Tax Turkmenistan

Tax Aspects for Doing Business in
p g
Turkmenistan
August 2010

Oxford Business Information Services
www.taxman‐cis.com

1

Table of Contents
Table of Contents
S# Topic Page

1 Legal Entities 3

2 Corporate Tax 4

3 Value Added Tax 5

4 Withholding Tax 6

5 Employee Taxes & Social Security
E l T &S i lS it 7

6 Currency Regulations 9

7 Labor Code
Labor Code 10

8 Summary 11

2 www.taxman‐cis.com

Legal Entities
Legal Entities
 Foreign investors may establish either a limited presence, in the form of a
representative office or a branch of foreign legal entity, or a full presence as
Turkmen l l entities i the f
T k legal ii in h form of an enterprise with f i
f i i h foreign
participation that is co‐owned as a joint venture with Turkmen or foreign
partner(s).
 A representative office or a branch of a foreign legal entity, being a resident
p g g y, g
in Turkmenistan, does not have the status of a legal entity in Turkmenistan.
A representative office performs preparatory and auxiliary activities and is
authorized to conclude contracts on behalf of its parent company. A branch
is a division of a foreign legal entity, which may fulfill all or part of the
g g y, y p
functions of its parent company, including conducting business activities
that generate income.
 Both representative offices and branches act on the basis of a “Regulation”
and are managed by an individual authorized by the parent company under
a power of attorney.
 Branches and representations of enterprises are subject to state registration
as per the rules established for enterprises.


Corporate Tax
Corporate Tax
 Current rates of profits tax are
 8% for non‐governmental residents of Turkmenistan
 20% of the profits for other legal entities
 15% on dividends and other distributions to shareholders of legal
entities
 Infrastructure development tax of 1% on the profits.
p p
 In addition there are two other taxes which are outside the general tax
legislation but apply on the accounting profits:
 Agricultural Development Fund 3%
 Ashgabat City Development Fund 0.5%
 CIT returns / payment
 Profit tax returns shall be submitted for every quarter not later than
20th of the following month.
 P
Payment of CIT b d on th return h t b made not l t th 25th
t f based the t has to be d t later than
after adjusting advances paid.
 Advance payments of CIT shall be made on 13th and 28th of each
month.


Value Added Tax
Value Added Tax
 Selling of goods, performance of work and rendering of services within the
territory of Turkmenistan are subject to 15% VAT.
 Supply of goods from overseas vendors that terminate at port in
Turkmenistan, export of goods and goods and services for diplomatic
missions are not subject to VAT.

 VAT declarations / payment
 VAT declaration shall be submitted for every month not later than 20th
of the following month.
 Payment of VAT based on the declaration has to be made by 25th.
 Advance payments in amount of 1/3rd of the tax calculated of the
previous reporting period should be paid on 13th and 23rd days of the
reporting month and on 3rd day following the reporting month.


Withholding Tax
Withholding Tax
 Income of non‐resident legal entities are subject to WHT:
 Dividends received from shareholding in legal entities ‐ residents in
Turkmenistan, interests, rental, insurance payments, royalties,
provision of services and rendering of works, sale of immovable
property, fines and interests received for breach of contracts,
international transportation – 15%;
 Income received from rent of marine vessels and aircrafts ‐ 6%;
 WHT payment & declaration
 The tax should be paid within 5 days from the date when it was
withheld.
 Report should be submitted to the Tax Authority not later than 20th of
the following month when the payment was made.
 Treaty clearances
 In order to take advantage of double tax treaty, pre‐ clearance from the
tax authorities is required. Approval is granted by the tax authorities on
a case by case basis after evaluating all the relevant documents.


Employee Taxes & Social Security
Employee Taxes & Social Security
 Individual Income Tax
 T rate of 10% on gross i
Tax t f income of employees (b th monetary and i
f l (both t d in
kind) is applicable.
 Expatriates residing in Turkmenistan for more than 183 days in a year are
generally taxed on their worldwide income.
 Tax withheld from employees should be paid to the State Budget of
Turkmenistan not later than the date when income is actually paid.
 Personal Income Tax should be calculated and paid in Turkmenistani
Manat.
 Monthly tax declaration should be submitted not later than 25th of the
following month.


Employee Taxes & Social Security…cont…
Employee Taxes & Social Security cont
 Social Security
 Social security contribution is payable by employers at the rate of 20% of
the total remuneration (both monetary and in kind) provided to local
employees.
 Expatriate employees are not subject to social security contribution
contribution.
 Employer is liable for 20% of the State Social Insurance contribution on
Employee’s gross income that is normally withheld on the day of
payment.
 There is no compulsory state pension or medical insurance contributions
as far as the employee is concerned. However, the employer may
withhold such contributions from the employee’s remuneration based on
the l t
th voluntary written application submitted b th employee.
itt li ti b itt d by the l


Currency Regulations
Currency Regulations
 All operations in foreign currencies should be performed via authorized
banks.
 Bank accounts in foreign currency are permitted for entities which have
registered as a participant of external economic activities (generally all
branches of foreign company obtain such certificate at the time of
registration).
 Contract settlement should be made in local currency unless the entity has a
special license.
 International settlements can b made in f
l l be d foreign currency subject to
b
provision of justifying documents like contracts, invoices etc.


Labor Code
 Normal duration of working day should not exceed 8 hours and regular
workweek of 40 hours.
 The d
h duration of overtime work should not exceed 4 h
i f i k h ld d hours d i
during two
consecutive days and 120 hours during the year. Overtime is compensated at
200%.
 The minimum paid annual vacation is 30 calendar days and must be provided
to all employees.
 An employer should obtain permission from the appropriate body to employ
temporarily foreign employees and then obtain a work permit.
p y g p y p
 It should also be noted that there is a limit of 30% for the employment of
foreign employees from the total amount of the workers.


Summary
y
 General profit tax rate – 20%
 Withholding tax rate – 15%
 VAT rate – 15%
 Individual Income Tax – 10%
 Social security contribution – 20% (only for locals)
 Fixed exchange rates between USD and Manat
Accounting – 2.850
 Abbreviations used
 VAT – Value Added Tax
 CIT – Corporate Income Tax
 WHT – Withholding Tax
 DTT Double Tax Treaty
DTT – Double Tax Treaty
 PE – Permanent Establishment


Disclaimer
The information contained in this publication is for general purpose
only and is not intended, and should not be construed, as legal,
accounting, or tax advice or opinion provided by Oxford Business
Information Services to the reader. This material may not be
applicable or suitable for, the reader’s specific circumstances or
needs. Therefore,
needs Therefore the information should not be used as a substitute
for consultation with professional accounting, tax, or other
competent advisors.

The publishers and the authors expressly disclaim all and any liability
and responsibility to any person, entity or corporation who acts or
fails to act as a consequence of any reliance upon the whole or any
part of the contents of this publication
publication.


Tax Turkmenistan

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