TurkmenistanTax Obligations Detailed

In Turkmenistan, employers face several tax obligations related to their employees' income and social security contributions.

Employer Obligations: Social Security and Income Tax

Employers in Turkmenistan contribute 20% of an employee's total remuneration towards the social security fund. This contribution covers retirement and disability benefits for the employees. Additionally, a 3.5% social security contribution is also mandated. Employers are responsible for withholding 10% of each employee's income as Personal Income Tax (PIT). This tax is applicable to all forms of income, including wages, bonuses, and benefits.

Employee Obligations: Social Security and Income Tax

Employees in Turkmenistan also contribute to social security, with a 2% deduction from their salary. They are subject to a flat 10% income tax rate on their earnings. This income tax is usually withheld at the source by the employer.

Payroll Cycle and Tax Deadlines

Payroll in Turkmenistan is typically processed monthly, with salaries disbursed by the end of the month. There's no legal obligation for a 13th-month payment, although employers can offer bonuses. The annual deadline for filing Personal Income Tax returns for foreign citizens is April 15th of the following year. For Turkmenistan citizens, this deadline is February 10th. Corporate income tax returns are filed quarterly, within the month following the reporting quarter.

Value Added Tax (VAT)

The standard VAT rate is generally 15%. However, a reduced 0% rate applies to certain goods and services, primarily related to exports and specific essential commodities. Input VAT on purchases can be offset against output VAT on sales, and VAT related to capital expenditures is capitalized.

Other Taxes

A 2% customs duty is levied on most imported goods. Specific items may have different rates, ranging from 5% to 100%. A 0.2% customs clearance fee also applies. Property tax is assessed at 1% of the average annual net book value of fixed assets and tangible assets used for business. Contractors and subcontractors under petroleum law may be exempt. Currently, there are no transfer or stamp taxes. However, state duties apply to certain actions like branch registration. Excise taxes are levied on specific goods like alcohol, tobacco, and automobiles, with rates varying by product and origin (domestic or imported).

In Turkmenistan, employee tax deductions primarily involve a flat 10% income tax on gross income, along with deductions for social security, a special duty for urban/rural improvements, and voluntary pension/health insurance.

Income Tax

The standard income tax rate for residents and non-residents employed in Turkmenistan is a flat 10%. This applies to all forms of income, including employment income, business income, interest, royalties, and capital gains.

Social Security Contributions

Turkmenistan's social security system involves contributions from both employers and employees. While specific percentages for 2025 are not available in the provided sources, it's important to factor these contributions into overall deductions. It's crucial to check with up-to-date official sources or local experts to confirm the most current rates.

Special Duty for Urban/Rural Improvement

A special duty, aimed at improving urban and rural territories, is levied on all employed individuals. For individual entrepreneurs, the rate is 0.3% of gross revenue net of VAT (but not less than TMT 5 per month). For other individuals, the monthly duty is a flat TMT 5.

Voluntary Deductions

Employees can choose to make voluntary deductions for pension and health insurance contributions. These deductions are subtracted from the gross income before the 10% income tax is calculated. The minimum rate for voluntary pension insurance is 2% of total remuneration.

Deductions and Allowances

Besides the deductions mentioned above, several allowances and deductions can reduce the taxable income. These include a monthly deduction equal to the minimum wage (TMT 1,280 as of 2024. Current 2025 information could not be located.) as well as other deductions allowed under the Tax Code of Turkmenistan. Always consult the latest official sources or consult a tax professional for precise information.

Employer Responsibilities

Employers in Turkmenistan operate under a Pay As You Earn (PAYE) system. They are responsible for withholding all taxes and other deductions (social security, special duty, voluntary contributions) from employee salaries and remitting them to the relevant authorities.

Tax Residency

Individuals are considered tax residents in Turkmenistan if they spend 183 days or more in the country within a calendar year. Residents are taxed on their worldwide income, while non-residents are taxed only on Turkmenistan-sourced income.

It's important to note that tax laws and regulations are subject to change. The information above is based on available data and should not be considered financial advice. It's essential to verify the most up-to-date information and consult with tax advisors for specific situations and the latest regulations applicable to 2025.

In Turkmenistan, the Value Added Tax (VAT) is a consumption tax levied on most goods and services.

VAT Rates and Exemptions

• The standard VAT rate is 15%.

• A zero rate applies to specific goods and services, including:

  • Exported goods (excluding gas, oil, and related products)
  • International transportation of passengers and cargo
  • Goods, works, and services provided for petroleum operations to contractors and subcontractors under the Petroleum Law.

• Exemptions exist for other operations, including some agricultural products and services like veterinary and sanitary services. Specific details can be found within Turkmenistan tax legislation.

VAT Registration

• While specific registration thresholds are not defined in available international resources, businesses involved in taxable operations in Turkmenistan are generally required to register for VAT.
• Non-resident companies conducting taxable activities and generating income from Turkmenistan must register, even if a tax agent is present. This often involves temporary registration. Further information can be obtained by consulting Turkmenistan's tax authority directly or legal experts specializing in Turkmen tax law.

VAT Filing and Payment

• The tax period for VAT is the calendar month.
• VAT declarations must be filed by the 20th day of the following month.
• VAT payments are due by the 25th day of the month following the reporting period.

Additional Information on Turkmenistan Taxes

• Customs Duties: A general customs duty of 2% applies to most imported goods. Certain items are subject to specific duties ranging from 5% to 100%. A customs clearance fee of 0.2% of the customs value also applies.
• Excise Taxes: Levied on specific goods like alcohol, tobacco, and automobiles. Rates vary based on the product and whether it's domestically produced or imported.
• Property Tax: A 1% tax applies to the average annual net book value of fixed assets and intangible assets used for business purposes in Turkmenistan. Some exemptions exist, particularly for businesses operating under the Petroleum Law.
• Corporate Income Tax (CIT): Companies are generally subject to CIT, with rates varying. Standard regime CIT payments are made monthly, with final payments due after each quarter and year. Companies operating under the Petroleum Law usually pay CIT annually, as specified in their Product Sharing Agreements.
• Individual Income Tax: Individuals are subject to income tax, with specific deductions and allowances available. Tax residents may deduct expenses like voluntary pension fund and medical insurance contributions. Expatriates have different filing deadlines. Further information can be obtained from local tax authorities.
• Transfer Taxes: Turkmenistan does not have transfer taxes.
• Tax Administration: Tax audits can be cameral (desk audits) or documentary. Documentary audits typically occur every three years.
• Tax Treaties: Turkmenistan has tax treaties with several countries, allowing for foreign tax credits. Residents can credit foreign taxes paid on foreign-source income against their Turkmen income tax liability.

It's important to note that this information is current as of February 5, 2025, and might be subject to change. Consulting with a tax advisor or referring to the official resources of the Turkmenistan tax authorities is recommended for the most up-to-date and precise information.

Tax incentives in Turkmenistan are complex and often granted on a case-by-case basis. While general tax rates exist, specific exemptions and benefits are possible, especially within designated zones. Information below is valid as of 05 February 2025.

Corporate Taxes

• Standard Rate: The general corporate tax rate is 8%. However, specific industries like oil and gas may have additional taxes.
• Value Added Tax (VAT): The standard VAT rate is 15%. Some exemptions exist, particularly for domestic private companies and certain activities within designated zones.
• Dividends: Dividends are typically taxed at a rate of 15%.
• Foreign Tax Credit: Turkmenistan offers a foreign tax credit, usually based on applicable tax treaties, for taxes paid on foreign-source income. The credit is limited to the tax liability calculated under Turkmenistan's regulations.

Individual Taxes

• Standard Rate: The general personal income tax rate is 10%. However, a lower rate of 2% applies to most individual entrepreneurs.
• Special Duty: A special duty for urban and rural territory improvement is levied on residents working under employment or civil contracts, and individual entrepreneurs. The duty is TMT 5 monthly for most individuals, and 0.3% of gross revenues (minimum TMT 5 monthly) for individual entrepreneurs.

Tax Incentives and Exemptions

• Negotiated Incentives: Incentives are often negotiated individually and can include tax exemptions and other privileges. Presidential decrees may grant specific exemptions, especially during the initial investment recovery period.
• National Tourism Zone (NTZ): The NTZ offers certain tax benefits for businesses involved in tourism-related construction and services. These can include VAT exemptions and income tax holidays.
• Free Economic Zones (FEZ): Although legislation for FEZs exists, there are currently no known operational zones as of 2025. However, the legislation outlines potential benefits such as license and tax exemptions, reduced fees, and extended visa validity.
• Customs Benefits: Contributions to charter funds, fixed assets of foreign branches, and specific investments based on treaties or contracts can be exempt from customs duties. Enterprises with foreign investment may also have license-free import/export privileges for their own needs.

General Tax Information

• Tax Code: Turkmenistan's primary tax legislation is outlined in its Tax Code, though other laws and decrees can also impact taxation.
• Tax Treaties: Turkmenistan has various tax treaties that can influence tax obligations and benefits for foreign investors. It's crucial to review specific treaties for applicable provisions.
• Case-by-Case Basis: Given the prevalence of individually negotiated incentives, it's essential to consult with relevant authorities or advisors to understand the specific tax implications for a particular investment or business activity in Turkmenistan.