Recently, there has been a surge in global business interest in capitalizing on emerging market opportunities in Afghanistan. According to a comparative report by the World Bank, Afghanistan ranks 28th in terms of ease of starting a new business, with the bureaucratic and legal processes taking around seven days to complete.
Afghanistan represents a new market for many international companies, with the potential to distribute products or services that cater to the needs of low-income, developing countries. To become a legal entity in Afghanistan, individuals and businesses must register with the Afghanistan Central Business Registry within the Ministry of Commerce & Industry (MoCI) under the Commercial Laws of Afghanistan (2007).
Setting up a company in Afghanistan can be challenging due to several factors that need to be considered, including legal compliance, market research, and competition. However, our blog aims to provide valuable insights into the process of offshore company registration in Afghanistan and the opportunities and challenges that come with it. Whether you are a veteran entrepreneur or a novice seeking to venture into the Afghan market, our blog can be a valuable resource to help you navigate Afghanistan’s complex business landscape.
Business Opportunities in Afghanistan
Afghanistan presents various business opportunities across various sectors, including agriculture, mining, energy, and infrastructure, for investors planning for Afghanistan business incorporation. The country’s vast mineral resources, including copper, gold, lithium, and rare earth metals, make it an attractive destination for companies engaged in the extractive industries.
The agricultural sector, which contributes significantly to the country’s GDP, presents opportunities for businesses to invest in value-added products, such as dried fruits, nuts, and livestock. Additionally, the Afghan government has undertaken several initiatives to develop the country’s infrastructure, leading to construction, transportation, and logistics opportunities.
Afghanistan’s strategic location at the intersection of South and Central Asia provides businesses with prospects to access the regional market. Despite challenges such as security concerns and political instability, Afghanistan’s untapped potential offers a range of opportunities for businesses seeking to expand their operations and enter emerging markets.
Benefits of Starting a Business in Afghanistan
Afghanistan offers several advantages of doing business in Afghanistan to owners looking to set up an offshore company. If you intend to start a business in Afghanistan, here are some advantages you need to know:
- Afghanistan’s strategic location at the confluence of South and Central Asia provides a distinct advantage in terms of trade and commerce. It is a gateway for businesses looking to enter or expand their operations in neighboring countries, including Pakistan, India, Iran, and the Central Asian states.
- Furthermore, Afghanistan possesses abundant natural resources, including precious stones, metals, minerals, and agricultural products such as fruits and nuts. These resources present opportunities for businesses to invest in mining, agriculture, and other related industries.
- Thirdly, the Afghan government has taken significant steps to improve the country’s business climate in recent years. The government has implemented reforms to reduce bureaucracy, streamline business registration procedures, and improve financial access. According to the World Bank, these measures have led to Afghanistan’s ranking of 28th worldwide for ease of starting a new business.
- Finally, the Afghan people have a strong entrepreneurial spirit and desire economic growth and development. This provides an enthusiastic and motivated workforce for businesses seeking to invest in the country.
Requirements for Starting a Business in Afghanistan
It could seem like an excellent idea to start a business in Afghanistan, but with the correct guidance, it can be more accessible.
To start a business in Afghanistan, companies must know the proper procedures. The Afghanistan company incorporation requirements are as follows:
- The Afghanistan Investment Support Agency (AISA) is a government agency entrusted with the responsibility of promoting and facilitating investment in the country.
- Foreign investors must obtain an AISA license to start a business in Afghanistan.
- The AISA license is issued by the Ministry of Commerce and Industries (MoCI) and is mandatory for foreign investors planning company incorporation in Afghanistan.
Taxpayer Identification Number (TIN)
- Before a company registration in Afghanistan, all its directors, shareholders, company secretaries, and auditors must have a Tax Identification Number (TIN) issued by the Afghanistan Revenue Department for tax-related purposes.
- The TIN serves as a unique identification number for these individuals.
To start a business in Afghanistan, a business can be established with one or more directors, either local or foreign individuals. However, foreign individuals who wish to serve as directors must first obtain work and temporary residence permits.
Types of Business Structures in Afghanistan
In Afghanistan, several business structures are available for entrepreneurs planning to start a business in Afghanistan, each with its benefits and requirements. Here are the options for business to do in Afghanistan:
- The most straightforward form of business structure in Afghanistan is a sole proprietorship.
- It is a business owned and operated by a single person, and the owner is personally liable for the company’s liabilities and debts.
- This type of business structure is easy to set up and has minimal regulatory requirements.
- In Afghanistan, a partnership is a business type wherein two or more individuals mutually agree to operate a business together and share profits and losses.
- There are two types of partnerships in Afghanistan: Limited Partnership, in which some partners have limited liability, and General Partnership, in which all partners have unlimited liability.
- Partnerships are a flexible business structure often used by professionals such as lawyers, accountants, and doctors.
Limited Liability Company (LLC)
- An LLC (Limited Liability Company) in Afghanistan is a distinct legal entity separate from its owners, with shareholders having limited liability limited to their invested capital.
- LLCs are widely favored as a business structure in Afghanistan due to their flexibility akin to a partnership, combined with the liability protection a corporation offers.
- This type of business structure requires compliance with the Commercial Laws of Afghanistan and registration with the Afghanistan Central Business Registry within the Ministry of Commerce & Industry (MoCI).
- A corporation is an independent legal entity separate from its owners, with the ability to raise capital by issuing shares of stock.
- Shareholders’ liability is limited to the extent of their invested capital in the company.
- In Afghanistan, companies can be a Private Limited Company (Ltd.), a Public Limited Company (Plc.), or a branch of a foreign company.
Company Registration Process
For company registration in Afghanistan, specific tasks must be completed. The following are the steps to incorporate a company in Afghanistan:
- To begin the company registration process in Afghanistan, obtain a referral letter from the Trade License Office, ASIA, or any other license department, and submit it to the Afghanistan Central Business Registry (ACBR).
- In addition to the referral letter, the following requirements must be provided during the submission process: the business application form available on the ACBR website, a copy of the president and vice president’s passport or equivalent identification, and two sets of colored passport photos of both individuals. The Articles of Incorporation must also be submitted.
- After successful registration, a Tax Identification Number (TIN) will be issued. This ten-digit number is permanent, but it must be renewed upon expiration.
- The details of the newly registered business, including the company name, names of the president and vice president, the initial capital, the location of the business, and the type of operation or activities the company will engage in, will be published in the Official Gazette.
- A Registration Certificate will also be issued, which has no expiration date and must be kept for record-keeping purposes.
- Finally, to complete the company registration process in Afghanistan, a memo indicating that the business is duly registered and has been issued a TIN will be received. The relevant licensing officer will issue the business license.
How Much Does it Cost to Incorporate a Company in Afghanistan?
The cost of incorporating a company in Afghanistan is estimated at $15,800 in the first year, while the subsequent annual company costs are $4,000. The average cost per engagement, which includes setting up a company in Afghanistan, opening a corporate bank account, and paying all government fees, is expected to be $30,650.
Are Foreigners in Afghanistan on Certain Passes Allowed to Start a Business in Afghanistan?
The Afghanistan Investment Support Agency (AISA) promotes foreign and domestic investment for companies planning to start a business in Afghanistan. AISA’s mandate is to provide comprehensive support to investors by creating a favorable investment climate and simplifying administrative procedures.
Foreign investors who wish for company incorporation in Afghanistan must obtain an investment license from AISA. The investor must first register their company with the Ministry of Commerce and Industries (MOCI) to obtain the license. Once the registration is complete, the investor can submit their investment application to AISA.
The investment application must include details such as the investor’s business plan, financial projections, and a list of proposed investments. AISA will then evaluate the application and decide within 14 days. If approved, the investor will be issued an investment license valid for up to three years and can be renewed.
The investment license provides the investor various benefits, including tax exemptions and protections against expropriation. However, the investor must comply with all relevant laws and regulations for offshore company registration in Afghanistan.
Government Assistance for Foreign-owned Businesses
The Afghan government has implemented straightforward business regulations, making company incorporation in Afghanistan more accessible. A few grants to start a business in Afghanistan are given below:
- According to the Private Investment Law of 2005 (PIL), foreign and domestic qualified entities are allowed to invest in all sectors of the economy while planning to start a business in Afghanistan.
- Afghanistan joined the World Trade Organization (WTO) on July 29, 2016, resulting in numerous benefits for the country, including increased foreign direct investment opportunities.
- Furthermore, under Article 16 of the PIL, approved foreign and domestic companies with similar objectives are granted equal rights and protections under Afghan law. They are safeguarded against any form of discriminatory governmental action.
- In October 2016, the Afghanistan Investment Support Agency (AISA) merged with the Ministry of Commerce and Industries (MOCI) to form a unified entity. However, during the ongoing transition period, AISA continues to function semi-autonomous, retaining certain responsibilities.
- A restructuring plan is being executed to establish an investment promotion directorate under the MOCI. The MOCI now assumes responsibility for promoting trade, investment, and business development to encourage foreign entities to start a business in Afghanistan. The High Commission on Investment (HCI), which comprises the Ministers of Agriculture, Economy, Finance, Foreign Affairs, Mines and Industries, the Governor of the Central Bank, and the Chief Executive Officer of AISA, is accountable for investment policy formulation. The Minister of Commerce and Industries presides over the HCI. The High Economic Council (HEC) is also involved in investment policy development and comprises HCI members, private sector and academic representatives, and is chaired by the president.
- The HCI, HEC, MOCI, Afghan Chamber of Commerce and Industries, and AISA have been charged with holding talks and settling business disputes with the government.
How Can Multiplier Help?
Setting up a company in Afghanistan can be challenging and requires careful planning, research, and financial considerations. However, partnering with a Professional Employer Organization (PEO) and Employer of Record (EOR) company can simplify the process significantly. Multiplier is a reputable PEO and EOR provider offering various HR, payroll, and compliance solutions to businesses in various industries and locations.
By choosing Multiplier, businesses can entrust their HR responsibilities to our team of experts, who will manage their global workforce, streamline the onboarding process for new hires, and handle payroll without the need to establish a subsidiary. Our qualified professionals will assist in recruiting workers from around the world and expanding businesses internationally. With Multiplier’s day-to-day HR support, businesses can focus on growing their company while we manage the administrative aspects.
It is essential to note that Multiplier’s services are designed to help businesses comply with local laws and regulations, including labor, tax, and immigration laws, which can be particularly challenging in foreign markets. As a result, businesses can avoid costly penalties and legal issues by partnering with Multiplier.