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Taxation in Afghanistan
The national taxation system of Afghanistan has been altered in recent years; new changes were brought in to simplify a wide range of nuisance taxes. Both tax authorities and investors were trained and educated; for authorities to effectively and efficiently administer tax payments while for investors on their tax obligations. The taxpayer must acquire a tax identification number (a unique number for every taxpayer). All investors need to file their returns even if the returns are not taxable. Information provided by the taxpayers is kept confidential in the Ministry of Finance (MoF) unless authorized by law. The taxpayers are also required to maintain books and records using an accrual method of accounting. The taxation year starts from 1st of Jaddi (21st of December) to last day of Qaws (20th of December).
Following are some main types of taxes in Afghanistan:
Corporate/Income TaxThe income tax is imposed for each taxable year on the taxable income of each person, corporation, limited liability company, or other entity. The taxable year is the solar year except as otherwise provided in this Law. The taxable income is the sum remaining after all the deductions and exclusions authorized in this Law and its regulations are deducted from the total of all receipts of the person, corporation, Limited Liability Company or organization. The income tax of legal persons, corporations, limited liability companies, and general partnerships is 20 percent of its taxable income in the fiscal year. Income in foreign money shall be converted to Afghanis for purposes of taxation. The rate of conversion shall be the average of free rates used by Da Afghanistan Bank to purchase such foreign money at the end of each month.
Withholding of TaxesAll partnerships, organizations, agencies, departments, and enterprises of the State and municipalities; all corporations and limited liability companies employing two or more persons in any month of a year are required to withhold taxes as provided in Article 3 of Income Tax Law (Full Law link provided at the end of this document) from all salary and wage payments, and pay the amount withheld to the Government account.
|NO||Taxable Amount (AFS)||Rate of Tax||Description|
|1||0 – 5000||No Tax||No tax is imposed on salaries/wages up to mentioned amount.|
|2||5001 – 12500||2%||AFS 5000 Tax free, AFS 7500 taxed at 2% which equals AFS 150.|
|3||12501 – 100000||10%||AFS 150 + 10% Tax remaining amount which equals AFS 8750.|
|4||100001 – Above||20%||AFS 8900 + 20% Tax on remaining amount.|
|5||1Rental Withholding||20%||Payments of rent for buildings and constructions which are rented to legal or natural persons and are used for business purposes or offices where the monthly rent is more than AFS 15,000, are subject to a 20 percent income tax.|
Business Receipts TaxThe business receipts tax is collected from limited liability companies, corporations, general partnerships and organizations as follows:
- Five percent of the gross receipts (before any deductions) during the fiscal year of commissions, fees, interest, dividends, rent, royalties, and similar income. However, the business receipt tax does not apply to the rental income of a natural person from which tax has been withheld under Article 65.
- Two percent of all the gross receipts (before any deductions) during the fiscal year for materials, equipment, services, transportation, and construction provided under terms of a contract;
- Two percent of the gross receipts (before any deductions) during the fiscal year from premium income for insurance;
- Two percent of the gross receipts (before any deductions) during the fiscal year from sale of admissions to public entertainment including cinema shows, plays, concerts, exhibitions, sports and other shows.
- Two percent of the gross receipts (before any deductions) during the fiscal year from sales of products, good s, assets, and other services.
- Ten percent of the income derived from the services provided by a legal or natural person which is AFS 50,000 or more per month in accordance with the rulings issued by Ministry of Finance.
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