In addition to Corporate Income Tax, companies operating in Afghanistan need to understand another important tax—the Business Receipts Tax (BRT) . It is a tax levied on a company's gross turnover and runs parallel to income tax, but they are fundamentally different. This article will explain all aspects of BRT in detail.

I. What is Business Receipts Tax (BRT)?

Business Receipts Tax (BRT) is a tax imposed on the gross receipts (turnover, before any deductions) of legal persons (companies) and, in certain circumstances, natural persons (individuals) who provide goods and services in exchange for payment.

Core Features:

• Based on Gross Receipts: BRT is levied on your total receipts before deducting any costs, expenses, or outlays.

• Deductible: BRT paid or payable can be claimed as an ordinary and necessary business expense deduction when calculating your annual Corporate Income Tax.

• Quarterly Filing: BRT must be filed and paid on a quarterly basis.

• Parallel to Income Tax: Even if a company is in a loss position (i.e., no profit), BRT is usually still payable as long as it has generated receipts.

II. Who Must Pay BRT?

The following entities are liable for BRT:

1. All Legal Persons: This includes joint stock companies, limited liability companies, partnerships, etc., regardless of their income level. They must file quarterly returns and pay BRT.

2. Natural Persons (Individuals) in Specific Circumstances:

   • Any individual whose gross receipts for a quarter are AFN 750,000 or more must file a quarterly return and pay BRT.

   • Any individual who owns a hotel, restaurant, or guesthouse MUST file a quarterly return and pay BRT, even if their quarterly gross receipts are less than AFN 750,000.

III. What are the BRT Rates?

BRT rates fall into three tiers: 2%, 5%, and 10%, depending on the business activity.

1. Gross Receipts Subject to 2% BRT

Most goods and services fall under the 2% rate unless specifically listed under the 5% or 10% categories. This includes:

• Commissions, fees, dividends, rent, royalties, and similar income.

• Materials, equipment, services, transportation, and construction provided under a contract.

• Premium income for insurance.

• Sale of admissions to public entertainment (cinema, plays, concerts, exhibitions, sports).

• Sales of products, goods, assets, and other services.

• Imports: The value of imported goods (including any customs duties paid) is subject to 2% BRT. This 2% BRT paid at import is treated as an advance payment against your quarterly BRT liability.

• Low-income hotels/restaurants/guesthouses: Those with total quarterly receipts below AFN 750,000 are taxed at 2%.

2. Gross Receipts Subject to 5% BRT

• High-income hotels/restaurants/guesthouses: Those with total quarterly receipts of AFN 750,000 or more.

• Event Venues: Gross receipts from halls and clubs where events are held (such as wedding halls).

3. Gross Receipts Subject to 10% BRT

• Luxury Hotels and Restaurants: Those considered to provide "superior services".

• Telecommunication Services: Provision of any kind of telephone, internet, or fax service.

• Airline Services: Passenger air services where the flight originates in Afghanistan.

IV. Can a Single Business Have Multiple Rates?

Yes. If a business engages in multiple activities, its receipts must be taxed at the applicable rate for each activity.

• Example: "Kabul Nights Restaurant" is a fine dining company. Its restaurant services are taxed at 10% BRT. However, it also sells traditional handicrafts in the restaurant. The income from handicraft sales is taxed at 2% BRT. The company must account for these separately in its return.

V. How to Calculate and File BRT?

1. Filing and Payment Schedule

BRT is filed and paid quarterly based on the solar calendar. Payments are due at Da Afghanistan Bank by the 15th day following the end of the solar quarter.

2. Tax Form

A specific four-part BRT form is used. You need to provide:

• Taxpayer information (name, address, TIN).

• Business type.

• Gross receipts for each type of BRT.

• Tax calculated for each type.

• Total tax payable.

If BRT has already been paid during the quarter (e.g., the 2% on imports), it must be deducted from the total calculated to arrive at the net payment due.

3. Calculation Examples

Example 1: Single Rate
Ahmad opens a restaurant. His gross receipts for the first three months (Mizan, Aqrab, Qaus) are AFN 274,000, below the AFN 750,000 threshold. His rate is 2%.

• BRT Due = AFN 274,000 × 2% = AFN 5,480

• Due by 15 Jeddi.

Example 2: Rate Change
Ahmad's restaurant becomes popular. The next quarter (Hamal, Saor, Jowza), his gross receipts are AFN 970,000, exceeding the threshold. His rate becomes 5% for that quarter.

• BRT Due = AFN 970,000 × 5% = AFN 48,500

• Due by 15 Saratan.

Example 3: Mixed Receipts with Prepayment
"Kabul Nights Restaurant" has the following for Q2 (Saratan - Sunbala):

• Handicraft sales (2%): AFN 320,000

• Restaurant services (10%): AFN 1,050,000

• BRT paid on imports earlier in the quarter: AFN 2,000

Calculation:

• 2% BRT portion: 320,000 × 2% = AFN 6,400

• 10% BRT portion: 1,050,000 × 10% = AFN 105,000

• Total BRT for quarter: 6,400 + 105,000 = AFN 111,400

• Less prepayment: 111,400 - 2,000 = AFN 109,400 net due

• Pay by 15 Mizan.

VI. What if There is No Income in a Quarter?

If your business meets the criteria for BRT but has no receipts in a quarter, you must still file a return with a statement explaining that there were no gross receipts. If the claim is accepted, no BRT is due for that quarter. Failure to file can result in penalties.

VII. Income Exempt from BRT

The following types of income are exempt from BRT:

1. Interest income.

2. Fees from currency exchange, bank account operations, issuing checks/guarantees, online banking, providing mortgages/loans/lines of credit.

3. Issuance of cash-settled contracts.

4. Futures contracts settled by physical delivery.

5. Insurance or re-insurance premiums.

6. Dividends distributed to shareholders.

7. Income from the export of goods and services.

8. Income specified in certain articles of the Income Tax Law.

9. Rent from residential property leased to an individual for residential use for over six months.

10. Sale of property by an individual outside the ordinary course of their business (i.e., not regular and continuous sales).

VIII. Relationship Between BRT and Corporate Income Tax

BRT is a deductible expense for Corporate Income Tax purposes.

• Example: A company has AFN 1,000,000 in taxable income (before considering BRT).

  • If it owes AFN 100,000 in BRT, its taxable income for Corporate Income Tax becomes AFN 1,000,000 - AFN 100,000 = AFN 900,000.

  • Corporate Income Tax payable = AFN 900,000 × 20% = AFN 180,000.

  • Total tax paid by the company: BRT 100,000 + Corporate Tax 180,000 = AFN 280,000.

IX. Summary

• BRT is a quarterly tax on gross receipts that runs parallel to income tax.

• Rates are 2%, 5%, or 10% depending on the business activity.

• All legal persons and qualifying individuals must file, even with no income (nil return).

• 2% BRT paid on imports acts as a prepayment.

• BRT itself is a deductible business expense when calculating Corporate Income Tax.

Accurately understanding and complying with BRT regulations is a crucial part of tax compliance for companies in Afghanistan.