IFA December 22nd Sanzar Kakar

SANZAR KAKAR
CHAIRMAN
AFGHANISTAN HOLDING GROUP
OPPOSITE MRRD, DARULAMAN, DISTRICT 6, KABUL, AFGHANISTAN
AFGHANISTAN COMPLIANCE
DISCUSSION OF TAXATION REQUIREMENTS
Copyright 2014 Afghanistan Holding Group. Email us at info@ahg.af, call us at +93 796 000 111 or visit www.ahg.af for more information.
WHY REGISTER IN AFGHANISTAN

Required under Afghanistan Central Business Registry
Law as well as the Commercial Code

Required by the BSA under Government or other contract
Required for starting in country operations, including:
Obtaining specialized permits
Opening a bank account
Applying for a tax exemptions
Remitting withheld taxes from landlords, employees and vendors
WHY KEEP COMPLIANT IN AFGHANISTAN

1. File and pay taxes monthly/quarterly/annually, in order to
2. Obtain a tax clearance letter, in order to
3. Obtain a no objection letter for license renewal, in order to
4. Renew your license, in order to
5. Continue in country operations, including:
Obtain work permits / work visas
Import / export through customs
Qualify to bid on certain contracts
Make changes to your license
Qualify for a 2% vs. 7% withholding rate
Register another organization
TAX LIABILITIES ACRUE FROM THE BEGINNING

OF ACTIVITIES IN AFGHANISTAN
Must keep up to date:
1. Rental Tax Withholding (Article 59)
2. Employee Tax Withholding (Article 58)
3. Contractor Tax Withholding (Article 72)
4. Dividend/Interest/Royalties Tax Withholding (Article 46)
5. Business Receipts Tax (Article 64)
6. Annual Income Tax (Article 8)
RENTAL TAX WITHHOLDING

When paying a monthly
rent of
Then you
And remit
should
within
withhold
0 Afs to
0%
10,000 Afs
10,000 Afs to 100,000 Afs 10% flat

Over 100,000 Afs
15 % flat
15 days after
end of month
in which
payment was
made
EMPLOYEE TAX WITHHOLDING

When paying a monthly
salary of
Then you
should
withhold
And remit
within
0 Afs to
5,000 Afs
0%
5,000 Afs to
12,500 Afs
10 days
after end of
month in
which
payment
was made
2% of amount
over 5,000
12,500 Afs to 100,000 Afs 150 Afs + 10%
over 12,500
Over 100,000 Afs
8900 Afs + 20%
over 100,000
CONTRACTOR TAX WITHHOLDING

When paying a subThen you should
contractor
withhold
Under 500,000 Afs per
0 Afs
year
Over 500,000 Afs per year 2% flat
to a company with an
valid license
Over 500,000 Afs per year 7% flat
to a company without an
valid license
And remit
within
10 days
after end of
month in
which
payment
was made
DIVIDEND, INTEREST, ROYALTIES TAX

WITHHOLDING
When paying a third
Then you should
party, not one of the
withhold
previous withholding
categories
And remit
within
Any amount of
interest, dividends,
royalties, prizes,
rewards, lotteries,
gratuities, bonuses
10 days
after end of
month in
which
payment
was made
20% flat
BUSINESS RECEIPTS TAX

When revenue is from
Then you
should
pay
0 Afs
A MOF confirmed tax

exempt contract
Telecom, airline, or
10% flat
hospitality >750,000 Afs
Hospitality revenue of
<750,000 Afs
All other sources
5% flat
And file
within
15 days
after end
of quarter
in which
payment
was made
4% flat
ANNUAL INCOME TAX

When revenue is
from
Then you should

pay
A MOF confirmed tax

exempt contract
0 Afs
All other contracts
And file
within
3 months
after end of
the fiscal
20% of profit after all year
allowable
(21 March)
expenses
MOF INTERPRETATION OF EXEMPT-ABILITY

As of
1/1/2015 for
contractors
to:
DOD
(BSA)
NATO
(SOFA)
USAID
(SOAG)
DOS/INL
only
DOS other
UN
EC, ADB
Others
Should Remit:
Rental
Withholding
Employee
Withholding
NonAfghan
Afghan
Contractor
Withholding
NonAfghan
Afghan
BRT
Annual
Income
Tax
Custom
Duties
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
Exempt
X
X
X
X
X
Exempt
X
X
X
Exempt
X
X
X
X
X
X
X
X
X
X
X
Exempt
Exempt
X
X
Exempt
X
X
X
Exempt
Exempt
X
NON COMPLIANCE MEANS

As per Article 99:
1. Failure to pay the due tax by the due date prescribed by
the provisions of this Law,
2. Failure to maintain or provide access to books and
records of business transactions,
3. Failure to file a tax return and balance sheet,
4. Failure to withhold tax,
5. Failure to pay tax without reasonable cause, or
6. Failure to obtain a Taxpayer Identification Number.
Or any of above with the intent of evading payment of tax
PENALTIES FOR NON COMPLIANCE

Either self-assessed or audit department assessed,
in addition to the tax:
Article 100: 0.1% of the tax due per day payments late
Article 101: 20,000 Afs ($400) for poor records*
Article 102: 500 Afs ($10) per day late filing annual returns*
Article 103: 10% of the tax due for not withholding tax
Article 104: 10% of the tax due without reasonable cause
Article 105: 20,000 Afs ($400) not obtaining TIN*
Article 106: Referred to AGO for MOF disclosure of confidential
material or misuses position for direct or indirect benefit
Article 98: 2 times the tax due for tax evasion
*penalty rates for businesses, not individuals
OTHER ENFORCEMENT MEASURES

Enforcement department actions:
Article 92: Collection of unpaid tax from third parties
Freezing and seizure of bank accounts in country
Garnishment of income from customers and debtors
Auction assets to cover tax liabilities
Article 93: Personal liability of key staff

Article 94: Persons not allowed to leave Afghanistan
Article 95: Business closure
Article 96: Restrictions on disposal of property
Prosecution and prison sentence
RECOMMENDATIONS
1. Plan and budget for all withholdings and taxes
2. Keep excellent accounting processes and records
3. Complete clear self-assessment from start date
4. Timely monthly, quarterly and annual filings
5. Keep signed copies of all communication provided
and received
6. Constant communication with the case managers,
audit department and enforcement department
7. Understand the bigger picture
WHAT TO DO WHEN TAX AUDIT STARTS

1. Identify the three assigned audit team members and tax
2.
3.
4.
5.
6.
years under audit

Request a written list of documents requested by the
audit team and corresponding deadlines
Carefully gather all documents that have been provided
and prepare all documents that are being requested
Do you own calculations to compare against the draft
audit assessment
Pay final agreed assessment to obtain audit clearance
Do not make illegal payments this is a crime under
Afghanistan Anti-Corruption Law, U.S. FCPA and U.K.
Anti-Bribery Act and more
WHAT TO DO WHEN TAX ENFORCEMENT STARTS

1. Identify the assigned enforcement team members and
2.
3.
4.
5.
6.
the final assessment being enforced

Immediately send acknowledgement letter and assure
full cooperation
Clearly understand all deadlines
Discuss an advance tax payment percentage against
audit assessments
Discuss a payment plan if needed and obtain
appropriate approvals
Make initial payment to return to audit department
QUESTIONS

IFA December 22nd Sanzar Kakar

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SANZAR KAKAR

WHY REGISTER IN AFGHANISTAN

Law as well as the Commercial Code

WHY KEEP COMPLIANT IN AFGHANISTAN

TAX LIABILITIES ACRUE FROM THE BEGINNING

RENTAL TAX WITHHOLDING

10,000 Afs to 100,000 Afs 10% flat

EMPLOYEE TAX WITHHOLDING

CONTRACTOR TAX WITHHOLDING

DIVIDEND, INTEREST, ROYALTIES TAX

BUSINESS RECEIPTS TAX

A MOF confirmed tax

ANNUAL INCOME TAX

Then you should

A MOF confirmed tax

All other contracts

MOF INTERPRETATION OF EXEMPT-ABILITY

NON COMPLIANCE MEANS

PENALTIES FOR NON COMPLIANCE

OTHER ENFORCEMENT MEASURES

Article 93: Personal liability of key staff

WHAT TO DO WHEN TAX AUDIT STARTS

years under audit

WHAT TO DO WHEN TAX ENFORCEMENT STARTS

the final assessment being enforced

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