Operating losses can be carried-forward for 3-years following the year in which the loss was incurred. One-third of the loss can be offset each year. If the taxpayer does not have an operating profit during any or all of those three years, the loss carried forward is forfeited. A non-Afghan source operating loss cannot be used to offset or reduce Afghan source taxable income. Similarly, an Afghan source operating loss cannot be used to offset or reduce non-Afghan source taxable income. Operating losses incurred during a tax holiday or tax exemption are not allowed to be carried forward.
Companies registered under the Afghanistan Private Investment Law (other than those operating in the restricted sectors) are entitled to unlimited carry-forward of losses, whereby the net operating loss incurred for a financial year can be carried forward indefinitely until offset in full. Operating losses incurred during a tax holiday or tax exemption are not allowed to be carried forward.
Losses incurred on the sale or exchange of shares can be offset only against gains from the sale or exchange of shares in the same year. If the gains exceed the losses from such transactions, the excess is taxable and if the losses exceed the gains, the excess is not deductible.
Net operating losses incurred on account of depreciation can be carried forward until such loss is fully offset. For claiming such offset, the enterprise must be an approved enterprise under Afghanistan Private Investment Law. Depreciation relating to a period before grant of such approval cannot be considered in the net operating losses.
Depreciation and expenditure relating to a period covered by a tax exemption cannot be considered in the calculation of the net operating loss.