Afghanistan Compliance Advisory
18 October 2014
Introduction. On 30 September 2014, on its first day after inauguration, the new Afghan administration signed the Bilateral Security Agreement (BSA) with the United States of America and the Status of Forces Agreement (SOFA) with NATO. The full texts of each agreement as published by the Afghanistan Ministry of Foreign Affairs are available here: http://ahg.af/BSA.pdf andhttp://ahg.af/SOFA.pdf.
Focus. In this email, the Afghanistan Holding Group (AHG) is providing its understand of the implications of the BSA and SOFA for contractors operating in Afghanistan. The sections relating to contractors are nearly identical in both agreements. However, we have chosen to reference the SOFA because it covers all NATO Member States and Operational Partners, including the United States, and hence is applicable to more contractors in Afghanistan. For each matter, we compare the previous status in practice before 31 December 2014 with any differences now agreed in the SOFA effective 1 January 2015.
Stakeholders. The SOFA begins with following definitions (Article 1.1-13), each divided into two subcategories:
- NATO, divided into NATO Member States (Albania, Belgium, Bulgaria, Canada, Croatia, the Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Iceland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Turkey, the United Kingdom and the United States) and Operational Partners
- NATO Forces, divided into Members of the Force and Members of Civilian Component
- NATO Contractors (which is specifically defined to include subcontractors), divided into Afghan Legal Entities and Non-Afghan Legal Entities
- NATO Contractor Employees, divided into Afghan Nationals and Non-Afghan Nationals
Timing. The SOFA “shall enter into force on 1 January 2015” (Article 25.1). Specific procedures and clarifications will be detailed by the “Afghanistan-NATO Implementation Commission” and “Working Groups” (Article 23.1) in conjunction with relevant Afghan authorities.
Laws. Previously, there was confusion over operating “inside the wire” as somehow different from Afghan soil. Now it is clear that NATO is to “respect the Constitution and laws of Afghanistan” (Article 4.1) including within all military bases. Furthermore, “Afghanistan maintains the right to exercise jurisdiction over NATO Contractors” (Article 11.5) meaning NATO Contractor Employees can be put on trial in Afghan courts for civil or criminal offenses.
Procurement. Similar to AfghanFirst initiatives, NATO “shall strive to utilize Afghan suppliers of goods, products and services to the greatest extent practicable” (Article 9.1). To identify and vet Afghan vendors, please email email@example.com.
Registration. Previously, AISA issued one year licenses and there were other line ministry permits also required depending on the activity. Now “NATO Contractors are subject to registration in Afghanistan, via an expedited process that shall include issuance of a business registration license valid for three years and payment of a reasonable, standard, one-time service charge to the Afghanistan Investment Support Agency [AISA] as required by the laws and regulations of Afghanistan.” NATO Contractors are also “exempt from all other Afghan licenses and similar requirements in relation to their entry into or execution of contracts and subcontracts” (Article 9.2). To register or renew your AISA license, please email firstname.lastname@example.org.
Visas. Previously NATO Contractors could utilize military flights to enter and exit Afghanistan without visas. If visas were requested by NATO Contractors, typically single entry visas were issued for one or three months, or six month multiple entry visas were issued with work permits. Now all NATO Contractors are required to obtain visas to Afghanistan “in accordance with Afghan law” including those arriving on military flights. Afghan visas to NATO Contractors “shall provide for multiple entries and exits and shall be valid for a period of not less than one year” and will be issued “expeditiously” (Article 13.2). The NATO-Afghanistan Implementation Commission shall “establish procedures to implement” Article 13. To apply for visas, please email email@example.com.
Customs. NATO Contractors are allowed to import or export goods on behalf of NATO forces’ and not for any private commercial purposes, as well as personnel effects that are “reasonable and proportionate to personal use.” These goods “shall not be subject to restrictions, such as licensing, inspection or verification… or taxes and custom duties or other charges.” Furthermore, no imports of “alcohol, pornography, illegal narcotics, or privately owned firearms, or other contraband” are allowed (Article 14.1-4). To clear goods through commercial customs, please email firstname.lastname@example.org.
Weapons. Previously, many NATO Contractors working within military bases carried weapons for self-defense. Now, Contractors “may only carry weapons in accordance with Afghan laws and regulations.” (Article 12.2). Afghan regulations require civilians to individually obtain approval to register a weapon at the Ministry of Interior. To learn more about weapons registration options, please email email@example.com.
Business taxes. Previously, only revenue from prime contracts was considered tax exempt, while subcontract revenue was not. Now, NATO Contractors “shall not be liable to pay any tax or similar or related charges… under a contract or subcontract with or in support of NATO Forces”. However, “Afghan legal entities shall not be exempt… on income received due to their status as NATO Contractors” (Article 15.3). To confirm tax exemptions and file returns, please email firstname.lastname@example.org.
Personal taxes. Previously, both Afghan national and non-Afghan national employees working under prime contracts were tax exempt. Now, Afghan national employees are not exempt from taxation and Contractors are required to perform “employer withholding of personal income tax” from Afghan national employees (Article 15.4-6). Non-Afghan national employees working for either prime contractors or subcontractors are tax exempt. To withhold, remit and file taxes for employee payroll, please email@example.com.
Conclusion. While long awaiting BSA & SOFA provides clarity into a number of critical operational areas for NATO Contractors in Afghanistan, there are still procedures and details that need time to be established. As 1 January 2015 approaches, we recommend companies address the above compliance matters as soon as possible to after delays at the end of the year.