What is BRT?
Under Article 64 of the Afghanistan Income Tax Law, Business Receipts Tax (BRT) is a tax which is imposed on total gross income (sales) before any deductions, based on the rates set forth in the Income Tax Law. BRT applies to both individuals (in certain circumstances) and businesses who provide goods or services in exchange for payment. BRT is typically paid on a quarterly basis.
What Income is Exempt from BRT?
Under Article 65 of Afghanistan Income Tax Law, certain types of incomes are specifically exempt from BRT in order to promote investment, support the banking system, and encourage export. Below is a list of income types not subject to BRT:
- Banking and Financial Services
- Interest income earned from saving accounts or investments in banks or financial institutions.
- Income received in the form of fees from exchange of currency, bank operations on saving accounts, fixed deposits, other deposits, bank investment, internet banking, and issuance of cheques and guarantee letters.
- Income received from providing loans, mortgages, or letters of credit.
- Future Contracts
- Income received from issuance of cash-settled futures contracts (future contract is an agreement to buy or sell a specified amount of a product at an agreed price on or before a given date in the future).
- Income from issuance of physically-settled futures contracts (contracts delivered with actual goods).
- Insurance
- Income received from insurance or re-insurance (insurance provided to another insurance company) services.
- Dividends
- Dividends or profit distributions received by a shareholder from a corporation, limited liability company or partnership.
- Export Income
- Income derived from the export of goods and services.
- Income Covered Under Other Articles
- Income types under Articles 17 or 46 of the Income Tax Law, such as wages and salaries, dividends, interest, royalties, lottery, and bonus are specifically exempt from BRT.
- Residential Property Rental
- Income received from rent or lease of residential property to a natural person, provided the tenant uses the property as a residence for more than six months of the tax year.
- Sale of Property
- Income from sale of property by a natural person if the sale occurs outside the ordinary course of the natural person’s business and is not regular or continuous.
Important Notes
- The exemption from BRT does not mean exemption from the income tax, unless otherwise specified.
- Proper documentation and classification of exempt income is essential to avoid misinterpretation during audits.