Understanding Private Rulings for Non-Profit Organizations in Afghanistan
Non-profit organizations in Afghanistan may apply for a private ruling to qualify for tax-exempt status. This article explains the process, qualifications, and requirements for obtaining a private ruling from the Afghanistan Revenue Department (ARD).
What is a Private Ruling?
A private ruling provides a non-profit organization with a legal interpretation regarding the application of the Income Tax Law 2009 to a specific situation. It is not a ‘tax exemption certificate’ or a ‘tax compliance certificate’. A private ruling provides an interpretation based on disclosed business activities but does not confirm compliance with the law.
Qualification
Non-profit organizations established under the Law on NGOs in Afghanistan (Gazette No 859, 15 Saratan 1384) may apply for a private ruling related to their tax liability from contributions, grants, and income from necessary operations in Afghanistan as provided by Article 10, Income Tax Law 2009. To qualify, the organization must: Operate on a non-profit basis exclusively for educational, cultural, literary, scientific, or charitable purposes. Contributors, shareholders, members, and employees cannot benefit from the organization during its operation or upon its dissolution. Register with the Ministry of Economy under the Law on Non-Governmental Organizations (NGOs). Registration alone does not confer tax-exempt status; the organization’s goals and activities must satisfy Article 10 requirements.
Application Process
To apply for a private ruling, non-profit organizations must follow these steps: Step 1: Register with the Ministry of Economy under the Law on Non-Governmental Organizations (NGOs). Step 2: Submit an application on the prescribed form, signed by the president or secretary of the organization, to ARD. Attach the following documents: By-laws, rules and regulations, any memorandum or articles of association or the constitution (charter) of the organization. Latest audited balance sheet and financial statements prepared under International Accounting Standards (IAS). A list of names, addresses, and telephone numbers of officers, including their family relationships. Assessment issued by the High Evaluation Commission (HEC) for registration under the Law on NGOs. A statement on the application of surplus funds. A list of donations, contributions, subscriptions, and grants for welfare activities/projects. Step 3: Provide further documentation if required by ARD.
Issuance, Validity & Term
ARD usually issues a private ruling within 21 calendar days of receiving all relevant documentation. The ruling will: State the exempt status of the organization under Article 10, Income Tax Law 2009. State the exemption from contributions and income from necessary operations. Specify reporting and withholding income tax requirements for compliance. Remain valid unless withdrawn for reasons assigned, with an opportunity for the organization to contest the action.
Reporting Requirements and Other Obligations
Approval as a tax-exempt organization does not exempt the organization from reporting requirements under the Income Tax Law 2009. These include filing an income tax return (Article 88), maintaining and preserving records (Article 36), withholding tax from salary and wages (Article 58), rent withholding tax on buildings (Article 59), and preparing and submitting withholding tax statements (Articles 61 and 62).
Bi-lateral Agreements and Tax Exempt Status
If a non-profit organization is involved in humanitarian or development tasks funded under a bilateral agreement or multilateral organization as stipulated in Article 10(1)2, Income Tax Law 2009, it may be subject to rules affecting its exempt status. If the organization believes a bilateral agreement exempts it from tax liability, it may: Do nothing and assume no tax liability, submit a letter request to ARD for a private ruling, or refer to a group ruling obtained from ARD by the donor country or organization. Note: There are no fees for obtaining a private ruling from ARD.
Business Licensing and Tax Clearances
If an organization needs an official letter from ARD for a license application or renewal, it should contact the Medium Taxpayer Office (MTO), ARD, Kabul.
Customs Duties and Other Taxes
The private ruling process described pertains only to income taxation. For other taxes or customs duties, the organization should contact the relevant government department.
Enforcement Provisions
Non-compliance with the Income Tax Law 2009 may lead to administrative action by ARD, including additional income tax and penalties. Intentional evasion may result in investigation and prosecution by the Attorney General’s Office.