Taxes in the country are collected by the government in accordance with the Afghanistan tax laws. Citizens and ex-pats are required to pay taxes on all income earned while residing within the territory. Also, companies operating fully in the state must pay tax on the profits made from doing business in the nation.
If you are interested in learning more about the tax system here, this guide provides detailed information on taxes and their various types.
Tax payment requirement
Generally, residents must pay tax on income received under employment. Likewise, non-residents and ex-pats are liable to similar taxes for Afghanistan-sourced income.
An individual is deemed to be a resident for the tax year provided such a person has a permanent home here during the tax year, stays in Afghanistan for 183 days in the tax year, or is an employee under the government working overseas.
Types of Taxes
There are several types of taxes levied in the state. They include business receipt tax, corporate income tax, personal income tax, capital gains tax, value-added tax, and withholding tax.
Corporate Income Tax
Corporations are subjected to paying a CIT. Foreign businesses have to pay the same tax as Afghan corporations, irrespective of having a permanent establishment in the state or not, but only on their Afghan-sourced incomes.
Capital Gains Tax
Capital gains are considered taxable, thus a corporate tax rate of 20 percent is imposed on them. However, if gains arise from the transfer of movable or immovable property, a 1 percent capital gains tax is paid instead. When a loss is incurred during the sale or exchange of shares (stock), it may be offset against gains by such transaction in the same year.
Personal income taxes
The Personal income tax rate is imposed on persons with sources of income such as labor, pensions, interest, and dividends. Revenues generated from this tax are sources of income for the government and are used to provide amenities for citizens. It is compulsory for all persons living here to pay tax at progressive rates, calculated monthly.
| Income slab per month (AFN) | Rate |
| 0 – 5,000 | 0% |
| 5001-12,500 | 2% |
| 12,501-100,000 | 10% + AFN 150 |
| 100,001 and above | 20% + AFN 8,900 |
Persons such as entrepreneurs who are self-employed have to file a tax return yearly. They are permitted to deduct business expenses incurred against their income to estimate the net taxable income.
Value Added Tax (VAT)
The tax amendment in 2010 came with a value-added tax rate (VAT) of 10%. Local business owners and their trade partners are subject to VAT. A native taxpayer pays the VAT on the taxable supply, while the importer pays the VAT on the taxable imports.
Income realized from the following sources in accordance with the provisions of the law are VAT exempt: health services, education services, financial and insurance services, transfer or lease of immovable properties for residents, provision of religious services, humanitarian aid, provision of goods and services to a government entity for rehabilitation after natural disasters, industrial incidents and catastrophes, physical education, and sports services. Some imports are tax-exempt. They include goods of travelers for personal use, personal effects of immigrants and refugees; goods of diplomats, et cetera.
Withholding tax
When a company is paid for the provision of goods and services under contracts to state organizations and private firms, they are subject to a 2 percent withholding tax (7% for firms without an AISA business license). A withholding tax rate of 20 percent is imposed on income from rents surpassing AFS 15,000.
Note
There is no provision for any other tax in the Afghan Income Tax law.
