Taxation in Turkmenistan
The taxation system in Turkmenistan is an intricate structure that plays a crucial role in the country’s economic strategy, providing a balance between revenue collection and promoting growth and investment. This system includes various taxes, each regulated by a detailed set of rules and rates. A thorough grasp of this environment is vital for businesses, investors, and individuals to manage their finances strategically and ensure compliance.
Taxation system
Turkmenistan’s taxation system is structured to be in harmony with its internal fiscal policies as well as its international responsibilities, providing a systematic yet flexible method for taxation. This system might include a mixture of flat rates, progressive tax scales, and specific exemptions that mirror the nation’s economic goals and social aims. Grasping the complexities of these tax mechanisms is essential for maximizing financial results, achieving compliance, and taking advantage of opportunities within the legal framework.
Capital gains tax
In Turkmenistan, capital gains are classified as ordinary business income and taxed at the standard corporate income tax rate of 8% for resident companies. Non-resident entities face a 15% withholding tax on capital gains if they do not have a permanent establishment in the country.
Corporate taxation
Turkmenistan imposes a corporate tax rate of 8% for resident nongovernmental entities and 20% for nonresidents, as well as entities subject to the Petroleum Law. The tax is determined by taxable income, which is calculated as the difference between gross income and allowable deductions. Nonresidents that do not have a permanent establishment in Turkmenistan face a 15% withholding tax on their gross income. There are no additional taxes or alternative minimum taxes applicable.
Personal income taxation
Turkmenistan implements a flat personal income tax (PIT) rate of 10% on various types of income, including employment income, business and professional income, interest, royalties, income from immovable property, and capital gains. Employers typically withhold personal income tax directly from employees’ earnings. For those earning business and professional income, self-assessment procedures are in place. Residents are taxed on their global income, whereas nonresidents are taxed only on income generated from sources within Turkmenistan.
Dividend taxation
Dividends distributed to both resident and nonresident companies incur a 15% withholding tax. For individuals, whether resident or nonresident, the withholding tax on dividends is set at 10%. These taxes are collected at the source. If dividends have already been taxed at the source, they can be subtracted from gross income. The rate applicable to nonresidents may be lowered based on relevant tax treaties.
Property tax
In Turkmenistan, the property tax is set at a rate of 1% on the average annual net book value of fixed assets as well as the average annual value of tangible assets utilized for business activities and situated within the country. This property tax is deductible when calculating profits tax, allowing companies to lower their taxable income by the amount of tax paid.
Inheritance taxation
Turkmenistan does not levy an inheritance tax. As a result, people receiving inherited assets, whether from within the country or from overseas, will not have to pay any taxes on those assets.
International taxation
Turkmenistan’s international tax framework encompasses withholding taxes and other charges on income generated by non-residents and foreign entities. Withholding taxes typically apply to dividends, interest, royalties, and technical services fees, with rates of 15% for companies and 10% for individuals. Tax agreements with different countries may offer lower tax rates or exemptions. The standard corporate income tax rate for non-residents with a permanent establishment is 20%, whereas non-residents without a permanent establishment face a 15% withholding tax.
Cryptocurrency taxation
Turkmenistan presently lacks dedicated laws concerning the taxation of cryptocurrency. Without explicit regulations, current tax laws could potentially be understood to cover transactions involving cryptocurrency. Consequently, depending on the classification of cryptocurrency (for instance, as property), capital gains tax or income tax could be applicable when it is sold or exchanged.
VAT system
In Turkmenistan, VAT is typically levied on the turnover from taxable activities related to the supply of goods, works, and services, unless there is a specific exemption. Goods that are exported (excluding oil and gas) and services related to international transport are taxed at a rate of 0%. Contractors working under the Petroleum Law might be exempt from VAT. The tax base consists of sales turnover, and input VAT can be deducted from output VAT. In some instances, a reverse charge mechanism is implemented.
Our taxation solutions
In a continuously changing tax landscape, professional advice is crucial. Our firm provides a range of specialized tax solutions customized to address the varied needs of individuals, corporations, and investors in Turkmenistan. Our services aim to manage the intricacies of the tax code, reduce liabilities, and guarantee complete adherence to regulations.
- Personal tax advisory: Tailored advice to minimize tax exposure while ensuring legal compliance.
- Corporate tax strategy: Comprehensive planning to maximize tax efficiency and leverage incentives.
- Capital gains optimization: Expert guidance to manage and reduce taxes on capital gains.
- International tax planning: Advanced strategies for optimizing cross-border tax outcomes.
- Cryptocurrency advisory: Compliant tax strategies for both individual and corporate crypto activities.
- Inheritance and estate planning: Strategic planning for efficient wealth transfer and reduced inheritance taxes.
- VAT compliance: Full-service support for VAT registration, reporting, and optimization.
Book a consultation
Navigating the intricate realm of taxation can be greatly improved with expert guidance. Reach out to us today to arrange a consultation with our tax specialists. We will collaborate with you to create a customized tax strategy that meets your goals and guarantees complete adherence to the regulatory framework of Turkmenistan.
Disclaimer
Tax laws and regulations are continuously evolving and can differ depending on personal situations. The information presented here serves as general guidance and may not be indicative of the latest changes. It is strongly advisable to seek the assistance of a qualified tax professional for precise and current advice tailored to your circumstances.