Afghanistan will introduce the Value Added Tax (VAT) regime effective 22 December 2021. The tax applies to the supply of goods and provision of services in the country, including imports. The VAT replaces the Business Receipts Tax (BRT) on imports and taxpayers subject to VAT are not subject to domestic BRT. However, the BRT will continue to be imposed on non-registered taxpayers where standard conditions for BRT are met.

The VAT regime provides that the standard VAT rate is 10%. Certain supplies are either exempt or zero-rated.

Exempt Supplies Include:

Health services;
Education services;
Financial and insurance services;
Transfer or lease of immovable properties for residential purposes;
Provision of religious services;
Humanitarian aids;
Goods and services provided to a government entity for the purposes of rehabilitation after natural disasters, industrial incidents, and catastrophes; and
Sport services.

Zero-Rated Supplies Include:

Exports;
International transportation of goods and passengers;
Specified foodstuffs;
Transfer of part or whole of a business as a going concern by a registered person to another registered person, provided made by a written agreement between the parties and notified to the ministry of finance;
Books and educational materials; and
Basic materials used for household purposes (coal, wood, gas, soap).

Registration Threshold

Taxpayers are required to register for VAT if the taxable turnover is AFN 150 million or more in the previous 12 months or if the threshold is expected to be met within the next 12 months. Taxpayers are required to remain registered for at least 1 year after the registration.

Voluntary registration is allowed and compulsory for at least 2 years if the following conditions are fulfilled:

Turnover is at least AFN 100 million;
At least 75% of supplies are made to VAT-registered persons or at least 25% of supplies are for export;
Tax laws are complied with; and
An office for economic activity is maintained in Afghanistan.

Returns and Payments

Taxpayers are required to file VAT returns and make payments on a monthly basis (for medium or large taxpayers) or quarterly basis (for small taxpayers) within 30 days after the end of the tax period.

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