Afghanistan Compliance Advisory – Issue #28
29 October 2018
Many companies incorrectly assume that they can wait until a business license is expired to renew it, without realizing there are monthly, quarterly and annual tax filing requirements along the way. These mandatory filings are required even if all of your contracts are tax exempt, or even if you have no activity in Afghanistan at all. A tax clearance letter from the Ministry of Finance (MOF) is required for business license renewal, changes or closure. This process can take several months to complete, so please plan well ahead of your license expiry date. Obtaining new visas or renewing visas requires an active business license, as do certain pre-deployment training programs, base access requests, and even bid proposals. The end of the fiscal year 20 December 2018 is fast approaching, with annual income tax returns due 20 March 2019.
Extension of the 95% Tax Penalty Amnesty Program
The deadline for utilizing this wonderful program has now been extended from 27 October 2018 to the end of the fiscal year 20 December 2018. For taxpayers who have not yet filed their monthly, quarterly and annual income tax forms for any of the years 2002-2017, if they file and pay in full their overdue principal tax liabilities (if any) before 20 December 2018, they will only have to remit 5% of the total associated tax penalties. So far, an incredible 8,300 companies have utilized this program but there are still an estimated 20,000 companies that have yet to file. The MOF emphasized that this will be the last opportunity to save 95% and requests companies to file as soon as possible.
Permanent Reduction in Tax Penalties
Effective 2 October 2018, the MOF has amended the Tax Administration Law which includes a reduction in the standard tax penalty amounts. The Official Gazette along with a draft English translation by AHG is available for download at https://ahg.af/aca/. Here are some of the highlights:
- Instead of 100% (or the practice of 50%), the amendment clarifies that 30% of the tax assessed should be paid prior to the initiation of a tax dispute.
- Instead of being able to add a taxpayer to the no fly list for any amount of tax liability, the amendment clarifies that the tax liability must exceed 500,000 AFA and be at least 30 days overdue.
- The late payment penalty of 0.1% of the tax due per day late has been reduced to 0.05% per day and the penalty amount has been capped at 100% of unpaid tax amount.
- The late filing penalty of 100 AFA per form per day late has been reduced to 50 AFA for businesses and from 30 AFA to 15 AFA for individuals.
- The punitive penalty for intentionally evading tax has been reduced from 200% of the tax due to 100% of the tax due.
The MOF has clarified that Afghan-owned companies operating under a BSA contract are in fact also eligible for tax exemption for quarterly Business Receipts Tax (BRT) on the corresponding revenue, but not exempt on withholding taxes or annual income taxes. In addition, the MOF has published the new process for confirming tax exemptions for U.S. DOD and NATO contracts. Previously, a Request Letter was required from the Contracting Officer, along with a complete or redacted copy of the contract for which a TEC was being requested. The new process only requires the ARD NATO/US Contractor Supplementary Form to be signed by the U.S. DOD or NATO Contracting Officer, and then authenticated by Resolute Support International Agreements Branch (RS IAB).
The new US-Afghan Assistance Exemption Agreement has been approved by the Cabinet and was signed on 28 July 2018. It covers U.S. funded development work not otherwise covered by BSA (U.S. DOD and NATO), USAID and INL bilateral agreements, but does not cover U.S. Embassy work which is governed by the Geneva Convention. A copy of the agreement is available for download at https://ahg.af/aca/.
New Visas (Military Contractors). The process for obtaining new BSA visas has been further streamlined. These are for military contractors only, those operating under a prime or subcontract to the U.S. DOD or NATO. AHG can assist with processing visa invitation applications through the MOCI and then MOFA in Kabul. The required documents are:
- One request letter per batch on contractor letterhead listing your employee names, passport numbers, nationalities and your authorized agent
- Color copy of valid business license (3-year license required)
- Color copy of the biographical page of the passport
- Copy of Letter of Authorization (LOA) for each applicant – either from DOD SPOT or NATO NSPA/NCI
- One company-wide NATO Contractor Certificate from Resolute Support HQ
- $90 government fees paid to MOCI
Once MOFA issues the visa invitation letter to the chosen Consulate, such as the Afghan Consulate in Dubai, AHG can pickup the original passport in Dubai, get the Afghan visa stamped in and return back, usually within the same business day. The required documents are:
- Company request letter includes a list of the names, nationalities and passport numbers of all employees applying for visas and the authorized pickup/drop-off agent
- One visa application form per applicant
- Two 4x5cm photos attached to the application form
- Original passport valid for at least six (6) months
- $1,020 government fees paid to Consulate (varies by country)
Visa Renewals (Military Contractors). These are issued in Kabul are for employees who have 4 months or less left on their current 1 year BSA visa. AHG can assist with processing the required documents, which are usually the above documents, plus:
- Color copy of the previous 1 year BSA visa (30 days or less left on current visa)
- Color copy of the most recent entry stamp on passport by Afghan immigration officials
- Color copy of company photo ID of the applicant (non-military ID acceptable)
- $800 government fees paid to the Ministry of Interior
Visas and Renewals (Non-Military). An entry visa invitation letter is required first, then a 1-month entry visa, then once the employee is in country a 1-year work permit is obtained, followed by a 6-month work visa, which is renewable for another 6 months. AHG can assist with processing the required documents which are similar to the above, except that instead of a NATO Contractor Certificate, employee LOA and company photo ID, these documents and government fees are required:
- Applicant’s educational certificate (i.e., university diploma or professional qualification)
- Applicant’s CV or resume
- Applicant’s employee contract
- $30 government fee for a new visa invitation letter from MOCI
- $150 government fee for a work permit fee with 1-year validity
- $300 government fee for a work visa fee with 6-month multiple entry status
- $300 government fee for visa renewal for another 6 months
If you would like AHG to introduce attorneys for any legal assistance in Afghanistan, please email email@example.com.
For those new to Afghan compliance, previous issues of this advisory and relevant documents are available at https://ahg.af/aca/.
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