13.8 against any rise/change in the taxes also?
Waiting for your valuable comments and Thank you in advance for your help.
I am trying to share my comments with you in this regard.
For varied or additional work for which BOQ rate are not available then additional tax should be justified to claim for new rate of the item executed.
1.Contractor can not claim during the currency of the project as the deduction of tax on account of contractor that may be claim separately from the relevant tax department.
2. If change in rate of tax that can not be affect the price adjustment. If change in law of the country affect the cost of project that can be taken in account for such rise and fall and contractor may claim Extension time if he suffers due this change in law of the country during the project period.
I hope you will consider my comments in good spirit and further discussion will be welcome through follow up.
With best regards