Afghanistan flag Afghanistan: Business Environment

Tax rates in Afghanistan

Tax Rates

Consumption Taxes

Nature of the Tax
A Business receipt tax (BRT) was levied at at varying rates according to the sector of activity. However, this tax has been replaced by VAT, which entered into force on 21 December 2020 (with a 10% rate).
Tax Rate
Reduced Tax Rate
Exempt goods and services include:
•    health services;
•    educational services;
•    financial and insurance services;
•    transfer or lease of immovable properties for residential purposes;
•    provision of religious services;
•    humanitarian aids;
•    goods and services provided to a government entity for the purposes of rehabilitation after natural disasters, industrial incidents, and catastrophes; and
•    sports services.

Zero-rated goods and services include:
•    export of goods or services for use outside the country;
•    international land transport of goods or passengers including the supply of goods and related services;
•    transfer of part or whole of a business as a going concern by a registered person to another registered person, provided by a written agreement between parties and notified to the ministry of finance;
•    some basic foods items (wheat, flour, rice, sugar, cooking oil, tea, onions, potatoes, salt);
•    books and educational materials; and
•    basic materials used for household purposes (coal, wood, gas, soap).

Other Consumption Taxes
There are no excise taxes in Afghanistan.

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Corporate Taxes

Company Tax
Tax Rate For Foreign Companies
Foreign companies are subjected to the same taxation treatment as Afghan companies, regardless of whether they have a permanent establishment in Afghanistan, but only on their income sourced in the country.
Capital Gains Taxation
Capital gains are generally included in taxable income and subject to the corporate tax rate of 20%. Nevertheless, gains arising from the transfer of movable or immovable property are subject to a 1% capital gains tax. This tax can be used as a credit against corporate tax.
Losses incurred on the sale or exchange of shares of stock may be offset only against gains from the sale or exchange of shares of stock in the same year.
Main Allowable Deductions and Tax Credits
In general, all expenses related to the business activity are deductible.
Depreciation of capital assets, movable and immovable property (except for land) is deductible for tax purposes. There is no provision for the deduction of start-up expenses in the Afghan Income Tax Law.
Interest expenses can be deducted subject to the withholding tax at a rate of 20%. No deduction is allowed for dividends, interest, royalties, rents, commissions, wages, salaries, payments to contractors and similar expenses if the taxpayer is required to withhold tax but has failed to do so.
Bad debts are allowed as a deduction if the following conditions are satisfied:
- the amount of the debt was previously included in the taxable income
- the debt is written off in the accounts of the taxpayer
- the taxpayer has reasonable grounds for believing that the debt will not be recovered.
There is no provision for the deduction of charitable contributions, fines and penalties and taxes (except for the business receipt tax, which is considered to be an ordinary and necessary expense and is therefore deductible from gross income).
Net operating losses can be carried forward for three years and set off against profits until the loss is fully set off.
Other Corporate Taxes
Natural and legal persons importing goods with a valid business license are subject to a fixed tax rate of 2% of the total cost (including custom duties). Natural and legal persons without a business license issued by the Afghanistan Investment Support Agency (AISA) or the Ministry of Commerce are subject to the income tax at a rate of 3%.
Payments for providing goods and services under contracts to state institutions and private entities are subject to a 2% withholding tax (7% for firms without an AISA business licence).
Rental income exceeding AFS 15,000 per month is subject to a withholding tax of 20%.
There is no provision for any other tax in the Afghan Income Tax Law (stamp tax, social security contributions, etc.).
Other Domestic Resources
Afghanistan Revenue Department
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Country Comparison For Corporate Taxation

  Afghanistan South Asia United States Germany
Number of Payments of Taxes per Year 8.0 31.1 10.6 9.0
Time Taken For Administrative Formalities (Hours) 275.0 282.9 175.0 218.0
Total Share of Taxes (% of Profit) 36.4 39.9 36.6 48.8

Latest available data.

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Individual Taxes

Tax Rate

Personal Income Tax Progressive rates from 0% to 20%
Between AFN 0 and 12,500 0%
Between AFN 12,500 and 100,000 10%
Above AFN 100,000 AFN 8,750 + 20%
Allowable Deductions and Tax Credits
Natural persons are subject to the same deduction rules as legal persons. As such, all ordinary and necessary expenses of production, collection, and preservation of income can be deducted provided that these expenses have been incurred during the tax year or one of three previous years.
Income obtained from agricultural or livestock production is exempt from income tax. Grants and gifts from public institutions and foreign governments are also exempt from income tax.

Self-employed individuals must file a tax return and are allowed to deduct all ordinary and necessary business expenses against their income to compute net taxable income.

Special Expatriate Tax Regime
Non-resident persons and expatriates are subject to the same tax treatment for their Afghanistan-sourced income.
A person is considered a resident of Afghanistan for the tax year if:
- the person has his or her principal home in Afghanistan at any time during the year; or
- he/she is present in Afghanistan for a period or periods amounting to 183 days in the tax year; or
- he/she is an employee or official of the Government of Afghanistan posted abroad at any time during the tax year.

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Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed

Withholding Taxes
Dividends 20%, Interests 20%, Royalties 20%.

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Sources of Fiscal Information

Tax Authorities
Afghanistan Revenue Department (ARD)
Other Domestic Resources
Tax and customs law
Tax guides (Ministry of Finance)

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Latest Update: April 2024