Guide 04

Tax Overview
for Businesses,
Investors & Individuals

Introduction
This guide is intended to assist the taxpayer
with self-assessment and compliance with tax
obligations as provided by the Income Tax Law
2009. The guide provides accurate information
concerning common taxes that businesses
are likely to encounter but it is not intended
to substitute for technical or legal advice and
should not be used as a legal reference.

Note
There are no fees or charges payable to
the Ministry of Finance or its Revenue
Department for any Tax Guides or Forms or
at any stage of the tax assessment collection
or enforcement processes.
The Income Tax Law 2009 provides for a
penalty if a taxpayer fails to submit a tax
return. This applies even if no tax is due for
the period covered by the return. To avoid
being penalized taxpayers therefore should
submit returns even if no tax is due and
state on the return that none is due.

Law, required to pay taxes or customs duties,

including social, non-prot and welfare
organizations which are withholding taxes
from the salaries of employees or from rental
payments, are required to obtain a Taxpayer
Identication Number. Persons who have or
open an account with a bank or other financial
institution are also required to have a Taxpayer
Identification Number (Article 86). The Income
Tax Law 2009 provides for additional taxes and
penalties where a person fails to apply for a TIN
without reasonable cause (Article 105).
Taxpayer Identication Numbers, as well as
information regarding TIN requirements and
application forms, can be obtained in Kabul
at the Afghanistan Revenue Department or
at the Mustuat offices in Mazar-e Sharif,
Kandahar, Jalalabad, Herat, and Kunduz. As
well as information rearding TIN requirments
and application froms, TIN applications are also
available online at www.mof.gov.af/tax.

Note
Most businesses have a licensing or
registration
requirement
with
other
government
agencies.
For
import/
export businesses, please contact the
Department of Licensing at the Ministry
of Commerce in Kabul. For investments,
please contact the Afghan Investment
Support Agency (AISA), located opposite
the Ministry of Foreign Affairs in Kabul at
+93 (0) 70 288 304. The web address for AISA is:
www.aisa.org.af.

Confidentiality

Administrative Issues for Taxpayers

All information provided in the tax returns or

gathered by the Afghanistan Revenue Department
through examination of books and records of the
taxpayer, or a third party associated with the
taxpayer, is confidential. It may not be disclosed
to anyone outside the Ministry of Finance unless
authorized by law (Article 91).

In order to make tax administration more efficient

and to ensure proper crediting of taxes paid to
taxpayer accounts, the Ministry of Finance has
implemented a unique taxpayer identication
number (TIN) program. All individual persons,
companies, and organizations which are,
according to the Income Tax Law and Customs

Any instance of a taxation officer disclosing

confidential information or misusing their
position in any unauthorized way for the
purpose of direct or indirect benefit will be
referred to the office of the Attorney-General so
that the matter can to be dealt with accordingly
(Article 106).

Taxpayer Identication Number (TIN)

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Requirements for books & records

The Income Tax Law 2009 requires taxpayers
maintain and preserve business records (Article
36). All natural or legal persons with taxable
income in a taxable year must keep records
related to all transactions, all movable and
immovable property, and all income necessary
to prepare complete and accurate tax returns.
Records include ledgers, journals, vouchers,
financial statements and accounts, and income
tax records. They are to be supported by source
documents.
Records normally summarize the information
contained in the source documents. Source
documents include sales invoices, purchase
receipts, contracts, guarantees, bank deposit
slips, cheques etc. They also include cash
register slips and credit card receipts, purchase
orders, work orders, import and export
documents, delivery slips, e-mails and general
correspondence in support of the transaction.
The Afghanistan Revenue Department does not
specify the books and records you need to keep.
You may choose a system of record keeping that is
suited to the purpose and nature of your business.
However, these records must clearly reflect your
income and expenditure. Your records must be:
 eliable and complete
R
Provide the correct information necessary
to calculate your tax obligations and
entitlements
Be supported by source documents to verify
the information contained in the records
Include
other documents such as
appointment books, logbooks, income tax
returns, business receipts tax returns, rent
withholding tax returns, wage withholding
tax returns, certain accountants working
papers, that assist in determining your
obligations and entitlements

businesses should retain documentation related

to transfer pricing policies and documentation
pertaining to any distribution of branch and
subsidiary profits.

Method of accounting
Corporations and limited liability companies
are required to compute their income using the
accrual method of accounting which recognizes
income and expenses when due (Article 37).

Taxation year
The taxable year is the solar year which starts
from the first day of Hamal (21st March) and ends
on the last day of Hoot (20th March) (Article 3),
A legal person (but not a natural person) wishing
to use a different taxation year may apply in
writing to the Ministry of Finance explaining the
reasons for the requested change. The Ministry
of Finance may approve such an application
but only where the application is justifiable. The
Ministry will inform the legal person of this in
writing, establishing the commencement date
of the change and expected tax payment dates
which will be determined by the Ministry. The
Ministry decision will ensure that neither the
taxpayer nor the Government of Afghanistan
obtains an unduly favourable tax position as
compared with payments by other taxpayers.

Note: Persons engaged in more than one

business are required to keep separate
records for each business.
Businesses should also retain documentation
to support their transactions. This is particularly
important for businesses engaged in international
non-arms
length
transactions.
These
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2010 03 004 001 E

Availability of records
In order to confirm that a tax liability or refund
has been properly established, or to estimate the
income of a person, Ministry of Finance officers
are entitled to have access to the business
premises and to the inspection, examination and
copying of books of account, papers, records etc.
held by the person or by third parties (Article 91).
Third parties may include business associates,
customers, suppliers, financial institutions, other
government departments etc.

Taxes
Income Tax
Corporate (legal persons):
Corporate income tax is a at tax of 20%
(Article 4) of net taxable income. Net taxable

income is computed by deducting all ordinary

and necessary business expenses from gross
income (Chapter 2). Corporate rates apply
to legal entities such as corporations, limited
liability companies, and other legal entities. The
annual tax return is due and payable by the end
of Jawza (3rd month) of the next fiscal year.
Personal (natural persons):
Resident natural persons are taxed on income from
all sources worldwide, including but not limited to
wages, salaries, rents, certain types of partnership
income, royalties, etc. Non-residents are taxed
on all income with its source in Afghanistan. The
annual tax rates are as follows (Article 4):
Income
more than

Income not
more than

Tax

60,000
afghani

0%

60,000
afghani

150,000
afghani

2% of amount over
60,000 afghani

150,000
afghani

1,200,000
afghani

1,800 + 10%
of amount over
150,000 afghani

1,200,000
afghani

106,800 + 20% of
the amount over
1,200,000 afghani

Two aspects of personal income tax may impact

on business owners. They are wage withholding
and personal income tax for sole proprietors.

Wage withhdolding tax

Employers with two or more employees are
required to withhold tax from their employees
salaries and wages based on the above rates
(Article 58). There is a monthly exemption of 5000
afghani per person. Salaries and wages include:
regular pay, overtime pay, cash allowances (e.g.
food, transportation) and non-cash payments.
These rates are pro-rated based on the frequency
of payment (monthly, weekly, etc.).
Wage/salary earners with only one employer and
no other sources of income are not required to le
an annual tax return. A wage earner who has more
than one employer or additional sources of income
must le an annual income tax declaration.
The employer is required to remit to the State
the amount withheld no later than 10 days after
2010 03 004 001 E

the end of the month in which the amounts were

withheld (Article 60). The remittance is made
directly to a branch of Da Afghanistan Bank
using the appropriate form.
There are annual reporting requirements for
employers both to the employee and to the
Ministry of Finance (Article 61).
For more information regarding the wage
withholding tax, please refer to Guide 05, Wage
Withholding Tax, available at the Afghanistan
Revenue Department or online at www.mof .gov.
af/tax.

Sole proprietors
Self-employed individuals must le a tax return
and are allowed to deduct all ordinary and
necessary business expenses against their
income to compute net taxable income.
Tax is calculated on net taxable income using
the same annual tax rates and thresholds as
applicable to other individuals (Article 4).
The annual tax return for a sole proprietor is due
and payable by the end of Jawza (3rd month) of
the next fiscal year.

Withholding tax on rental

services (Article 59)
This is a pre-payment of landlords income tax.
Legal entity tenants and natural person tenants
conducting business at the rented property, and
paying more than 10,000 afghani per month in
rent are required to withhold the tax (and are
liable for the tax) at the time the rent is paid.
The tax withheld is 10% of the rent payment for
payments over 10,000 afghani per month but
less than or equal to 100,000 afghani per month,
and 15% of the rent payment for payments over
100,000 afghani.
The landlord is responsible for reporting rental
income on his annual income tax declaration
and paying tax annually at appropriate rates
depending on entity type (legal person or natural
person). Ordinary and necessary expenses of
maintaining a rental property are allowable as
deductions against rental income. Tax withheld
and paid by the tenant is allowed as a credit
when the annual tax return is led.
3

Landlords are responsible for providing their

tenants with accurate copies of their rental or
lease agreements as well as their Taxpayer
Identification Number (TIN)
Taxes are generally due on a monthly basis.
However, if the rental agreement specifies
a different rental payment schedule (e.g. bimonthly, quarterly etc.) the tax withholding and
payment should follow the rental schedule. The
payment is made at Da Afghanistan Bank no
later than the 15th day following the end of the
solar month in which the rent payment is due.

Business Receipts Tax (BRT) (Chapter 10)

A 2% business receipts tax is imposed on
gross receipts of all types of income of
corporations and limited liability companies
and individuals whose income is more than
750,000 afghanis per quarter, except for
certain types of income described below
where the BRT rate is 5% or 10%.
There is also a 2% BRT on imports, payable to
the Customs House where and when the customs
duty is paid. This BRT is treated as an advance
payment of the quarterly BRT assessment.
10% BRT is payable on gross receipts from
provision of the following services:
International passenger airline services
T
 elecommunications services, including
Internet services
Hotels providing superior services
Restaurants providing superior services

Other hotels and restaurants with income of

750,000 afghanis or more per quarter and clubs
and halls (event venues) pay 5% BRT.
The business receipts tax paid is deductible from
gross income in arriving at taxable income for
income tax purposes (Article 67)
Tax forms and payments are due on a quarterly
basis using the solar calendar. Tax payments are
made at Da Afghanistan Bank no later than the
15th day following the end of the solar quarter in
which the sales were made (Article 88).
For more information regarding the business
receipts tax please refer to Guide 03 - Business
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2010 03 004 001 E

Receipts Tax on Services, Guide 9 2% and 5%

Business Receipts Tax and Guide 12 - Airlines
(available online at www.mof.gov.af/tax).

Fixed Taxes (Chapter 11)

There are xed taxes in lieu of income tax
imposed on certain business and transaction
types. In some cases the fixed tax is a prepayment
of income tax but does not relieve the taxpayer
from the need to file an income and/or business
receipts tax return. The following fixed taxes are
addressed by Chapter 11:
 ixed tax on imports
F
Fixed tax on the transport of goods or
passengers for business purposes
Fixed tax of contractors
Fixed tax on exhibitions
Fixed tax on small businesses

Fixed Tax on Imports (Article 70)

Persons who import goods are subject to a fixed
tax on the cost, including customs duties, of the
imported goods.
Persons with a current business license are
subject to a 2% fixed tax. The tax paid is allowed
as a credit in the income tax assessment for
the year in which it is paid. Persons without a
business license are subject to a 3% fixed tax
which is payable instead of income tax.
The fixed tax on imports is paid when and where
the customs duties on the imported goods are paid.

Fixed Tax on the Transport of Goods

or Passengers for Business Purposes
(Article 71)
Persons who transport passengers or goods
for business purposes are required to pay an
annual fixed tax before renewal of their vehicle
registration.

Fixed Tax on Contractors (Article 72)

Persons who, without a business license, provide
supplies, materials, services and/or construction
under contract to government agencies,
municipalities, state entities, private sector
business and organizations, and other persons,
are subject to a 7% fixed tax in lieu of income tax.
Persons carrying business licenses providing

the above services to the mentioned entities

are subject to 2% contractor tax. This tax is
creditable against subsequent tax liabilities.
This tax is withheld from the gross amount
payable to the contractor.

Fixed Tax on Exhibitions (Article 73)

The fixed tax on exhibitions applies to natural
persons who are resident of Afghanistan and
to non-resident natural and legal persons who
provide entertainment such as theatre, cinema,
radio, television, music, or sport in Afghanistan.
Income from these businesses is subject to a fixed
tax of 10% of receipts from sale of admission or
tickets. The fixed tax is imposed in lieu of income
tax and business receipts tax. The fixed tax is due
on a monthly basis and must be paid no later than
the 15th day of the next month. If the mentioned
shows are not continuous, the tax must be paid
by the 15th day of the month following the month
in which the show took place.
Other persons who provide entertainment and
recreational services are subject to income tax
and business receipts tax.

Fixed Tax on Small Businesses

(Article 74 and 75)
Shopkeepers and other small businesses that
do not keep detailed records are classied
according to amount of gross income received
and pay a prescribed fixed tax accordingly.

Note
Articles 71 (Fixed Tax on Exports), 75 (Fixed
Tax on Grain and Processing Mills, Cane
and Seed Oil Machinery), 78 (Fixed Tax
on Physicians), 80 (Fixed Tax on Persons
without a Fixed Place of Business), and 81
(Fixed Tax on Brokers and Commissioners)
from the Income Tax Law 2005 have been
repealed. Taxpayers affected by this change
will now be subject to annual income tax or
the Fixed Tax on Small Business.

your local Mustufiat Office.

Other fees
The Ministry of Finance administers a fee that
is not contained in the Income Tax Law 2009.
This is the Airport Departure Fee of 500 afghanis
for international departures and 50 afghanis for
domestic departures.

Tax administration organization, audit

and enforcement Provisions, and other
administrative issues
Large Taxpayer Office (LTO)
The Large Taxpayer Office serves as a one-stop
office for a select number of large taxpayers.
Criteria for inclusion in this program include
annual turnover, risk to Ministry revenues,
specialized industry type, and amount of capital
investment.
The LTO program offers many benets to
the taxpayer. The higher ratio of Revenue
Department employees to taxpayer allows
for service tailored to large taxpayer needs,
multi-lingual communication (Dari, Pashto, and
English) and frequent contact via telephone,
e-mail, and personal visits.
The LTO program also features personalised
information and education programs for taxpayers
and their employees related to specialised
business or industry/sectors concerns.
The LTO program includes special selection
and training of Revenue Department employees
with training which emphasizes responsiveness,
courtesy, and professionalism in their dealings
with taxpayers.
The LTO is located at the Afghanistan Revenue
Department in Kabul, with expansions either in
place or planned for Herat, Jalalabad, Balkh,
Kunduz and Nimroz; the program will cover all
large taxpayers nationwide.

Medium Taxpayer Office (MTO)

For more information regarding fixed
taxes, see Guide 19 Fixed Taxes on
Commercial Activities or contact the
Afghanistan Revenue Department or
2010 03 004 001 E

The criteria for inclusion of taxpayers in this

category are very similar to those for the LTO
but, in general, with a lower level of turnover.
The following categories are included.
5

A


business with income or invested capital

sufficient to qualify for LTO treatment but
income is exempt or largely exempt
Business entities required to prepare
balance sheets
Diplomatic or International representations.
Educational or Health Institutions outside
the State system
Foreign owned businesses
Unregistered sole proprietors or legal
entities whose annual gross income does
not exceed 5 million afghanis or with initial
capital of 15 million afghanis.
The intention is to extend the same level of service
provided by the LTO to a much greater number
of taxpayers and at the same time significantly
improve the flow of revenue to the Government.
The MTO in Kabul is located on the ground floor
of the Afghanistan Revenue Department Building
on Jalalabad Road. Future expansion of the MTO
concept is being planned for other provinces.

submit tax returns or failing to pay their tax

liabilities are actually defrauding their country
and fellow residents/citizens.
The Afghanistan Revenue Department is obliged
by law to determine and collect from each
taxpayer only the correct amount of tax that is
due to the Government.
The Afghanistan Revenue Department officers and
staff are representatives of the Minister of Finance
and in that capacity must ensure that the tax laws
are administered correctly and fairly so that no one
is prejudiced or favored above the rest.
The Income Tax Law 2009 provides the Ministry of
Finance with all of the enforcement powers necessary
to collect the taxes that are rightfully due.
A
 ssessments

the Ministry of Finance may

amend tax assessments (or tax shown on tax
returns) to correct intentional or inadvertent
errors. The Ministry may also raise an
assessment for tax based on estimated
income where no return has been filed.

Tax forms and instructions

Examples of tax returns, instructions for
completing tax returns and miscellaneous guides
can be seen on line at www.mof.gov.af/tax . Tax
returns are available at the Large Taxpayer
Office and the Medium Taxpayer office.

Audit of taxpayers records

The Revenue Department regularly conducts
audits of taxpayer records to assure accuracy of
filings and correct payments based on the self
assessment methods prescribed by the Income
Tax Law 2009.

Audit frequency depends on a number of factors.

Audits generally will be arranged in advance at
times mutually convenient to the taxpayer and
revenue officials so as to minimize disturbance to
the taxpayers business. Any errors and necessary
corrections discovered will be discussed and
agreed to at the end of the audit visit.

Enforcement provisions (Chapters 14 & 16)

Tax revenue enables the Government to provide
essential services such as education, health,
infrastructure and security to the residents of
Afghanistan. Taxpayers who ignore their tax
obligations such as not registering, failing to
6

2010 03 004 001 E

 roperty actions The Ministry of Finance

P
may place restrictions on the sale of movable
and immovable property, place liens or
encumbrances on property or seize property
for the purpose of sale. These actions may be
taken upon approval of the courts.
 irector and shareholder liability The Ministry
D
may under certain conditions collect the tax
debt of the company from its directors, certain
shareholders and third parties who have
received assets from the debtor company.
 ollection from third parties The Ministry has
C
the power to issue an order (sometimes known
as a garnishee order) to collect amounts owed
to the tax debtor by third parties. These third
parties could include customers, financial
institutions, employers, tenants, etc.

 eparture Prevention Order This is an order

D
to the appropriate authorities to restrict or
prevent an individual (including an assessed
director, shareholder or third party) who has
unpaid taxes of more than 20,000 afghanis
from leaving the country.
T
 emporary business closure Where a
person fails to file a tax return, fails to pay tax

liabilities on the due date or fails to withhold

(rent, wages, dividends etc.) and pay tax, that
person may be the subject of an order to close
the business until the taxes are paid.

 on-issuance of licenses When persons

N
have not paid the taxes due, the Ministry of
Finance may inform other government ministries, agencies and departments which
have the authority to issue licenses, not to
renew those licenses. Other ministries and
government agencies are to issue licenses
only when they have such documents from
the Ministry of Finance to indicate that the
business has fulfilled its tax obligations.

The law also provides for the imposition of

additional taxes, penalties and fines. These
sanctions may be imposed under several
circumstances including:
 ailure to maintain and to provide access
F
to books and records (Article 101)
Failure to file a tax return (Article 102)
Failure to withhold tax as required rent,
dividends, interest, royalties, wages,
salaries, commissions etc. (Article 103)
Failure to pay the taxes due (Article 104)
Failure to apply for a Tax Identification
Number (TIN) (Article 105)
Evasion of income tax (Article 98)
Offenses committed by taxation officers
pertaining to disclosure of confidential
information and misuse of their position.
(Article 106)

Late Payment Charge

When a taxpayer has failed to pay his/her tax
liability by the due date, the person is subject to
additional income tax of 0.10 per cent of the tax
due, per day (Article 100).

Overpayment of Tax
If the Ministry of Finance finds, upon examination
of a return, refund claim, overpayment claim or
court judgment that the tax paid is in excess
of the amount due, the Revenue Department
official in charge of the taxpayers file will
contact the Customs Department to confirm that
the taxpayer does not have any outstanding
liability for customs duties. The official will also
investigate if any other taxes remain unpaid. Any
2010 03 004 001 E

overpayment will be first applied against unpaid

taxes or customs duties and the excess held in
credit for the taxpayer (Article 90).

Objections and Appeals

The Income Tax Law 2009 provides a formal
administrative dispute resolution process for
any person who is dissatisfied with an income
tax assessment (Article 89). This process
can involve three steps. First, a person may
request an amendment to his/her income tax
assessment. Second, if a person is dissatisfied
with the decision on his/her request for an
amendment, they may lodge an objection which
is reviewed by an independent review panel.
Third, and finally, a person who is dissatisfied
with the decision of the review panel may appeal
to a court of competent jurisdiction.
More detailed information concerning the
objections and appeal process can be obtained
from the Appeals Unit, the Large Taxpayer Office
or the Case Management Team of the Medium
Taxpayer Office at the Afghanistan Revenue
Department, at your local Mustufiat Office, or by
visiting the tax information website at www.mof.
gov.af/tax.
The website provides access to the appropriate
objection/appeal forms, the tax law, the tax
manual and Guide 11 Disputing the Amount
of Income Tax Payable in an Income Tax
Assessment.

Electronic funds transfer

It is now possible to pay your taxes using
electronic funds transfer. The process is simple
and should make compliance easier, especially
for those businesses and organizations with
accounting and payment offices outside of
Afghanistan.
For additional information on electronic funds
transfers please refer to Guide 6 Paying Your
Tax by Electronic Funds Transfer at www.mof.
gov.af/tax. You may also visit the Afghanistan
Revenue Department, Taxpayer Assistance
Team at the Ministry of Finance in Kabul.

Customs duties
Import and export businesses, as well as
those businesses that must import goods and
7

materials for use in their business should contact

the appropriate customs house regarding their
customs affairs.

Tax administration reform

In order to promote voluntary compliance with
Afghanistans tax laws, the Ministry of Finance is
working to reform the Revenue Department and
other Ministry offices in order to create a more
efficient and effective tax administration. The
new organization will be more service-oriented,
realizing that education and information are the
foundations for compliance. At the same time,
the organization will be developing modern
enforcement programs along international
standards that will help ensure a fair tax
system. Above all, the Ministry is working to
eliminate corruption and establish a transparent
administration that effectively uses budgeted
funds. This is a long term commitment, and the
resulting organization will do much to create a
better business climate in Afghanistan.

Corporate tax reform

The government is committed to making
Afghanistan attractive to investors and has
continued to reform corporate taxation consistent
with international standards and best practice.
The Income Tax Law 2009 includes provisions
for accelerated depreciation (over four years for
buildings and two years for other assets) and the
ability to carry losses forward for an unlimited
period until fully recouped.

A
 llowing

legal persons to apply for a fiscal

year that is other than the Solar Year.

Tax forms and information

For tax forms, guides, and other
information and assistance, you can visit
the, Afghanistan Revenue Department,
your local Mustufiat Office, or the Tax Information
Page at www.mof.gov.af/tax where you can also
find and download the Income Tax Law 2009.

Note
The
Taxpayer
Information
Page
at
www.mof.gov.af makes it easy for taxpayers
to find and download useful information to
meet their needs. Here the taxpayer can find
the Income Tax Law 2009, various public
announcements and rulings, forms, along
with instructions for completing same,
guides, archived documents, Questions &
Answers regarding wage withholding tax, and
more. The page also includes an Income Tax
Manual. The manual discusses separately
each article of the law, along with relevant
regulations, often with helpful examples

Other corporate tax reform measures which

have been implemented include:
T
 axing branches of foreign companies on
the same basis as subsidiaries of foreign
companies
T
 ax incentives for extractive industries
Extending the 20% withholding on dividends
to include withholding for interest, royalties
and other similar payments
Deductions allowed on the basis of
attribution of actual expenses between the
branch and the non-resident person
Ensuring arms length pricing between
associated entities
Implementing general anti-avoidance rules
to address tax avoidance practices
Quarantining foreign losses against foreign
income

2010 03 004 001 E

1389
Ministry of Finance
Afghanistan Revenue Department

Islamic Republic of Afghanistan