ey - worldwide personal tax guide · 2017-12-20 · preface the worldwide personal tax guide...

Worldwide personaltax guideIncome tax, social security and immigration2012–2013

Preface

The Worldwide Personal Tax Guide (formerly The Global Executive) is part of a suite of premier tax guides published each year by Ernst & Young. The others are the Worldwide Corporate Tax Guide, the Worldwide VAT, GST and Sales Tax Guide, and, new this year, the Estate and Inheritance Tax Guide. Each represents thousands of hours of tax research, and within the limits of annual publications, they are the most reliably comprehensive tax guides available.

Since the global financial crisis, national governments have quickly and substantially amended their tax codes. Those frequent enactments of new rates, deductions, credits and other tax provi-sions have made these guides all the more valuable.

The content of the Worldwide Personal Tax Guide is straightfor-ward. Chapter by chapter from Afghanistan to Zimbabwe, we summarize personal tax systems and immigration rules for indi-viduals in 152 jurisdictions. The content is current on 1 July 2012, with exceptions noted.

Each chapter begins with Ernst & Young’s in-country executive and immigration contact information, and some jurisdictions add contacts from our International High Net Worth Group. Then we lay out the essential facts about the jurisdiction’s personal taxes. We start with the personal income tax, explaining who is liable for tax and, at some length, what types of income are considered taxable and which rates, deductions and credits apply. A section on “other taxes” varies by jurisdiction but often includes estate, inheritance, gift and real estate taxes. A social security section covers payments for publicly provided health, pensions and other social benefits, followed by sections on tax filing and payment procedures and double tax relief and tax treaties. The immigra-tion sections provide information on temporary visas, work visas and permits, residence visas and permits, and family and per-sonal considerations. Appendices summarize the taxability of various income items in a concise table and offer a sample tax calculation.

At the back of the book, readers will find a list of the names and symbols for all national currencies and a list of contacts for emerging markets.

Electronic versions of the Worldwide Personal Tax Guide and other tax publications are available on ey.com, viewable on large and small devices, and an app for tablets is available at app stores.

Ernst & YoungSeptember 2012

Although this publication is intended to be comprehensive, it should not be regarded as offering advice or a complete explanation of the tax and other matters referred to and is sub-ject to changes in the law and other applicable rules. Also, this publication does not provide guidance on the application of the information contained in practice. Local publications that are more detailed are frequently available, and readers are advised to consult their local Ernst & Young professionals for further information.

About Ernst & Young’s Tax servicesYour business will only achieve its true potential if you build it on strong foundations and grow it in a sustainable way. At Ernst & Young, we believe that managing your tax obligations responsibly and proactively can make a critical difference. Our global teams of talented people bring you technical knowledge, business experi-ence and consistent methodologies, all built on our unwavering commitment to quality service — wherever you are and whatever tax services you need.

Effective compliance and open, transparent reporting are the foundations of a successful tax function. Tax strategies that align with the needs of your business and recognize the poten-tial of change are crucial to sustainable growth. So we create highly networked teams who can advise on planning, compliance and reporting and help you maintain effective tax authority relationships — wherever you operate. Our technical networks across the globe can work with you to reduce inefficiencies, mitigate risk and improve opportunity. Our 29,000 tax people, in more than 140 countries, are committed to giving you the quality, consistency and custom-ization you need to support your tax function. It’s how Ernst & Young makes a difference.

© 2012 EYGM Limited.All Rights Reserved.

Contents

Ernst & Young Global Tax contacts ............................................ 1

Afghanistan ................................................................................. 3

Albania ...................................................................................... 10

Angola ....................................................................................... 19

Argentina ................................................................................... 23

Armenia .................................................................................... 45

Aruba ........................................................................................ 59

Australia .................................................................................... 63

Austria (European Union member state) .................................. 78

Azerbaijan ................................................................................. 92

Bahamas .................................................................................... 96

Bahrain .................................................................................... 100

Barbados ................................................................................. 103

Belarus .................................................................................... 113

Belgium (European Union member state) .............................. 125

Bermuda .................................................................................. 141

Bolivia ..................................................................................... 149

Bonaire, Sint Eustatius and Saba (BES-Islands) .................... 155

Botswana ................................................................................. 160

Brazil ....................................................................................... 167

British Virgin Islands .............................................................. 179

Brunei Darussalam.................................................................. 183

Bulgaria (European Union member state) .............................. 186

Cambodia ................................................................................ 196

Cameroon ................................................................................ 202

Canada ..................................................................................... 210

Cayman Islands ....................................................................... 234

Chile ........................................................................................ 241

China, People’s Republic of .................................................... 251

Colombia ................................................................................. 266

Congo, Democratic Republic of ............................................. 276

Congo, Republic of ................................................................. 283

Costa Rica ............................................................................... 290

Côte d’Ivoire ........................................................................... 295

Croatia ..................................................................................... 304

Curaçao ................................................................................... 312

Cyprus (European Union member state) ................................ 320

Czech Republic (European Union member state) .................. 327

Denmark (European Union member state) ............................. 339

Dominican Republic ............................................................... 349

Ecuador ................................................................................... 354

Egypt ....................................................................................... 361

El Salvador .............................................................................. 368

Equatorial Guinea ................................................................... 376

Estonia (European Union member state) ................................ 381

Ethiopia ................................................................................... 397

Fiji ........................................................................................... 404

Finland (European Union member state) ................................ 410

France (European Union member state) ................................. 421

Gabon ...................................................................................... 445

Georgia .................................................................................... 451

Germany (European Union member state) ............................. 465

Ghana ...................................................................................... 488

Greece (European Union member state) ................................ 496

Guam ....................................................................................... 509

Guatemala ............................................................................... 516

Guernsey, Channel Islands ...................................................... 523

Guinea ..................................................................................... 530

Honduras ................................................................................. 535

Hong Kong Special Administrative Region

(SAR) of China ...................................................................... 540

Hungary (European Union member state) .............................. 552

Iceland ..................................................................................... 564

India ........................................................................................ 573

Indonesia ................................................................................. 592

Iraq .......................................................................................... 604

Ireland, Republic of (European Union member state) ............ 608

Isle of Man .............................................................................. 628

Israel ........................................................................................ 637

Italy (European Union member state) .................................... 651

Jamaica .................................................................................... 665

Japan ....................................................................................... 674

Jersey, Channel Islands ........................................................... 688

Jordan ...................................................................................... 698

Kazakhstan .............................................................................. 702

Kenya ...................................................................................... 711

Korea (South) .......................................................................... 720

Kuwait ..................................................................................... 739

Laos ......................................................................................... 744

Latvia (European Union member state) ................................. 751

Lebanon ................................................................................... 761

Lesotho .................................................................................... 767

Libya ....................................................................................... 771

Liechtenstein ........................................................................... 776

Lithuania (European Union member state) ............................ 780

Luxembourg (European Union member state) ....................... 790

Macau Special Administrative Region (SAR) of China ......... 808

Macedonia, Former Yugoslav Republic of .............................. 817

Madagascar ............................................................................. 824

Malawi .................................................................................... 827

Malaysia .................................................................................. 834

Maldives .................................................................................. 848

Malta (European Union member state) .................................. 849

Mauritania ............................................................................... 866

Mauritius ................................................................................. 872

Mexico .................................................................................... 880

Moldova .................................................................................. 892

Montenegro ............................................................................. 898

Morocco .................................................................................. 902

Mozambique ........................................................................... 908

Namibia ................................................................................... 914

Netherlands (European Union member state) ........................ 921

New Zealand ........................................................................... 942

Nicaragua ................................................................................ 957

Nigeria ..................................................................................... 961

Northern Mariana Islands, Commonwealth of the ................. 970

Norway .................................................................................... 978

Oman ....................................................................................... 990

Pakistan ................................................................................... 995

Palestinian Authority ............................................................. 1009

Panama .................................................................................. 1013

Papua New Guinea ................................................................ 1021

Paraguay ................................................................................ 1029

Peru ....................................................................................... 1034

Philippines............................................................................. 1042

Poland (European Union member state) ............................... 1066

Portugal (European Union member state) ............................ 1075

Puerto Rico ........................................................................... 1089

Qatar ...................................................................................... 1101

Romania (European Union member state) ........................... 1105

Russian Federation ................................................................ 1112

Rwanda.................................................................................. 1122

Saudi Arabia .......................................................................... 1126

Senegal .................................................................................. 1132

Serbia .................................................................................... 1140

Seychelles ............................................................................. 1146

Singapore .............................................................................. 1149

Sint Maarten .......................................................................... 1163

Slovak Republic (European Union member state) ............... 1171

Slovenia (European Union member state) ............................ 1180

South Africa .......................................................................... 1192

Spain (European Union member state) ................................. 1205

Sri Lanka ............................................................................... 1225

Swaziland .............................................................................. 1238

Sweden (European Union member state) ............................. 1244

Switzerland ........................................................................... 1256

Taiwan ................................................................................... 1270

Tanzania ................................................................................ 1286

Thailand ................................................................................ 1295

Trinidad and Tobago ............................................................. 1303

Tunisia ................................................................................... 1312

Turkey ................................................................................... 1319

Uganda .................................................................................. 1331

Ukraine .................................................................................. 1339

United Arab Emirates ........................................................... 1350

United Kingdom (European Union member state) ............... 1353

United States ......................................................................... 1386

U.S. Virgin Islands ................................................................ 1418

Uruguay ................................................................................. 1425

Uzbekistan ............................................................................. 1428

Venezuela .............................................................................. 1435

Vietnam ................................................................................. 1442

Zambia .................................................................................. 1455

Zimbabwe .............................................................................. 1459

Contacts for emerging markets ............................................. 1471

Foreign currencies ................................................................. 1475

1

Ernst & Young Global Tax contacts

London GMT

Ernst & Young Global +44 (20) 7980-0000Becket House Fax: +44 (20) 7980-0275 (Tax)1 Lambeth Palace RoadLondon SE1 7EUEngland

Ernst & Young Global TaxDavid Holtze, +44 (20) 7980-0019 Global Vice Chairman – Tax Mobile: +44 7825-938-783 Fax: +44 (20) 7980-0275 Email: [email protected]

Area Tax LeadersAmericasKate J. Barton New York: +1 (212) 773-8762 Boston: +1 (617) 585-6820 Mobile: +1 (617) 230-1500 Efax: +1 (866) 854-9928 Email: [email protected]

Asia-PacificJames D. Hunter +852 2849-9338 Mobile: +852 6119-3360 Fax: +852 2157-6581 Email: [email protected]

Europe, Middle East, India and AfricaStephan Kuhn +41 (58) 286-44-26 Mobile: +41 (58) 289-44-26 Fax: +41 (58) 286-30-04 Email: [email protected]

JapanKenji Amino +81 (3) 3506-2164 Mobile: +81 (80) 1394-9144 Fax: +81 (3) 3506-2412 Email: [email protected]

Global Tax Functional LeadersPaul Antrobus, +420 225-335-811 Global Tax – People Leader Mobile: +420 731-627-015 Fax: +420 225-335-222 Email: [email protected]

James D. Miller, +44 (20) 7951-4547 Director – Global Tax Finance Mobile: +44 7768-818-456 and Infrastructure Fax: +44 (20) 7980-0275 Email: [email protected]

Aidan O’Carroll, +44 (20) 7980-0789 Global Leader – Tax Markets Mobile: +44 7768-911-551 Fax: +44 (20) 7980-0275 Email: aidan.o’[email protected]

2 2 ER N S T & YO U N G GL O BA L TA X C O N TAC T S

Srinivasa Rao, +44 (20) 7980-0936 Global Chief Operating Officer – Tax Mobile: +44 7825-341-657 Fax: +44 (20) 7980-0275 Email: [email protected]

Meg Salzetta, +1 (312) 879-3683 Global Tax Communications Mobile: +1 (773) 817-9012 and Marketing Leader Efax: +1 (866) 288-3221 Email: [email protected]

Michael Wachtel, +61 (3) 8650-7619 Global Leader – Tax Quality & Mobile: +61 408-994-646 Risk Management Fax: +61 (3) 8650-7777 Email: [email protected]

Global Tax Subservice Lines LeadersBusiness Tax ServicesDavid H. Helmer, +44 (20) 7980-0373 Global Director Mobile: +44 7768-470-754 Fax: +44 (20) 7980-0275 Email: [email protected]

Human CapitalDina A. Pyron, New York: +1 (212) 773-7667 Global Director Houston: +1 (713) 750-8816 Mobile: +1 (713) 818-9847 Efax: +1 (866) 543-6963 Fax: +1 (212) 773-2722 Email: [email protected]

Indirect TaxPhilip Robinson, Mobile: +41 (58) 289-31-97 Global Director Email: [email protected]

International Tax ServicesAlex Postma, +44 (20) 7980-0286 Global Director Mobile: +44 7827-842-941 Fax: +44 (20) 7980-0276 Email: [email protected]

Transaction TaxAidan Stokes, +44 (20) 7980-0046 Global Director and Europe, Mobile: +44 7769-672-519 Middle East, India and Africa Fax: +44 (20) 7980-0275 Transaction Tax Director Email: [email protected]

Senior Tax Advisory Leader, Tax Executive CommitteeJames J. Tobin +1 (212) 773-6400 Mobile: +1 (917) 365-9466 Efax: +1 (866) 862-1314 Email: [email protected]

Editor – Worldwide Personal Tax GuideRonald Anes +1 (732) 516-4551 Efax: +1 (866) 863-4590 Email: [email protected]

3

Afghanistan

ey.com/GlobalTaxGuidesey.com/TaxGuidesApp

(Country code 93)

Kabul GMT +4½

Ernst & Young Street address:Ford Rhodes Sidat Hyder & Co. Park Plaza, 2nd FloorAfghanistan mail address: Torabaz Khan RoadPark Plaza, 2nd Floor Shehre Nou, KabulTorabaz Khan Road AfghanistanShehre Nou, KabulAfghanistan

Executive and immigration contactsNasim Hyder +92 (21) 3565-0007-11 (resident in Karachi, Pakistan) Fax: +92 (21) 568-1965 Email: [email protected] Haq +92 (21) 3565-0007 (resident in Karachi, Pakistan) Email: [email protected] Juma +93 (75) 205-5025 Email: [email protected]

A. Income taxWho is liable. Taxation in Afghanistan is based on an individual’s residential status for tax purposes. In general, tax residents of Afghanistan are taxed on their worldwide income, while nonresi-dents are taxed on their Afghan-source income only. However, a nonresident person may be exempt from income tax in Afghanistan if the person is from a foreign country that grants a similar exemption to Afghan residents based in that country.

An individual is considered to be a tax resident of Afghanistan if any of the following three conditions are met:• The person has his or her principal home in Afghanistan at any

time during the tax year.• The person is present in Afghanistan for a period aggregating

183 days in a tax year (21 March to 20 March).• The person is an employee or official of the government of

Afghanistan and has been assigned to perform services abroad at any time during the tax year.

Income subject to taxEmployment income. Income from salary is Afghan-source income if it is attributable to employment exercised in Afghanistan. No exceptions exist. As a result, all cash and noncash benefits received with respect to employment in Afghanistan may be con-sidered taxable.

Business income. All residents and nonresidents who are engaged in economic, service or business activities are taxed on their busi-ness income.

Natural persons who engage in business activities and meet both of the following conditions are subject to fixed tax:• Their income is neither exempt nor subject to withholding tax.

4 AF G H A N I S TA N

• Their total gross income is less than AFN 3 million for the tax year.

Natural persons who have total income of less than AFN 60,000 from all sources, including business activities, are exempt from fixed tax.

The following are the rates of the fixed tax.

Gross income Exceeding Not exceeding Annual AFN AFN amount of tax 0 60,000 0 60,000 150,000 AFN 2,000 (paid in equal quarterly installments) 150,000 500,000 AFN 8,000 (paid in equal quarterly installments) 500,000 3,000,000 3% of gross income, or income tax and business receipt tax (BRT; see below)

A person who is required to pay 3% tax on gross income received may elect to pay BRT (see Section B) and annual income tax under the normal tax regime. The election to pay income tax and BRT is irrevocable for a period of three years.

All natural persons who meet the conditions described above are required to file an income tax return.

Investment income. In general, dividend, interest and royalty in-come derived by nonresident natural persons is subject to a final tax of 20%, which is withheld at source. For resident individuals, this tax is treated as advance tax that may be credited against the eventual tax liability of the taxpayer.

Any gain derived from the sale, exchange, or transfer of assets is treated as taxable income.

Entertainment income. Income derived from entertainment exhi-bitions such as movies, radio or television, music, sport competi-tions and other similar activities, is subject to a 10% fixed tax.

Rental income. Income derived from the renting or leasing of tangible property owned by natural persons is subject to income tax that is withheld at source. The tax withheld is treated as ad-vance tax, which may be credited against the taxpayer’s final tax liability calculated using the normal income tax rates (see Rates).

Payments of rent by natural persons with respect to immovable property used for commercial, industrial and other economic pur-poses are subject to withholding tax at a rate of 10% or 15%, depending on the amount of the monthly rent.

Other income. Income from prizes, rewards, lotteries, gratuities, bonuses and service charges is subject to a final withholding tax at a rate of 20%.

Exempt income. The following types of income are not subject to tax in Afghanistan:

AF G H A N I S TA N 5

• Grants, gifts and awards of the state, foreign governments, in-ternational organizations or nonprofit organizations, for contri-bution to science, art, literature, social progress or international understanding

• Scholarships, fellowships, and other grants for professional and technical training

• Health, accident, and unemployment insurance benefits and life insurance paid on death

• Compensation or damages for personal injuries or sickness or restitution of reputation

• Proceeds of borrowing and proceeds from stocks and bonds issued by companies

• Acquisition of assets in connection with mergers of domestic corporations and other legal persons

• Acquisition of movable or immovable property through expro-priation of property of debtors

• Payments on principal received from debtors• Interest on bonds issued by the state or municipalities• Income representing self-consumption of food, fuel or other

goods by the producer or by members of their household• Pensions of government employees• Any other receipts according to the provisions of the law

Taxation of employer-provided stock options. Employer-provided stock options are taxed at the time the options are exercised. The taxable amount is the difference between the market value of the shares on the date of issuance and the amount paid by the employee.

Capital gains and losses. Gains derived from the sale of capital assets used in business, including depreciable assets, shares of stock, trades or businesses, are taxed at the normal individual tax rates provided in Rates. However, capital gains derived from the sale, exchange or transfer of such assets held for more than 18 months are subject to tax at special rates. The special rate is cal-culated based on the average tax rate derived from distributing the gain equally over the holding period with 2% being the lowest rate.

If a natural person transfers an immovable or movable personal asset, the price received or receivable from such transfer is sub-ject to a 1% tax at the time of transfer of ownership of the prop-erty. This fixed tax is imposed instead of income tax. This mea-sure does not apply to capital gains derived from the sale or transfer of movable or immovable property acquired by inheri-tance. Such capital gains are not subject to tax.

Capital losses may offset capital gains only.

Partnerships. General and special partnerships are treated as flow-through entities with partners being taxed on their share of profits at the applicable individual tax rates. However, limited liability companies are taxed as corporations, and their distribu-tions are treated as dividends for tax purposes.

DeductionsDeductible expenses. Expenses of production, collection and preservation of income are allowed as deductions from business income if these expenses have been incurred during the tax year or one of the preceding three years. The following is a list of de-ductible expenses:


• Rent paid on leased property used for the purposes of the busi-ness

• Noncash benefits provided to employees if the providing of the benefits is directly related to the employer’s business

• Losses of property used for the production, collection, or pres-ervation of income, resulting from fires, earthquakes, casualties or any disasters to the extent that such losses are not reimbursed by insurance

• Premiums paid for insurance of property

Nondeductible expenses. The following personal expenses are not deductible:• Costs and expenses incurred in providing benefits for owners,

officers and management that are not necessary for the conduct of business

• Payments made to persons for their own benefit or enjoyment or their family’s benefit and enjoyment

• Costs of maintenance, repair, construction, improvement, fur-nishing, and other expenses with respect to the taxpayer’s fam-ily house or residence or any property devoted to the taxpayer’s own personal or family use

• Interest on personal loans• Costs of commuting to and from work and cost of travel for per-

sonal purposes• Cost of life, accident, health, and liability insurance for the

protection of the taxpayer and his or her family• Cost of any type of insurance for the protection of property

used for personal purposes

Rates. The following tax rates apply to income derived by indi-viduals.

Taxable income Tax on lower Rate of Exceeding Not exceeding amount tax AFN AFN AFN % 0 60,000 0 0 60,000 150,000 0 2 150,000 1,200,000 1,800 10 1,200,000 — 106,800 20

Withholding tax. All natural persons who employ two or more employees are required to withhold taxes from salaries and wages paid.

The tax withheld must be deposited together with the Report of Tax Withholding and Bank Deposit Form for Employers into an account determined by the Ministry of Finance (MoF) no later than 10 days after the end of the month in which the amounts are withheld.

For information regarding other withholding, see Income subject to tax.

Relief for losses. Business losses of approved and registered enter-prises are entitled to carry forward the net operating loss to offset profits of subsequent years until the losses are fully offset.

Credits. Foreign tax credits are generally available if foreign tax is paid on foreign-source income.

If a resident person derives income from more than one foreign country, he or she may claim a foreign tax credit against the tax on

AF G H A N I S TA N 7

his or her foreign-source income from each country. The foreign tax credit for each country is proportionate to the foreign-source income derived from that country as compared to worldwide income. A foreign tax credit is available in full.

B. Business receipt taxNatural persons who have business income of AFN 3 million or more per year are subject to a 2% business receipt tax (BRT). BRT is imposed on the total income (gross receipts) received before any deductions. The following exceptions apply:• Hotels, guest houses and restaurants that have total income of

more than AFN 3 million per year are subject to BRT at a rate of 5%.

• All clubs and halls are subject to BRT at a rate of 5%.• Telecommunication, airline services, hotels and restaurants pro-

viding premium services are subject to BRT at a rate of 10%.

BRT paid is deductible in calculating taxable income.

C. Tax filing and payment proceduresTax Identification Number. All natural persons who are liable to pay tax or custom duties must have a Tax Identification Number (TIN).

A TIN can be obtained by requesting an application form from the MoF or a mustofiat office that has a TIN office located on the premises.

Income tax returns. The tax year in Afghanistan for all natural persons is from 21 March to 20 March.

All natural persons who are subject to income tax must file a detailed tax return and balance sheet and submit it to the relevant tax office by the end of the third month of the following year (that is by 21 June of the following tax year).

Taxpayers who are subject to income tax, but are exempt from tax under an international agreement or treaty, must file an income tax return reflecting the effect of the exemption. The relevant agreement or portion of the treaty must be attached to the tax return together with an explanation as to why the agreement or treaty applies.

All residents and nonresidents who intend to leave the country, and who will be out of the country when their tax return is due must prepare and file their tax return two weeks before departing the country.

Tax payments. Taxpayers who are subject to fixed tax are re-quired to pay their tax quarterly by the 15th day of the month following the end of each quarter.

The income tax (or any tax instead of income tax) on shows, exhibitions, theaters, cinemas, concerts and sports must be paid by the 15th day of the following month. If the shows are not continuous, income tax must be paid after the end of each show.

Any income tax payable must be paid when the return is filed.

Business license. All nonresidents planning to conduct business activities in Afghanistan must obtain a business license from the Afghanistan Investment Support Agency (AISA).


The license needs to be renewed every year. The license may be renewed on the filing of the annual return and obtaining a clear-ance certificate. The applicant or an authorized representative must be personally present at the office of AISA to complete the license registration process.

D. Bilateral agreementsA bilateral agreement between Afghanistan and the United States exists in the form of Diplomatic Notes exchanged between the countries. Under the Diplomatic Notes, tax exemption is provid-ed to the U.S. government and its military, contractors and per-sonnel engaged in activities with respect to the cooperative efforts in response to terrorism, humanitarian and civic assistance, mili-tary training and exercises, and other activities that the U.S. government and its military may undertake in Afghanistan.

Military and technical agreements have also been entered into with International Security Assistance Forces (ISAF), which allow similar exemptions.

Exemptions available under these agreements are subject to pri-vate rulings obtained from the MoF. In addition, the agreements generally do not provide exemptions from the obligation to with-hold tax from all payments to employees, vendors, suppliers, service providers, lessors of premises and other persons, as re-quired under the local tax laws.

E. VisasTo promote domestic and foreign investment, the Afghan govern-ment has begun implementing a policy to strengthen and con-solidate its relations with the international community. To carry out this policy, Afghanistan has introduced various types of visas. Details regarding the various types of visas issued by Afghanistan are provided below.

Business visa. An entry visa is issued for business, economic, commercial, cultural, industrial purposes and for employment with nongovernmental organizations. A single-entry visa is used to obtain a work permit visa, followed by a multiple-entry or stay visa. A business visa can be obtained from the Consulate Section of the Afghan Ministry of Foreign Affairs. The employer or spon-sor must directly contact the relevant department of the Ministry of Foreign Affairs. To obtain the visa, the following documents must be submitted:• Complete visa application form• Two recent passport-size photos (size of ¾ centimeter)• Valid passport, with a remaining validity period of at least six

months• Employment letter or a letter of introduction from the employer/

sponsor stating the purpose and duration of the individual’s stay• Visa processing fee (usually payable in local currency)• Curriculum vitae (CV) of employee• Copy of educational certificates

A short interview may also be required.

Tourist visa/visit visa. A tourist visa/visit visa is issued for for-eign nationals who intend to travel to Afghanistan individually or with a group for the purpose of touring Afghanistan or visiting

AF G H A N I S TA N 9 AF G H A N I S TA N 9

their relatives. Afghan missions issue this type of visa. This type of visa is valid for one month, which can be extended only once by the Ministry of Interior with the agreement of the Afghan Tourism Organization.

Work permit visa. A work permit visa is usually issued to foreign nationals who are interested in working in Afghanistan. The Ministry of Labor and Social Affairs issues a work permit visa for a normal fee of US$150. The following documents must be sub-mitted with respect to an application for a work permit visa:• Application for work permit on company letterhead• Original passport and entry visa• Original educational certificates (attested by foreign office of

individual’s country)• Employee job description• Copy of invitation letter from the employer that was sent for

entry visa• Four latest passport-size photographs of employee• Color photocopy of passport of employee, including pages with

picture and particulars of the passport holder• Copy of registration certificate of company or firm registered in

Afghanistan or with AISA (original must be ready for presenta-tion at all times)

• Contract letter with Ministry of Labor and Social Affairs (this is a pro forma contract available at all ministries)

Resident visa. The Ministry of Interior issues resident visas to foreign nationals holding ordinary passports who have already entered Afghanistan with a proper visa. The validity of this type of visa is from one month to six months and can be extended.

Diplomatic visa. The diplomatic visa is issued to diplomatic pass-port holders who intend to travel to Afghanistan. Diplomatic passport holders can obtain this type of visa from the Afghan missions abroad. However, they must contact the Section of Diplomatic Passport and Diplomatic Visa of the Afghan Ministry of Foreign Affairs directly through their mission in Kabul.

Exit visa. An exit visa is issued to the foreign nationals who have entered the country with a work permit visa. The validity of this type of visa is one to six days. In some circumstances, its dura-tion can be extended. All Afghans with dual citizenship are re-quired to obtain a visa exception letter from Afghan embassies or consulates abroad.

Other information and regulations. The Ministry of Foreign Affairs strongly recommends all visitors extend their visa prior to expiration, if they wish to stay longer than the permitted duration. If the visa is not extended by the expiration date, a penalty of US$2 for each day during the first 10 days of the delay is im-posed on the holder of the passport, and a penalty of US$4 per day is imposed for the next 10 days of the delay (the penalty can be paid at ports). If the delay is more than 30 days, an additional penalty of US$10 per day is imposed, and the holder is deported.

Visitors are strongly recommended to register with their embassy in Kabul, the local Afghan Police Department and the Afghan Tourist Organization (if the visit is for tourism purposes only) on arrival.

10

Albania


(Country code 355)

Tirana GMT +1

Ernst & YoungDibra Str. “Observator” Building7th Floor1001 TiranaAlbania

Executive and immigration contactsDr. Alexandros Karakitis +355 (4) 241-9571, Ext.111 Email: [email protected] Kovacheva +359 (2) 817-7146 (resident in Sofia, Bulgaria) Email: [email protected] Jasini +355 (4) 241-9575, Ext.131 Email: [email protected]

Albania is in transition from a direct-command economy to a free-market economy, and new commercial laws, rules and regulations are being adopted. The government of Albania is proposing an economic restructur-ing of the country. As a result, many of the past laws, rules and regulations are being reviewed, modified or superseded. Because the tax and other legislation in Albania is still evolving and is subject to change and because of the lack of established tax precedents, it is difficult to predict the tax results of transactions with the same confidence that could be expected in many other European countries. For these reasons, readers should obtain updated information and seek professional advice before engaging in transactions.

A. Income taxWho is liable. Individuals who are resident in Albania are subject to tax on their worldwide income. Nonresidents are subject to tax on income derived from Albania sources only.

The following individuals are considered resident for tax pur-poses in Albania:• Individuals who have a permanent residence, family or vital

interests in Albania.• Albanian citizens serving in a consular, diplomatic or similar

position outside Albania.• Individuals who reside in Albania consecutively or nonconsec-

utively for at least 183 days during a tax year, regardless of their nationality or country of vital interests. The calculation of the residence period in Albania includes all of the days of physical presence, including holidays.

Income subject to tax. Individuals are subject to tax on the fol-lowing types of income:• Employment income• Self-employment income• Dividends• Interest from bank deposits and securities• Royalties

AL BA N I A 11

• Income from rentals and leases of real property and loans• Income derived from transfers of ownership rights over immov-

able property• Income derived from transfers of quotas and shares• Income derived from gambling and other games of chance• Other income

These categories of income are described below.

Employment income. Employed persons are subject to income tax on remuneration and all benefits received from employment. Employment income includes the following:• Salaries, wages, allowances, bonuses, and other remuneration

and benefits granted for services rendered in a public office or in private employment

• Directors’ fees

Self-employment income. Self-employed individuals must regis-ter as individuals with the Commercial Register for tax purposes. Income derived by individuals from independent professional services and self-employment activities that generate more than ALL 2 million are subject to tax at a rate of 10%. The tax base equals the difference between total gross income and total deductible expenses.

Small businesses that generate annual turnover of up to ALL 2 million are subject to a fixed tax obligation that varies according to the type of business activity and the location of the business. The following table provides the annual small business tax rates for businesses located in the municipalities of Durres and Tirana.

Type of activity Tax (ALL)Retail sales 45,000Wholesale 45,000Production 33,000Services 25,000Independent professional services and self-employment 38,000Mobile sales (sales by ambulatory merchants) 8,000

Dividends. Dividends received by individual shareholders or part-ners in commercial companies are subject to tax.

Amounts received for decreases in the total of participation quo-tas or capital withdrawals by partners or owners of initial capital are considered dividends received and are taxed to the extent that the amounts are paid out of the company’s capitalized profits and not from contributions in cash or in kind by the owners.

Interest from bank deposits or securities. Bank interest and inter-est on securities, other than interest generated from government treasury bills or other securities, issued before the law “On income tax” entered into force in 1999, are included in taxable income.

Royalties. Royalties (intellectual ownership payments) are con-sidered to be income generated from the use of, or the right to use, literature, artistic or scientific works, including movies, tapes, radio records, patents, trademarks, sketches or models, designs, secret formulas, technological processes and industrial, commer-cial or scientific information.

12 AL BA N I A

Income from rentals and leases of real property and loans. Income from rentals and leases of real property and loans includes any periodic compensation in cash or in kind that an individual generates from the leasing of real estate and lending of replace-able items (for example, funds).

Income derived from transfers of ownership rights over immovable property. The taxation of income derived from transfers of owner-ship rights over immovable property is discussed in Capital gains.

Income derived from transfers of quotas or shares. The taxation of income derived from transfers of participation quotas or capi-tal shares is discussed in Capital gains.

Income derived from gambling and other games of chance. The payer of income from gambling and other games of chance must with hold a 10% tax and remit it to the tax authorities within 24 hours after making the payment.

Other income. Other forms of income include all types of income that are not identified in the categories mentioned above. This category includes the following:• Income from sponsoring (for example, individuals not regis-

tered with tax bodies receive sponsoring from different sources and use the sponsorship for artistic or sports activities).

• Income from professional activities, including teaching, train-ing and publishing articles in newspapers if the beneficiary is not registered with tax bodies and if such activities are of a temporary or secondary character.

• Income realized from collecting and selling metals.• Cash contributions to share capital. Such contributions are tax-

able if they have not yet been taxed or if no sufficient evidence exists that they originate from sources that are excluded from the scope of Albanian taxation or that they are exempt from tax for other reasons.

Exempt income. The following types of income are exempt from personal income tax:• Income received from obligatory and voluntary schemes for

life, social and health insurance and allowances for families or individuals with no or low income.

• Awards up to the limit specified in the law, regardless of the source of the payment.

• Allowances received for diseases or disasters, up to 20% of the annual employment income earned by the recipient of the allowances.

• Benefits in cash or in kind granted to former landowners as remuneration for the dispossession required by the government for the public interest. This exemption must be proven by legal documentation explaining the nature of the income.

• Compensation for damages received from insurance companies.• Income in kind, such as food (antidotal), received from busi-

nesses that are allowed to pay such income under the law.• Income excluded by international agreements approved by the

Albanian parliament.• Indemnities received by former political prisoners.• Life and health contributions made by employers for the benefit

of employees.

AL BA N I A 13

Taxation of employer-provided stock options. No specific rules in Albania govern the tax treatment of employer-provided stock options. Stock options are subject to personal income tax at the moment of exercise.

Capital gainsTransfers of ownership rights over immovable property. Capital gains derived from disposals of real estate are subject to tax. The tax base equals the amount by which the sale price exceeds the acquisition cost. For real estate transfers, the sale price taken into account may not be less than the “reference price” for such property. For this purpose, the “reference price” is the objective value per meter in the relevant area, as indicated in the refer-ence table published by the Albanian Institute of Statistics for the main Albanian cities.

Transfers of quotas or shares. Capital gains derived from trans-fers of participation quotas or capital shares include income from sales of quotas owned by partners in businesses or partnerships, income from sales of shares and income from sales or liquida-tions of businesses. The tax base is equal to the following:• Shares: difference between the sales value of the shares and

nominal value or the purchase value• Capital participation quotas: difference between the sales value

and nominal value or the purchase value• Liquidation: difference between the sales value or liquidation

value of a business and book value

Capital losses. Capital losses are not deductible for tax purposes.

Deductible expenses. In general, the gross amount of income is subject to tax and deductions do not apply.

RatesEmployment income. Wages, salaries and compensation relating to employment are taxed at the rates set forth in the following table.

Monthly taxable incomeExceeding Not exceeding ALL ALL Rate 0 10,000 0% 10,000 30,000 10% of amount above ALL 10,000 30,000 — 10% of total taxable income

The tax is withheld by the employer and the employee is not required to file a tax return reporting this income.

Other types of income. Albanian resident entities, government institutions and other specified entities must withhold a 10% tax from all other types of income. This tax is considered to be a final tax. For a discussion of the types of income subject to tax in Albania, see Income subject to tax. An individual must file a personal income tax return for any income that has not been taxed at source, including self-employment income, income from rentals and leases of real property and loans, royalties and foreign-source income.

14 AL BA N I A

B. Other taxesAnnual Real Estate Tax. Annual Real Estate Tax (ARET) is imposed annually on all completed buildings based on the area in square meters of the building for each floor of the building above and below the ground. The annual tax ranges from ALL 5 to ALL 200 per square meter, depending on the municipality where the property is located. The annual tax is ALL 200 per square meter for buildings located in the municipalities of Durres and Tirana.

Tax on hotel accommodation. The tax on hotel accommodation equals 5% of the accommodation price and is payable in the municipality or the commune by the fifth day of the following month.

Annual registration tax on vehicles. Annual registration tax on vehicles is levied at a rate of ALL 600 to ALL 8,000 per year.

Tax on waste disposal. The tax on waste disposal is determined at the municipality level. It is payable by individuals and legal enti-ties residing or performing economic activity in the municipality.

C. Social securityEmployers and employees contribute to a social security fund a percentage over the calculated monthly salary. The total contribu-tion is 27.9%, of which 16.7% is paid by the employer, and 11.2% is paid by the employee. The contribution consists of a social security contribution of 24.5% and a health security con-tribution of 3.4%. The contribution is calculated on the monthly salary, from a minimum amount of ALL 20,000 to a maximum amount of ALL 87,700. The contribution must be paid to the tax authorities by the 20th day of the following month.

Self-employed persons must pay a contribution of 30% calculat-ed on the amount exceeding the minimum amount of salary, which is ALL 17,540.

D. Filing and payment proceduresThe tax year in Albania is the calendar year.

Employers must withhold personal income tax from wages and compensation paid, and they must pay the withholding tax to the tax administration by the 20th day of the following month. Employers must maintain records of payments in accordance with instructions issued by the Ministry of Finance.

Individuals earning income subject to personal income tax during the tax year must file a declaration with the tax administration of the relevant jurisdiction by 30 April of the following year, unless the tax liability has been settled through tax withholding. Indi-viduals earning less than ALL 800,000 can deduct expenses on social security, education loans and medical care.

E. Double tax relief and tax treatiesTax treaties. Albania has entered into double tax treaties with the following jurisdictions.

AL BA N I A 15

Austria Hungary NorwayBelgium Ireland PolandBosnia- Italy Romania Herzegovina Korea (South) RussianBulgaria Kosovo FederationChina Latvia SerbiaCroatia Macedonia SingaporeCzech Republic Malaysia SloveniaEgypt Malta SpainFrance Moldova SwedenGermany Montenegro SwitzerlandGreece Netherlands Turkey

Albania has signed tax treaties with Estonia, Kuwait, Luxembourg and Qatar, but these treaties have not yet entered into force.

Foreign tax credit. Resident taxpayers may credit the foreign income tax paid in other countries on the income realized in such countries. The amount of the foreign tax credit may not exceed the amount of tax calculated for Albania.

F. Entry visasAlbania issues the following temporary visas:• Tourist visas, which are issued to foreign tourists who visit

Albania for tourism or similar purposes. These visas are issued for up to six months. Holders of tourist visas may not undertake employment or engage in any profit-seeking activities.

• Study visas, which are issued to foreigners who intend to attend courses or universities in Albania. The term of the visa depends on the studies.

• Work visas, which are issued to foreigners who will engage in business activities in Albania.

• Medical visas, which are issued to foreigners who will perform medical visits or seek medical treatment in Albania.

• Transit visas, which permit a visit of 48 hours or a transit pas-sage. Holders of transit visas may not undertake employment or engage in any profit-seeking activities.

• Visas for 72 hours, which are issued to foreign citizens who are required to make a prior application for a visa but who, for a valid reason, cannot present a visa to customs. Within the 72-hour period, foreign citizens may make an application to obtain another type of visa.

G. Work permitsThe Labor and Social Issues Ministry is in charge of the policies for the employment of foreign citizens. Work permits are issued to foreigners by local institutions (labor office, sector of immigra-tion) and the Directory of Immigration in Labor and Social Issues.

Various types of work permits are issued. Foreigners may apply for a type A/P work permit if they have legally entered Albania, fall in the list eligible for this type of visa and have regular employment contracts. To obtain a Type A/P work permit, the following documents must be submitted:• Application form• Passport (expiration date at least three months after the visa

expiration date)

16 AL BA N I A

• Copy of passport information regarding generalities and other important information

• Individual employment contract or secondment contract between the foreign entity, the local entity and the individual employee

• If the above documents are filed by an authorized party instead of the individual, an authorization signed by the individual

• University degree certificate• Five passport-size pictures• Receipt for fee payment (ALL 6,000)

H. Residence permitsThe duration of a residence permit may be three months, six months, one year, five years or permanent. Residence permits with the first three periods of duration can be renewed up to three consecutive times. Foreigners may apply for a five-year residence permit if they have had a legal residence in Albania for two con-secutive years and have a permanent activity. To obtain a resi-dence permit, the following documentation must be submitted:• Application form• Passport (valid for at least three months after the expiration date

of the visa)• Copy of passport information regarding generalities and other

important information• Criminal Records Clearance of the individual extracted in the

last six months• Rent or purchase contract for an apartment or house in Albania• Personal/Family Certificate translated in Albanian, released in

the last six months• Two passport-size pictures• Declaration from the host or employer about the purpose of stay• Photocopy of the work permit or the professional license• Medical report (for citizens of and coming from countries

affected by epidemics)• Fee payment receipt

The amount of the application fee depends on the duration of the resident permit. The following are the amounts of the fee.

Duration of permit Fee3 months ALL 5,000 + document charge6 months ALL 5,000 + document charge 1 year ALL 10,000 + document charge2 years ALL 15,000 + document chargePermanent ALL 25,000 + document charge

I. Personal and family considerationsMarital property regime. A court may require one of the ex-spouses to pay a contribution to the other spouse to compensate for the inequality of the divorce. The court decides whether the contribution will be a lump-sum amount or a periodic amount and how the contribution will be paid. The contribution is deter-mined according to the needs of the beneficiary ex-spouse and the income of the other spouse. The duration of the compensation is also determined by the court in accordance with the needs of the ex-spouse.

In making the above determination, the court takes into consider-ation the following:

AL BA N I A 17

• Age and medical condition of the ex-spouses• Time spent and expenses for children’s education• Professional education of the ex-spouses• Current and future rights of the ex-spouses• Capital or income of the ex-spouses after the divorce

If the house is the property of one of the ex-spouses and if the other ex-spouse does not own a house, the court may decide to permit the usage of the house by the other ex-spouse in the fol-lowing cases:• The other ex-spouse has custody of the children.• The divorce is requested by the ex-spouse who is the owner of

the house.

The court decides the duration of usage and the rent to be paid to the owner of the house based on the ex-spouse’s income. If the other ex-spouse remarries, he or she loses the right to use the house.

Forced heirship. Albanian succession law provides for forced heir-ship for children under 18, and disabled dependants.

Drivers’ licenses. Expatriates with valid residence permits may drive legally in Albania with their home-country drivers’ licenses if their home-country licenses are valid and if they have official translations of their licenses into Albanian or English.

Appendix 1: Taxability of income items Not Taxable taxable CommentsCompensationBase salary X — (a)Business travel expenses — X (b)Travel allowances — X (c)Directors’ fees X — —

Other itemsSelf-employment X — —Personal ordinary income (interest and dividends) X — —Capital gain from sale of immovable properties X — —Capital gains X — —Royalties X — —

(a) Employment income includes the basic wage and all the permanent increments added to the basic wage, including a seniority bonus, and additional payments and allowances because of a strenuous job, distance from the workplace or special nature of the work or services, as well as other allowances. Further allowances include all income or remuneration arising from the individual’s employment. All further allowances are taxed in the respective month in which they are added to the salary.

(b) Business travel expenses must be substantiated by the relevant service days inside or outside Albania and must be justified by the relevant travel docu-ments, such as transport tickets and passports (showing exit and entry stamps from Albania).

(c) For travel within Albania, travel allowances include per diems not exceeding the limit of ALL 3,000 per whole service days and ALL 1,000 per half-service days. For travel outside Albania, the per diems may not exceed €60 per whole service days and €30 per half-service days.

18 AL BA N I A

Appendix 2: Sample tax calculationThe following is a sample tax calculation for a month in 2012.

ALLCalculation of taxable incomeMonthly gross remuneration 90,000Taxable income 90,000

Calculation of taxWithholding tax (income tax): (ALL 90,000 at 10%) 9,000Social security and health insurance premium for the employee (11.2% of ALL 87,700) 9,822Total of tax and social security premium 18,822Monthly net salary: (ALL 90,000 – ALL 18,822) 71,178

19

Angola


(Country code 244)

Luanda GMT +1

Ernst & YoungAvenida 4 de Fevereiro95 – 2nd FloorLuandaAngola

Executive contactsLuis Marques +244 222-371-390/461 Fax: +244 222-336-295 Lisbon: +351 217-912-000 Lisbon fax: +351 217-957-590 Email: [email protected]ónio Neves +351 217-912-249 (resident in Lisbon) Fax: +351 217-957-592 Email: [email protected] Fernandes +244 222-371-390/461 Lisbon: +351 217-912-295 Fax: +244 222-336-295 Lisbon fax: +351 217-957-592 Email: [email protected]

At the time of writing, the 2012 tax reform had been proposed, but not yet fully enacted. Section F of this chapter sets out the most relevant changes for 2012 based on the proposed law. Because the changes for 2012 have not yet been fully enacted, readers should obtain updated information before engaging in transactions.

A. Income taxWho is liable. Individuals receiving work-related income and/or business and professional income in Angola are subject to tax if the compensation is paid by an Angolan entity or if the respective cost of such income is allocated to an entity with a head office, residence or permanent establishment in Angola. Angolan law does not provide criteria for tax residence purposes to determine who is liable for tax in Angola.

Income subject to taxEmployment income. All employment income is subject to tax, including wages, salaries, directors’ fees, leave payments, fees, gratuities, bonuses, and premiums or allowances (for productivity or reaching certain goals), paid in cash or in kind. Allowances for travel and certain other expenses (for example, costs incurred for meals while representing the employer) are taxable to the extent that the amount paid to the employee exceeds the limits applica-ble to civil servants.

Self-employment income. Self-employed individuals are taxed on actual profit, which is gross revenue less deductible expenses (see Business deductions). In certain cases, business income is subject to Industrial Tax (corporate income tax).

20 AN G O L A

Investment income. Income derived from the use of capital is generally subject to withholding tax. Interest on loans and late payment charges are taxed at a rate of 15%. Dividends, interest on bonds, interest on shareholder loans and royalties are taxed at a rate of 10%.

DeductionsDeductible expenses. No deductions from employment income are allowed, except for social security contributions.

Business deductions. The following expenses are deductible if prop erly documented:• Rent paid for business premises• Wages (subject to a maximum of wages paid to three employees),

commissions and fees paid for services• Water, gas, telephone and electricity expenses• Insurance premiums• Other necessary expenses required to carry out the taxpayer’s

business• Depreciation of the business premises

The total deduction for the above expenses is limited to 30% of the taxpayer’s total income if the taxpayer does not have an organized accounting regime.

Rates. Income tax rates applicable to taxable employment income derived by residents and nonresidents are set forth in the follow-ing table.

Taxable income Tax on lower Rate onExceeding Not exceeding amount excess AOA AOA AOA % 0 25,000 0 0 25,000 30,000 0 5 30,000 35,000 250 6 35,000 40,000 550 7 40,000 45,000 900 8 45,000 50,000 1,300 9 50,000 70,000 1,750 10 70,000 90,000 3,750 11 90,000 110,000 5,950 12 110,000 140,000 8,350 13 140,000 170,000 12,250 14 170,000 200,000 16,450 15 200,000 230,000 20,950 16 230,000 — 25,750 17

Individual business owners receiving salary income are taxed at a flat rate of 20%.

Income from self-employment is taxed at a rate of 15%.

Capital gains and losses. Capital gains derived from the disposal of business assets of self-employed individuals are included in operational profits and taxed at the regular Industrial Tax (corpo-rate income tax) rate of 35%. Capital gains from the disposal of securities, other than those subject to Personal Income Tax or Industrial Tax, are taxed at a rate of 10% under the Investment Income Tax.

AN G O L A 21

Capital losses may not be carried forward or back. However, under the Industrial Tax, tax losses may be carried forward for three years.

B. Other taxesInheritance and gift tax. Inheritance and gift tax is payable by heirs and donees. This tax is levied on gratuitous transfers of movable and immovable assets and rights located or transferred in Angola. Tax rates range from 10% to 30%, depending on the value of the estate or the gift and on the relationship of the heir or donee to the deceased person or donor.

Property tax. Property tax is levied at a rate of 25% or 0.5% on the official assessment value of real property, which is deter-mined, respectively, based on the charged rent or on the patrimo-nial value of the property.

Property transfer tax. Property transfer tax is levied at rate of 2% with respect to transfers of immovable property, including long-term leases (20 years or more).

C. Social securitySalaries and additional remuneration specified under law are subject to social security contributions. No ceiling applies to the amount of remuneration subject to social security contribu-tions. The rates of the contributions are 8% for employers and 3% for employees.

Employees working transitorily in Angola are not required to make social security contributions if they can prove that they are covered by the social security system in another country.

Self-employed persons are subject to social security contribu-tions based on a predefined monthly notional salary. The rate of the contributions is 8%, but it may be increased to 11% if addi-tional benefits are covered.

D. Tax filing and payment proceduresThe fiscal year in Angola is the calendar year.

Self-employed individuals must file returns (Form M/1) in January following the tax year-end and are notified of their final tax liability. Income taxes on employees are withheld by the employer under a Pay-As-You-Earn (PAYE) system, and employ-ees are not required to file returns.

Tax on income from capital is generally withheld by the payer. Otherwise, the recipient is responsible for paying the tax.

E. Tax treatiesAngola has not entered into any double tax treaties, but treaties are being negotiated.

F. Proposed 2012 tax reformAt the time of writing, the 2012 tax reform had been proposed, but not yet fully enacted. The following are the most significant tax changes in the proposed 2012 tax reform affecting individuals:

22 AN G O L A

• Caps will be introduced for the allowances not subject to tax, which are termination payments, holidays and Christmas subsi-dies and the daily meals allowance.

• Although the 50% tax exemption will continue to be available for housing allowances, the full amount is taxable if the rental agreement is not submitted to the tax authorities.

• It will be clarified that income from work or services is subject to tax in Angola if the work or services are performed for an Angolan entity (including a permanent establishment of a for-eign entity). Consequently, taxation will not be limited to work or services performed in Angola.

• The tax exemption for taxpayers who are more than 60 years old and for individuals rendering military service will be eliminated.

• Business income earned by individuals will become subject to Personal Income Tax rather than Industrial Tax.

• The tax rate applicable to self-employed individuals will be increased from 15% to 20%.

23

Argentina


(Country code 54)

Buenos Aires GMT -3

Ernst & Young – Pistrelli, Henry Martin y Asociados SRL25 de Mayo 487Fourth and Fifth FloorsC1002ABI Buenos AiresArgentina

Executive and immigration contactsEduardo Perelli +54 (11) 4510-2274 Fax: +54 (11) 4318-1777 Email: [email protected] Flores +54 (11) 4510-2274 Fax: +54 (11) 4318-1777 Email: [email protected] Sabin +54 (11) 4318-1681 Fax: +54 (11) 4318-1777 Email: [email protected] Politis +54 (11) 4318-1681 Fax: +54 (11) 4318-1777 Email: [email protected]ía Bárbara López Lagoria +54 (11) 4318-1681 Fax: +54 (11) 4318-1777 Email: maria-barbara.lopez-lagoria

@ar.ey.comValeria Dworski +54 (11) 4318-1681 Fax: (11) 4318-1777 Email: [email protected] Henrique +54 (11) 4318-1681 Fax: +54 (11) 4318-1777 Email: [email protected]és Tellado +54 (11) 4318-1681 Fax: +54 (11) 4318-1777 Email: [email protected] Benayas +54 (11) 4318-1681 Fax: (11) 4318-1777 Email: [email protected]

A. Income taxWho is liable. Residents are subject to tax on worldwide income. Nonresidents are taxed on Argentine-source income only.

The following individuals are deemed to be resident in Argentina:• Native and naturalized Argentine citizens• Foreign individuals who are granted permanent residence in

Argentina• Foreign individuals who remain in the country under temporary

authorization for a period of 12 months or longer

Individuals in the third category who have not been granted per-manent residence are deemed to be nonresident if they can prove that they do not intend to stay permanently in Argentina.

24 AR G E N T I NA

Foreign individuals who can prove that they are in Argentina because of their employment, and who remain in the country for a period not exceeding five years, are not considered to be resi-dent in Argentina. This rule also applies to members of the indi-vidual’s family who accompany the individual to Argentina.

Income subject to tax. The taxability of various types of income is discussed below. For a table outlining the taxability of income items, see Appendix 1.

Employment income. Taxable income from employment includes all salaries, regardless of the taxpayer’s nationality or the place where the compensation is paid or the contract is concluded. In general, taxable compensation also includes most employer-paid items, except moving expenses.

Educational allowances provided by employers to their local or expatriate employees’ children who are 18 years old or under are taxable for income tax and social security purposes.

Self-employment income. Self-employment and business income is taxable, regardless of the recipient’s nationality, the place of payment or where the contract was concluded.

Investment income. In general, dividends from Argentine corpo-rations paid to residents or nonresidents are not taxable. How-ever, if a company pays a dividend in excess of its accumulated taxable income, the excess is subject to a final withholding tax at a rate of 35%. Dividends from foreign corporations paid to resi-dents are taxable. Royalties and income derived from renting real property are taxed as ordinary income. Interest is taxed as ordinary income, except interest from certain bank deposits in Argentina and Argentine government bonds, which is tax-exempt. Interest from bank deposits paid to nonresidents is exempt from Argentine tax only if the income is also exempt from foreign tax.

Directors’ fees. Directors’ fees are taxed as self-employment in come to the extent that they are deducted by the payer company (allowable up to the greater of 25% of book profit or ARS 12,500 per director per year). The portion of fees not de ductible at the corporate level is not taxable to the director if the amount of the company’s income tax increases by an amount equal to the tax attributable to the directors’ fees. Directors’ fees paid by Argen-tine companies are considered Argentine-source income, regard-less of where the services are performed.

Taxation of employer-provided stock options. Stock options grant-ed to employees are deemed to be payments in kind and are therefore subject to income tax and social security withholding. Taxable income is recognized at the time the option is exercised in an amount equal to the difference between the strike price and the fair market value of the stock on the date of exercise.

Capital gains. In general, capital gains are exempt from income tax, with certain specific exceptions.

DeductionsDeductible expenses. For purposes of computing tax to be with-held from an employee’s salary, employers may deduct certain allowable expenses, including the following:• Mandatory social security contributions

AR G E N T I NA 25

• Medical insurance payments for employees and their families, with certain limitations

• 40% of invoiced medical expenses up to a maximum of 5% of the taxpayer’s annual net income

• Expenses incurred by traveling salespeople based on estimates established by the tax authorities

• Donations to the government and certain charitable or non-profit institutions, up to 5% of net taxable income

• Burial expenses, up to ARS 996.23 annually• Life insurance premiums, up to ARS 996.23 annually• Mortgage interest, up to ARS 20,000 annually, for the purchase

of a dwelling destined to be a permanent abode• Tax on Bank Debits and Credits, subject to certain limitations• Contributions made to Mutual Guarantee Companies (SGRs;

special companies that guarantee loans)• Compensation and employer contributions related to domestic

help personnel, up to ARS 12,960 annually

Self-employed individuals may deduct expenses incurred in pro-ducing income, in addition to the expenses listed above.

Personal deductions and allowances. Employed and self-employed individuals are entitled to standard deductions in amounts estab-lished by law. The amounts for 2012 are ARS 14,400 for a spouse, ARS 7,200 for each child and ARS 5,400 for each other dependant. To qualify, dependants must reside in Argentina for more than six months in the tax year and may not have income in excess of ARS 12,960.

A deduction of ARS 12,960 is granted to taxpayers who are resi-dent in Argentina for longer than six months during the calendar year.

A special deduction is available against compensation derived from personal services. The annual amount is ARS 62,208 for employ-ees and ARS 12,960 for self-employed persons.

Nonresidents residing in Argentina longer than six months in a calendar year may claim the deductible expenses actually in curred and exemptions available to residents.

Rates. The progressive tax rates applicable to Argentine residents for 2012 range from 9% to 35%.

The following table presents the 2012 individual income tax rates.

Taxable income Tax on lower Rate on Exceeding Not exceeding amount excess ARS ARS ARS % 0 10,000 0 9 10,000 20,000 900 14 20,000 30,000 2,300 19 30,000 60,000 4,200 23 60,000 90,000 11,100 27 90,000 120,000 19,200 31 120,000 — 28,500 35

Nonresidents residing tem porar ily in Argentina, that is, for six months or less, are subject to final withholding tax. A standard deduction of 30% of compensation is allowed for expenses in -curred in earning income. The re main ing 70% of compensation

26 AR G E N T I NA

is taxed at a flat rate of 35%, with no other allowable deductions or ex emptions, resulting in an effective withholding tax rate of 24.5%.

For a sample tax calculation, see Appendix 2.

Relief for losses. Business losses of self-employed persons may be carried forward for five years. Foreign-source business losses may offset foreign-source income only.

B. Other taxesTransfer tax. Sales of real estate are subject to transfer tax at a rate of 1.5% on the sale price.

Personal assets tax. Individuals with total assets subject to tax of up to ARS 305,000 are exempt from the personal assets tax. Individuals domiciled in Argentina with assets totaling more than ARS 305,000 are required to pay the personal assets tax for 2012 at the rates listed in the following table.

Total value of taxable assets Exceeding Not exceeding Rate ARS ARS % 305,000 750,000 0.50 750,000 2,000,000 0.75 2,000,000 5,000,000 1.00 5,000,000 — 1.25

Under the Substitute Taxpayer Regime, individuals domiciled in foreign countries are subject to personal tax on Argentine assets only at a rate of 1.25%. In this case, the minimum of ARS 305,000 does not apply.

Liabilities, other than those incurred for the purchase, construc-tion or improvement of a taxpayer’s home, are not deductible for purposes of the personal assets tax. A tax credit is allowed for similar taxes paid abroad.

Expatriates residing in Argentina on work assignments for a period not exceeding five years are considered to be domiciled in Argentina but they are taxed only on personal assets located in Argentina.

C. Social securityContributions. Social security contributions are paid by employ-ees, employers and self-employed persons.

Employees. Employees’ social security contributions are with-held from their monthly salary.

Employees make contributions to the Pension Fund at a rate of 11%, to the Retiree’s Fund at a rate of 3% and to the health-care system at a rate of 3%. The maximum monthly tax base for the calculation of these contributions is ARS 16,213.72 for January 2012 and February 2012 and ARS 19,070.55 from March 2012 through December 2012.

Monthly salary that exceeds the maximum tax base is not subject to contributions. For this purpose, a year comprises 13 months.

Employers. Employers pay social security contributions at a rate of 21% or 17%, depending on the company’s activity and turn-over (amount of sales). A 6% contribution for medical care is

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required in addition to the social security contributions. The tax base for employer social security contributions and health care contributions is not capped.

Other. No employee or employer social security taxes are payable with respect to directors’ fees. However, a director must pay fixed monthly amounts that are allocated to the social security’s Self-Employed System.

The social security tax law provides an exemption for all profes-sionals, researchers, scientists, and technicians who are contracted outside of Argentina to render services in Argentina for a period of not more than two years. The individuals must have a tempo-rary residence, be covered by the social security system of their countries, and provide evidence of their technical qualifications as well as of their coverage for death, disability and old age in their home countries or countries of residence. This exemption is available only once and, after being granted, it is in force from the date of the application for as long as the conditions for the exemption are met.

Totalization agreements. Social security taxes for nonresidents are collected as outlined above. However, both the employer and the nonresident employee may be exempt from contributions to the Argentine pension fund if certain conditions are met.

To provide relief from double social security taxes and to assure benefit coverage, Argentina has entered into totalization agree-ments with the following countries.

Brazil Italy Southern Common MarketChile Peru* (Mercado Común del Sur, Colombia* Portugal or MERCOSUR) countriesGreece Slovenia* Spain Uruguay

* This treaty is not yet in force.

Argentina has also signed the Latin American Treaty of Social Security, which is not yet in force.

D. Tax filing and payment proceduresThe tax year for individual taxpayers is the calendar year. Tax returns must be filed between 14 April and 20 April, depending on the taxpayer’s registration number) of the following year unless the taxpayer’s only income is from employee compensation. No extensions to file tax returns are allowed.

For the 2012 fiscal year, national and foreign employees must file an income and personal assets tax return for informational purposes if their gross compensation exceeds ARS 144,000 per year. If their compensation is higher than ARS 96,000, but lower than ARS 144,000, national and foreign employees must file tax returns reporting only their assets as of 31 December of the cur-rent year with the tax authorities.

Self-employed taxpayers must register with the tax authorities. Tax returns are filed annually in April, declaring earnings for the previous calendar year.

Individuals with nonwage income, including self-employment in come, must make advance tax payments bimonthly from June

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to February, based on the previous year’s tax. Under a withhold-ing system for payments to resident individuals, withholding is im pos ed at various rates on income exceeding a minimum thresh-old. Amounts withheld are treated as advance payments.

Advance payments are also required for purposes of the personal assets tax (see Section B).

For married couples, a wife is taxed separately on income derived from personal activities (including em ployment, self-employment and business), on assets acquired be fore marriage and on assets acquired during marriage with income earned from personal activities.

Nonresidents subject to the 35% withholding tax are not required to file tax returns.

E. Double tax relief and tax treatiesResident taxpayers are entitled to a tax credit for income taxes paid abroad, up to the increase in Argentine tax resulting from the inclusion of the foreign-source income.

Argentina has entered into double tax treaties with the following countries.

Australia Finland RussianBelgium France FederationBolivia Germany Spain*Brazil Italy SwedenCanada Netherlands SwitzerlandChile* Norway United KingdomDenmark

* Argentina recently withdrew from these treaties, which expire on 31 December 2012.

F. Types of visasGeneral immigration law allows foreign nationals to enter and stay in Argentina with transitory business and/or technical visas, or with temporary and permanent residence permits and visas.

The transitory technical work visa or authorization is seldom use-ful for international executives because holders of this type of permit may carry out remunerated activities in exceptional situa-tions only.

G. Transitory business visasTransitory business visas are issued to foreign nationals who were invited by a local commercial entity established in Argentina and will engage in the habitual performance of business, invest-ment or market research in Argentina. Business visas do not authorize their holders to work in Argentina.

A business visa allows multiple entries for a short term. In gen-eral, the maximum length of each stay is three months, which may be extended for another three months. However, nationals from Grenada and Hong Kong holding British passports are admitted for a maximum 30-day period, which may be extended for another 30 days. Chinese citizens holding passports from the Hong Kong Special Administrative Region (SAR) may be

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allowed to remain up to 90 days for business reasons in Argentina and are not required to apply for a business visa.

Nationals from Australia, Barbados, Belgium, Brazil, Bulgaria, Croatia, the Czech Republic, Denmark, Estonia, Finland, France, Guyana, the Hong Kong SAR, Hungary, Iceland, Ireland, Japan, Korea (South), Latvia, Lithuania, Malaysia, the Netherlands, New Zealand, Nicaragua, Norway, Poland, Puerto Rico, Romania, the Russian Federation, San Cristobal, Santa Lucia, San Vicente, Singapore, Slovenia, South Africa, Sweden, Thailand, Trinidad and Tobago, Turkey, the United Kingdom and the United States do not need a business visa to enter Argentina if they expressly inform the immigration authorities that they are businesspersons.

Agreements signed with India and Korea (South) establish a spe-cial immigration regime for business visas. Individuals from Korea (South) may enter the country for a 3-year period as business visitors and may stay in the country for 30 days during each trip. Individuals from India may stay in the country about 90 days dur-ing each trip for the duration of a 5-year period. In both of the above cases, multiple entrances are allowed during the validity term if the 30- or 90-day limits are observed.

Citizens from Brazil, France, Iceland, Japan and the United Kingdom are not required to obtain a visa to enter Argen tina for less than 90 days for the purpose of developing technical activities in the country.

Under an agreement between Argentina and Brazil, special immi-gration treatment is granted to businesspersons, professionals and specialized technicians (skilled workers who have completed high school or a third-level education).

Brazilian citizens qualifying under the agreement between Argen-tina and Brazil may enter Argentina without obtaining a visa if they remain in Argentina for less than 90 days, regardless of whether they receive remuneration in Argentina for the perfor-mance of the duties mentioned above. The term can be renewed once for an additional 90 days. Technicians may request exten-sions if they remain employed by the Brazilian entity.

To obtain the visa, nationals from other countries must request an authorization fro

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