Brt

Guide 03

Business Receipts Tax on Services

services of prepared food; or sales of cooked foods that were prepared on the premises. Telecommunication services – means the provision of telephonic services or internet services by a telecommunications service provider or internet service provider, including digital or analogue telephone, facsimile or data transfer communications and internet access by any means. Airline services – means passenger air services where the flight originates in Afghanistan. See also Guide No. 12 Who Must Pay the 10% BRT? If you are a legal person (corporation, limited liability company, partnership, etc.) or a natural person operating as a sole proprietor and your business falls into one of the four categories previously mentioned and your total sales value (turnover) is 100,000 Afghanis or greater for any month, you must file a return and pay tax for that month.

Introduction Tax Rate The Business Receipts Tax (BRT) affecting the following types of businesses (Articles 64 & 65 Income Tax Law) came into effect on 30 Jowza 1383 (June 19, 2004): 1. 2. 3. 4.

Hotel services Restaurant services Telecommunication services Airline services

Note 1: There has been a legislated change to the monthly threshold of 50,000AFs per month. This has been increased to 100,000AFS effective November 14, 2005 (23 Aqrab, 1384)

Note 2: All taxpayers with business receipts tax obligations that do not fall into the above four categories will continue to follow the existing Business Receipts Tax rules. Please note: The filing and payment frequency for business receipts taxes not listed above has been switched from annual to quarterly. This change to quarterly filing and payment is effective from 1 Hamal 1385 (March 21, 2006). Contact your local Mustufiat office for more information (Article 93).

Note 3: There are no fees or charges payable to the Ministry of Finance or its Revenue Department or the Mustofiat for any Tax Guides or Forms or at any stage of the tax assessment collection or enforcement process Definitions (Article 65) Hotel services – means the provision of sleeping accommodation and related services, including the provision of meals, beverages, laundry and communications services, to persons who occupy such accommodation as transient guests. Restaurant services – means the provision of food or beverages by an establishment that provides facilities for immediate consumption at that establishment, or catering

The rate for those affected by this application of the Business Receipts Tax will be 10% of the gross receipts or income of the business for all affected businesses (both legal and natural persons), irrespective of whether the taxpayer has passed the tax onto the customer. Example: Ahmad, who is a sole proprietor, runs a restaurant in Kabul. Monthly gross sales of the restaurant for Mizan, Aqrab and Qaus are 90,000Afs, 104,000Afs and 80,000Afs, respectively. As the sales in Mizan and Qaus are less than 100,000Afs, the business (a sole proprietor) does not have a BRT liability for those months. The business only has a BRT liability for Aqrab in which the gross sales are 104,000Afs. The tax rate used in this case is 10%, which is applied to the full 104,000Afs. Therefore, the BRT payable is 10,400Afs. How is the Tax Paid? Tax forms and payments are due on a quarterly basis using the solar calendar (Article 93). However, tax is calculated on a monthly basis. Tax payments should be

made in Afghanis at Da Afghanistan Bank no later than the fifteenth (15th) day following the end of the solar quarter in which the sales were made.

Quarter Hamal – Jowza Saratan – Sunbala Mizan – Qaus Jeddi – Hut

Due Date 15 Saratan 15 Mizan 15 Jeddi 15 Hamal

Example: Ahmad has calculated his tax due on the 104,000Afs for Aqrab as 10,400Afs. Since the return and tax are due on a

quarterly basis, he would complete his form showing no tax for Mizan and Qaus, and tax of 10,400Afs for Aqrab. He would file this return and pay the tax at Da Afghanistan Bank no later than 15 Jeddi.

Treatment of Business Receipts Tax for Income Tax purposes The Business Receipts Tax paid or payable is considered

Recordkeeping

to be an ordinary and necessary expense of doing business and is therefore deductible from gross income when computing taxable income for the year (Article 67).

The tax law requires taxpayers to maintain adequate accounting books and records to prove that the correct amount of tax has been paid (Chapter V). The Ministry of Finance has the authority to examine the books and records of the taxpayer and those of associated persons (Article 96).

Tax Forms and Information Tax forms, guides and assistance are available from the Ministry of Finance, Afghanistan Revenue Department, Individual Tax Unit or phone 0752015016. Also, additional information and a copy of the Income Tax Law is available on the Ministry of Finance “Tax Information Page” at – www.mof.gov.af/tax

Method of Accounting The 10% Business Receipts Tax is based on income derived from the services provided by a legal or natural person. The term ‘income derived’ means income derived under an accruals method of accounting.

Enforcement Provisions Failure to comply with the requirements of the Income Tax Law may result in the Ministry of Finance using administrative powers within the tax law to ensure compliance. These provisions are contained in Chapters XIV & XVI and include fines, penalties and imprisonment.

The Tax Form The Business Receipts Tax form is a four part form which requires your identifying information (name, address, taxpayer identification number – TIN, etc.) your business type, gross receipts, and total tax. You will provide one copy to the cashier at Da Afghanistan Bank when you pay your tax. The bank will also keep two additional copies, which they will forward to the Ministry of Finance. You will receive one copy for your records.

Islamic Republic of Afghanistan Ministry of Finance Afghanistan Revenue Department

Example:

1385

Waheed Nasri operates a guesthouse, which also includes a restaurant, as a limited liability company. During the first quarter of 1384 he had gross guest-house receipts of 400,000Afs for Saratan, 300,000 Afs for Asad, and 350,000Afs for Sunbala. He also had restaurant receipts of 120,000Afs, 90,000Afs and 110,000Afs for the same three months. He would report this income by 10 Mizan 1384 as Asad Sunbala follows: Saratan - Hotel Services 400,000 - Restaurant 120,000 Services - Telecommunication Nil Services - Airline Services Nil ______ Monthly Total 520,000

300,000 90,000 Nil Nil ______ 390,000

350,000 110,000 Nil Nil ______ 460,000

Calculation of Tax Once the 100,000Afs threshold is exceeded the 10% tax rate is calculated on the entire amount. For example in a month where the sales are under 100,000Afs no 10% BRT is payable, but in a month where the gross receipts are over 100,000Afs, it is the entire amount on which the 10% BRT is payable, not just the amount that exceeds the 100,000Afs. Note: Limited liability companies, corporations, general partnerships and organizations will be liable for the 2% BRT on gross receipts when the total is under the

100,000Afs threshold.

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