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Afghanistan's New VAT Law Coming into Force — Orbitax Tax News & Alerts

Afghanistan's Value Added Tax Law is scheduled to come into force on 21 December 2020 (first day of Jadi 1399). The VAT Law, approved on 13 April 2016 with amendments in 2017, provides for a standard VAT rate of 10% with a registration threshold of AFN 150 million turnover per annum. Voluntary registration will also be allowed subject to certain conditions, including where at least 75% of a person's taxable supplies are to registered persons or at least 25% of the supplies are for export. VAT replaces Business Receipts Tax (BRT) on imports and on supplies made by VAT registered persons but will continue to be imposed on non-registered persons where standard conditions for BRT are met.

With respect to scope, the VAT will be imposed on all imports (irrespective of whether the importer is VAT registered) and on the sale of goods and services in Afghanistan by businesses registered for VAT. Certain supplies are exempt under the VAT Law, including health services, education services, and financial and insurance services, and certain supplies are zero-rated, including exports, international transportation of goods and passengers, and certain nutritious foodstuffs.

Return and payment requirements are to be based on monthly or quarterly VAT periods. The tax due by a registered person in respect of any VAT period is the amount of tax payable less the amount of tax creditable (input tax), with the possibility of a refund.

Further details on the implementation of the VAT Law in Afghanistan will be published once available.