Taxation in Afghanistan

All companies, no matter what kind of legal form the company is, are required to pay a corporate tax at the rate of 20 percent. It can be found in the 4th article of the Afghan Income Tax law.^[1]

In 2014, the parliament of Afghanistan worked closely with the International Monetary Fund to raise the domestic revenues and therefore added a value-added tax (VAT) of 10 percent.^[2][3] Although, the existing law does not include all goods and services (hotels are affected for example), the government is planning to broaden this tax. VAT affects both domestic business people and their trade partners. The domestic taxpayer is obliged to pay the VAT on the taxable supply and the importer is obliged to pay the VAT on the taxable imports.^[4][5][6]

Afghanistan has many different tax rates of business receipt tax on their goods and services. The size of the business receipt tax depends on which kind of company and how large the company is. Lowest BRT has travel agents, culture, smaller restaurants and commodities with a tax rate of 4 percent. The larger restaurants, hotels and club halls have to pay 5 percent in business receipt tax. That tax rate was increased during 2015, from 2 percent to 4 percent, when the government wanted to increase the state revenues to finance the increased need for aid and foreign arms.^[7]

Individuals are subject to tax at progressive rates, calculated monthly.^[1]

Tax assessment is handled by the Taxpayers Services Directorate, while taxes are paid directly to Da Afghanistan Bank.^[8]

Since the beginning of the 21st century, governmental revenues have aggregately increased. One of the reasons for this improvement is a more efficient tax system. However, revenues have been less than what they planned for due to situations such as tax evasion and the large drug market, tightening constraints on the budget. In 2015, the government made some improvements of both the tax administration and the customs and that made the revenues increase during 2015.^[9]