Tax Aspects for Doing Business in 
          p             g
              Turkmenistan
                   August 2010



...
Table of Contents
    Table of Contents
      S#                                   Topic   Page

       1        Legal Ent...
Legal Entities
    Legal Entities
     Foreign investors may establish either a limited presence, in the form of a
      ...
Corporate Tax
    Corporate Tax
        Current rates of profits tax are
              8% for non‐governmental residents...
Value Added Tax
    Value Added Tax
     Selling of goods, performance of work and rendering of services within the
     ...
Withholding Tax
    Withholding Tax
        Income of non‐resident legal entities are subject to WHT:
            Divide...
Employee Taxes & Social Security
    Employee Taxes & Social Security
     Individual Income Tax
         T rate of 10% ...
Employee Taxes & Social Security…cont…
    Employee Taxes & Social Security cont
     Social Security
         Social se...
Currency Regulations
    Currency Regulations
     All operations in foreign currencies should be performed via authorize...
Labor Code
      Normal duration of working day should not exceed 8 hours and regular
        workweek of 40 hours.
     ...
Summary
           y
      General profit tax rate – 20%
      Withholding tax rate – 15%
      VAT rate – 15%
      I...
Disclaimer
          The information contained in this publication is for general purpose
          only and is not intend...
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Tax Turkmenistan

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Tax aspects for doing business in Turkmenistan

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Tax Turkmenistan

  1. 1. Tax Aspects for Doing Business in  p g Turkmenistan August 2010 Oxford Business Information Services www.taxman‐cis.com 1
  2. 2. 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 Oxford Business Information Services 2 www.taxman‐cis.com
  3. 3. 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. Oxford Business Information Services 3 www.taxman‐cis.com
  4. 4. 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. Oxford Business Information Services 4 www.taxman‐cis.com
  5. 5. 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. Oxford Business Information Services 5 www.taxman‐cis.com
  6. 6. 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. Oxford Business Information Services 6 www.taxman‐cis.com
  7. 7. 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. Oxford Business Information Services 7 www.taxman‐cis.com
  8. 8. 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 Oxford Business Information Services 8 www.taxman‐cis.com
  9. 9. 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. Oxford Business Information Services 9 www.taxman‐cis.com
  10. 10. 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. Oxford Business Information Services 10 www.taxman‐cis.com
  11. 11. 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 Oxford Business Information Services 11 www.taxman‐cis.com
  12. 12. 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. Oxford Business Information Services 12 www.taxman‐cis.com

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