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Business Development and Promotion Program

Contents:

Investing in Afghanistan
Investment News
General Preferential Tariff and Least Developed Country Tariff Rules of Origin Regulations
Afghanistan Economy in Brief

Ensuring Fiscal and Economic Stability
Creating a Stable Currency and Liberal Foreign Exchange Regime
Simple, Low, Cost-effective Taxation Arrangements
An Open Liberal Trading Regime
An Open, Liberal Investment Regime
A Modern Legal Framework
Major Sectors of the Afghan Economy

The Agri-business Sector
The Construction Sector
Industry breakdown (‘value chain’)
The Marble Sector
Conclusion
Resource Guide
Afghanistan Business Registration Procedures for Canadian companies
Key contacts for Business Licensing in Afghanistan
Canadian Embassy in Kabul – Economic Section
Ministry of Foreign Affairs – Trade, Transit and Investment Directorate
Afghanistan Investment Support Agency (AISA)
Ministry of Commerce and Industry (MoCI)

Afghanistan's Tax Requirements
Afghanistan's Full Tax Laws
Afghanistan Business Gateway
Inquiry Form


Investing in Afghanistan


Dear Investor

Thank you for visiting our website, the Government of Afghanistan actively supports investment in the private sector as a means to creating a prosperous market economy in Afghanistan. Your decision to consider investing in Afghanistan is a smart one. There is no region in the world with greater untapped economic potential than Central Asia. As an area rich in human and natural resources,  profitable investment opportunities  abound.

Historically, Afghanistan has been at the heart of major trading routes, amongst them, the fabled Silk Road, which is one of many that have served the region throughout the centuries. Over the past ten years, the Afghan people have steadily progressed towards peace and prosperity, and its economy has seen meteoric growth. Once again, Afghanistan is emerging as a central hub for trade as the economies of Central and South Asia continue to grow and become increasingly integrated into the global economy.

The Government of Afghanistan understands the critical role it must play to create a favorable environment for investment. The passage of the Private Investment Law in 2006 was an important milestone demonstrating the Government’s commitment to attracting new investment. The Investment Law allows for one hundred percent foreign ownership, easy repatriation of profits, and treats foreign investors in the same fashion as domestic investors, meaning a foreign investor can achieve 100% ownership of his or her investment.

With this in mind, the Government has adopted a pro-private sector stance and a liberal trade regime. In this environment, the economy has been growing at approximately 10% per year. Although real GDP growth is expected to close the fiscal year 2011 at 7%, 11% in 2012 and 6.4% in 2013 GDP growth is projected to pick up again and is estimated to reach 7.1%.

Additionally, our Financial Management Law emphasizes fiscal discipline and management of public finances in line with the current international standard of best practice. The 100 % write-off of Afghanistan’s past debt, combined with the Government’s policy of maintaining a balanced budget, allows for Afghanistan to now be one of the least indebted governments in the world.

Afghanistan has a very liberal foreign exchange system that allows people to legally bring money to the country and easily take it out again. Therefore, individuals, companies, and banks are allowed to operate foreign exchange accounts in Afghanistan.

In 2005, the  tax code  was restructured and clarified with an emphasis on simplicity and low taxation with export taxes removed for almost all products. Afghanistan has the lowest tariffs in the region and its tariff categories are simple and few in number.

The Government of Afghanistan has created a highly pro-business investment administration and scores very highly when measured by the World Bank’s Doing Business Indicator. We rank 30 out of 183 countries in terms of ease in starting a business in Afghanistan.

For further information on trade and investment in Afghanistan, please contact Dr. Ghulam Nayab, iIn charge of Business Development and Promotion Programs.




 
Investment News


Current Updates:

  1. For available tenders in Afghanistan please visit Afghanistan Reconstruction and Development Services website http://ards.gov.af/
  2. Bilateral negotiation on WTO accession with Canada was signed in Geneva in July 2013
  3. Foreign Investment Protection Agreement (FIPA) application was submitted on December 2012 and is in progress.

Good Reads:

  • A  least developed country  (LDC) is a country that, according to the United Nations, exhibits the lowest indicators of socioeconomic development  with the lowest Human Development Index  ratings of   all countries in the world. The concept of LDCs originated in the late 1960s and the first group of LDCs was listed by the UN in its resolution 2768 (XXVI) of 18 November 1971.  A country is classified as a Least Developed Country if it meets three criteria:
  • Poverty  (adjustable criterion: three-year average   GNI  per capita of less than   US $992, which must exceed $1,190 to leave the list as of 2012)
  • Human resource  weakness (based on indicators of   nutrition,   health,   education  and adult   literacy) and
  • Economic   vulnerability  (based on instability of agricultural production, instability of exports of goods and services, economic importance of non-traditional activities, merchandise export concentration, handicap of economic smallness, and the percentage of population displaced by natural disasters)

Afghanistan is in the Least Development Countries Tariff list of Canada for details please follow this links:

‘Customs Tariff Departmental Consolidation Oct 01, 2014’,

General Preferential Tariff and Least Developed Country Tariff Rules of Origin Regulations




 
Afghanistan economy in brief


Introduction:

Over the decade since the Taliban have been ousted from power, Afghanistan’s economy has had robust growth. The Afghan economy has grown at around a 10% per annum, one of the highest rates in the world. According to the World Bank, growth outlook for the country in 2010/11 is once again positive, with anticipated GDP growth of 8.5-9.0 percent, and inflation around 5 percent. Although assistance from the international community, in particular the United States has been a major factor behind the growth much of the economic boom has been a result of Afghanistan’s adoption of a “market economy”. The government continues to pursue policies that encourage further private sector investment.

Afghanistan‘s top export markets are India, Pakistan, Iran, Saudi Arabia, Central Asian Republics and the EU. Imports primarily come from China, Japan, Pakistan and Iran. Big business constitutes a very small part of Afghanistan’s private sector. Large companies exist in bottling, telecommunications, airlines, construction, importing and transport and logistics. The Government of Afghanistan has taken a number of steps to create attractive conditions for foreign investment:

Ensuring Fiscal and Economic Stability

The Central Bank Law established the independence of the Central Bank and the autonomy of monetary policy. This has resulted in inflation being low and a mild appreciation of the Afghan currency. The Financial Management Law emphasizes fiscal discipline and management of public finances in line with international best practice. The 100 % write off of Afghanistan’s old debt, combined with the Government’s policy of maintaining a balanced budget, mean that Afghanistan is now one of the least indebted governments in the world.

Creating a Stable Currency and Liberal Foreign Exchange Regime

Currency reform was completed in early 2003, resulting in a stable exchange rate. Afghanistan has a very liberal foreign exchange system which allows people to legally bring money to the country and easily take it out again. Individuals, companies and banks are allowed to operate foreign exchange accounts in Afghanistan.

Simple, Low, Cost-effective Taxation Arrangements
In 2009, the tax code was restructured and clarified with an emphasis simplicity and low taxation.

An Open Liberal Trading Regime
Export taxes have been removed for almost all products. Afghanistan’s tariffs are the lowest in the region and its tariff categories simple and few in number. Afghanistan recently signed a transit agreement with Pakistan giving it access to the giant Indian market. Border ports now operate 24/7 and export and import processes have been simplified. Afghanistan has begun the process of joining the WTO and will shortly ratify SAFTA.

An Open, Liberal Investment Regime
The Investment Law allows hundred percent foreign ownership, easy repatriation of profits, treats foreign investors identically to domestic ones and gives generous tax breaks.

A Modern Legal Framework
The new Company Law gives shareholders comparable rights to those in the US. The new Banking Law regulates the operations of the banking system in accordance with the principles of a market economy. Improvements have been proposed to the Law on Corporations and the Law on Arbitration. A Bankruptcy Law has been drafted and regulations have been developed in across a range of areas. The new Mining Law 2010 makes it much easier to invest in mining. It streamlines bidding processes and reduces royalties.
In other words, Afghanistan has created a highly pro-business investment regime. In some areas, as measured by the World Bank’s Doing Business Indicator, it scores very highly. Thus we rank 30 out or 183 countries for establishing a business.

Major Sectors of the Afghan Economy

The Agri-business Sector

The agricultural sector constitutes an estimated 30 % of Afghanistan’s GDP, with around 85% of the Afghan population dependent on agriculture and agriculture related activities for their livelihoods. At one time, high quality Afghan agricultural product exports such as dried fruits, nuts, almonds and pistachios occupied a prominent share of the world market. Following almost three decades of conflict, farmers in Afghanistan have recently made great strides in reviving agro business in the country. Development of the agricultural sector is a high priority of the government and is the focus of international donor efforts to revive rural economic activity. Improvements in irrigation systems, fertilizer use and extension services have increased production and reduced input prices.

The domestic market potential for agricultural products is huge and demand is increasing with a rise in population and income across the country. Currently, most processed food is being imported. With rapidly improving supply conditions for agricultural products, there is a large potential for import competition and early entrants stand to benefit as the first domestic suppliers of their products. In addition, Afghan agricultural products represent a valuable export product for investors, particularly in regional markets such as India and Pakistan. There are also significant opportunities in cold and dry storage, processing, particularly cleaning and packaging and in other elements of the value chain such as testing and certification for both international and domestic markets.

The Construction Sector
The construction industry currently constitutes around 10% of national GDP at $769,500,000: It is a sector that has expanded rapidly since the end of the war in 2001, and has continued to be a significant driver of economic growth throughout the decade, growing by 29.5% between 2003 and 2011. This increase reflects the demand from the reconstruction program, the international presence (including military), as well as a massive increase in private construction (notably housing).

Industry breakdown (‘value chain’)
The majority of the value of construction projects goes to countries other than Afghanistan, as large international companies are often the main contractor, with little value cascaded down to Afghan sub-contractors. Moreover, around two thirds of building materials are imported to Afghanistan from Pakistan, Russia, and to a lesser degree China and the UAE. There is ample room therefore for import substitution and for Afghanistan based contractors to grow quickly.

The Marble Sector
Afghanistan is home to 60 known deposits and it is estimated that there are as many as 400 varieties of marble. With numerous high-quality deposits, the Afghanistan dimension stone industry has great potential to become a significant player in the Afghan economy and provide thousands of rural jobs at the quarries and in the downstream processing industry.

The quality and quantity of Afghan deposits provides a comparative advantage which the industry can leverage to build a competitive advantage. For example the deposits in Chesht and Khogiani are of top quality white marble very similar to Cararra marble from Italy. Buyers in the Gulf Countries, U.S., Italy and neighboring countries are already purchasing this marble and demand for it exceeds available supply. Currently nine white cities are being created in Turkmenistan using Afghanistan white marble which has replaced imports of Italian marble. As perhaps the only source of high quality white marble in the region, Afghanistan enjoys a comparative advantage with other regional competitors based on the availability of raw materials and with respect to Italy as a result of its proximity to market. The high value of the marble will cover the higher costs of any inefficiency while the enterprises fine tunes their operations.

Conclusion

With increasing stability and increasing investments in roads, railways and air routes, entrepreneurs can trade not only with Afghanistan, but also with Central and South Asia. Already, goods are flowing from Central to South Asia, from India to Iran and back. Thus, by investing in Afghanistan, you are not only accessing a market of 35 million, but a market of 300 million just in the areas immediately surrounding Afghanistan.
The country’s developmental challenges are many, but they are not insurmountable.
Security in some areas, lack of clarity regarding administrative structure, and lack of information are just some of the challenges that businesses may face. However, for those who are patient, have a long-term plan and vision, and work with Afghans to create partnerships, there are many opportunities for successful enterprises and investments in Afghanistan.
By creating jobs and new business opportunities, it gives the citizens of Afghanistan hope for their future. Thus, your investment is not only a business venture, but also an investment in regional and world stability.




 
Resource guide


Afghanistan Business Registration Procedures for Canadian companies

How do I register my Company in Afghanistan as a foreign Business?

  • A company must first be licensed and in good standing in the Canada to be licensed as a Canadian/foreign company in Afghanistan. You must also have a physical address, telephone # and contact for your office in Afghanistan. You may begin by having notarized a copy of your Canadian Business License, (if not incorporated) Articles of Incorporation (if incorporated) and any powers of Attorney and have each of these documents attested by your state and Federal Government authorities.
  • Have any Powers of Attorney translated into Dari (Farsi) or Pashto and include along with your original Canadian attested documents (from Step 1 above) to the Consulate Section of the Embassy of Afghanistan in Ottawa or Toronto or Vancouver for attestation of the final set of documents by the Afghan Government in Canada.
  • Take the final set of Consulate attested documents along with your company’s tax ID # and a copy of Canadian passports of key Principals of the company (President, V.P) to the Canadian Embassy in Kabul (Economic Section) for issuance of a referral letter to the Ministry of Foreign Affairs of Afghanistan in Kabul.
  • Bring your Canadian Embassy referral letter together with all documents to the Ministry of Foreign Affairs in Kabul (the Trade, Transit and Investment Directorate) who will the issue a final referral letter either to the Afghanistan Investment Support Agency (AISA) or the Ministry of Commerce & Industry (MoCI) depending on the nature of your work.
  • If your company deals with investment-related sectors including Services, Consulting, Logistics, Transport (see  www.aisa.org.af  for full list and information), take all documents from above steps together with the license application to AISA to obtain an “Investment License”. In order to obtain a “Trade” Business License (for Import/ Export activities) follow all the above stated procedures except that you should go to the MoCI Business Licensing Department for final processing of your license. In some cases you will need to register in both places, depending on the nature of your company’s work.

Key contacts for Business Licensing in Afghanistan:

Canadian Embassy in Kabul – Economic Section

Hameed Khan Mubtakir

Trade Commissioner

Canadian Embassy Kabul

Street # 15, Wazir Akbar Khan, Kabul

Hameedkhan.Mubtakir@international.gc.ca

Telephone: +93(0) 701 108 800 EXT: 3779 / Mobile: +93(0)796095389

Government of Canada  

Ministry of Foreign Affairs – Trade, Transit and Investment Directorate

Website:  www.mfa.gov.af

Telephone: +93(0)20-210-0377
Address: Malik Azghar Road, Kabul, Afghanistan
Email:  contact@mfa.gov.af

 

Afghanistan Investment Support Agency (AISA)

Website:  www.aisa.af.org
Telephone: 0093(0) 20-210-3404
Address: Opposite Ministry of Foreign Affairs, Kabul, Afghanistan
Email:  invest@aisa.org.af

Ministry of Commerce and Industry (MoCI)

Website:  www.commerce.gov.af
Telephone: 0093-(0)700-225-718
Address: Darul Aman Road, Karte Se, Kabul, Afghanistan




 
Afghanistan's tax requirements


Afghanistan's Full Tax Laws

Rental Tax Withholding

  • When paying a monthly rent of  0 AFA to 10,000 AFA , then you should withhold  0%  and file within 15 days after the end of month in which payment was made.
  • When paying a monthly rent of  10,000 AFA to 100,000 AFA , then you should withhold  10% flat  and file within 15 days after end of month in which payment was made.
  • When paying a monthly rent of  over 100,000 , then you should withhold  15% flat  and file within 15 days after end of month in which payment was made.

Employee Tax Withholding

  • When paying a monthly salary of  0 AFA to 5,000 AFA , then you should withhold  0%  and file within 10 days after the end of the month in which the payment was made.
  • When paying a monthly salary of  5,000 AFA to 12,500 AFA , then you should withhold  2% of amount over 5,000 AFA  and file within 10 days after the end of the month in which the payment was made.
  • When paying a monthly salary of  12,500 AFA to 100,000 AFA , then you should withhold  150 AFA + 10% over 12,500 AFA  and file within 10 days after the end of the month in which the payment was made.
  • When paying a monthly salary of  over 100,000 AFA , then you should withhold  8,900 Af+ 20% over 100,000 AFA  and file within 10 days after the end of the month in which the payment was made.

Contractor Tax Withholding

  • When paying a sub-contractor  under 500,000 AFA per year , then you should withhold  0 AFA  and file within 10 days after the end of the month in which payment was made.
  • When paying a sub-contractor  over 500,000 AFA per year to a company with an AISA license , then you should withhold  2% flat  and file within 10 days after the end of the month in which payment was made.
  • When paying a sub-contractor  over 500,000 AFA per year to a company without an ASIA license , then you should withhold  7% flat  and file within 10 days after the end of the month in which payment was made.

Business Receipts Tax Return

  • When revenue is from a contract with a valid contract specific tax exemption on file with the Ministry of Finance, then you should pay  0%  and file within 15 days after the end of quarter in which the payment was made.
  • When revenue is from all other contracts, then you should pay  2% flat  and file within 15 days after the end of quarter in which the payment was made.

Annual Income Tax Return

  • When revenue is from a contract with a valid contract specific tax exemption on file with the Ministry of Finance, then you should pay  0 AFA  and file within 3 months after the end of the year.
  • When revenue is from all other contracts, then you should pay  20% of profit after all allowable expenses  and file within 3 months after the end of the year.

For all further inquiries please contact (Office Hours Mon. – Fri, 9:00am – 1:00pm):

Dr Ghulam Nayab: In charge of Business Development and Promotion Program

Embassy of Afghanistan in Ottawa Canada
240 Argyle Avenue, Ottawa ON K2P1B9
Tel: +1 613-563-4223 
Cell: +1647-408-3211
Fax: +1 613-563-4962
Email: g.nayab@afghanembassy.ca or ghulam.nayab@gmail.com
Website: http://www.afghanemb-canada.net

 




 
Afghanistan Business Gateway


Follow this link to   Afghanistan's Business Resource Center




 
Inquiry Form





 
 
     
   
 
 
EMBASSY OF AFGHANISTAN IN OTTAWA
240 Argyle Ave. Ottawa, Ontario, K2P-1B9 | Phone: (613) 563-4223 / 65 | Fax: (613) 563-4962 | contact@afghanembassy.ca
 
   
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