Employers in Afghanistan have certain tax obligations they need to fulfill. Here's a breakdown of the key areas:

Income Tax

Employer contributions towards employee pensions or social security funds are considered part of the employee's taxable income. Employers are responsible for withholding income tax from employee salaries each month. The tax is calculated based on a progressive tax rate table provided in the Income Tax Law (Article 4). Withheld taxes must be submitted to the government within 10 days of the end of the month they were withheld.

Corporate Income Tax

Companies in Afghanistan are subject to a corporate income tax rate of 20% on their taxable income. Taxable income is determined by deducting allowable business expenses from the company's gross revenue. For specific information on allowable deductions, the Income Tax Law should be consulted.

Other Potential Employer Taxes

Employers may be liable for customs duties on imported goods for business use. Property owners, which could include businesses, may be subject to property tax.

Registration and Filing

Employers typically need to register with the Afghanistan Revenue Department (ARD) to obtain a Tax Identification Number (TIN). Filing tax returns and remitting payments are usually done on a monthly or annual basis, depending on the specific tax type.

Remember to always consult with a tax advisor in Afghanistan to ensure you fully understand and comply with your tax obligations as an employer.

In Afghanistan, employees have a limited number of tax deductions they can claim against their income tax liability.

Income Tax

Income tax is withheld directly from employees' salaries by their employers. The withheld amount is calculated based on a progressive tax rate structure. The current tax brackets are as follows:

• 0 – 5000 AFN: 0%
• 5000 – 12500 AFN: 2%
• 12500 – 100,000 AFN: 10% + 150 AFN
• Over 100,000 AFN: 20% + 8900 AFN

Social Security (Social Insurance)

Employers are obligated to withhold and contribute towards employees' social security, sometimes referred to as social insurance.

Limited Deductions

Afghanistan has a relatively limited scope of deductions available to employees compared to some other countries. At present, things like medical expenses or charitable contributions are not deductible.

Standard Deduction

A standard deduction may apply to reduce your taxable income based on your filing status.

Afghanistan has implemented a Value-Added Tax (VAT) system that impacts the service sector in several ways.

Standard VAT Rate

The standard VAT rate in Afghanistan is currently 10%. This rate applies to most taxable supplies of services within the country.

Taxable Services

In general, most services provided in Afghanistan are subject to VAT. Some limited exceptions may exist such as basic healthcare and education.

VAT Registration

Businesses providing taxable services with an annual turnover exceeding a specific threshold, as determined by the Afghanistan Revenue Department, are generally required to register for VAT.

Place of Supply for Services

The place of supply of services determines where the VAT is due. Generally, the place of supply for services is considered where the service is effectively used or consumed. For some services, more specific rules apply such as services related to real estate.

VAT Invoicing

VAT-registered businesses supplying taxable services must issue tax invoices that comply with Afghan VAT regulations. The invoice should include information such as the supplier's Tax Identification Number (TIN), the customer's TIN (if applicable), the date, description of services, taxable amount, and VAT amount charged.

Zero-Rated Services

Exported services are normally zero-rated for VAT purposes. This means no VAT is charged on the export, but the business can claim back input VAT paid on expenses related to the exported services.

Input VAT Recovery

VAT-registered businesses can generally recover the VAT they paid on business-related expenses (input VAT) by offsetting it against the VAT they collect on their sales (output VAT).

VAT Filing and Payment

VAT-registered businesses are typically required to file VAT returns and remit any VAT due on a monthly or quarterly basis. Deadlines can be found on the Afghanistan Revenue Department (ARD) website.

Afghanistan offers a variety of tax incentives to attract investment and stimulate specific business sectors. These incentives include reduced corporate income tax rates, tax holidays, accelerated depreciation, customs duty exemptions, exemptions on specific activities, and other incentives such as land allocation and loss carryforward.

Reduced Corporate Income Tax Rates

Companies involved in the extraction of oil, gas, or minerals may benefit from a reduced corporate income tax rate of 20%. Other businesses in certain designated areas or for specified projects may also be eligible for reduced corporate income tax rates for a limited period.

Tax Holidays

Newly established businesses in preferred sectors or locations may be granted a tax holiday, often for a period of 3-5 years. During this time, their income may be exempt from corporate income tax.

Accelerated Depreciation

Businesses investing in eligible assets can benefit from accelerated depreciation allowances. This allows them to deduct a greater portion of the asset's cost in the earlier years of its operation, reducing their taxable income.

Customs Duty Exemptions

Businesses may be able to import certain machinery, equipment, and raw materials for specified purposes without paying customs duties.

Exemptions on Specific Activities

Some activities, such as certain agricultural activities, may be granted exemptions from specific taxes.

Other Incentives

Businesses in specific industries or development zones may be given preferential access to land at reduced rates. Companies that incur losses may be allowed to carry them forward to offset future taxable profits, lowering their future tax burdens.

Finding Information on Tax Incentives

Information on investment opportunities and incentives available in Afghanistan can be found through the Afghanistan Investment Support Agency and the Ministry of Finance. Consulting tax advisors in Afghanistan will offer the most up-to-date and tailored advice on incentives applicable to your business.

Important Considerations

Tax incentives usually have specific eligibility criteria and conditions which need to be met by the business to qualify. There might be a formal application process to obtain tax incentives. Understanding the application process and requirements is important. Tax incentives are sometimes included as part of larger investment promotion frameworks, and may be subject to change in line with development priorities.