Under Afghan law, there is no such thing as “inactive” status for companies. Once your organization is registered in Afghanistan, whether as a local company or a branch of a foreign company, certain tax reporting obligations attach to the organization. These reporting obligations continue regardless of whether the company currently has operations in Afghanistan. Failure to keep up with reporting obligations, even when there are no revenue or expenses to report, will lead to penalties, late fees, and possibly other enforcement actions such as bank accounts being frozen or the company being blacklisted by the Central Business Registry (CBR).
The only way to stop the tax reporting burden is to close the company. If your organization currently has no business in Afghanistan but has a reasonable prospect of future business, then it probably makes sense for you to retain a tax consultant to make your tax filings for you. However, if you are ceasing operations for the foreseeable future, then closing the company is an option you should consider.
Closing a company is not complicated, but it can be a lengthy and time-consuming process. It is not unusual for the process to take 4-6 months, and sometimes longer. If you are contemplating this option, you should seek advice and start the process as early as possible.
The application to close the organization consists primarily of a letter to the CBR requesting closure. However, the CBR will issue letters to a number of other government offices, including the tax office, asking those authorities to confirm that your company has no outstanding obligations. If you are not fully caught up on your tax filings, the tax authorities will not issue a clearance letter, and the CBR will not close the company. You will need to file any missing tax returns before you can obtain the required clearance letter and proceed with the closing.
You should also be aware that depending on your particular circumstances, you may have other legal obligations. If you are closing or downsizing an office, or suspending operations, you may be responsible for severance payments to terminated employees. You also may need to cancel work permits and visas for your employees (note that under new Ministry of Labor procedures, work permits must be formally canceled by the company even if the permits are expired).
Kakar Advocates is available to guide you through all aspects of the closure process. Contact us to discuss company closure and other tax and labor-related issues your organization may be facing.