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Income Tax Law

Version 7 April 2005

AFGHANISTAN

INCOME TAX LAW
(consolidation to 31 March 2005)
A translation of the Income Tax Act 1965
as published in Gazette number 25 of 1965 and as amended to date. .

* This is not an official translation and has no bind ing force . *

This Consolidation has been prepared by the General Presidency of Revenue, Ministry of Finance. It is not an
official version of the law and should be read and used with regard to this limitation. All reasonable effort has
been made to provide an accurate translation of the official law published in the Dari and Pashtu languages.
Where a person requires more certainty than an unof ficial translation of the Official Gazettes can provide, that
person is advised to seek proper professional advic e based on Official Gazettes.

Version 7 April 2005

__________________
Note: The following Articles have been amended by the
Income Tax Amendment Decree 1383 (2005) published
in Official Gazette number 845 dated 20 March 2005.
1, 3, 4, 5, 6, 7, 8, 9, 10, 12, 18, 23, 24, 34, 52, 53, 64,
65, 72, 73, 80, 81, 83, 84, 89, 90, 91, 92, 93, 94, 95, 96,
97, 98, and 99

This consolidation of the Income Tax Law includes the
amendments to those Articles. __________________

Importantly, the Income Tax Amendment Decree 1383 comes into force
from 30 Jauza 1383 (19 June 2004),
Article 65 hereof shall be in effect from 1 Hamal 1383 (20 March 2004).

With the enactment of the Income Tax Amendment Decree 1383
attachments number (8) of Official Gazette number (445) dated 1979, (9)
of Official Gazette number (481) dated 1981, (10) of Official Gazette
number (494) dated 1981, (11) of Official Gazette number (502) dated
1982, (12) of Official Gazette number (521) dated 1981, (13) of Official
Gazette number (670) dated 31/4/1367 [1988], (14) of Official Gazette
number (704) dated 1989, and decree number (106) dated 28/7/1371
[1992], decree number (610) dated 9/10/1372 [1993], order (hukm)
number (366) dated 2/2/1419 H.Q. [1998], part B of decree number (30)
dated 23/8/1420 H.Q. [1999], decree number (857) dated 1/12/1420 H.Q.
[1999], the decree (2642) dated 12/12/1351 in official gazette (232)
dated 29/12/1351, and Article 76 of the Income Tax Law 1344/2/29 are
canceled.

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TABLE OF CONTENTS

CHAPTER I Tax on Income of Persons, Corporations, Limited Liability Companies,
and Other Entities

Article l Tax on income of all persons, corporation s, limited liability companies and
other entities in Afghanistan and of Afghan residen ts abroad and definition of
a resident

Article 2 Tax imposed for each taxable year
Article 3 Tax rates
Article 4 Tax on income of resident natural person s in Afghanistan

Article 5 Non-resident natural persons who become residents

Article 6 All resident entities other than natural persons taxable on income from
sources within and outside Afghanistan
Article 7 Non-resident persons exempt from tax if f oreign country grants exemption to
residents of Afghanistan
Article 8 Income and deductions of non-resident per sons not engaged in trade or
business in Afghanistan for interest, dividends, re nt, royalties and any gain or
profit sourced in Afghanistan

Article 9 Non-resident persons engaged in business activities in Afghanistan subject to
income tax on all taxable income from sources withi n Afghanistan.
Deductions allowable to the extent connected with t hat income

Tax Exemption

Article l0 Taxability of foreign governments, inte rnational organizations and their non-
resident employees determined by treaties and contr acts with the State

Article 11 Organizations which are exempt from tax ation

Article l2 Agencies and departments of the State a nd municipalities except government
enterprises are exempt

CHAPTER II Determination of Taxable Income
Article l3 Definitions: Taxable Income
Exemption
Deduction
Article l4 Definition of Income
Article l5 Income not subject to taxation
Article l6 The value of food, fuel, and goods consu med or used by the producer is
excluded from income tax

Article l7 Rent and agricultural land, gardens and livestock

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Article l8 Withholding tax on salary and wages and
exemption of government pensions

Article l9 Deduction of ordinary and necessary expe nses of business

Article 20 Personal expenses are not deductible
Article 2l The costs of acquiring assets are not de ductible

Article 22 Additions to reserves for continge ncies are deductible only as provided by
Law
Article 23 Foreign income tax paid by non-resident persons on income sourced in
Afghanistan not deductible or allowed as credit e xcept as provided by treaty

Article 24 Income from sources within Afghanistan
CHAPTER III Gain or Loss from the Sale, Exchange or Transfer of Assets

Article 25 Gain taxable from sale or exchange of as sets

Article 26 Gain from sale or exchange of assets of a corporation or limited liability
company is taxable in the year the asset is transfe rred.

Article 27 Taxable gain derived by an individual fr om the sale, exchange, or transfer of
an asset except by inheritance
Article 28 Basis for computing gain
Article 29 Market value of the asset when transfer red

Article 30 Nature of transfer of asset does not af fect taxability of gain, except by
inheritance

Article 3l Losses on assets used in business deduct ible from taxable income

Article 32 Losses from shares in stock deductible o nly from gains on other shares in
stock in the same year
Article 33 Method of
determining and computing tax on capital gains from asset owned
more than l8 months

Article 34 Sale of immovable and movable property of an individual is subject to a fixed
tax on market value.

CHAPTER IV Partners and Partnerships
Article 35 Definitions
a. Partnership b. Partner
c. Partnership agreement
d. General partnership
e. Special partnership
f. Limited liability company

Article 36 A limited liability company is subject t o the same provisions as a corporation

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Article 37 A special partnership is treated as a ge
neral partnership.

Article 38 General partnerships are not subject to income tax

Article 39 A general partnership must file a return and report partners’ shares, salaries,
and net income or loss

Article 40 Income, expenses, and net earnings of a general partnership are shared by
partners

CHAPTER V Rules for Accounting
Article 41 Preservation of records
Article 42 Corporations and limited liability compa nies must use the accrual method of
accounting

Article 43 Individuals are to report income on cash basis, and by the accrual method if
permission is granted

Article 44 The taxpayer is required to keep records prescribed by the Ministry of
Finance

Article 45 Inventories must be taken at the close o f each year

Article 46 If two or more businesses are controlled by the same person or entity, the
Ministry of Finance may adjust receipts, deductions , credits or allowances
between businesses to correctly reflect income and prevent evasion of taxes

CHAPTER VI Special Provisions Relating to Corporat ions and Limited Liability
Companies

Article 47 Carry-over of losses limited to one-thir d each of the succeeding three years

Article 48 Distribution of property, not dividends, by corporations and limited liability
companies

Article 49 Liquidation of a corporation or a limite d liability company

Article 50 Dividends in money and securities
Article 5l Withholding of tax on dividends, wages, and salaries paid by corporations
and limited liability companies

Article 52 Expansion credit for five years of l5 pe rcent and not more than 5 percent in
any one year of the cost of new machinery and equip ment

Article 53 Tax Incentives:
a. Where conflict between this law and other law, agreements or
contracts, the income tax law prevails,
b. Cessation of tax holidays from 9 June 2004, an d
c. Provision of accelerated depreciation and unlim ited loss carry
forward for registered companies

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CHAPTER VII Taxation of Insurance Companies
Article 54 Insurance companies’ services
Article 55 Taxable receipts of insurance companies

Article 56 Exempt premium income
Article 57 Non-deductible expenses of insurance co mpanies

Article 58 Deductible expenses of insurance compan ies

Article 59 Foreign insurance company or underwrite r receiving premium income of any
kind from within Afghanistan is subject to taxation on net income

CHAPTER VIII Taxation of Banks, Loan, and Investmen t Corporations

Article 60 Banks, loan and investment corporations are subject to income tax on all
income.

Article 6l Deductions from income described in Art icle 60

Article 62 Additions to reserves against losses on loans are deductible if such reserve
does not exceed 25 percent of the loans outstanding at the end of the taxable
year.

Article 63 Change in value of securities not recogn ized until sale or exchange. Any
gain or loss shall be income or loss in the year the sale or exchange
occurred.
CHAPTER IX Withholding Taxes on Income
Article 64 All partnerships, organizations, agenci es, departments, and enterprises of the
State and municipalities, corporations, and limited liability companies
employing two or more persons must withhold taxes o n salaries and wages.

Article 65 Withholding of 20 percent tax by tenants on payments of rent to landlords

Article 66 Tax withheld by employer to be remitted to DaAfghanistan Bank or authorized
agent within one week
Article 67 Annual salary and tax statement to be fu rnished each employee

Article 68 Annual Summary Report of Taxes Withheld from Salaries and Wages to be
filed as prescribed by the Ministry of Finance

Article 69 Persons who discharge tax liabilities th rough taxes withheld

Article 70 Additional tax liability of person emplo yed by more than one employer subject
to tax withholding

Article 7l Tax liabilities of person with income ot her than salaries and wages

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CHAPTER X Business Receipts Tax
Article 72 Business receipts tax imposed on the bus
iness activities of limited liability
companies, corporations, general partnerships, orga nizations and natural
persons

Article 73 Application and rates of business receip ts tax

Article 74 Business receipts tax is due and payable within six months after the close of
the taxable year, either before or at the same time that income tax is paid

Article 75 Business receipts tax is payable whether there is income or a loss by the
business

Article 76 Exemption from business receipts tax for new industries under the Foreign
Investment Law (repealed)

Article 77 Business receipts tax is deductible from income

CHAPTER XI Fixed Taxes
Article 78 Fixed taxes imposed on commercial activi ties of individuals, limited liability
corporations and companies or who own properties as provided in this
Chapter

Article 79 Fixed taxes are due and payable during t he taxable year unless otherwise
provided

Article 80 Fixes tax of importers
Article 8l Fixed tax of exporters
Article 82 Fixed tax of internal traders
Article 83 Fixed taxes of persons engaged in busine ss of transporting persons or goods

Article 84 Fixed tax of persons contracted to the G overnment or its agencies

Article 85 Fixed taxes of cinemas, theatres, exhibi tions, carnivals, etc.

Article 86 Fixed tax of grain and processing mills, cane and seed oil machinery

Article 87 Fixed tax of mills and saw mills operate d by electrical or diesel power

Article 88 Individuals selling goods and services f rom established places of business
are subject to taxes specified in the Schedule of T ax Categories of
Businesses established by the Ministry of Finance

Article 89 All business establishments are classifi ed into appropriate tax categories
according to certain factors by the Minister of Fin ance

Article 90 Fixed taxes of physicians or medical pra ctitioners

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Article 91 Amendments to categories, exemptions and
tax rates must be proposed by
Ministry of Finance and approved by Ministerial Cou ncil.

Article 92 Persons engaged in commercial activities with no fixed place of business

Article 93 Returns, lodgement of returns and Tax Id entification Numbers

Article 94 Individuals who are brokers, commission agents, or sellers of goods without
fixed place of business pay tax at rates fixed by M inistry of Finance

Article 95 Due date for payment of taxes
XII. Final Articles
Article 96 Ministry of Finance required to provide forms and may issue public and
private rulings

Article 97 Fines and penalties
Article 98 Understatement of tax
Article 99 Government agencies not to issue license without certificate of responsibility
approved by Ministry of Finance and ministries, gov ernment agencies and
other organizations not to issue or renew license w ithout a tax identification
number.

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CHAPTER I

TAX ON INCOME OF PERSONS, CORPORATIONS,
LIMITED LIABILITY COMPANIES AND OTHER ENTITIES
Article l – Article 12

Article l A tax is imposed on the income from Afgha n sources of all persons,
corporations, limited liability companies, and othe r legal entities
whether in Afghanistan or abroad, and on the foreig n income of
residents of Afghanistan in accordance with provisi ons of this Law.
A natural or legal person is considered a resident of Afghanistan if:

(1) The person has his or her principal home in Afg hanistan at any
time during the fiscal year; or
(2) The person is present in Afghanistan for a peri od or periods
amounting to one hundred eighty-three days in the f iscal year; or

(3) The person is an employee or official of the Go vernment of
Afghanistan assigned abroad at any time during the fiscal year.

(4) Any other entity is resident in Afghanistan for a taxation year if it
was established, formed, or created in Afghanistan or has the centre
of its administrative management in Afghanistan at any time during the
year.
Article 2 The income tax is imposed for each taxabl e year on the taxable
income of each person, corporation, limited liabili ty company, or other
entity. The taxable year is the solar year except a s otherwise provided
in this Law. The taxable income is the sum remainin g after all the
deductions and exclusions authorized in this Law an d its regulations
are deducted from the total of all receipts of the person, corporation,
limited liability company or organization.
Article 3 (1) The income tax of legal persons, corp orations, limited liability
companies, and general partnerships is 20 percent o f its taxable
income in the fiscal year.

(2) Income in foreign money shall be converted to a fghanis for
purposes of taxation.
The rate of conversion shall be the average of free rates used by Da
Afghanistan Bank to purchase such foreign money at the end of each
month.
(3) The income tax of a natural person is the amoun t calculated in
accordance with the following schedule:

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TAXABLE INCOME AMOUNT OF TAX

From

l afghani
up to afs
12,500 per month

exempted

afs12,501 up to afs 100,000 per month
10%

afs100,000 above
in addition to
afs 8,750
20%

Article 4 Tax on income of resident natural persons in Afghanistan shall be
calculated as follows:
1. A natural person who is a resident of Afghanista n is subject to
annual income tax on his taxable income including i ncome from
sources outside Afghanistan. 2. Any income tax paid to the government of a forei gn country by
a resident natural person of Afghanistan may be tak en as credit only
against that part of his annual income tax attribut able to his foreign
income.
3. If the income of an Afghan resident is derived f rom more than
one foreign country, the income tax credit shall be in proportion to the
income from each country as provided in the Income Tax Manual
established by the Ministry of Finance.

Article 5 A natural person who becomes a resident o f Afghanistan during a fiscal
year shall be considered a resident from the time o f his arrival in
Afghanistan and will no longer be a resident on the day following his
departure.
.

Article 6 All entities that are residents of Afghan istan other than natural persons
are subject to the income tax on all taxable income from all sources
within Afghanistan and outside Afghanistan accordin g to the
provisions of Article 4 of this Law.

Article 7 Non-resident persons are exempt from inc ome tax provided that the
foreign country grants a similar exemption to resid ents of Afghanistan.

Article 8 (1) A non-resident not engaged in trade o r business in Afghanistan is
subject to income tax on the amount received from s ources within
Afghanistan as interest, dividends, rents, royaltie s, and gain or profit of
any kind according to the provisions of this Law.
(2) Deductions allowed to legal non-residents under this Law are only
allowed in respect of income other than interest, d ividends, rents and
royalties to those legal non-residents which file a true and accurate
return including all information required by this L aw and the Income
Tax Manual established by the Ministry of Finance.

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Article 9 (1) Non-resident natural persons, compani es and other organizations
engaged in economic, service or business activities in Afghanistan are
subject to income tax on all taxable income from so urces within
Afghanistan.
(2) Deductions are allowable only if and to the ext ent that they are
connected with income from sources within Afghanist an.

(3) Earnings derived from the operation of aircraft under the flag of a
foreign country are exempt from taxation, provided that the foreign
country grants a similar exemption to residents of Afghanistan.

(4) A correct apportionment of expenses with respec t to sources of
income within Afghanistan shall be determined as pr ovided by this
Law and the Income Tax Manual.

Article 10 The taxability of income in Afghanistan of foreign governments,
international organizations, and of their employees not residents of
Afghanistan shall be determined by the provisions o f existing treaties
and contracts with the State.

Article 11 Organizations which are Exempt from Taxa tion
: Contributions re-
ceived and income from the necessary operations of organizations
that meet the qualifications and conditions stated in this Article are
exempt from taxation under this Law. The qualificat ions that must be
met are the following:
a. The organization must be formally and legally o rganized under
the laws of Afghanistan.

b. The organization must be organized and operated exclusively for
educational, cultural, literary, scientific, or cha ritable purposes.

c. The organization must be so organized and operat ed that no
profit or gain except those services rendered to an yone else goes
to or accrues in the account of any contributor, sh areholder,
member or officer either during its operation or up on its
dissolution.

Remark 1
: Such income becomes exempt only upon approval of an
application for exemption. Such application shall b e
made by the organization in the form and manner sta ted
in the Income lax Manual prescribed by the Ministry of
Finance. The application shall be filed with the Mi nistry of
Finance within six months of the enactment of this Law,
or, in case of a new organization, within six month s of its
formation. The Ministry of Finance shall consider t he
facts presented in the application and other inform ation
available and as a result shall approve or reject t he
application.

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Rejection by the Ministry of Finance of an applicat
ion for
exemption may be appealed from by the organization to
the appropriate court as provided in Chapter XII of this
Law. In case the application is rejected by the Min istry of
Finance, and by the appropriate court if appealed, all
income of the organization is subject to taxation a s
provided by this Law.
Remark 2
: Income from any commercial activity not in keepin g with
the purposes of the organization according to its c harter
cannot be exempted from taxation under any provisio n of
this Article.

Article 12 (1) The income of agencies and departmen ts of the State and of
municipalities is exempt from taxation.

(2) Government enterprises are excepted from the pr ovision of
paragraph 1 of this Article.

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CHAPTER II

DETERMINATION OF TAXABLE INCOME
Article 13 – Article 24

Article 13 Taxable Income is the total of all receipts less those exemptions and
deductions authorized in this Chapter.
Exemptions
are allowances, such as personal exemptions, autho rized
by provision of this Law.
Deductions
are expenses of production, collection, and preser vation of
income, which are allowed, by provisions of this Ch apter, to be
deducted from receipts.
Expenditures and costs not specifically defined as exemptions or
deductions are not to be allowed.

Article 14 Receipts in cash, or otherwise, subject to income tax include but are
not limited to the following items: salaries, wages , fees and
commissions, all receipts derived from business and industry, receipts
from sale of property, interest, dividends, rents, royalties, awards,
prizes, winnings, bakhshishis (gratuities, bonus pa yments), distributive
shares of partnership gross income, income of perso ns claimed as
dependents, and any other return from labor, capita l, or economic
activity, except as is otherwise provided in this L aw.

Article 15 Receipts which are excluded from the gro ss income of persons,
corporations, limited liability companies, and othe r entities are limited
to the following items:

a. grants, gifts, and awards of the State;
b. grants, gifts, and awards of foreign governments , international
organizations, or nonprofit organizations for contr ibutions to
science, art, literature, social progress, and unde rstanding among
people;

c. all scholarships, fellowships, and grants for pr ofessional and
technical training;
d. health, accident, and unemployment insurance ben efits;
e. life insurance paid on death;
f. compensation or damages for personal injuries or sickness;
g. proceeds of borrowing;
h. proceeds of issues of stocks and bonds by corpor ations;

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i. acquisition of property in connection with merge
rs of domestic
corporations and other entities;

j. payments on principal received from debtors;

k. interest on deposits of individuals from banks i n Afghanistan;

l. interest on bonds issued by the State and by mun icipalities of
Afghanistan;
m. value of property acquired by gift or inheritanc e by lined
descendants;
n. any other receipts made exempt by the provisions of this Law.

Article 16 Income represented by the value of food, fuel, and goods consumed
or used by the producer of the same or by members o f his household
is excluded from income tax.

Article 17 Rent received in money or otherwise from renting and leasing
immovable property used for residential, commercial , or industrial
purposes is subject to income tax. Taxation of agr icultural lands,
gardens, and livestock together with their income a re taxed by
separate laws.

Article 18 (1) Ministries, agencies and other gover nment organizations,
enterprises, companies and charitable institutions are required to
withhold taxes from the salary or wages of their em ployees at the time
they are being paid and transfer the withheld amoun t to the
government account.
(2) Pensions of government employees are exempt fro m income tax.

Article 19 Deduction of all ordinary and necessary expenses of the production,
collection, and preservation of income is allowed t o persons,
corporations, limited liability companies, and othe r entities
. To be
deductible, these expenses must have been incurred during the
taxable year, or one of three previous years in acc ordance with
provisions of this Law. Personal expenses (not conn ected with
business) and other expenses not specified in the f ollowing
paragraphs of this Article are not deductible.
a. Any expense directly related to the cost of prod uction or trade
and business, such as insurance and freight expense s, etc., is
deductible.
b. The cost of supplies, materials, fuel, electrici ty, water, and
ordinary and necessary expenses used in the product ion of
income, or in a trade or business, is deductible.

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c. Wages, salaries, commissions, and fees paid for
services
rendered by employees in trade or business are dedu ctible.

d. Interest on business debts is deductible.
e. Rent paid on property necessary to and used in t rade or
business is deductible.
f. Cost of repairs and maintenance of properties ne cessary to
and used for purposes of the business or trade is d eductible.

g. Depreciation of property (except agricultural la nd) used in a
trade or business or held by the producer for the p roduction of
income, is deductible according to the Income Tax M anual.
The total of deductions for depreciation of any ite m of property
over a period of years shall not exceed its cost to the taxpayer.
h. Any tax or charge that is an ordinary and necess ary expense
of doing business, holding property for income, or of producing
income, if paid or accrued during the taxable year, is
deductible. Taxes imposed by this Law and taxes not qualifying
as necessary business expense are not deductible, e xcept as
otherwise provided by this Law.
i. Damages to property, which are substantiated by records or
other evidence, caused by fire, earthquake, and by casualty or
disaster of any kind are deductible over a three ye ar period, to
the extent that the loss was not recovered by insur ance.
j. Losses in business or trade from bad debts are d eductible
according to the Income Tax Manual established by t he
Ministry of Finance.

k. Dividends paid in money by a corporation or limi ted liability
company organized under the laws of Afghanistan are deductible
from the taxable income of that corporation or limi ted liability
company. Such dividends are to be included in the taxable
income of the person, corporation, limited liabilit y company, or
other entity receiving the same
;

l. Other expenses of doing business and of holding property for
the production of income are deductible in accordan ce with the
rules and regulations established by the Ministry o f Finance.
m. Advertising and entertainment expense evidenced by
documents and up to two per cent of net income is d eductible.

Article 20 Personal expenses including but not limi ted to the following items are
not deductible:
a. wages or other compensation paid to any person f or services
rendered to the taxpayer or his family for his or h is family’s
benefit and enjoyment.

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b. expenses and costs of maintenance, repair, cons truction,
improvement, furnishing, and other expenses of the taxpayer’s
or his family’s house or residence or any property devoted to
his own personal or family’s use;

c. interest on personal indebtedness;
d. costs of commuting to and from work and cost of travel for
personal purposes;

e. cost of life, accident, health, and liability in surance for the
protection of the taxpayer and his family; and

f. cost of insurance of any kind for the protection of property used
for personal purposes.

Article 21 The cost of acquiring land, buildings, d urable items such as
machinery, equipment, fixtures, and furniture, or c osts of additions or
improvements to the same are not deductible, except in the form of
depreciation expense allowable under paragraph “g” of Article l9, and
except at the time of sale of the property as provi ded in Chapter III.

Article 22 Additions to reserves for contingencies, bad debts, and other similar
purposes are deductible as provided by law.

Article 23 Taxes paid to foreign countries by non-r esidents on income from
sources within Afghanistan are not deductible from income, nor
allowable as credits against the income tax, except as provided by an
existing treaty.

Article 24 Income from sources within Afghanistan i s as follows:

1. Interest from loans, deposits, investments, etc;

2. Dividends received from resident companies doing
business in Afghanistan;

3. Salaries, wages, self-employment income, etc., f or
services performed; 4. Rentals and royalties from any property (movable and
immovable);
5. Gain from sale of immovable and movable property ;

6. Commissions on sales of any kind including insur ance;

7. Income from commercial activities within Afghanistan;

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8. Gains from the sale or transfer of any movable
property
used in commercial or employment activities;
9. Royalties, a management fee, or a commission pai d by
a resident of Afghanistan;
10. Income from other sources in Afghanistan which is subject to
tax according to the provisions of this Law;
11. Income from exploitation of any interest in a r ight to
explore for, or exploit, any mineral, petroleum, o r any
other resources.

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CHAPTER III

GAIN OR LOSS FROM THE SALE, EXCHANGE, OR TRANSFER OF ASSETS
Article 25 – Article 34

Article 25 Gain from the sale or exchange of assets is subject to the tax on
income as specified in this Chapter.

Article 26 Gain from the sale or exchange of any as set of a corporation or limited
liability company is taxable income in the taxable year the asset was
transferred.

Article 27 Gain from the sale, exchange, or transfe r, except by inheritance, of an
asset, belonging to an individual and specified bel ow is taxable
income:
a. a trade or business, including goodwill;
b. a factory including equipment, machinery, build ings and land,
or any part of such assets;

c. equipment used in the business of transporting persons and
property; and
d. shares of stock in corporations or limited liab ility companies.

Article 28 Proceeds from sale, exchange, and transf er of assets, except by
inheritance, shall be reported in full. The followi ng deductions from
proceeds of sale or exchange are allowed in determi nation of taxable
gain:
a. Cost to the taxpayer of the asset and investment sold, less the
total amount allowable for its depreciation since i t was
acquired.
b. Expenses of sale including sales commissions, ad vertising
expense, legal expense, transaction and document ta xes, and
other expenses of selling and transferring the asse t

Article 29 The market value of the asset at the tim e it was transferred or
exchanged (except inheritance), other than by sale, shall be the basis
for computing the gain.

Article 30 The nature of the transfer shall not a ffect taxability of gain from the
transfer, except by inheritance, which is not taxab le.

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Article 31 Losses from the sale or exchange of fixe
d assets used in trade or
business are deductible from the taxable income of the taxpayer in the
taxable year in which the sale or exchange took pla ce, provided that
the gain from such sale or exchange would have been actually
taxable.

Article 32 Loss from sale or exchange of shares of stock is not deductible except
from gain from sale or exchange of shares of stock in the same year.
For any such gain, if in excess of loss from such t ransactions, the
excess is taxable, but if any such loss is in exces s of gain, the excess
loss is not deductible.

Article 33 Method of Determining and Computing Tax on Capital Gains
:

a. Gain, taxable under Article 27, from sale or exc hange of an
asset owned by an individual eighteen months or mor e is subject
to the provisions of this Article if one or more of the following
criteria and conditions is met:

1. the transfer (except by inheritance) of property was not a sale;
2. the asset transferred was a capital asset;
3. the asset was transferred in the sale or liquida tion of a
business.

b. The income tax of any individual in any taxable year during
which fixed assets and investments owned by him eig hteen
months or more were transferred under any of the ci rcumstances
described above, should be the product of his taxab le income
from all sources multiplied by the special rate imp osed by
paragraph “c” of this Article.
c. The special rate imposed by this Article shall b e determined as
follows:
1. the gain from transfer of any assets (except by inheritance)
subject to the provisions of this Article is divide d by the
number of years (to the nearest year) it was owned;

2. the average annual gain or gains so determined a re added to
all other taxable income;

3. a tentative tax is computed on this total by app lying the rate
schedule in Article 3;
4. the tentative tax so obtained, divided by the amount in which
it was computed, is the special rate referred to ab ove, except
that if the resulting rate is less than four per ce nt the special
rate shall be four percent.

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Article 34 (1) Except by inheritance and as mention
ed in Article 27 of this Law, a
gain from sale or transfer of immovable property is subject to a fixed
tax of one percent of the market value of the prope rty at the time of
transfer of the ownership in lieu of income tax.
(2) A gain from sale of movable property or a vehic le is subject to a
fixed tax of two percent of the market value of the property at the time
of transfer of ownership in lieu of income tax.

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CHAPTER IV

PARTNERS AND PARTNERSHIPS
Article 35 – Article 40

Article 35 The following definitions apply with re ference to provisions of this Law:
a. A partnership
is an association of two or more parsons joining
under an agreement, in accordance with the provisio ns of the
Commercial Code, to carry on business and share the profits.
b. A partner
is one of the members of the partnership.
c. The partnership agreement
is the body of provisions agreed to
by the partners under which they operate the partne rship
d. A general partnership
(Sherkat-Tazamoni) is one in which the
partners are liable for payment of debts of the partnership
individually and collectively.

e. A special partnership
(Sherkat-Tazamoni-Mekhtalet) is one in
which one or more partners have unlimited liability for debts of
the partnership and the rest of the partners have l iability limited
to their
shares of capital in the partnership.
f. A limited liability company
(Sherkat-Mahdudul Masseliat) is a
partnership in which the partners are not individua lly liable for
debts of the company, but each partner has liabilit y limited to
his shares of capital in the company.

Article 36 A limited liability company is subject t o the same provisions of this Law
as corporations (Sherkat-Sahami). Partners in such companies are
considered shareholders, and distributions of earni ngs are considered
dividends for purposes of this Law.

Article 37 A special partnership is subject to the same provisions of this Law as
a general partnership.

Article 38 A general partnership in itself is not subject to the income tax imposed
by this Law. Partners are liable for income tax onl y in their separate
and individual capacities. The income of the genera l partnership is
taxable as income of the partners individually, eac h of whom is
required to include his share of the partnership in come in his taxable
income.

Article 39 Every general partnership is required to make an annual report of all
its receipts, expenses, and disbursements, and to d etermine its net

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income in the same manner as an individual, except
that no
deductions for personal exemptions may be made. The partnership is
required to report separately for each partner his share of the following
items:
a. the net income or net loss;
b. the gains or losses from sale or exchange of mov able and
immovable property; and

c. salary, interest, dividends, advances, etc.

Article 40 The income, expenses, and net earnings o f a general partnership
shall be deemed to have been shared by the partners according to the
terms and conditions of the general partnership agr eement.

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CHAPTER V

RULES FOR ACCOUNTING
Article 41 – Article 46

Article 41 All persons with taxable income in a tax able year, all partnerships,
limited liability companies, corporations, and othe r entities shall keep
records of all transactions, of all movable and imm ovable property
owned or leased, and of all income. Such records to gether with all
statements, receipts, and other documents pertainin g to transactions,
leases, contracts, and other business shall be pres erved by the owner
and be available to the Ministry of Finance upon re quest.

Article 42 Corporations and limited liability compa nies shall compute their
income using the accrual method of accounting which recognizes
income and expense when due.

Article 43 A taxpayer, except a corporation and a l imited liability company, shall
compute taxable income using the cash method of acc ounting
together with adjustments for inventories and depre ciation. The
Ministry of Finance may permit a taxpayer to comput e his income
using the accrual method. Before a taxpayer may cha nge his
accounting method he must have the consent of the M inistry of
Finance.

Article 44 The Ministry of Finance is authorized to prescribe the records that
shall be kept by any taxpayer or class of taxpayers to reflect income
clearly and to require such reports as it deems nec essary to
administer the income tax.

Article 45 Inventories of goods, products, and mate rials used in business shall
be taken at the close of each taxable year and pric ed at cost or market
value, whichever is lower. All taxpayers engaged in manufacturing,
trade, or other business are required to take inven tories on such basis
as the Ministry of Finance may prescribe.

Article 46 In case two or more organizations, trade s or businesses are owned or
controlled directly or indirectly by the same perso n, group of persons,
corporation, or other entities, the Ministry of Fin ance may distribute,
apportion or allocate receipts, deductions, credits , or allowances
between or among such organizations, trades or busi nesses to reflect
accurately the income and prevent evasion of taxes or may require
returns on a consolidated basis if deemed necessary in order to
prevent evasion of taxes and clearly reflect income .

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CHAPTER VI

SPECIAL PROVISIONS RELATING TO
CORPORATIONS AND LIMITED LIABILITY COMPANIES
Article 47 – Article 53

Article 47 Carry-Over of Losses
. A net operating loss is defined as the amount
by which deductions allowed under this Law exceed r eceipts. A
corporation or limited liability company incurring a net operating loss in
a taxable year should deduct this loss from its tax able income of three
succeeding years, deducting each year one-third of the loss.

Article 48 Distribution of Property; not Dividends, by Corporations and Limited
Liability Companies . Except payments of dividend, and except when
made in connection with liquidation of a corporatio n or a limited liability
company, the distribution of the assets of the corp oration or limited
liability company to its shareholders or partners s hall be treated by the
shareholder or partner as a reduction in the cost o f his stock or capital
share.

Article 49 Liquidation of a Corporation or a Limite d Liability Company
. A
distribution of assets among shareholders or partne rs in connection
with liquidation of a corporation or a limited liab ility company shall be
treated by the shareholder or partner as proceeds f rom sale or
exchange of assets as provided in Chapter III of th is Law. In such
cases, the amount distributed in money plus the mar ket value of any
other assets distributed less the shareholder’s cos t of the stock or the
amount of partner’s capital on which distribution i s made, is taxable
income of the shareholder or partner. No gain or lo ss shall be
recognized to the corporation or limited liability company on the
distribution of its assets in partial or complete l iquidation.

Article 50 Dividends in Money and Securities
. A dividend is any distribution of
money or assets made by a corporation or a limited liability company
to its shareholders or partners out of earnings. Di vidends are subject
to the following provisions:

a. Dividends paid by a corporation which is organiz ed under the
laws of Afghanistan and a wholly owned affiliate wh ich cannot
be consolidated may be excluded from the income of the
corporation receiving such dividends if it is organ ized under the
laws of Afghanistan and whose income is subject to income
tax.
b. Dividends paid in the form of securities of any kind are not
deductible from income of the corporation or limite d liability
company.

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c. Dividends in money are taxable income of the rec
ipient at the
time received, but dividends in the form of securit ies of any
kind are not considered taxable income of the recip ient at the
time received.

Article 51 Withholding of Tax on Dividends, Wages, and Salaries Paid by
Corporations and Limited Liability Companies . Any corporation or
limited liability company organized under the laws of Afghanistan is
required to withhold income tax from wages and sala ries paid, as
provided in Chapter IX of this Law. A corporation o r limited liability
company is also required to withhold 20 percent of all dividends or
distributions paid in money. An additional 10 perce nt (total of 30
percent) shall be withheld from such dividends upon anonymous
investments in shares of the corporation or limited liability company.
The amounts withheld are to be paid by the corporat ion or limited
liability company to the State within one week. At the same time a
report shall be filed with the Ministry of Finance listing the names of all
shareholders or partners, the amount of dividend wi thheld, and the
amount paid each shareholder or partner. When distr ibuting dividends,
a corporation or limited liability company shall is sue to each
shareholder or partner a statement of the amount of his dividend, the
amount withheld, and the balance paid to him. The a mount withheld
shall be a credit against the income tax of the sha reholder or partner
on all of his income, including the dividend before withholding. The
statement from the corporation or limited liability company shall be
attached to his income tax return for the taxable y ear in which the
dividend was paid.

Article 52 The credits mentioned in this Article sh all not be allowed from 21
March 2005 (1 Hamal 1384).

To companies meeting the following conditions for t he purpose of
expansion, a credit for five years of not more than 15 percent in total
and no more than five percent in any year is allowe d only for
acquisition cost of new machinery, equipment, and apparatus based
on the certification of the Ministry of Mines and I ndustries, and only
against tax liabilities of five consecutive years b eginning with the first
day of the taxable year during which the new machin ery, equipment,
or apparatus was acquired:

a. the corporation is engaged in manufacturing or m ining;
b. the corporation has purchased and acquired new m achinery,
equipment, or apparatus which has been or will be p laced in
operation in Afghanistan;
c. the corporation has furnished copies of all docu ments pertaining
to the purchase and delivery of the property involv ed to the
Ministry of Finance in accordance with the Income T ax Manual.

The allowance of this credit shall affect neither d epreciable value nor
the deductibility of depreciation of the assets acq uired.

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Article 53 (1) In the event of any conflict between contracts, agreements and
provisions of other laws with the Income Tax Law, t he provisions of
the Income Tax Law shall prevail.

(2) International contracts and agreements signed b y the Government
of Afghanistan with foreign countries or United Nat ions agencies are
not subject to paragraph (1) of this Article.

(3) Enterprises approved under the Law on Domestic and Foreign
Private Investment in Afghanistan (Official Gazette number 803 dated
20 Sunbulla 1381) (“approved enterprises”) ( tashabuz mansur shuda)
prior to 22 November 2003 (1 Kawos 1382) which have commenced
activities may use the concessions mentioned in the provisions of that
Law only if they have complied with all the require ments set out in the
provisions of related laws.
(4) Approved enterprises which have not met the req uirements set out
in the Law on Domestic and Foreign Private Investme nt of Afghanistan
are not entitled to use the tax exemptions mentione d in the provisions
of that Law after 21 June 2004 (1 Saratan 1383).
(5) Approved enterprises shall be entitled to a ded uction for the
depreciation of capital assets as follows: – four years for buildings; and
– two years for other capital assets.

(6) As an exception to Article 47 of the Income Tax Law, approved
enterprises which incur a net operating loss in a f iscal year based on
legal records and accounting records may carry this loss forward as a
deduction from taxable income in each subsequent ye ar until the loss
is fully extinguished. The loss incurred by such a pproved enterprises
shall be calculated in accordance with Article 47.
(7) If approved enterprises granted tax exemption u nder the provisions
of the Law on Domestic and Foreign Private Investme nt in Afghanistan
hold capital assets on the date on which the tax ex emption ends as a
result of paragraph (4) of this Article, after the calculation of the
depreciation for the capital assets, the remaining value of the capital
assets on that date will be treated as the cost of the capital assets for
the purpose of applying paragraph (5) of this Artic le.

(8) The depreciation deduction for buildings and eq uipment shall be
an equal deduction for each fiscal year of deprecia tion. If a capital
asset is owned by the enterprise for less than one half of the year,
then a deduction for half the annual amount will be allowed.

(9) The depreciation deduction shall only apply to capital assets
acquired and first used in the year in which the en terprise was
approved or the following two years.

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CHAPTER VII

TAXATION OF INSURANCE COMPANIES
Article 54 – Article 59

Article 54 Insurance companies, to qualify for the provisions of Articles 55, 56,
57 , and 58, shall meet the following conditions:

a. They shall have been organized as corporations u nder the
laws of Afghanistan.
b. If the company is engaged in more than one field of insurance,
such as casualty-risk insurance, life insurance, or in any other
business, it must have separate accounting and rese rves for
each of its fields of insurance and other activitie s.

Article 55 Taxable Receipts of Insurance Companies
. The following receipts of
insurance companies are subject to income tax:

a. Interest, dividends, rent, and other income from investments
and property;
b. all receipts from activities other than insuranc e;
c. all premiums for insurance against fire, theft , accident,
sickness, casualty, or risk, the insurance of which is for a
specified term, and no money claim because of the i nsurance
may be presented to the company by the policyholder except
for losses from the eventuality insured against;
d. gains from capital transactions which are taxabl e as provided
in Chapter III of this Law.

Article 56 Premium Income that is Exempt from Incom e Tax
. All insurance
premiums received for written contracts that requir e ultimate payment
of specified benefits to the policyholder or his be neficiaries are exempt
from income tax.

Article 57 Non-deductible Expenses of Insurance Companies
. The following
expenses and payments made in connection with insur ance for which
premium income is tax exempt under Article 56 are n ot deductible:

a. Commission expense and other costs of writing s uch
insurance;
b. Payments of benefits to the policyholders or th eir beneficiaries.

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Article 58 Deductible Expenses of
Insurance Companies
. The following
expenses and payments of insurance companies are de ductible from
their income:
a. claims paid on insurance for which premium inco me is taxable;
b. commissions and other costs of writing insuranc e for which
premium income is taxable;

c. reinsurance costs of insurance for which premium in come is
taxable;
d. additions to reserves for claims, provided such reserves do not
exceed 100 per cent of premiums for marine insuran ce and 50
per cent of premiums for any other risk insurance received
during the taxable year;

e. additions to reserves for losses in operations in the field of
insurance for which premium income is taxable, pro vided such
reserves do not exceed twice the amount of paid-in capital for
such field of insurance;

f. all necessary expenses of doing business as provided in
Chapter II except those cited in Article 57.
Remark:
Any transfers or payments from reserves cited in c lause
“d” and clause “e” above, except for actual claims and losses or for
dividend payments in money, are taxable income in t he taxable year
during which the transfer or payment was made.

Article 59 Any foreign insurance company or underwr iter receiving premium
income of any kind from within Afghanistan is subje ct to taxation on its
net income from within Afghanistan. Such income sha ll be determined
as follows:
a. the premiums received by the company from withi n
Afghanistan in the taxable year shall be determi ned;

b. the total premiums received world-wide by the c ompany
in the same period shall be determined;

c . the net income before income tax and dividend
payments of such company from its world-wide
business shall be determined;
d. the amount determined in ”a” divided by the amo unt
determined in “b” multiplied by the amount dete rmined
in “c” shall be taxable income.

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CHAPTER VIII

TAXATION OF BANKS, LOAN AND INVESTMENT CORPORATIONS
Article 60 — Article 63

Article 60 Banks, loan and investment corporations are subject to income tax on
all income from dividends, interest, discounts, ren ts, service charges,
fees, commissions, and on gains from capital transa ctions.

Article 61 Necessary and ordinary business expenses , as provided in Chapter II,
are deductible from the income described in Article 60. Losses from
capital transactions, dividends paid in money
and additions to a
reserve against losses on loans are also deductible .

Article 62 Additions to reserves against losses on loans are deductible only if
such reserve does not exceed 25 per cent of loans outstanding at the
end of the taxable year. Any transfers or payments from such reserve,
except in accordance with the purpose of the reserv e, are taxable
income in the year the transfer or payment was made .

Article 63 Increase or decrease in value of securit ies owned is not recognized for
purposes of this Law until realized through sale or exchange of the
securities. When gain or loss is realized through s ale or exchange of
the securities, such gain or loss shall be income o r loss in the year in
which the sale or exchange took place.

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CHAPTER IX

WITHHOLDING TAXES ON INCOME
Article 64 – Article 71

Article 64 Withholding of Taxes on Salaries and Wag es
. All partnerships,
organizations, agencies, departments, and enterpris es of the State
and municipalities; all corporations and limited li ability companies
employing two or more persons in any month of a yea r are required to
withhold taxes as provided in Article 3 of this Law from all salary and
wage payments, and pay the amount withheld to the G overnment
account.

Article 65 (1) Payments of rent for buildings and c onstructions which are rented
to legal or natural persons and are used for busine ss purposes or
offices where the monthly rent is more than 15,000 afghanis, are
subject to a 20 percent income tax.

(2) Tenants of buildings and constructions mention ed in paragraph (1)
of this Article are required to pay tax according t o the rulings issued by
the Ministry of Finance.
(3) Tax collected under this Article is paid by the tenant in respect of
the income tax liability of the landlord on rental income under this Law.
This tax shall be treated as prepayment of the tax liability of the
landlord and shall be credited at the time of annua l tax payment. In
the event of a dispute about the amount of rent owe d by a tenant, the
tenant will be treated as having paid to the landlo rd as rent any tax
that was paid to the relevant authorities under thi s Article.
(4) Payments for rental services include: any money, goods or services or any other benefit received by
person or persons for rental services; and the cost of any repairs, renovations or improvemen ts to the property
carried out by the tenant or for the tenant and pai d for by the tenant.

(5) If the rental payment of a property is less th an the actual rental
value of the property, the Ministry of Finance will calculate the rent
according to the market value by its authorized pan el.

(6) Property dealers are required to send a copy o f the agreement to
the Ministry of Finance as soon as it is signed. If a property dealer
makes a false agreement or delays sending the agree ment, the
Ministry of Finance will officially notify the Mini stry of Justice to take
necessary action.

(7) Where it is proven that the rent in a lease ag reement is more than
20 percent lower than the market value rent, paragr aph 5 of this Article
will be applied. In the case of a dispute on market value of the rent,

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the onus is on the landlord to prove that the rate
fixed by Ministry of
Finance is not correct. This subsection is applicab le where the Ministry
of Finance finds evidence and documents which show that the rent
mentioned in the contract is less than what is paid . In this case, the
Minister of Finance can seek an order of an authori zed court that
requires the landlord to lease the property to the Minister of Finance at
the end of the current lease for a period twice the period set out in the
current lease for the rental price set out in the c urrent lease.

(8) If the tax has not been paid within 15 days of the due date, the
following rules will apply:
(1) Subject to an order from an authorized court, t he right
of the landlord in a lease agreement or similar con tract to
receive payment for rental services shall be treate d as if it has
been temporarily transferred to the Minister of Fin ance as
representative of Government of Afghanistan;
(2) If the tenant has not paid the tax due within 3 0 days
after receiving notice from the Ministry of Finance of the amount
overdue, the right of the landlord in a lease agree ment or similar
contract to evict tenants for non-payment of rent s hall be treated
as if it has been transferred to the Minister of Fi nance as
representative of Government of Afghanistan;
This arrangement will remain in place until the Min istry of
Finance receives rental tax and non payment fine.

(3) The provisions of paragraph (8) of this Article shall
apply only on the basis of an order of an authorize d Court.

Article 66 Remittance of Tax Withheld
. Any employer required to withhold taxes
by Article 64 is required to remit to the State the amount withheld
within one week. The remittance shall be made to Da Afghanistan
Bank or to an agent authorized in the rules and reg ulations of the
Ministry of Finance to receive tax payments. The em ployer shall
submit with this remittance a Tax Withholding Repor t in such form as
is prescribed in the Income Tax Manual of the Minis try of Finance.

Article 67 Annual salary and tax statement to be fu rnished to each employee
. At
the end of the taxable year, each employer required to withhold taxes
from salaries and wages shall prepare for each pers on on the payroll
during the taxable year a salary and tax statement in the form prescribed
by the Ministry of Finance.

Article 68 Annual Summary Report of Taxes Withheld from Salaries and Wages
.
Every employer required to withhold taxes from salaries and wages
shall file an annual summary report of taxes withhe ld from salaries and
wages in the form and at the time and place prescri bed by the Ministry
of Finance.

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Article 69 Person Who Discharge Tax Liabilities Thr
ough Taxes Withheld
.
The income tax liability for a taxable year is discharged by a person
filing his salary and tax statement, certified by h is employer, within six
months after the end of the taxable year, provided he meets the
following conditions:

a. He has no taxable income in the taxable year ot her than the
salary or wage form which taxes were withheld.
b. He was not employed during the taxable year by more than
one employer.
c. The taxes withheld were in accordance with the tables of
instructions issued by the Ministry of Finance as provided in
Article 65.

Article 70 Additional Tax Liability of Person Emplo yed by More than one
Employer Subject to Tax Withholding . Any person with income from
salaries or wages subject to tax withholding from m ore than one
employer, but with no other taxable income, shall f ile an income tax
return as provided in Chapter XII. The amounts of taxes withheld at
the sources from salary or wages shall be a credit against the
taxpayer’s tax liability.

Article 71 Tax Liabilities of Persons with Income O ther than Salaries and Wages
.
Any person with taxable income in addition to his s alary or wages shall
file an income tax return as provided in Chapter XI I. The taxes
withheld shall be a credit against the taxpayer’s t ax liability.

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CHAPTER X
BUSINESS RECEIPTS TAX OF LIMITED
LIABILITY COMPANIES AND CORPORATIONS
Article 72 – Article 77

Article 72 (1) The business receipts tax is imposed on the business activities of
limited liability companies, corporations, general partnerships and
organizations.
(2) Natural and legal persons deriving 50,000 afgha nis or more
income per month from providing taxable services me ntioned in
paragraph 2 of Article 73 of this Law are subject t o tax mentioned in
paragraph 1 of this Article.

Article 73 (1) The business receipts tax is collect ed from limited liability
companies, corporations, general partnerships and o rganizations as
follows:
1- Five percent of the gross receipts (before any d eductions)
during the fiscal year of commissions, fees, intere st, dividends,
rent, royalties, and similar income. However, the business
receipt tax does not apply to the rental income of a natural
person from which tax has been withheld under Artic le 65.

2- Two percent of all the gross receipts (before a ny deductions)
during the fiscal year for materials, equipment, se rvices,
transportation, and construction provided under ter ms of a
contract;

3- Two percent of the gross receipts (before any de ductions)
during the fiscal year from premium income for insu rance;
4- Two percent of the gross receipts (before any d eductions)
during the fiscal year from sale of admissions to p ublic
entertainment including cinema shows, plays, concer ts,
exhibitions, sports and other shows.
5- Two percent of the gross receipts (before any d eductions)
during the fiscal year from sales of products, good s, assets, and
other services.

6- Ten percent of the income derived from the serv ices provided
by a legal or natural person which is 50,000 afghan is or more
per month in accordance with the rulings issued by Ministry of
Finance.

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(2) Taxable services mentioned in paragraph 6 of Ar
ticle 73 are hotel
services, restaurant services, telecommunications s ervices, and airline
services:

– “hotel services” means the provision of sleeping
accommodation and related services, including the p rovision of
meals, beverages, laundry and communications servic es, to
persons who occupy such accommodation as transient guests;

– “restaurant services” means the provision of food or beverages
by an establishment that provides facilities for im mediate
consumption at that establishment, or catering serv ices of
prepared food; or sales of cooked foods that were p repared on
the premises;
– “telecommunications services” means the provision of
telephonic services or internet services by a telec ommunications
service provider or internet service provider, incl uding digital or
analogue telephone, facsimile or data transfer comm unications,
and internet access by any means.
– “airline services” means passenger air services w here the flight
originates in Afghanistan.

(3) Total income of a business entity is not separ able.

(4) The monthly receipts of a person for the provi sion of taxable
services includes money, goods and services. The co st of goods and
services are computed in afghanis according to mark et value.

(5) Persons who derive taxable income from the pro vision of taxable
services are required to file return forms for each quarter year of the
fiscal year by the 10
th day of the month following each quarter.

(6) If a taxpayer claims that he had no taxable in come for the past one
or more months, he is required to file a return for m and submit it to the
Ministry of Finance.

If the claim is accepted then the taxpayer shall b e subject to the tax
mentioned in paragraph (1) of this Article.

Article 74 The business receipts tax is due and pay able within six months after
the close of the taxable year. The taxable year is the solar year in
which the receipts and income were realized. The bu siness receipts
tax must be paid either before or at the same time as the income tax is
paid.

Article 75 Business receipts tax is payable on the total receipts and it is not
affected whether the taxpayer has a profit or loss during the taxable
year.

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Article 76 Article 76 repealed with effect from 19
June 2004 (30 Jauza 1383)
Business Receipts Tax Subject to Exemptions for New Industries and by
Investment Laws . Exemption given to companies under laws to encourage
new industries or under the Foreign Investment Law shall apply with respect
to the business receipts tax provided by this Chapt er.

Article 77 Business Receipts Tax is Deductible from Income
. The business
receipts tax paid or payable shall be a deductible expense in
computing taxable income for the same taxable year.

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CHAPTER XI

FIXED TAXES OF INDIVIDUALS
Article 78 – Article 91

Article 78 The taxes imposed by this Chapter are ca lled fixed taxes and are
imposed on commercial activities of individuals, li mited liability
companies, and corporations who are engaged in the activities or who
own the properties described in this chapter, and i n the manner and at
rates fixed by each activity.

Article 79 Fixed taxes are due and payable during t he taxable year unless
otherwise provided in this Chapter.

Article 80 (1) Persons who import goods without hav ing a business license are
subject to three percent fixed tax on the total cos t (including customs
duties) of the goods imported in lieu of taxes on i ncome from such
activities.
(2) Persons who import goods and have an interim bu siness license
but do not provide their business declaration form to the Ministry of
Finance are subject to three percent fixed tax on t he total cost
(including customs duties) of goods imported in lie u of taxes on
income from such activities.

(3) The tax mentioned in paragraphs (1) and (2) of this Article shall be
paid at the customs house where customs duties of t he goods are
paid.

Article 81 (1) Persons who export goods without hav ing a business license are
subject to two percent fixed tax on the total cost (including customs
duties) of the goods exported in lieu of taxes on i ncome from such
activities.

(2) Persons who export goods and have an interim bu siness license
but do not provide their business declaration form to the Ministry of
Finance are subject to two percent fixed tax on the total cost (including
customs duties) of the goods in lieu of taxes on in come from such
activities.
(3) The tax mentioned in paragraphs (1) and (2) of this Article shall be
paid at the customs house where customs duties of t he goods are
paid.

Article 82 Fixed Tax of Internal Traders
All individuals engaged in internal trade
without any business license, in which goods are mo ved from one
province to another, are subject to fixed tax of fo ur percent of the total
cost of foreign goods purchased and two percent of cost of domestic

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goods purchased, except foodstuffs and fuel, and ra
w materials for
domestic manufacturing. The tax shall be paid at t he custom houses of
the district in which the goods were purchased. Su ch tax is in lieu of
taxes on income from such internal trade.

Article 83 Persons who transport persons or goods f or business purposes are
required to pay an annual tax as follows, before re newal of their
driving license:

No TYPE OF VEHICLE TAX
1. Vehicles based on tons
1 From 1 up to 2 tonnes 2600 afs
2 From 2 up to 3 tonnes 3400 afs
3 From 3 up to 4 tonnes 4200 afs
4 From 4 up to 5 tonnes 5000 afs
5 From 5 up to 6 tonnes 6000 afs
6 From 6 up to 8 tonnes 7500 afs
7 From 8 up to 10 tonnes 9000 afs
8 From 10 up to 12 tonnes 10500 afs
9 From 12 up to 14 tonnes 12000 afs
10 From 14 up to 16 tonnes 13500 afs
11 From 16 up to 18 tonnes 15000 afs
12 From 18 up to 20 tonnes 16500 afs
13 From 20 up to 25 tonnes 18500 afs
14 More than 25 tonnes 18500 afs and 500 afs
per additional tonne
15 More than the total allowable tons of a trailer Over 500kg then 200 afs
per tonne
2 Passenger vehicles
1 Taxi with capacity of 3 to 5
passengers 2000 afs
2 Taxi with capacity of more than 5
passengers 2000 afs and 200 afs per
additional seat
3 Microbus with up to 14 seats 2600 afs
4 Other buses from 15 to 22 seats 4000 afs
5 Other buses from 22 up to 30 seats 6000 afs
6 Other buses from 30 up to 40 seats 7000 afs
7 Other buses from 40 up to 50 seats 7500 afs
8 Other buses from 50 up to 60 seats 8000 afs
9 Other buses with more than 60 seats 8000 afs and
200afs per
additional seat
3 Vehicles according to their cylinders
1 4 cylinders 1500 afs per vehicle
2 6 cylinders 2000 afs per vehicle
3 8 cylinders 3000 afs per vehicle
4 More than 8 cylinders 3000 afs and 500 afs per additional cylinder
4 Rickshaw
1 Motorbike rickshaw 500 afs
2 Rickshaw 1000 afs

Article 84 Persons who furnish supplies, materials , or services or construction
under contract to the State or its agencies without a business license
are subject to a seven percent fixed tax in lieu of taxes on income from
such activities. Fixed tax is to be withheld from t he amount to be paid.

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Article 85 Fixed Taxes of Cinemas, Theaters, Ex hibitions, Carnivals, Etc
.
Organizations not subject to taxation under Chapter X of this Law or
individuals who are the owners of cinemas, theaters , exhibitions,
carnivals or other places of entertainment and who at the same time
operate such places, are subject to a fixed tax of ten per cent of
receipts from sale of admissions. This fixed tax is in lieu of taxes on
income from such business. The fixed tax on admissi ons sold during
each month is to be paid before the sixth day of th e following month at
the tax office of the district in which the showing took place.

Article 86 Fixed Tax of Grain and Processing Mill, Cane and Seed Oil
Machinery . Owners of mills grinding grains or processing rice, cane or
seed oil extracting machines other than those inclu ded in Article 86
and its regulations are subject to a fixed tax in l ieu of taxes on income
from such property. This tax shall be ten per cent of the estimated
gross income per year from such mills or machines. The estimated
gross income per year shall be determined in accord ance with rules
and regulations of the Ministry of Finance, and the tax shall be paid by
the owner at the tax office of the district in whic h the mill or machine is
located.

Article 87 Fixed Tax on Mills and Saw Mills Operate d Electrically or By Diesel

Owners of mills and saw mills with machines which o perate by electric or
diesel power are subject to a fixed tax on the inco me from such mills.
The fixed tax is equal to 200 afghanis per year per horse power of the
motors or machines providing power for the mill. Th e tax shall be paid by
the owner of the mill at the tax office of the dist rict in which the mill is
located.

Article 88 All individuals selling goods and serv ices from established places of
business are subject to taxes specified in the sche dule of tax
categories of businesses. These taxes are in lieu o f income taxes from
the sale of such goods and services. The tax due fr om an individual
owner (or owners) of a fixed place of business is t he amount specified
for the related category and grade of such establis hment. This tax
shall be paid at the tax office of the district in which the business
establishment is located. The schedule of tax categ ories of business
establishments shall be prepared by the Ministry of Finance.

Article 89 (1) The fixed tax of business establis hments is to be set by a
committee considering the following factors and is to be approved by
the Minister of Finance every three years:
1- The kind of goods and services offered;
2- The estimated volume of business;
3- The size and rental value of the establishment;

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4- The economic advantages of its location in relat
ion to
the population;

5- Demand for goods and services offered;
6- Estimation of turnover, cost of goods and sales of
goods;
7- Classification between domestic and foreign prod ucts;

8- Classification between consumable and non-
consumable goods;
9- Estimation of daily, monthly and annual net inco me of
the business establishment.

(2) A fixed tax is imposed on business establishmen ts which do not
have complete accounting documents, and is computed according to
the following categories:
1- The fixed tax of business establishments which h ave
reliable purchase documents is three percent of the total
annual purchases.
2- The fixed tax of business establishments which h ave
reliable sales documents is two percent of the tota l annual
sales.
3- The fixed tax of business establishments which a re not
covered by subparagraphs (1) and (2) of paragraph t wo of
this Article is 2.5 percent of the estimated total annual
sales.
4- The fixed tax of business establishments whose
calculation of annual net income is not possible is six
percent of the market value of current stock on han d.

Article 90 (1) Physicians or medical practitione rs who treat patients outside of
State hospitals are required to have a medical trea tment license and
are subject to a fixed tax in lieu of income tax.

(2) A medical treatment license is valid for one ye ar and can be
distributed by the Ministry of Health in Kabul and its health directorates
in the Provinces.
(3) The annual fixed taxes of physicians or medical doctors who treat
patients outside of State hospitals shall be levied as follows:

1- 5,000 afghanis for physicians or medical practi tioners,
who have up to 10 years of experience,

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Version 7 April 2005 page 32
2- 7,000 afghanis for physicians or medical practi
tioners
who have more than 10 years and up to 20 years of
experience,
3- 10,000 afghanis for physicians or medical practi tioners
who have more than 20 years of experience.

(4) The fixed taxes mentioned in paragraph (3) of t his Article are
collected by the relevant section of Ministry of Pu blic Health while
issuing or renewing medical treatment licenses.

Article 91 (1) Amendments to categories, exemptio ns and tax rates of this Law
must be proposed by the Ministry of Finance and app roved by the
ministerial council and legislative authorities.

(2) Tax imposition and exemptions are not valid wit hout the approval
of the Ministry of Finance.

Article 92 Persons who are shopkeepers engaged in c ommercial activities with
no fixed place of business and are not otherwise ta xed under the
provisions of this Law are subject to fixed occupat ional tax in
accordance with the provisions of Article 94. Fixe d occupational tax is
payable to the nearest tax office of the district i n which the person
resides.

Article 93 (1) Persons who are subject to Incom e Tax are required to file a
detailed return to report income, deductions, and o ther necessary
information required by this Law and its regulation s, as prescribed by
the Ministry of Finance and submit it to the releva nt tax office.
(2) An individual who derives wage income that is s ubject to income
tax withholding in accordance with the provisions o f Articles 51 and 64
shall not make a return unless the person receives wages from two or
more employers or the person has other income in ad dition to his
wage income. Withholding tax from salaries and wage s withheld
according to this Law is not refundable.
(3) Persons who are required to complete a tax retu rn must submit
their tax return by the end of Jawza (the third mon th) of the next year
to the relevant tax office.

(4) Residents and non-residents who will leave Afgh anistan before the
due date for payment of their tax are required to s ubmit their return
form and pay the tax due two weeks before leaving t he country.

(5) Individuals, companies and organizations which are, according to
the Income Tax Law and the Customs Law, required to pay taxes or
customs duties, social, non profit and welfare orga nizations which are
withholding taxes from the salaries or wages of the ir employees, and
individuals who have or open an account with a bank or other financial
institution, are required to have a Tax Identificat ion Number. The

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Version 7 April 2005 page 33
Ministry of Finance will issue rulings on how to ap
ply for and use a Tax
Identification Number.
Employees and contracted employees of the State and employees of
State agencies whose income is salary or wages only are excluded
from this provision.

Article 94 Persons who are brokers, commission a gents, or sellers of goods
without a fixed place of business shall pay tax acc ording to the rates
determined by the Ministry of Finance.

Article 95 (1) Persons who are, according to the pr ovisions of this Law, required
to pay income tax and submit a return form, shall p ay their tax no later
than the end of Saratan (fourth month) of the next year.

(2) Persons who are required to pay business recei pts tax on services
shall pay their tax quarterly no later than the fif teenth day of next
month.

(3) Persons who carry on business from fixed busin ess establishments
are required to pay their tax quarterly.

(4) Persons who own moveable and immovable propert y shall pay tax
due when the ownership of such property is transfer red.
(5) Tax on contracts signed with the government age ncies, according
to provisions of Article 84 of this Law, shall be w ithheld at the time the
payment is made by the relevant government agency.

(6) Income tax on gains by brokers shall be paid no later than the end
of the fiscal year.
(7) Income tax on exhibitions, theaters, cinemas, s hows, sports, and
concerts shall be paid no later than the fifteenth day of the next month.
If the mentioned shows are not continuous, tax shal l be paid at the
end of each show.

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CHAPTER XII

FINAL ARTICLES
Article 96 – Article 99

Article 96 (1) The Ministry of Finance is required to provide forms that are
necessary for the purpose of determining and collec ting tax according
to the Law.

(2) The Ministry of Finance may issue public and pr ivate rulings
regarding income tax for the better administration of the provisions of
this Law. – Issued rulings are not binding on the taxpayer bu t
departments of the Ministry of Finance are required to
apply these rulings.

– The Ministry of Finance is not required to apply a private
ruling if the person requesting the ruling does not provide
complete and correct information about the planned
transaction.

Article 97 (1) Persons who deliberately do not subm it relevant documents to the
representatives of Ministry of Finance in order to escape the payment
of tax will be considered to have committed a crime and are liable to
be prosecuted.

(2) Persons who under report their original income shall not be fined or
penalized if it is proved that his action was not d eliberate but he shall
be required to pay the shortfall of tax.
(3) Persons who under report their original income and are fined or
penalized because of the late payment of tax shall be required to pay
the shortfall of tax plus additional tax if it is p roved that his action is not
a deliberate.
(4) Persons who do not complete and submit their re turn form by the
due date will be required to pay additional tax for late payment as
follows:

1- where they have no business activities: 400afs.
2- where they have a business license: 1,500afs.
3- If business or profitable company: 2500afs.
(5) Persons who do not pay their tax by the due dat e shall be liable to
additional tax of 0.10 percent per day.
(6) The time for payment and the amount of addition al tax for non-
payment of rent withholding tax on buildings and co nstructions shall

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be implemented according to a ruling prepared by th
e Ministry of
Finance.
(7) An individual, company or organization that is required to have a
Tax Identification Number according to paragraph 5 of Article 93 of
this Law, but fails to apply for or gives a false T ax Identification
Number shall be required to pay additional tax as f ollows:
1- Natural person: 500 afghanis.
2- Businesses that are not legal entities: 5,000
afghanis.

3- Persons and companies who do not apply for a Ta x
Identification Number as a result of carelessness a re
required to pay 25 percent of the income tax and
customs duties of that year.

4- Persons and companies who do not apply for a Ta x
Identification Number in order to evade tax are req uired
to pay 100 percent of the income tax and customs
duties of that year.

5- Persons and companies who deliberately submit a
false or another Tax Identification Number are requ ired
to pay 5,000 afghanis.

6- Persons and companies who provide a false Tax Identification Number in order to evade tax are req uired
to pay 100 percent income tax and customs duties of
that year.

7- Additional tax mentioned in this Article shall be
considered as income tax and is payable by the
fifteenth day of next month at which time the perso n is
required to have applied for a Tax Identification
Number.

8- The Ministry of Finance is authorized to revise the
rates of additional tax.

Article 98 (1) A deliberate evasion of tax is a cri me and shall be liable to
prosecution.
(2) Legal persons who conceal their taxable income are required to
pay their income tax and additional tax as follows:
– First, tax payable and two times the concealed ta x as
additional tax.
– Second, tax payable and four times the concealed tax as
additional tax.

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– If they conceal their income tax more than two ti
mes, then
subject to an order of the court, their business ac tivities
shall be terminated.
(3) If documents of a company are proved false, the Ministry of
Finance is authorized to calculate 15 percent of th e total cost of its
goods (including custom duties and administration c osts) as profit and
collect tax on this basis.
(4) If tax of an individual businessman cannot be c alculated based on
his documents, the Ministry of Finance is authorize d to calculate 15
percent of total cost of exported and imported good s (including custom
duties and administration costs) as profit and coll ect tax on this basis.

(5) If an individual businessman has a business lic ense and does not
have any business activity without lawful excuse du ring the year or
when his calculated tax is less than 10,000 afghani s, he is required to
pay 10,000 afghanis as income tax.
(6) If a trading company has a business license and does not have
any business activity without lawful excuse during the year or when
calculated tax is less than 20,000 afghanis, it is required to pay 20,000
afghanis as income tax.

Article 99 (1) Considering the provisions of this L aw, all government agencies
which have the authority to issue licenses shall, p rior to renewal or
issuance of licenses, request the applicant to prov ide a document of
compliance approved by the Ministry of Finance.
(2) Ministries, government agencies and other organ izations shall not
issue or renew a business license for a natural orl egal person who is
required to have a Tax Identification Number and fa ils to provide it.

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