Afghanistan's 2026 Tax Relief Measures: Key Changes and Their Impact on Businesses

The Ministry of Finance of Afghanistan has announced a package of tax relief measures aimed at reducing the tax burden on individuals and businesses while encouraging investment and facilitating commercial activity. Approved pursuant to Cabinet Resolution No. 1478 dated 14 Mizan 1447 AH, the measures amend existing tax rates, exemption thresholds, and fixed tax obligations across several sectors. Collectively, these amendments reflect a policy shift toward improving tax compliance through lower tax burdens while supporting economic growth.

1. Reduction of Corporate Income Tax

The corporate income tax rate applicable to legal persons has been reduced from 20% to 15%. This significantly increases after-tax profitability and enhances Afghanistan's attractiveness as an investment destination while reducing the substantive tax liability of corporate taxpayers.

2. Increase in Personal Income Tax Exemption Threshold

The monthly exemption threshold has increased from AFN 5,000 to AFN 10,000, while the annual threshold has increased from AFN 60,000 to AFN 120,000. Lower-income earners will benefit immediately through reduced or eliminated tax liability.

3. Elimination of the 2% Tax Bracket

The previous 2% personal income tax bracket has been abolished, simplifying the tax system and reducing compliance complexity.

4. Revised Progressive Personal Income Tax Rates

Income between AFN 120,001 and AFN 1,000,000 is taxed at 10%. Income exceeding AFN 1,000,000 is subject to AFN 108,000 plus 15% of the excess. The revised structure preserves progressive taxation while reducing the overall tax burden.

5. Reduction of Capital Transfer Tax

The tax on transfers of movable and immovable capital assets has been reduced from 2% to 0.5%, lowering transaction costs and encouraging formal registration of transfers.

6. Revised Fixed Tax Regime for Fuel and Gas Traders

The Ministry introduced revised fixed taxes for wholesalers, commission agents, and retailers in the domestic fuel and gas sector based on their business model and size.

7. Effective Date

The measures apply from 12 July 2026 (corresponding to 21 Saratan 1405) and are expected to operate prospectively unless implementing legislation provides otherwise.

What Businesses Should Do

Businesses should review their tax position and compliance framework in light of these amendments. In particular, they should:• Assess eligibility for the reduced 15% corporate income tax rate.• Recalculate payroll and withholding obligations using the revised personal income tax thresholds.• Review planned asset or property transfers to benefit from the reduced 0.5% capital transfer tax where appropriate.• Confirm whether fuel and gas operations fall within the revised fixed tax regime and ensure correct classification.• Update accounting systems, tax policies, employment practices, and compliance procedures to reflect the new rules.

Conclusion

The 2026 tax relief measures represent one of the most significant recent developments in Afghanistan's tax framework. By reducing corporate and personal tax burdens and lowering transaction taxes, the reforms aim to stimulate investment and formal economic activity. Businesses should proactively assess the impact of these amendments on their operations and ensure that their tax planning and compliance strategies are aligned with the revised legal framework.

How We Can Help

Our firm advises domestic and international businesses on Afghan tax law, corporate structuring, regulatory compliance, and investment matters. We assist clients in interpreting legislative changes, assessing their legal and commercial implications, implementing compliant tax strategies, and managing engagements with Afghan tax authorities. If you would like to understand how these reforms affect your business or investment, our team is available to provide tailored legal advice.