Afghanistan taxes companies, both Afghan and foreign-owned, only on income actually sourced within Afghanistan, regardless of where the company is incorporated or who owns it, under a territorial system administered by the Afghanistan Revenue Department. The July 2026 reform reduced the standard corporate rate to 10% for most entities, with mining extraction companies excluded from the reduction.
Afghanistan's tax administration operates on the Afghan solar calendar (currently fiscal year 1404/1405), with the July 2026 reform's effective-date rule based on when a return or assessment is filed or finalized (after July 11, 2026) rather than the fiscal year the underlying income relates to; a computerized self-assessment tax filing system requiring a Taxpayer Identification Number is in place.
10% flat rate for most entities, down from a prior 20%, effective under a reform announced July 12, 2026 by Afghanistan's Ministry of Finance under the Islamic Emirate administration. Mining extraction companies are excluded from the reduction and remain subject to a higher rate. Access to the reduced rate is reportedly conditional on formal registration in the tax system and digitalization of financial operations. Notably, the effective-date rule is based on when a return or assessment is filed or finalized (after July 11, 2026) rather than the fiscal year the underlying income relates to - meaning even a return for fiscal year 1403/1404 (2024-2025) filed after that date uses the new 10% rate.
Progressive, also reduced under the July 2026 reform: income between AFN 60,000 and AFN 120,000 annually is exempt, income from AFN 120,001 to 1,200,000 is taxed at 10%, and income above AFN 1,200,000 faces a 15% top rate (down from a prior 20% top rate). Administration is under the Afghanistan Revenue Department; a person is resident if their principal home is in Afghanistan at any point in the tax year, they are present for 183 days total, or they are a Government of Afghanistan employee posted abroad.
No formal VAT currently operates in Afghanistan. A 2014-2015 VAT initiative developed with IMF support was never fully implemented to cover all goods and services (hotels, for example, remained excluded) and appears to have been superseded rather than completed. The operative indirect tax today is a Business Receipts Tax (BRT) on gross business receipts, with no input credit mechanism: 4% general rate, 2% for restaurants, and 5% for airlines and telecom.
A person is resident in Afghanistan for a tax year if they have their principal home in Afghanistan at any time during the year, are present for 183 days total in the tax year, or are a Government of Afghanistan employee or official posted abroad during the tax year. Non-resident persons and expatriates are subject to the same tax treatment for their Afghanistan-source income as residents.
A non-resident company operating through a permanent establishment in Afghanistan is subject to the standard corporate tax rate on income sourced within Afghanistan, consistent with the jurisdiction's territorial approach described elsewhere on this page; a specific codified PE test comparable to a full OECD Model treaty article is not published in accessible primary sources, consistent with Afghanistan's very limited tax treaty network.
Afghanistan has no CFC regime. Afghanistan taxes companies - both Afghan and foreign-owned - only on income actually sourced within Afghanistan, regardless of where the company is incorporated or who owns it. Because Afghanistan does not tax the foreign-source income of its own resident companies in the first place, there is no separate mechanism needed to attribute a foreign subsidiary's undistributed profits back to an Afghan parent - the structural reason a CFC regime exists elsewhere simply does not arise under Afghanistan's territorial system.
No statutory thin capitalization ratio is identified in available primary or secondary sources.
Afghanistan classifies entities under its own domestic tax law rather than offering an elective check-the-box system, and no ATAD2-style anti-hybrid mismatch regime addressing double-deduction or deduction-without-inclusion outcomes has been identified, consistent with Afghanistan having no CFC regime: because Afghanistan does not tax the foreign-source income of its own resident companies in the first place, there is no separate mechanism needed to attribute a foreign subsidiary's undistributed profits back to an Afghan parent.
No domestic FBAR-equivalent regime requires Afghan residents to separately disclose foreign financial accounts, and Afghanistan is not currently a CRS participating jurisdiction, so it does not automatically exchange financial account information with foreign tax authorities under the OECD's Common Reporting Standard. US persons remain independently subject to FinCEN Form 114 (FBAR) and potentially Form 8938 regardless of Afghanistan's own rules.
Not a meaningful question given Afghanistan's territorial system: dividends and capital gains from a foreign subsidiary are already outside the Afghanistan tax base entirely since Afghanistan taxes only Afghanistan-sourced income, achieving a more complete practical effect than a conventional participation exemption regime would provide.
No dedicated general unilateral foreign tax credit mechanism is identified in available sources; given Afghanistan's territorial approach (only Afghanistan-sourced income is taxed in the first place) and its very limited treaty network, a foreign tax credit has limited practical relevance for most Afghan taxpayers, and any specific cross-border fact pattern should be confirmed directly with the Afghanistan Revenue Department.
Afghanistan has a very limited tax treaty network, consistent with its current limited international diplomatic recognition; a comprehensive named-partner list is not available in accessible current sources. Afghanistan operates a computerized self-assessment tax filing system requiring a Taxpayer Identification Number.