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Law on Foreign [and Domestic?] Private Investment in Afghanistan - 2002

Honorable Lawyer Abdurrahim Karimi, the Minister of Justice

The law on domestic and foreign private investment in Afghanistan, in view of importance of the subject and in order to provide more facilities for domestic and foreign investment, has been thoroughly evaluated by the ministerial commission and has been ratified by the Council of Ministers.

The above law has been approved by me on the basis of Decree # (134), dated 2/6/1382 (24/08/2002) and has been communicated so that you may take action for the publication thereof in the official gazette.

Hamid Karzai
President, Islamic Transitional Government of Afghanistan

Presidential Decree of the Islamic Transitional Government of Afghanistan

NO.: (134)
Date: 2/6/1381 (24/08/2002)

In order to encourage and provide support to domestic and foreign private investments in Afghanistan, to expand the local market, to augment the national revenues, to improve the living standards as well as to assist the rehabilitation process, I approve the law on domestic and foreign private investment in four chapters and thirty articles.

The relevant ministries and organizations shall be obligated to comply with the provisions of the present law while taking actions at their end.

The present law shall be enforced beginning with the date on which it has been approved and shall be published in the official gazette.

Hamid Karzai
President, Islamic Transitional Government of Afghanistan

Law on Domestic and Foreign Private Investment in Afghanistan
CHAPTER ONE
General Provisions

Article One:

The present law has been enacted in order to encourage and support domestic and foreign private investments in Afghanistan. Investment in the present law stands for economic development, expansion of the local market, augmentation of national revenues, improvement of living standards as well as providing support to the rehabilitation process of Afghanistan.

Article Two:

Terms used in this law and the meanings they stand for are given below:

1-Investment: Employment of material and immaterial capital in the form of cash money, credit, goods, services or other types thereof (patent right, trademark and copyright) in the approved entrepreneurship.

2- Approved entrepreneurship: Investment by a real or juristic domestic and foreign entity, which meets the requirements of the present law.

Article Three:

In accordance with provisions of the present law as well as in accordance with articles of the law on commerce concerning commercial activities, domestic and foreign real and juristic entities may invest in all economic fields, such as manufacturing and services.

Article Four:

Foreign, domestic and mixed investments in Afghanistan can take place in one of the following forms:

1- 100% domestic private capital;

2- 100% foreign private capital.

3- Mixed domestic and foreign private investment.

4- Mixed government and private domestic and foreign investment.

Concerning the latter, percentage and proportion of capital shall be fixed on the basis of mutual agreement of the parties.

Article Five:

The approved entrepreneurships shall arrange their account books on the basis of international standards and shall submit them to the relevant authorities for audit.

CHAPTER TWO
SUPERVISION & COORDINATION BODY

Article Six:

The Higher Investment Commission shall be the policy making, coordinating and supervisory body of the AISA. The Commission is composed of:

• - The Minister of Commerce
• - The Minister of Justice
• - The Minister of Interior
• - The Minister of Finance
• - The Minister of Planning
• - The Minister of Rehabilitation
  

The Minister of Commerce shall chair the Higher Investment Commission.

Minister of the relevant ministry under the jurisdiction of which the investment project is being undertaken shall attend the meeting of the Higher Investment Commission in regard to that ministry.

If necessary, the President of State may bring changes in the composition of the Commission.

Article Seven:

Two entrepreneurs shall participate alternatively in the Higher Commission for a term of one year.

For the first year these representatives shall be elected by the chambers of commerce, and thereafter entrepreneurs shall recommend to the Higher Commission the methodology of election of the representatives.

Article Eight:

In order to carry out the contents of this law, the investment organization (AISA) shall be established within the framework of the ministry of commerce. Powers, functions and the organizational structure of the above organization shall be regulated through a by-law to be approved by the Higher Commission.

Article Nine:

President of the investment organization (AISA) mentioned under article eight, shall perform functions as secretary of the Higher Investment Commission.

Article Ten:

The Higher Investment Commission shall have a secretariat.

CHAPTER THREE
Fringe benefits, exemptions and obligations of the improved entrepreneurs

Taxes:

Article Eleven:

The government shall grant tax exemptions as follows:

• - In respect of short-term investment four years at maximum following the issuance of the permit, or three after the commencement of production whichever may happen first.
• - In respect of mid-term investment six years at maximum following the issuance of the permit, or five years after the commencement of production whichever may happen first.
• - In respect of long-term investment for eight years at maximum following the issuance of the permit, or seven years after commencement of production whichever may happen first.
  

Where on the basis of its particular conditions and in view of universal norms an investment needed more time the Higher Investment Commission may agree on a longer period.

Article Twelve:

In compliance with universal norms the investment organization (AISA) shall determine that under which one of the three clauses of article eleven the proposed investment does fall.

Customs Duty:

Article Thirteen:

Products of the approved entrepreneurships shall be exempt from all kinds of customs duties and charges from a period of four years following the date of commencement of production.

Lease of immovable property:

Article Fourteen:

On the basis of short-term, mid-term or long-term lease contract a foreign entrepreneur may lease immovable property for a period of ten years, twenty years and thirty years respectively. A land lease shall be conditional upon implementation of the investment project.

The Higher Investment Commission may, in view of justifiable requirement and conditions, extend the above period.

Transfer of capital and benefits:

Capital and benefits of private entrepreneurships are transferable.

Sale:

Article Sixteen:

Upon settlement of their legal accounts and agreement of the investment organization (AISA) private investors may sell the approved entrepreneurship.

Article Seventeen:

Capital and the sale proceeds can be transferred outside the country.

Purchase and sale of shares:

A foreign approved entrepreneurship may sell its shares to Afghan citizens or to the government of Afghanistan.

Article Nineteen:

Buying and selling as well as use of patents, trademarks and all types of technical information belonging to the approved entrepreneurship shall take place under legal contracts in accordance with the commitments of the entrepreneur.

Banking facilites:

Article Twenty:

An approved foreign and domestic entrepreneurship shall have the right to use banking facilities in Afghanistan, including opening foreign exchange bank accounts, as well the right to obtain loan and credit for carrying out investment in the country.

Article Twenty-one:

Private entrepreneurs, as far as possible, shall hire Afghan personnel with required skills for the operations of the approved entrepreneurship, and shall assist them in improving their technical and professional level.

CHAPTER FOUR
Miscellaneous Provisions

Seizure & sequestration:

Article Twenty-two:

The government shall not be authorized to seize and sequester foreign and domestic entrepreneurships without order of law and issuance of writ by a competent court.

Article Twenty-three:

Expropriation of foreign and domestic entrepreneurship shall only be permissible for ensuring public interests. In this case the government shall pay its fair value prior to expropriation on the basis of the prevailing rate or on the basis of estimation by an authentic global appraisal institution.

Article Twenty-four:

Private entrepreneurs shall be authorized to transfer outside the country funds receive from the government as a result of expropriation without payment of tax. The Higher Investment Commission shall redress complaints of the approved entrepreneurships and shall adopt necessary measures in this regard.

Article Twenty-five:

Construction of pipelines, telecommunications establishments, petroleum, gas, mines and heavy industries shall be an exception to the provisions of the present law. Investment in these fields shall be regulated by separate rules and regulations.

Article Twenty-six:

Dispute between foreign and domestic entrepreneurs, on the one side, and between the investment organization (AISA) and individuals and governmental institutions, on the other, shall be settled directly in a friendly manner and thorough mutual understandings in compliance with provisions of the present law, documents of the approved entrepreneurship and special contracts being signed in connection with the investment.

Where dispute cannot be solved in this way, it shall be settled through resorting to the international convention on the settlement of disputes in regard to investment between the government and citizens of other countries, concluded in Washington, dated 18 March 1965, or in accordance with the arbitration procedure of the UN Commission based on rules and regulations of international commerce.

Article Twenty-seven:

The decision adopted in accordance with international convention on dispute settlement or in accordance with arbitration procedure shall be final and shall become incumbent upon the parties.

Article Twenty-eight:

With the enforcement of this law the investment organization which had been established within the framework of the law on investment, dated 08/02/1422 L.H., (circa. 02/05/200), shall be deemed abolished. The Higher Investment Commission shall take separate decision concerning projects being evaluated by this organization.

Article Twenty-nine:

Where any provision (s) of this law may happen to be in contradiction with any provision (s) of other enforced laws on foreign and domestic private investment, the provisions of the present law shall prevail.

Article Thirty:

This law shall be enforced beginning with the date on which it has been approved by the President and shall be published in the official gazette, and with the enforcement thereof the law on domestic and foreign private investment and the rule on regulating the performances and activities of the central office for the encouragement and promotion of private investment published in official gazette # (797), dated 08/02/1422 L.H., (circa. 02/05/ 2001) shall be deemed abolished.