Exemptions are requested on all taxes and customs duties (except income taxation on local staff). These exemptions cover goods and services directly financed by ODA and other appropriated foreign assistance (including activities financed by ODA and implemented by private sector entities). This policy comes from Section 7013 "Prohibition on Taxation of United States Assistance" of the "Consolidated Appropriations Act, 2022" (P.L. 117-103) – copied below:
PROHIBITION ON TAXATION OF UNITED STATES ASSISTANCE SEC. 7013.
(a) PROHIBITION ON TAXATION.—None of the funds appropriated under titles III through VI of this Act may be made available to provide assistance for a foreign country under a new bilateral agreement governing the terms and conditions under which such assistance is to be provided unless such agreement includes a provision stating that assistance provided by the United States shall be exempt from taxation, or reimbursed, by the foreign government, and the Secretary of State and the Administrator of the United States Agency for International Development shall expeditiously seek to negotiate amendments to existing bilateral agreements, as necessary, to conform with this requirement.
(b) NOTIFICATION AND REIMBURSEMENT OF FOREIGN TAXES.— An amount equivalent to 200 percent of the total taxes assessed during fiscal year 2022 on funds appropriated by this Act and prior Acts making appropriations for the Department of State, foreign operations, and related programs by a foreign government or entity against United States assistance programs, either directly or through grantees, contractors, and subcontractors, shall be withheld from obligation from funds appropriated for assistance for fiscal year 2023 and for prior fiscal years and allocated for the central government of such country or for the West Bank and Gaza program, as applicable, if, not later than September 30, 2023, such taxes have not been reimbursed.
(c) DE MINIMIS EXCEPTION.—Foreign taxes of a de minimis nature shall not be subject to the provisions of subsection (b).
(d) REPROGRAMMING OF FUNDS.—Funds withheld from obligation for each foreign government or entity pursuant to subsection (b) shall be reprogrammed for assistance for countries which do not assess taxes on United States assistance or which have an effective arrangement that is providing substantial reimbursement of such taxes, and that can reasonably accommodate such assistance in a programmatically responsible manner.
(e) DETERMINATIONS -
(1) IN GENERAL. The provisions of this section shall not apply to any foreign government or entity that assesses such taxes if the Secretary of State reports to the Committees on Appropriations that—
(A) such foreign government or entity has an effective arrangement that is providing substantial reimbursement of such taxes; or
(B) the foreign policy interests of the United States outweigh the purpose of this section to ensure that United States assistance is not subject to taxation.
(2) CONSULTATION.—The Secretary of State shall consult with the Committees on Appropriations at least 15 days prior to exercising the authority of this subsection with regard to any foreign government or entity.
(f) IMPLEMENTATION.—The Secretary of State shall issue and update rules, regulations, or policy guidance, as appropriate, to implement the prohibition against the taxation of assistance contained in this section.
(g) DEFINITIONS.—As used in this section:
(1) BILATERAL AGREEMENT.—The term ‘‘bilateral agreement’’ refers to a framework bilateral agreement between the Government of the United States and the government of the country receiving assistance that describes the privileges and immunities applicable to United States foreign assistance for such country generally, or an individual agreement between the Government of the United States and such government that describes, among other things, the treatment for tax purposes that will be accorded the United States assistance provided under that agreement.
(2) TAXES AND TAXATION.—The term ‘‘taxes and taxation’’ shall include value added taxes and customs duties but shall not include individual income taxes assessed to local staff.
Where available, exemptions are claimed in all countries.