Afghanistan Compliance Advisory
23 June 2015
Introduction. There have been a number of changes in Afghan regulations over the past month. The BSA (for DOD) and SOFA (for NATO) entered into force on 1 Jan 2015 requiring all military contractors to abide by Afghan law, including with respect to business licensing, visas, weapons permits and taxation. Presidential Decree 38 instituted a transition period allowing for phased application of Afghan law until 1 Jun 2015, which was then extended to 1 Sep 2015.
Possible change in weekend. The Cabinet has agreed to change the weekend from Thursday/Friday to Friday/Saturday for all 34 provinces of Afghanistan. The proposal has been sent to the Parliament for consideration. As an aside, the Government announced a number of public holidays for September 2015: the 5th (RECCA & SOM Conference), 8th (Masood Day), 20th (Rabbani Day), 23rd (Arafat Day), and 24-26th (Eid-ul-Adha). Single work days falling between two off days are also public holidays.
Clarification of PSC status. Under Presidential Decree 66 effective 29 Aug 2015, DOD and NATO forces are now authorized to contract with Private Security Companies (PSCs). PSCs are still subject to the Ministry of Interior (MOI) and Afghanistan Investment Support Agency (AISA) regulations and licensing procedures, available at http://ahg.af/aca/. All PSCs were closed under the previous administration’s Presidential Decree 62 (except for PSCs serving diplomatic and police training missions), and replaced with the MOI’s Afghanistan Public Protection Force (APPF) and private Risk Management Companies (RMCs). Detailed information about APPF and RMCs is available here.
New telecom and internet fees. A new 10% fee will be imposed on telecom and internet services, including all types of prepaid and postpaid accounts, effective tomorrow 1 Mizan 1394 (23 Sep 2015), payable to the Treasury by all telecom companies and Internet Service Providers (ISPs). Read the official notice at http://ahg.af/aca/.
Increase in tax rates. The Business Receipts Tax (BRT) rate was increased from 2% to 4% on the cost price of all imported goods, in addition to customs duty. This BRT is treated as an advance payment for quarterly business receipts tax payable (Article 64). In addition, the standard quarterly BRT rate was increased from 2% to 4% on all gross income received (before any deductions) effective 1 Sunbula 1394 (23 August 2015). Given this change went into effect on the 1st day of the 3rd month of the 3rd quarter, the 2% BRT rate is to be applied on non-exempt revenue received during the first 2 months of the quarter, while the new 4% BRT rate is to be applied on revenue received during the 3rd month. Filing and payment is due together 15 days after the end of the quarter, 15 Mizan 1394 (7 October 2015). The 5% BRT rate (for hotels or restaurants earning more than 750,000 Afghani), and the 10% BRT rate (for telecom, airlines and superior hotels/restaurants) remain the same. Read the official notice at http://ahg.af/aca/.
Recommended 4th quarter BRT payment date. Although the 4th quarter BRT payment is not due until 15 Jaddi 1394 (5 Jan 2016), in order to assist the government in reconciling revenue at the end of fiscal year, it is suggested to remit an estimated BRT 4th quarter payment before 30 Qaws 1394 (21 Dec 2015). All 4 quarters of BRT are then reconciled on your annual income tax return, due 3 months later by 1 Hamal 1395 (20 Mar 2016). Email firstname.lastname@example.org to remit and file your BRT.
Tax exemption confirmations. Tax exemption confirmations (TECs) are not automatic and must be applied for at the MOF well ahead of the annual income tax return deadline (21 Mar 2016 for fiscal year ending 21 Dec 2015). All TECs are issued on a contract by contract basis, covering a specific period of performance, dollar figure and scope – not on a blanket organization basis. Both prime and subcontractors to NATO, DOD and USAID are eligible, while separate agreements govern DOS/INL, UK DFID, ADB, WB and the United Nations. Email email@example.com for assistance with obtaining TECs.
Payroll and tax withholdings. All entities, even those with TECs, are still subject to certain tax withholding and filing requirements. Tax forms, guides and instructions are available here. All taxes are calculated in Afghani currency, and official exchange rates are available here. All due dates follow the Afghan fiscal calendar (not the Gregorian calendar), and a converter is available here. Email firstname.lastname@example.org for assistance with calculating and remitting your monthly payroll as well as any applicable withholding taxes.
Business licensing. All entities are required to obtain their own business license in Afghanistan. Qualifying military contractors who received 1 year licenses may now apply to convert to a 3 year license immediately. AISA suspended 3 year licenses for military contractors on 1 Sep 2015, but resumed a week later. Email email@example.com to obtain or convert a business license.
Visas. Non-military contractors are required to obtain an invitation letter, a 1-month single entry visa, a 1 year work permit and then 6-month multiple entry visas (MEVs) for their employees. Afghan immigration officials have not yet been deployed to military airport terminals to check visas, but several bases are self imposing visa checks. Military contractors can apply directly for 1 year MEVs outside Afghanistan by requesting an invitation letter through the Ministry of Foreign Affairs (MOFA). The MOI suspended issuance of 1 year MEVs for military contractors in Kabul on 1 Sep 2015. Email firstname.lastname@example.org to obtain or renew work visas.
Weapons permits. The MOI issues weapons permits on a per weapon per person basis, with the weapon’s unique serial number assigned to each person. Email email@example.com for assistance with obtaining weapons permits for military contractors.