Tax Exemption in Afghanistan

The Income Tax Law of Afghanistan in it’s article one hundred and eleventh provides the subject of conflict of it’s provisions with international treaties and agreements, which are executed between the Afghan government and foreign governments or international organizations, the mentioned law states: “in case of conflict between the provisions of the Income Tax Law of Afghanistan and international treaties and agreements which Afghanistan is part of, the treaties would prevail on the Tax Law.”

While the Islamic Republic of Afghanistan regularly signs treaties with other countries or international organizations which may influence or impose certain types of taxes or tax exemptions; In this article, it is tried to briefly define the process of obtaining tax exemption under such treaties, to be a short guide for companies which are entitled to such tax exemptions.

The process for obtaining a tax exemption ruling from the Ministry of Finance of Afghanistan in accordance with bilateral or multilateral treaties, is consist of three phases which are described in the following states:

First Phase:

The tax exemption applicant is required to collect the bilateral or multilateral treaty which grants the tax exemption to the institution or company, and obtaining a duly certificate (“Contractor Certificate”) from the Subcontract granting entity, to confirm the details of the contract and entitlement of the Subcontractor company to the tax exemptions.

Second Phase:

Submission of the application package, which includes a copy of the relevant treaty,  Contractor Certificate and a copy of the Subcontract to the Revenue Department of the Ministry of Finance of Afghanistan along with an application letter to contain at least following information:

• Brief information of the applicant
• TIN (Tax Identification Number) of the applicant
• Name, title, contact information of the representative in Afghanistan to be in contact with Ministry of Finance for further correspondences.
• Explanation to justify the applicability of provisions of the international treaty concerned the services of the applicant in Afghanistan.

The application along with it’s supporting documents should be submitted to the Revenue Department of the Ministry of Finance of the Islamic Republic of Afghanistan.

The written request must be in Dari, Pashto or English language, if these documents are in a language other than Dari, Pashto or English in this case, it must be translated into one of these languages.

Third Phase:

After receiving the relevant documents and information, Ministry of Finance of the Islamic Republic of Afghanistan within 21 days will issue the tax exemption ruling, or provide sufficient reasons for denial on the grant of the exemption.

The tax exemption ruling would clearly state all types of services of the applicant which are subject to tax exemption; it would also determine the type of tax exemptions which the applicant is entitled to.