This guide explains the main features of Afghanistan’s tax system under the Income Tax Law 2009. It is written to help you understand your basic rights and obligations, the types of taxes you may encounter, how to comply, and what happens if you do not. Use it as a starting point; for detailed situations, please refer to the official Afghanistan Revenue Department (ARD) guides or seek professional advice.

1. Introduction

The Income Tax Law 2009 (the Law) sets out how income is taxed in Afghanistan. It applies to:

• All individuals (natural persons) and companies (legal persons) that earn income from Afghan sources.

• Residents of Afghanistan are also taxed on their worldwide income.

The Law is designed to be simpler and more transparent. It introduces self‑assessment, meaning you calculate your own tax and file returns. The Afghanistan Revenue Department (ARD) (part of the Ministry of Finance) and provincial Mustufiats are responsible for administering the tax system.

2. Taxpayer Identification Number (TIN)

A Taxpayer Identification Number (TIN) is a unique number that identifies you to the tax authorities. You must have a TIN if you:

• Are required to pay any tax or customs duty.

• Are a non‑profit organisation that withholds tax from salaries or rent.

• Have a bank account (banks require a TIN).

You can apply for a TIN at the ARD in Kabul, at any provincial Mustufiat (Herat, Kandahar, Kunduz, Jalalabad, Mazar‑e‑Sharif), or online at www.ard.gov.af.

Penalty: Failing to apply for a TIN without a good reason can lead to a fine (AFN 5,000 for individuals, AFN 20,000 for companies).

3. Confidentiality and Record Keeping

Confidentiality

All information you provide to the ARD is confidential. Tax officers cannot share it outside the Ministry of Finance unless the law allows it. Any unauthorised disclosure is a serious offence and may lead to prosecution.

Record Keeping

You must keep complete and accurate records of all your business transactions, assets, and income. Records include:

• Sales invoices, purchase receipts, contracts.

• Bank statements, cheques, deposit slips.

• Ledgers, journals, financial statements.

• Any other documents that support your tax calculations.

Your records must be:

• Reliable and complete.

• Supported by source documents.

• Kept for the period required by law.

If you have more than one business, keep separate records for each. The ARD can inspect your records at your business premises or ask third parties (e.g., banks, customers) for information.

Penalty: Failure to keep adequate records or to allow access can result in a fine of AFN 5,000 (individuals) or AFN 20,000 (companies).

Accounting Method

• Companies must use the accrual method (record income when earned, expenses when incurred).

• Individuals can use the cash method (record income when received, expenses when paid) unless their business size requires otherwise.

Tax Year

The standard tax year is the solar year, running from 1 Hamal (21 March) to 30 Hoot (20 March). Companies may apply to use a different tax year if they have a valid reason (e.g., to match a foreign parent’s reporting period).

4. The Main Taxes

4.1 Income Tax

Income tax is charged on net taxable income – that is, gross income minus allowable deductions.

For Companies (Legal Persons)

• Rate: A flat 20% on net taxable income.

• What is taxable: All income from business, industry, investments, property sales, interest, dividends, rents, royalties, and any other economic activity.

• What you can deduct: Ordinary and necessary business expenses, such as wages, rent, interest on business loans, repairs, depreciation, bad debts, business receipts tax paid, and certain other taxes.

• What you cannot deduct: Personal expenses, bribes, income tax itself, and most fines.

For Individuals (Natural Persons)

• Residents pay tax on their worldwide income. Non‑residents pay only on Afghan‑source income.

• Tax rates (progressive) :

• Filing: You must file an annual return by the end of Jawza (third month) of the next year, unless your only income is from one employer and tax was correctly withheld.

4.2 Business Receipts Tax (BRT)

BRT is a tax on gross receipts (total turnover before any deductions). It is deductible when calculating income tax.

• Filing: Quarterly, due by the 15th day after the end of each solar quarter. Even if you have no income in a quarter, you must file a nil return.

• Imports: 2% BRT is paid at customs (and can be credited against your quarterly BRT).

4.3 Fixed Taxes

For certain activities, the Law provides fixed taxes that replace income tax.

4.4 Withholding Taxes

Withholding taxes are amounts taken out of certain payments and paid directly to the government. They count as advance payments of the recipient’s final tax.

• Wages: Employers with two or more employees must withhold tax from salaries using the individual income tax rates. A monthly exemption of AFN 5,000 applies. Remit by the 10th of the following month.

• Rent: Tenants who are companies or individuals running a business must withhold 10% (if monthly rent ≤ AFN 100,000) or 15% (if > AFN 100,000). Remit by the 15th of the following month (or per rental schedule).

• Contractor payments: Government agencies, municipalities, and businesses must withhold 2% (if contractor has licence) or 7% (if unlicensed) from gross payments. The threshold for withholding is AFN 500,000 per transaction; once total payments in a year exceed this, all payments become subject to withholding.

• Dividends, interest, royalties: 20% withholding applies (see separate guides).

5. Tax Administration: Large and Medium Taxpayer Offices

To serve taxpayers better, the ARD has set up specialised offices.

• Large Taxpayer Office (LTO): For big taxpayers (high turnover, significant revenue risk, large investments). Offers personalised service, multilingual support, and tailored education. Located in Kabul, Herat, and Balkh.

• Medium Taxpayer Office (MTO): For businesses that need structured support but are not in the LTO category (e.g., foreign‑owned businesses, those required to prepare balance sheets). Located in Kabul and Herat, with plans to expand.

6. Filing and Payment Procedures

You are expected to self‑assess your tax – that is, work out what you owe and pay it on time.

• Annual income tax return: Due by 31 Jawza of the following year. Pay at Da Afghanistan Bank (DAB) using the four‑part form. The bank stamps the form, returns one copy to you, and you must then file the return with the ARD or Mustufiat.

• Quarterly BRT returns: Due by the 15th day after each quarter.

• Monthly withholding returns: Due by the 10th of the following month.

Electronic payment: You can pay by electronic funds transfer (EFT) – useful if your finance office is outside Afghanistan. Instructions and bank details are in Guide 06.

7. Penalties and Enforcement

The Law gives the ARD strong powers to ensure everyone pays the right tax.

Common Penalties

Reasonable excuse: If you can show a good reason for your failure (e.g., records destroyed by fire), penalties may be waived.

Intent to Evade Tax

If you deliberately avoid tax, you may be prosecuted by the Attorney General’s Office and face fines or imprisonment.

Enforcement Powers

The ARD can:

• Amend your assessment if it finds errors.

• Place liens on your property (with court approval).

• Collect tax from your debtors (e.g., banks, customers).

• Stop you from leaving Afghanistan if you owe more than AFN 20,000.

• Close your business temporarily for serious non‑compliance.

• Tell licensing authorities not to renew your licence.

8. Overpayments and Refunds

If you pay too much tax, the ARD will first use the overpayment to cover any other tax or customs duties you owe. Any remaining credit stays on your account for future taxes. Refunds are only issued after checking that no other liabilities exist.

9. Objections and Appeals

If you disagree with a tax assessment, you can challenge it through a three‑step process:

1. Request an amendment from the ARD.

2. If not satisfied, lodge a formal objection with the Objection Review Panel.

3. If still unhappy, appeal to a competent court.

Time limits apply, so act quickly. Forms and guidance are available from the ARD Appeals Unit or online.

10. Where to Get More Information

• ARD website: www.ard.gov.af – download forms, guides, the Income Tax Law, and the Tax Manual.

• ARD offices in Kabul and provincial Mustufiats.

• Guides: Detailed guides cover specific topics (wage withholding, contractors, fixed taxes, etc.). They are free and available in print and online.

This overview is based on official Afghanistan Revenue Department materials, especially Guide 04. It is for general information only. For your specific situation, consult the full law or a qualified tax professional.