Turkmenistan

Country Name: Turkmenistan
Currency: Turkmenistan Manat (TMT)
Primary Tax Authority: State Tax Service of Turkmenistan
Key Legislation:

Tax Code of Turkmenistan (as amended)
Customs Code
Investment Law
Value Added Tax (VAT) Law

Fiscal Authority Allocation

Centralized Fiscal System:
Turkmenistan operates a centralized tax system. The State Tax Service, under the Ministry of Finance and Economy, is responsible for administering and collecting taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and other indirect taxes.

Corporate Income Tax (CIT)

Standard Rate: 20%
Turkmenistan imposes a flat corporate income tax rate of 20% on resident companies and foreign companies with a permanent establishment in Turkmenistan.

Corporate Forms and Taxation:

Resident Companies: Taxed on worldwide income.
Non-Resident Companies: Taxed only on income derived from Turkmenistan.

Exemptions and Incentives:

Investment Incentives: Turkmenistan offers tax holidays and reduced CIT rates to companies investing in sectors such as oil and gas, agriculture, and infrastructure. Companies investing in priority sectors can receive CIT exemptions for up to 10 years.
Free Economic Zones (FEZs): Businesses operating in FEZs benefit from tax holidays, VAT exemptions, and customs duty reductions.

Goods and Services Tax (GST) / Value-Added Tax (VAT)

Standard Rate: 15%
Turkmenistan imposes VAT at a standard rate of 15% on most goods and services. VAT is levied on domestic production and imports. Exported goods and services are zero-rated, allowing businesses to reclaim VAT on inputs used in production for export.

Exemptions:
Certain goods and services, such as healthcare, education, and some agricultural products, are VAT-exempt. Businesses operating in special economic zones or under investment agreements may benefit from VAT exemptions.

Personal Income Tax (PIT)

Flat Rate: 10%
Turkmenistan applies a flat personal income tax rate of 10% on both residents and non-residents. Residents are taxed on worldwide income, while non-residents are taxed only on income earned within Turkmenistan.

Deductions and Allowances:
Limited deductions are available for residents, such as social security contributions and charitable donations.

Additional Mandatory Contributions

Social Security Contributions:
Employers and employees must contribute to the social security system, which provides pensions, healthcare, and unemployment benefits.

Employer Contribution: 20% of gross salary.
Employee Contribution: 2% of gross salary.

Withholding Taxes

Dividends: 15%
Interest: 10%
Royalties: 15%
Turkmenistan imposes withholding taxes on payments to non-residents. These rates may be reduced under Turkmenistan’s double taxation agreements (DTAs).

Transfer Pricing Rules

Turkmenistan applies the arm’s-length principle to transactions between related parties. Transfer pricing rules require that cross-border transactions between related entities are priced at market value. Documentation requirements apply for large companies engaging in related-party transactions.

Special Tax Regimes

Free Economic Zones (FEZs): Companies operating in FEZs benefit from reduced tax rates, VAT exemptions, and customs duty relief. These zones are designed to attract foreign direct investment (FDI) and boost export-oriented industries.
Investment Incentives: Turkmenistan provides tax holidays of up to 10 years for foreign and domestic companies investing in key sectors such as energy, mining, and agriculture. These incentives also include VAT and customs duty exemptions on imported equipment and raw materials.

Other Taxes

Customs Duties: Turkmenistan imposes customs duties on imports, with rates varying based on the type of goods. Essential goods, including food and raw materials for industry, may benefit from reduced rates or exemptions.
Excise Taxes: Excise taxes are levied on certain goods such as alcohol, tobacco, and fuel. Rates vary depending on the product.
Property Tax: A 1% tax is imposed on the value of commercial real estate and industrial properties.

Double Taxation Agreements (DTAs)

Turkmenistan has signed several double taxation agreements (DTAs) with countries such as Russia, Kazakhstan, and Turkey. These agreements help reduce withholding taxes on cross-border payments and prevent the double taxation of income earned in Turkmenistan and partner countries.

Local Taxes

Local governments may impose minor fees and taxes, such as property taxes or business registration fees. However, most significant taxes, including CIT, PIT, and VAT, are centrally administered by the State Tax Service.

Compliance and Reporting

Annual Filing:
Corporate tax returns must be filed by March 31st of the following year. Personal income tax returns are also due by March 31st. VAT returns are filed monthly, and businesses must remit VAT collected to the State Tax Service.

Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. Interest is generally charged at a rate of 0.05% per day on overdue tax payments, and additional penalties may be imposed for tax evasion or fraud.

Recent Developments

Energy Sector Investment:
Turkmenistan is focusing heavily on developing its energy sector, particularly natural gas and oil production. The government offers significant tax incentives, including CIT holidays, VAT exemptions, and reduced customs duties, to attract foreign investment in energy infrastructure and exploration.

Diversification Efforts:
Turkmenistan has been implementing economic policies aimed at diversifying its economy beyond natural gas exports. This includes promoting investment in agriculture, manufacturing, and tourism through tax incentives, particularly in Free Economic Zones (FEZs).

Modernization of Tax Administration:
The government of Turkmenistan has been working on modernizing its tax administration by implementing digital tax filing and payment systems to improve compliance and increase revenue collection efficiency.

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