Afghanistan Compliance Advisory
25 January 2015
Transition period. As per Presidential Decree 38 signed 31 Dec 2014, the Afghan Government has instituted a transition period from 1 Jan 2015 to 1 Jun 2015 allowing for a phased implementation of new processes agreed under the Bilateral Security Agreement with the U.S. and the Status of Forces Agreement with NATO. This advisory summarizes the implications of this Presidential Decree.
Business registration. All foreign contractors and subcontractors providing goods or services in Afghanistan, including on military bases, are required to register with the Afghanistan Investment Support Agency (AISA) before 1 Jun 2015. New registrations will be issued for 3 years while expiring registrations will be renewed for 3 years. Other than the AISA license, additional permits or licenses will not be required. As of the date of this advisory, AISA is still issuing 1 year visas. For assistance in registering with AISA, please email firstname.lastname@example.org.
Transitional visas. Only during the 5 month transition period, contractors may enter, work or exit Afghanistan by presenting an original hard copy certificate issued by NATO and their valid passport to Afghan immigration at commercial flight terminals. Utilization of such a certificate has been successfully tested at the commercial terminal of Hamid Karzai International Airport (previously Kabul International Airport), but a DOD CAC or ISAF/NATO identification card was requested by the immigration officer as well. It is also expected that enter/exit procedures at military flight terminals will continue as is (no visa or certificate required) until 1 Jun 2015.
Future work visas. Afghan consulates around the world, and the Ministry of Interior (MOI) in Kabul will begin issuing 1 year multiple entry work visas to contractors, which will be required starting 1 Jun 2015. Work permits will no longer be required, but a valid AISA license will still be required. While it is the U.S. Government’s position that this new visa process under the BSA applies to all nationalities (not just US/European), it is expected that Third Country Nationals (mainly from Africa, Philippines, India, Bangladesh, Nepal) will continue to face visa delays and that contractors will be continued to be asked to train/utilize Afghan nationals instead. As of the date of this advisory, this new visa process has not started and the previous process is still in effect. For assistance with visas, please email email@example.com.
Private Security Companies. The Afghan Public Protection Force (APPF) is a State-Owned Enterprise (SOE) that is continues to be the only entity allowed to provide non-diplomatic security services under Presidential Decree 62. DOD recently awarded PSC contracts for Forward Operating Bases in Kandahar and Bagram for 6 months and is planning to provide Guardian Angel support through May 2015 only. President Ghani has requested future plans for APPF be drafted and is expected to discuss with the new Afghan cabinet, once fully formed. As of the date of this advisory, no new Private Security Company (PSC) or Risk Management Company (RMC) licenses are being issued by the MOI.
Weapons permits. The procedures for registering contractor weapons (other than for PSCs or RMCs) have been established. Applications must include the “names of the contractors and their employees, type and serial number of the weapon, the time period present in Afghanistan, two photos of each employee and a certificate indicating that the US and NATO Forces have authorized the contractor employees to carry weapons in furtherance of their contractual duties”. There will be a licensing fee and a licensing card will be issued by the MOI. As of the date of this advisory, the MOI has not started processing weapons registration applications. For assistance with registering weapons, please email firstname.lastname@example.org.
Tax exemptions. Tax exemptions confirmations are issued on a contract by contract basis in Afghanistan. Tax exemptions are not automatic and must be confirmed by the MOF. Both prime and subcontracts are exempt for DOD under the BSA, for NATO under the SOFA, and for USAID under the SOAG. Other bilateral agreements include DOS/INL, DFID, EC, ADB and the UN. Previously, tax exemption confirmation applications were submitted directly to the Ministry of Finance (MOF) with required 3 documents – 1) a full copy of the contract, 2) a request letter from the contracting officer, and 3) a cover letter from the contractor. A new requirement has now been established for all U.S. DOD contracts under the BSA/SOFA. For assistance with tax exemption applications, please email email@example.com.
Tax compliance. Tax compliance is an ongoing process that requires a series of steps. 1) All contracts claimed as tax exempt must be confirmed by the MOF. 2) Taxes must be withheld monthly from payments towards rent, wages and subcontracts (unless exempted). As of 1 Jan 2015, there is no exemption for withholding tax from payments to Afghan landlords, Afghan subcontractors and Afghan employees. 3) Business Receipts Tax of 2%, 5% or 10% must be paid and filed quarterly (unless exempted). 4) Annual income tax returns are required to filed 3 months after end of the fiscal year. Even if exempt from paying income tax, an information return is required. 5) If under tax audit, an audit clearance letter is required for each year under audit. 6) A tax clearance letter is required from the MOF, stating that all tax liabilities have been filed/paid to date. 7) With a tax clearance letter, the contractor will then be allowed to renew their AISA license. 8) An active AISA license is required to apply for work visas, import/export goods, bid on certain contracts, make any changes to the AISA license, and qualify for the 2% rather than the 7% withholding rate. For more information, please see all official MOF guides and forms here and email firstname.lastname@example.org.