TAJIKISTAN Law and Practice Contributed by: Farhad Azizov and Shavkat Akhmedov, AAA Law Offices
9.2 Withholding Taxes on Dividends, Interest, Etc Rates, Withholding, and Treaty Relief Dividends paid by Tajik companies are generally sub - ject to a 12% withholding tax, regardless of whether the recipient is resident or non-resident. Interest and royalty payments to non-residents are also subject to withholding at source. Double tax treaties can reduce or eliminate these withholding rates provided the foreign recipient is the beneficial owner of the income and supplies a valid residence certificate and related documentation. Trea - ty benefits may be denied if the arrangement lacks substance or the recipient acts as an intermediary for another party. 9.3 Tax Mitigation Strategies Strategies for Reducing Tajik Tax Exposure Investors typically use structural and treaty-based planning to manage Tajik tax exposure, including: • locating holding or financing entities in treaty jurisdictions to reduce withholding on dividends, interest, or royalties, ensuring beneficial ownership and operational substance; • organising cross-border activities to avoid unin - tended PE creation or properly attribute income and expenses to a PE to manage the additional 15% PE profit tax; • structuring operations so that substantial activity occurs within an FEZ to take advantage of exemp - tions from most taxes; • balancing dividends (12% withholding) with deductible, arm’s length interest payments; • maintaining transfer pricing compliance; • using available loss carry-forward rules to offset future profits, and tracking cross-border losses separately if relevant; and • considering acquisition structures that allow higher depreciable asset values, consistent with Tajik accounting and tax rules. 9.4 Tax on Sale or Other Dispositions of FDI Capital Gains and Disposition Rules Tajik-source capital gains, including shares and real estate, are taxable. Non-resident sellers may be sub - ject to withholding by the local buyer or company.
If a state body’s actions cause damage, investors may claim compensation for losses, including lost profits,
through the courts. Dispute Resolution
Investment agreements can specify the governing law and forum for disputes. Investors may submit disputes to Tajik courts, international arbitration, or international commercial arbitration, including for expropriation or contractual issues. Dispute resolution clauses should be carefully drafted to ensure enforce - ability under Tajik law.
9. Tax 9.1 Taxation of Business Activities Overview of Business Taxes
Tajikistan’s main business taxes include corporate income tax, value-added tax (VAT), social tax, per - sonal income tax (as withholding on employees), excise duties, subsoil taxes for extractive industries, and various local property and road taxes. Resident companies are taxed on worldwide income, while non-residents are taxed only on Tajik-source income. A foreign company with a permanent estab - lishment (PE) pays profit tax on income attributable to that PE and an additional 15% tax on the PE’s net profit. Entities registered in Free Economic Zones (FEZs) enjoy broad exemptions from national taxes, except for social tax and personal income tax on employees. Activities outside an FEZ are taxed under the regular regime. Most businesses operate as limited liability com - panies or joint stock companies, both of which pay corporate income tax on net profits. Partnerships are rare. Foreign branches that meet PE criteria are taxed in the same way as domestic entities on their Tajik- source income.
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