The standard corporate tax rate for companies is 20%.
A Business Receipts Tax (BRT) is a tax collected from total gross income (sales), before any deduction accordingly to prescribed rates. BRT is payable even in case of loss during the fiscal year.
BRT is imposed on the following types of business services:
- Hotel, Restaurant, guest house: If the income earned from such business is less than AFN 750,000 per quarter, BRT is payable at 4% of the gross receipts. If the income is above AFN 750,000 per quarter, BRT is payable at 5% of the gross receipts.
- Provision of goods and services in exchange for consideration: BRT is payable at 4% of the gross receipts.
- Clubs and halls where events are held: BRT is payable at 5% of the gross receipts
- Large hotels/ restaurants providing luxury or premium services: BRT is payable at 10% of the gross receipts.
- Communication and airline services: BRT is payable at 10% of the gross receipts.
The BRT paid or payable is considered to be an ordinary and necessary expense of doing business and is therefore deductible expense while computing taxable income for the year.
Importers of goods are subject to BRT at a rate of 4% at the time of import. It is treated as an advance payment against the BRT by the importer based on its receipts from the sale of goods.
Following income is not subject to BRT:
- Interest income
- Fees from banking transactions
- Proceeds of futures contracts
- Insurance/ reinsurance premiums
- Distributions received by shareholders in respect of their interests in the company
- Exports of goods and services
- Salaries, dividends, royalties and other payments which are subject to withholding tax
- Income received from the rent or lease of residential property to a natural person, if the property is used for residential purposes for more than six months of the tax year
- Income of persons subject to tax at fixed rates
For certain categories of income and persons, Afghanistan imposes fixed taxes in lieu of income tax and BRT. It applies to income received by importers and contractors not holding a business license for the supply of goods and services, transporters and entertainers. The rate of tax varies based on the type of income.
Capital gains from sale/ transfer/ exchange of a capital asset or investment in a trade or business including goodwill, is subject to income-tax at the rate of 1% and tax so deducted is allowed as a credit.
Under the income tax law of Afghanistan, separate taxation rules are prescribed for qualifying extractive industry taxpayers (‘QEIT’). Companies which hold mining license or mining authorization or which are party to a hydrocarbons contract are subject to tax at the rate of 30%. The BRT is not applicable to following income of QEITs:
- Income from the sale of prescribed mineral substances, that are subject to a mining license or mining authorization;
- Income from the sale of hydrocarbons, that are subject to a hydrocarbons contract;
- Income from the sale or transfer of a mining license or mining authorization or a hydrocarbons contract.
Mineral royalties and surface rental fees are also applicable, in addition to the corporate income tax, at rates depending on the nature and volume of the production.