Chapter 1: Real Estate Income Tax
Article 52 : After deducting all appropriate exemptions established in this law, the income of a natural or legal person arising from the transfer of his or her rights in proportion to the real estate located in Iran is subject to real estate tax.
Article 53 : The income liable to real estate tax with respect to a leased estate consists of total rent, whether in cash or otherwise, after the deduction of twenty-five percent, concerning the expenses, depreciation, and obligations of the owner with regards to the leased estate.
The income liable to tax with respect to the primary lease of an estate under endowment or entailment/sequestration will be calculated according to this Article.
In the case that the mortgager takes possession of the property subjected to mortgage, the mortgager will be liable for real estate tax based on the provisions mentioned in this Article.
Whenever the landlord is not recognized as the owner of the estate, the income liable to real estate tax consists of the difference between the receivable and paid lease with respect to the real estate.
The verdict of this Article is not applicable regarding staff buildings belonging to legal individuals, provided that their estate tax has been set by legal bureaus.
Note 1: The location of residency of the father, mother, spouse, children, grandparents, or dependents of the owner is not considered a leased property unless it is indicated through documents and evidence that rent is paid. In the case that multiple residential units are being resided in by the owner or the mentioned individuals above, one unit for the owner, and only one unit for the mentioned individuals, as chosen by the owner, will be exempt from residential tax.
Note 2: Real estate that has been gratuitously placed under the authority of organizations and institutions mentioned in Article two of this law will not recognized as a leased estate.
Note 3: For the purpose of real estate tax on the income gained from rent, each unit of residency in an apartment building will count as an independent unit.
Note 4: In regards to property that has been leased out with furniture and machinery, the income gained from their lease will also be considered as estate income and be liable to tax according to this Chapter.
Note 5: Buildings that have been constructed by the tenant, according to contract, benefiting the landlord on the land belonging to the landlord, will be placed under the possession of the landlord and fifty percent of it will be calculated as income liable to annual yearly rental tax according to the trading value on the day of the completion of building.
Note 6: Expenses that as a result of law or contract have been placed under the responsibility of the landlord and are covered by the tenant, as well as expenses that as a result of a contract have been assumed by the tenant, in the case that according to common law or tradition are carried out by the landlord, will be evaluated based on the price of the day that the expenses were paid and will be added to the annual amount of rent received as a non-pecuniary lease item on the year the expenses were paid.
Note 7: In the case that the landlord of a constructed estate on a rental land completely or partially leases the estate, the value of the payment of rent will be calculated by deducting a proportional sum from the land, and the remaining value will be liable to real estate tax.
Note 8: In the case that the landlord sells his/her place of residency and the deed includes a respite for rent-free evacuation of the estate, during the time that the estate remains the place of residency of the ex-landlord, he will not be liable for real-estate tax for a period of six months. For Conditional Sale Transactions where, based on the conditions of the sales negotiation, the estate is placed under the volition of the buyer, the estate will not be considered as leased unless through the use of documents and evidence it is made clear that rent is paid.
Note 9: Ministries, institutions, government companies/organizations, organizations that all or part of their budget is provided by the government, institutions of the Islamic Revolution, municipalities, companies and organizations affiliated with them, and all other legal entities are required to deduct the tax pertaining to this chapter from their payment of rent and to pay the difference to the Taxation Affairs Administrations where the estate is located and to submit the receipt of this transaction to the landlord within ten days.
Note 10: Residential units belonging to housing construction companies that based on documents and evidence are handed over to the buyers prior to their final transfer are not considered leased during the period of occupation by the buyer. For the purpose of taxation, the buyer will be treated similar to that of a landlord provided that the final transfer of tax, mentioned in Article 59 of this law, has been paid as of the date of the possession of the residential unit.
Note 11: The owners of residential complexes who posses more than three leased units that have been constructed with compliance to the standard construction sample developed/proposed and indicated by the Ministry of Housing and Urban Development, is exempt from one hundred percent (100%) of real estate tax on the income gained from lease during the period when the property is being leased. Otherwise, the income of each individual in Tehran arising from lease of a residential unit or units up to a total of one hundred and fifty (150) square meters of usable floor area and up to two hundred fifty (250) meters of usable floor area in other locations (cities) will be exempt from real estate tax.
Article 54 : Lease will be determined according to an official deed. In the case that an official rental agreement is not present, the owner has not presented a deed or a copy of it, or the landlord, in addition to the price of the rent, receives payment in the form of a down payment or in any other fashion from the tenant, then the amount of rent will be determined based on the lease for a similar estate. If documents and evidences are accessed at a later time that determines the price of rent should be higher than the amount that has been determined above based on the assessment of income, the difference in tax will be claimed based on the provisions of this law.
Note 1: Cases for which the value of rent of a real estate must be determined by comparing leases for similar estates will be determined by the Taxation Affairs Administration in whose jurisdiction the property stands.
Note 2: As of the year 1382 (March 21, 2003), the basis of calculating the income liable to leased property tax will be the amount that has been determined by the Real Estate Assessment Committee (REAC) on lease on real estate per square meter in cities and villages as mentioned in Article (64) of this Act.
Article 55 : Whenever residential house or apartment owners rent their property and lease another place for themselves to reside in, or use a house provided to them by their employer, when calculating the amount of income liable to tax mentioned in this chapter, the amount of rent that is paid as a result of an official deed or contract, the amount of rent that is deducted from salary by their employer, or the amount of rent that is being assessed for the calculation of tax will be deducted from the total receivable rent of the owners.
Article 56: No longer exists.
Article 57 : In the case of natural persons who earn no income except rental out of their total annual income which shall be subject to taxation, an amount equal to the salary tax exemption, mentioned in Article 84 of the present Act, shall be exempt from payment of tax. However, the balance shall be subject to taxation in conformity with the provisions made in the present Chapter. Natural persons liable to this Article must submit special tax declarations based on the standard model provided by the State Taxation Affairs Organization to the local Taxation Affairs Administration where their estate is located to declare that other than rent they have no other means of income. The mentioned Taxation Affairs Administration, after receiving the tax declaration, is required to send a copy of the declaration to the local Taxation Affairs Administration where the place of residency of the taxpayer is situated. In case it is made evident that the tax declaration of the taxpayer is fraudulent, the taxpayer must pay the applicable tax in addition to a fine equal in amount to 100% of the taxes.
For the purpose of the implementation of this Article, pension, retirement allowance, dividend, bank prizes, and the interests paid by banks on the deposits will not be considered as income.
Note 1: The verdict of this Article does not apply to minors that are under the guardianship of their father.
Note 2: In the case that all other monthly income of the taxpayer liable to tax is less than the amount mentioned in this Article, that income gained from rent, which is used alongside the rest of the income of the taxpayer to produce the above mentioned amount/limit, is exempt from tax and the remaining balance is liable to tax based on the provisions mentioned in this Chapter.
Article 58: No longer exists.
Article 59: An absolute transfer of real estate, on the basis of the value of the transaction, and the transfer of the ownership of a real estate, on the basis of the value of the transfer, will respectively be liable to 5% and 2% tax rates on the date of the transfer by the owners.
Note 1: In the case that no transactional value has been determined for the purpose of the transfer, the transactional value of the real estate will be equal to the transactional value of a similar real estate that is located closest to it and will be the basis of the calculations of the applicable real estate tax.
Note: The right of transfer of real estate, from the view point of this law, includes the right of trade or business, the right of possession of the estate, or the right arising from the trading status of the estate.
Article 60: No longer exists.
Article 61 : In the cases that the transfer of real estate does not take place through a notary public, the transactional value of the real estate, based on the regulations in this Chapter, will be included during the calculations of the real estate tax of the landlord. In general, for real estate for which its transactional value has not yet been determined, its transactional value shall be the same as most identical real estate situated closest to the estate under consideration.
Article 62: No longer exists.
Article 63 : The absolute transfer of property that takes place without a sale contract, with the exception of the gratuitous transfer of property that is liable to tax according to the mentioned provisions, is liable to tax on the absolute transfer of the property mentioned in this Chapter. In the case that both transfers involve real estate, each of the transfers are liable to tax on the absolute transfer of the estates according to the above mentioned provisions.
Article 64 : Determining the transactional value of property is vested with the Real Estate Assessment Committee (REAC) which consists of seven members in Tehran: the representative(s) of the State Taxation Affairs Organization, the representatives of the ministries of Housing and Urban Development, Agricultural Jihad, the representative of the State Organization for Registration of Deeds and Real Estates, and three (3) trustworthy local experts knowledgeable in the field of property assessment as recommended by the city councils.
In the provinces, the REAC members shall consist of directors general or the heads of Taxation Affairs Administrations, Housing and Urban Development Administration and the Administration for Registration of Deeds and Real Estates in the centers of provinces and the representatives of the above-mentioned members in townships, as the case may be, in addition to three (3) trustworthy local experts knowledgeable in the field of property assessment as recommended by the city council. REAC shall hold annual meetings in order to determine and specify the transactional value of the real estates and properties.
Assessment of real estate in each district and subordinate village (according to the nationwide divisions) shall be carried out by three (3) trustworthy local experts knowledgeable in the assessment of property, who shall be recommended and named by the district council. In places where no city council or district council exists, three (3) competent individuals who shall not be civil servants and who shall be named by the governor general or governor of the district shall take part in the meeting held by REAC.
The Real Estate Assessment Committee shall hold meetings in Tehran based on the invitation of the State Taxation Affairs Organization, and in provinces upon the invitation of director or the head of taxation Affairs Administration. The meetings held by REAC will be made official with the presence of at least five individuals, three of whom are government officials/civil servants. All decisions and resolutions of the meeting will become validated after a voting process has been carried out and four of the individuals have voted in favor of the decision.
The Real Estate Assessment Committee is required:
A. To establish the value of urban lands with respect to the last established transactional value and the geographical location (division of lands, quality of earth, subterranean utilities, water, air and altitude) legal status (joint ownership, type of ownership: currently having title, possessing deed of ownership, leasehold), urban transportation networks, the extent and density of population and buildings, location of the land in commercial, industrial and residential areas (or a mixture of the above types), and in general the type of application of the land, infrastructural facilities, shopping areas, and quality of thoroughfares.
B. In addition to being compliant to provisions mentioned in Clause A, to establish the value of agricultural and rural lands with respect to their distance from cities, type of produces and their price, quality of earth and water supply, the possibility of carrying out mechanized farming on the land, topographical status, road facilities, type of road and its distance to the main roads and whether or not there are different owners for the land, buildings, and trees of orchards.
C. To establish the value of a real estate with respect to the quality of materials (steel structure, concrete, concrete structure, steel beam roof, etc.) and the age, density, application (residential, commercial, office, educational, sanitary, services, etc.) as well as the type of ownership, whether land or building.
The established transactional value shall become effective after one (1) month from the date of final approval by REAC and shall remain valid and in force until a new transaction value is determined.
Note 1: The State Taxation Affairs Organization or the administrations affiliated with it are able to convene REAC meetings before the expiration of the mentioned one year period for the following purposes:
1. For the determination of the transactional value of locations devoid of transactional value.
2. For modification of the determined transactional value for a location where the determined value by the Taxation Affairs Organization does not correspond to the transactional value of another real estate located in a similar location.
3. For modification of the determined transactional value of locations, as determined by the State Taxation Affairs Organization with regards to the information mentioned in this Article, where a drastic change in value has been determined.
The determined transactional value as mentioned in this Note will come into effect one month after the final approval of REAC and will remain credible until a new transactional value is determined.
Note 2: As long as the transactional value of real estate has not been determined based on the supervisions of this Law, the last determined transactional value will remain valid.
Article 65 : The absolute transfer of property that has or will become effective in the process of carrying out land reforms will not be liable to the tax mentioned in this Chapter. Residential units that have been constructed by housing cooperative companies will also not be liable to the tax mentioned in this Chapter.
Article 66 : In cases where the transferee of the property is the government, municipalities, or the institutes affiliated with them, and in cases where the property is transferred through the executive department of the State Organization of Deeds and Estates for Registration, or other governmental agencies on behalf of the owner, if the value mentioned in the deed is less than the transactional value, the value mentioned in the deed will be used instead of the transactional value to calculate tax according to Article 59 at the time of the transfer.
Article 67 : Cancellation of absolute transfers of property based on the judgments issued by judicial authorities in general, and rescinding or cancellation of absolute transfers by mutual consent or for all other cases which may be effected up to six months after the transaction will not be regarded as a new transaction and will not be liable to tax as mentioned in this Chapter.
Article 68 : Properties that have been placed under the possession of the government during the enforcement of Article 34 through the Registration Act of the month Mordad 1320 (1941) and the amendments following the Act are exempt from the payment of absolute transfer tax.
Article 69 : The first absolute transfer of low and medium price residential units constructed up to ten years after the validation of this Act according to the criteria and prices determined by the Ministry of Housing and Urban Development, and the Ministry of Economy and Finance will be exempt from absolute transfer tax on the properties. The first absolute transfer of the above mentioned properties up to one year after the expiration of the date of respite for carrying out construction projects as determined by the Ministry of Housing and Urban Development or the local municipality are also exempt from the payment of absolute transfer tax on the properties.
Article 70 : Whenever a property or funds that that are paid to or deposited in the name of a proprietor or the owner of the right, by the ministries, government institutes and companies or the municipalities in regards to real estate and land for the construction and/or development and extension of military installations or public domain, such as development or construction of roads, rail-ways, thoroughfares, water, oil and gas pipelines, digging streams and the like, shall be exempt from payment of tax under the present Chapter.
The estates that were or will be registered based on the listed provisions of Iran’s national relics in the case of a transfer of these estates to the Iranian Cultural Heritage Organization will be exempt from tax in proportion to the entirety of the absolute transfer tax. In all other cases that the ownership of the estate is maintained in the hands of the natural/legal persons shall be exempt from tax in proportion to fifty (50) percent of the tax applicable as mentioned in the Chapter relating to income tax. Furthermore, any kind of payment or sum of money that is put in the possession of the owners or properties by the legal persons mentioned above for the acquisition of the real estate or the rights established within the boundaries and limits of the projects meant for renewal, improvement and/or reconstruction of old places and deteriorated districts and regions of the cities and townships shall be exempt from transfer tax.
Article 71 : The value of construction of land/real estate that has been transacted through ordinary means of deed conveyance will be excluded during the calculation of taxes provided that government, judicial or municipal authorities or forums where the property is situated, shall certify and confirm in writing the facts and circumstances of the transaction.
Article 72 : In the cases that after the payment of taxes on the behalf of the taxpayer a transaction does not take place, the local Taxation Affairs Administration concerned is required, based on the request of the taxpayer concerned and its confirmation by an official notary public, to consider the transaction as null and to return the collected tax back to the taxpayer based on the supervisions listed in this Act. The verdict of this law also applies to the reimbursement of taxes applying to transfer of key-money and windfall earnings.
Article 73 : No longer exists.
Article 74 : If a property under the title of “dast arami” (gained) or any other title that based on the customs of the location is under personal possession is transferred to another individual, that transfer is liable to absolute conveyance tax according to the provisions mentioned in this Chapter. Also, in the case of income gained from the transfer of all other rights pertaining to the above mentioned property, the transferee, for tax purposes, will be recognized as the owner and will therefore be liable to all applicable taxes. In all the above cases, the date of possession of the property will also count as the date of ownership of that property.
Article 75 : For tax purposes, the tenants of endowed property/land, whether any buildings have been constructed on the mentioned land, will be subjected to the provisions mentioned in this Chapter and are considered as proprietors of the property/land.
Note 1: in the calculation of taxes for the above case, the date of the lease of the property will be regarded as the date of possession/title to the property.
Note 2: In cases that the property has been transferred by the tenant, the verdict of this Article will not be an obstacle to the implementation of Note 7 of Article 53 of this Act.
Article 76: In cases for which the transfer of property mentioned in Article 52 of this Act is liable to tax, as mentioned in Article 59 of this Act and according to the provisions of this Chapter, another income tax payment on transfer of property will not be demanded.
Article 77 : The first absolute transfer of newly constructed buildings, whether residential or otherwise, for which more than two years has not passed after the issuance of the certification of their completion, in addition to absolute conveyance tax according to Article 59 of this Act, are also liable to a fix tax of ten percent (10%) according to the transactional value of the building being transferred. Natural persons or legal entities are not liable to any other taxes on the income gained from construction and the sale of buildings mentioned in this Article.
Article 78 : In case of the transfer of rights mentioned in Article 52 of this Act by the owner of the object, excluding the cases that have been mentioned in Articles 53-77 of this Act, the income gained by the owner/transferor will be taxed based on the rates mentioned in Article 59 of this Act.
Article 79 : No longer exists.
Article 80 : The taxpayers mentioned in this Chapter are required to prepare their tax declaration based on the sample prepared and supplied by the State Taxation Affairs Organization and to submit the forms to the local Taxation Affairs Administration where the property is located and to pay the applicable taxes according to the provisions listed by the end of the month of Tir (July 22) of the subsequent year. With regard to the transfer rights of locations and taxpayers mentioned in Article 74 of this Act, the above mentioned forms must be submitted to the local Taxation Affairs Administration where the property is located up to thirty (30) days after the completion of the transaction.
Note 1: In cases for which the transactions mentioned in Article 52 of this Act take place with official documentation, the taxpayer is required to separately notify the local Taxation Affairs Organization concerned prior to the process of transaction of the amount received and/or the amount of income under each tax contained under Article 187 of this Article. This declaration, except for cases that the landlord has not changed, will be equivalent to carrying out the duties mentioned in this Article.
Note 2: In cases for which the transactions mentioned in this Chapter do not take place with official documentation, the transferee is required to notify the local Taxation Affairs Administration where the property is located in writing up to thirty (30) days after the completion of the transaction.
Chapter 2: Tax on Income Derived from Agriculture
Article 81 : Income gained from activities pertaining to agriculture, farming, animal husbandry, livestock breeding, pisciculture, apiculture, poultry farms, fishing, silk worm seeds production, revival of pastures and forests, orchards of any type and palm trees are exempt from payment of tax.
The government is required to submit all drafts of relevant studies and research on the grounds of all agricultural and other mentioned activities, such that the continuation of their tax exemption is necessary to the Islamic Republic of Iran, to the Islamic Consultative Assembly before termination of implementation period of the Third Economic, Social and Cultural Development Plan.
Chapter 3: Tax on Salary
Article 82 : The income (whether cash or otherwise) that a natural person puts in the service of another (whether natural or judicial) against his/her working power in regards to employment in Iran for either a period of time or a completed service is liable to salary tax.
Note: Income that an individual earns from Iranian sources (from the Islamic Republic of Iran or residents of Iran) during the period of an assignment outside of Iran is liable to salary tax.
Article 83 : The income liable to salary tax includes: Salary (basic salary or wage, or actual salary) and the benefits relating to the occupation, whether recurring or non-recurring, before any deductions are made and after calculating all the exemptions established in this Act.
Note: The non-cash/pecuniary income liable to tax is assessed and is calculated as follows:
a. Furnished housing at the rate of 25% and non-furnished housing at the rate of 20% of the monthly salary and pecuniary benefits (except for pecuniary benefits exempted in accordance to Article 91 of this Act) after all deductions on this account have been made from the salary of the worker.
b. An exclusive vehicle with a driver at the rate of 10% and without a driver at the rate of 5% of the monthly salary and pecuniary benefits (except for pecuniary benefits exempted in accordance to Article 91 of this Act) after all deductions on this account have been made from the salary of the worker.
c. All other non-pecuniary benefits equivalent to the incurred cost for the payer of salary.
Article 84: The annual income liable to salary tax of all recipients of salary, including the workers subjected to Labor Laws, whether their salary is gained through a single or multiple sources, are exempt from the payment of tax on up to one hundred and fifty (150) times their minimum salary on the basis of the salary table listed in Article 1 of the Law on Harmonized Salary of Civil Servants of 1370 (1991).
Article 85 : The tax rate on the income salary pertaining to the employees of ministries, institutions, and other governmental agencies as mentioned in Articles 1, 2, and the final section of Article 5 of the Law on State Service Management, the Law of Public Accounting provided the execution of Chapter 10 of the Law on State Service Management and any subsequent reformations and extensions, judges, members of the scientific board of universities and higher educational or research institutions, after the deduction of tax exemptions mentioned in this Act, will be set to a fixed rate of ten percent (10%). In the case of other salaried employees, after the deduction of tax exemptions mentioned in this Act, a 10% tax rate shall apply up to the amount of Rls.42,000,000 (forty two million rials) for the year 1388 (2009), and for the amounts exceeding the said sum, the tax rates prescribed in Article 131 of this Act shall apply.
Article 86 : The payers of salary at the time of each payment or allocation are required calculate the applicable taxes according to the provisions listed in Article 85 of this Act and to deduct the taxes from the salary and to submit a list containing the amount of salaries, names, and addresses of the receivers of salary to the local Taxation Affairs Administration within 30 days. For the subsequent months only changes to the above information needs to be submitted.
Note: Individuals or entities that provide any form of payment other than the original/established wage or salary, at the time of each payment, are required to calculate all applicable taxes without following the exemption mentioned Article 84 of this Act according to the rates mentioned in Article 85 of this Act and to submit a form containing the amount of payment, names, and addresses of the receivers of the payments to the local Taxation Affairs Administration, within thirty (30) days.
Article 87 : Excess payments with regards to salary income tax will be refunded based on the provisions of this Act, provided that after the end of the month of Tir (July) of the subsequent year a written claim is submitted by the recipient of salary to the Taxation Affairs Administration located in his/her place of residency.
The mentioned Taxation Affairs Administration is required to carry out all necessary verifications within three (3) months after the submission of the documents mentioned above. In the case that it is established that the payments have been in excess and that no other final debt is owed by the applicant to the administration, the applicant could now submit a claim in regards to the reimbursement of the excess payment.
In the case that the applicant owes any final debt to the administration, the amount of debt will be reduced from the excess payment of tax and the balance will be refunded.
Article 88 : In cases where individuals living abroad receive salary without a branch office or a representative in Iran, the recipients of salary are required pay the applicable taxes based on the provisions listed in this Chapter to the Taxation Affairs Administration of their location of residence within thirty (30) days of receiving the salary and to submit a tax statement in regards to the salary received to the mentioned Taxation Affairs Administration by the end of the month of Tir (July 22) of the subsequent year.
Article 89 : The issuance of an exit permit from the country, renewal of a residence permit, or a work permit for foreign nationals, except for individuals that based on the provisions of this Act are exempt from the payment of tax, are required to submit a tax settlement certificate or a written warranty by the employer of Iranian juridical entities who are parties to the contracts concluded by the employer of foreign nationals or the Iranian third party juridical entities.
Article 90 : In the cases that the payers of salary do not pay the applicable taxes in time or pay less than the actual amount, the Taxation Affairs Administration of the location where the salary recipient is residing, or in cases where the earned income is liable to the Note mentioned in Article 82 of this Act, the local Taxation Affairs Administration responsible for the payment of salary is required to calculate the applicable taxes and penalties with adherence to the provisions mentioned in this Act and to claim the taxes and penalties from the salary payers who are considered as tax payers according to the tax assessment notice in compliance to the respite mentioned in Article 157 of this Act. The jurisdiction of this Article (90) applies to the individuals subject to Article 88 of this Act.
Article 91 : Income from salary will be tax exempt in the following cases:
1. Directors and members of foreign diplomatic missions in Iran, and directors and members of high ranking delegations of foreign states with respect to the income gained from salary from their respective governments, provided that the transaction is reciprocal. Also, directors and members of delegations of the United Nations (U.N.) and its specialized agencies in Iran with respect to the salary received from the U.N. and the mentioned agencies, provided that they are not subjects of the Islamic Republic of Iran.
2. Directors and members of the foreign consular missions in Iran and the employees of the cultural institutions of foreign governments with respect to their income gained from salary from their respective governments, provided that the transaction is reciprocal.
3. Foreign experts that with the agreement of the Islamic Republic of Iran are dispatched to Iran by a foreign state or international institution under technological, economic, scientific, or cultural grants in aid, with respect to the salary received from their respective governments or the mentioned international institutions.
4. Local employees of Iranian embassies, consulates and agencies of the Islamic Republic of Iran abroad, with respect to their salary from the Islamic Republic of Iran, provided that they are not citizens of Iran and that the transaction is reciprocal.
5. Pensions, retirement allowances, stipends, termination compensation and benefits, service redemption pay, dependents’ pension, service life bonus, and the salary of unutivacation days due the employees upon their retirement or as a result of a disability.
6. Travel expenses and allowances related to an occupation.
7. No longer exists.
8. Housing accommodations at the location of a workshop or factory for the use of employees and low price staff quarters outside of the workshop or factory perimeters for the use of the employees.
9. Funds gained from insurance on account of compensation for physical injury, medical treatment, and similar circumstances.
10. New year or the end of the year bonuses in total equaling one twelfth (1/12) the amount of tax exemption mentioned in Article 84 of this Act.
11. Staff quarters that with legal permission or under special regulations are put under the use of civil officers.
12. Funds that the employer spends for the medical treatment of employees or their dependents, either directly or through the wage-earner to the attending physician or a hospital, as confirmed and supported by receipts and documents.
13. Non pecuniary benefits provided to the employees equaling to at most two twelfths (2/12) of tax exemptions mentioned in Article 84 of this Act.
14. The salary of the personnel of the armed forces of the Islamic Republic of Iran, whether military or disciplinary. Individuals subject to the Employment Regulations of the Ministry of Intelligence and the disabled veterans of the Islamic revolution, the Iraqi imposed war, and the liberated prisoners of war.
15. No longer exists.
16. No longer exists.
Article 92 : Fifty percent (50%) of the tax on salaries of workers employed in less developed regions according to the list established by the State Management and Planning Organization will be exempt.
Note: The debt resulting from tax on salary of an employee of the military or disciplinary forces up to the date of implementation of this Act will be exempted.
Chapter 4: Taxes on Income from Professions
Article 93 : Income that a natural person acquires in Iran through an occupation or job, or through other methods that have not been mentioned in the provisions of the other Chapters of this Act, after the deduction of applicable exemptions mentioned in this Act, is liable to income tax on profession.
Note: The income earned by civil companies (whether voluntary or compulsory) as well income earned through investor-agent partnerships, as long as the proprietor (investor) or the owner of the capital is a natural person, is liable to income tax on profession based on the provisions mentioned in this Chapter.
Article 94 : The income of taxpayers mentioned in this Chapter liable to tax includes the total amount of the sale of commodities and services, in addition to all other incomes that are not liable to tax according to the other Chapters of this Act, after the deduction of relevant expenses and depreciation according to the provisions of the Chapter on Deductible Expenses and Depreciation.
Article 95 : The job holders mentioned in this Chapter are required to maintain sufficient and reliable documents and evidence for the assessment of income liable to taxation. The job holders mentioned are divided based on the information below for the purpose of calculating the applicable income liable to tax:
a. Job holders that based on this Act are required to register and record their professional and occupational activities in the journal and the ledger as prescribed in the Commercial Code of Iran, and must maintain the relevant books, documents, vouchers and evidences, in compliance with the generally-accepted accounting principles, standards and criteria.
b. Job holders that based on this Act are required to record and register their vocational activities in Income and Expenditures Books. Samples of the mentioned records and documents are prepared by the State Taxation Affairs Organization and will be placed at the disposal of the public.
c. Job holders not liable to the provisions of Clauses (a) and (b) are required to keep a summary statement of their incomes and expenditures based on criteria determined by the sample forms of the State Taxation Affairs Organization.
Note 1: If necessary, before Dey 30 th (January 19) of each year the State Taxation Affairs Organization will prepare a list of the professions and occupations that will be added to Clauses (a) and (b) of Article (96) which will be liable to the mentioned provisions as of the beginning of the subsequent year. The State Taxation Affairs Organization will also be responsible for notifying the concerned taxpayers of the facts of the above-mentioned changes through trade organizations and by notification in official gazettes, as well as a highly-circulated newspaper.
Note 2: Regulations pertaining to the manner of maintaining books, documents, vouchers, and evidences as well as the method for the registration of financial activities and the preparation of final financial statements according to type of activity with compliance with the generally-accepted accounting principles will be prepared by the State Taxation Affairs Organization with the consent of the Chartered Accountants Society and approved by the Minister of Economy and Finance.
Article 96 :
a. The artisans mentioned in clause (a) of Article 95 of this Act include:
1. Commercial card holders and all importers and exporters.
2. Owners of factories, industrial production entities and workshops to which establishment license and exploitation permits were or shall be issued by the ministry in charge.
3. Mine operators and exploiters
4. The owners of auditing, accounting, book-keeping and financial service institutions, as well as providers of managerial, consultant, advisory, informatics, and computer services, whether consisting of software, hardware, or system design.
5. The owners of educational and training centers, free educational establishments, non-profit schools, universities, and higher education centers.
6. The owners of hospitals, maternities, hospices, polyclinics, and nursing homes.
7. The owners of hotels and motels with a rank of three stars or higher.
8. Wholesalers, department stores, financial brokers, representatives for the distribution of domestically-produced and imported goods and commodities, as well as the owners of warehouses.
9. The representatives of trade and industrial institutes and entities, whether domestic or foreign.
10. The owners of motor, land, sea, and air transport companies and institutes, whether passenger or freight.
11. The owners of engineering and engineering consulting institutes and companies.
12. The owners of advertisement and marketing institutes.
b. The artisans mentioned in clause (b) of Article 95 of this Article include:
1. The owners of industrial workshops.
2. Artisans engaged in industrial, technical computing, or supervisory occupations, as well as owners of technical and industrial, topography, and cartography establishments.
3. The owners of printing houses, lithographers, bookbinders, graphics specialists and those rendering printing services.
4. The owners of computerized telecommunication centers.
5. Attorneys, experts, official translators to the Ministry of Justice, legal advisors, chartered accountants, and members of the board of engineering organizations.
6. Free-lance researchers and experts engaged in the development of research projects.
7. Brokers, commission agents and agencies.
8. The owners of cultural-artistic centers, culture houses, professional societies, and professional and specialized associations.
9. The owners of cinemas, theatres, and recreational and athletic centers.
10. The artisans involved in film making, dubbing, editing, and other cinematic services.
11. Physicians and dentists who own a clinic as well as veterinarians practicing veterinary medicine.
12. The owners of test laboratories, X-ray, physical therapy, sonography, electroencephalography, and C.T. scan clinics and services, as well owners of beauty salons and the persons rendering medical and/or non-medical health services.
13. The owners of guesthouses and lodging houses.
14. The owners of wedding saloons, restaurants, producers of fast food, persons offering entertainment services as well as dish and silverware rentals.
15. The owners of notary publics.
16. The owners of authorized repair shops and auto-services.
17. The owners of automobile exhibition and sales halls, as well as housing and vehicle rental agencies.
18. The manufacturers and vendors of jewelry and gold ornaments.
19. Sales agents and vendors of ironware.
Note 1: The State Taxation Affairs Organization, provided that it finds necessary, is authorized to bind all artisans mentioned in clause (b) of this Article (96) to comply with the provisions of Clause (a) of this Article, provided that the above taxpayers are notified in writing about the relevant information documents before Dey 30 th of each year (January 19). The above mentioned taxpayers are required to comply with the relevant provisions at the beginning of the subsequent year.
Note 2: For the purpose of this Article, the mentioned owners are individuals whose accounts are engaged for the purpose of the operation of the institution.
Note 3: All individuals subjected to this Article that are engaged in other vocational activity mentioned in this Chapter are required to comply with the provisions of this Act in regards to all of their occupational activities.
Article 97 : For the following cases, the amount of taxable income of a taxpayer will be determined based on the average/estimated value:
1. In cases where the balance sheet, the profit/loss account and/or income and expense account as well as the profit/loss account is not submitted by the due date.
2. In cases where the taxpayers fail to provide their accounts books and documentation of their place of work as per the written request by the Taxation Affairs Administration (The meaning of work place in regards to legal entities is their legal address, unless the tax payers have previously changed their address for the purpose of providing documentation, books, and accounts in a written request to the Taxation Affairs Administration.)
For the purpose of the implementation of this clause, whenever a taxpayer fails or refuses to provide part of his/her account books and documentation, provided that the information is related to costs and expenses, those costs will not be considered as deductible. In the case that the information is related to costs and expenses, the tax liable income of this section will be determined based on averages/estimations.
3. In cases where the accounts books and documents produced for assessing the amount of taxable income shall be found inadequate for verification of the assessment in accordance with the opinion expressed by the Taxation Affairs Administration, or in cases where the accounts books shall not be found acceptable due to non-conformity with the legal provisions and criteria and the applicable regulations, the facts and circumstances in this regard shall be notified in writing to the taxpayer by producing sufficient evidence and reasons. The taxpayer is able to the case shall then be referred to a board comprising three (3) auditors appointed by the Director General of the State Taxation Affairs Organization. The taxpayer shall be authorized to seek recourse to the said board, within a period of one (1) month after the date of the notice and submit his argumentation and justifications in writing, demonstrating his compliance with the legal criteria and the applicable regulations, as the case may be. The board, under any circumstances, shall be required to advise its well-reasoned comments, proofs and evidence, to the Taxation Affairs Administration. The opinion communicated by the board shall be valid and binding and shall be adopted by a majority of votes of the members. However, the opinion of the minority members shall be duly recorded in the minutes of the meeting of the board. In cases where the board shall declare its opinion on rejection of the books of accounts for verification, the matter shall also be notified to the Disciplinary Taxation Prosecutor.
Note 1: For the purpose of the implementation of clause (3) of this Article, two (2) months shall be added to the period of investigation mentioned in Article 156 of this Act.
Note 2: In any case where, based on the documents and accounts that have been provided or acquired, it is not possible to determine the real income of a taxpayer, the Taxation Affairs Administration is required to determine the taxable income on the basis of examination of the mentioned documents. In the case that it is determined, on the basis of sufficient indication and evidence, that part of the income has been gained through concealed activities, the taxable income of those activities will also be determined based on averages/estimations and added onto the previously determined taxable income which shall function as the basis for tax claims.
Article 98 : In cases where assessment based on average or estimate is necessary, the Taxation Affairs Administration is required, after the necessary investigations and obtaining the required information from public or private sources, to select the relevant documents and information mentioned in this Act pertaining to situations and business activities of the taxpayer and to verify the information in a verification report stating its reasoning for the selection of the mentioned documents. The said Administration shall subsequently multiply the coefficients set forth by the said tax indications in order to obtain the amount of taxable income. In the case that the coefficient is applied to several tax indications, the average of the products obtained by such multiplication shall constitute the amount of taxable income.
Article 99 : Contractual agreements mentioned in Article (76) of the Direct Taxation Act approved in March 1967 (Esfand 1345) and its subsequent amendments which have been proposed prior to the date of approval and ratification of the present Act, for the purpose of finding the income liable to tax as well as the requirement for the payment of 4% flat and fixed tax, shall be subject to the provisions made in the above mentioned Act.
Note: Contractual agreements mentioned in Article (76) of the Direct Taxation Act approved in in March 1967 (Esfand 1345) and its subsequent amendments which have been proposed between Feb. 22, 1988 and Feb. 21, 1989, have been for the purpose of determining taxable income based on the provisions of this Act. Such contracts shall conform to the tax rates prevailing during the Iranian year 1367, in connection with their revenue operations in the year ending March 20, 1989.
Article 100 : The taxpayers subject to this Chapter of the present Act are required to submit separate tax declarations, according to the form prepared and supplied by the State Taxation Affairs Organization, for their activities during one fiscal year or for each one of the occupations they have and for each place of business, up to the end of the month of Tir (July 22) of the subsequent year, to the local Taxation Affairs Administration and pay the applicable taxes in conformity with the rates set forth in Article 131 of the present Act.
Note 1: In cases of workshops and productions unit such that their type of activity results in the inception of offices or shops in one or multiple locations, the taxpayer is only required to file one tax declaration with the local Taxation Affairs Administration pertaining to all the offices and shops.
Note 2: The taxpayers subject to the present Chapter who lack a fixed place of business are required to submit their tax declaration to the Taxation Affairs Administration where their place of residence is located.
Note 3: In the case of civil partnerships, a submission of a tax declaration by one of the partners does not relieve other partners of filing a declaration. The above case does relieve other partners from filing a joint tax declaration.
Note 4: The tax declaration of the taxpayers mentioned in the present Chapter shall comprise a balance sheet and profit/loss account, or income and expenditure account, or a summary statement of incomes and expenditures, as the case may be, in conformity with the forms which shall be specified by the State Taxation Affairs Organization.
Note 5: The State Taxation Affairs Organization is authorized to determine and specify the taxable income of any or all of the taxpayers subject to Clause (d) of Article 95 of the present Act in any year and in regions where it shall be deemed appropriate and expedient. The taxable income shall be fixed with the approval of the relevant guild. The tax assessed in this manner shall be final and collectible. If it is found that around the start of a new tax year the taxpayer had left his professions/shut down his business, or was unable to work for reasons outside of his control and the circumstances are approved by the Board for Settlement of Tax Disputes, the income liable to tax will be assessed in respect to the time of employment of the taxpayer and the applicable will then be collected.
Article 101 : The taxable income of taxpayers mentioned in this Chapter that have submitted their tax declaration according to the provisions of this Chapter in a timely manner are tax exempt up to the amount mentioned in Article (84) of this Act. The above mentioned individuals are subjected to the payment of tax according to the rates mentioned in Article (131). The requirement of the submission of a tax declaration in order to qualify for the tax exemption mentioned above shall apply to all revenue operation after year 1382 (2003).
Note: For civil partnerships, whether voluntary or compulsory , at most two tax exemptions could be used and the amount of exemption shall be equally divided between the two. The leftover amount of the share of each partner shall then separately be liable to tax. Partners who are connected through marriage shall be treated as a single partner in regards to qualifying for the tax exemptions. Accordingly, the tax exemption shall be granted to the couple. In the event of the demise of a partner, his/her heirs shall be regarded as the legal successor and shall benefit from the tax exemptions granted to the deceased individual. The tax exemption shall be equally divided amongst the heirs and deducted from their share of income.
Article 102 : In an investor-bailee partnership, the bailee, at the time of the submission of a tax declaration, in addition to the payment of his/her taxes, is required to deduct the share of income of the capital holder without following the exemptions mentioned in Article (101) of this Act and to deposit it in a tax account as down payment for the capital proprietor. The relevant receipts will then be sent to both the capital proprietor and the Taxation Affairs Administration.
Note: In the case that the owner of the account is a bank the bailee shall have no obligation to withhold the applicable taxes.
Article 103 : Attorneys and those acting as counsel before the special courts are required to specify the respective amount of fees on their power- of-attorney documents and to affix and make official a stamp amounting to 5% of the value of the mentioned fees as tax payments on account. In no case shall the value of the above mentioned stamp be less than the prescribed rate hereunder:
a. With respect to lawsuits and cases involving financial claims: 5% of the lawyer’s fee at each stage of the proceedings as specified in the relevant tariff.
b. In cases where the power of attorney does not involve financial claims, or in instances where the law does not require that the amount of claim should be indicated, and also in penal cases where the courts have the discretion to determine the lawyer’s fees, the amount of tax applicable for each stage of the proceedings shall be 5% of the minimum prescribed in the regulations governing the lawyer’s fees.
c. In penal cases involving financial claim from a private individual: As provided for in the provisions made in Clause (a) of this Article.
d. In instances of financial claims which shall be dealt with and settled by special and non-judiciary bodies and for which no specific tariff is prescribed, such as disputes concerning taxation, municipality charges and dues, widening-of-roads issues and the like, lawyer’s fees shall, for the sole purpose of taxation, be taken according to the scale indicated hereunder:
For disputes involving amount of up to Rls.10,000,000 (ten million rials): 5% thereof.
For disputes of up to Rls.30,000,000 (thirty million rials): 4% of the amount in excess of the first Rls.10,000,000.
For disputes of Rls.30,000,000 (thirty million rials) upwards: 3% of the amount in excess of the first Rls. 30,000,000.
Revenues stamps to the value of 5% of such fees shall be cancelled out. The provisions of the above Clause (d) shall also be applicable to such persons who on their behalf act as attorney of the taxpayers before the bodies mentioned in Clause (d) of this Article. This does not hold true, however, for the taxpayer’s employee, father, mother, brother, sister, son, daughter, grandson or granddaughter, wife or husband.
Note 1 : In cases where the provisions of above Article 103 shall not be duly complied with, the lawyer’s power of attorney shall not be acceptable, subject to the provisions of the Civil Procedure Act, to any court of law and or the bodies mentioned above, except in case of powers of attorney given by ministries, government agencies, and companies, municipalities and institutions affiliated with the government and municipalities whose power of attorney documents do not require affixing stamps thereon.
Note 2 : All ministries, government agencies and companies, municipalities, and institutes affiliated with the government or the municipalities shall be required to deduct 5% of the payments they make to lawyers as fees for legal representation, and to pay such amounts to the local Taxation Affairs Administration as provisional tax payment by the lawyers concerned within a period of ten (10) days.
Note 3 : In cases where stamps shall be canceled in respect of a power of attorney and then referred to another lawyer, the new lawyer is not required to cancel stamps on his relevant power of attorney.
Note 4 : Where the lawyer’s fee or any compensation relating thereto shall be fixed by a court of law at a higher or lower amount than that in respect of which stamps have been affixed and canceled out on powers of attorney, the court clerks shall be required to notify the respective Taxation Affairs Administration of the amount fixed according to the (above court’s) final verdict, so that the difference may be taken into account for calculation of the applicable tax.
Article 104 : The ministries, government institutes and organizations, municipalities, the entities and institutes affiliated with the government and municipalities as well as the juridical entities, whether for-profit or non-profit entities, and the natural persons mentioned in Clause (a) of Article 95 of the present Act, are required to deduct and withhold five percent (5%) of any sums they pay on account of any type of medical fees, hospital, laboratory or X-ray expenses, fees for arbitration, consultation, expert advice, administrative and fiscal services, auditing, writing, editing, composing, musical compositions and/or performances, theatrical performances, singing, painting, brokerage fee or commission, any type of fees, commissions or charges for the services excluding charges paid to the banks, Cooperatives Fund and the authorized nonbank credit institutes, cleaning of buildings, rental of offices and calculating machines, computer services, computerized telecommunication, rental of any kind of ground, air and marine motor vehicles and means of transportation, machinery, plants, cold stores, warehouse charges, repair and maintenance of lifts, central heating and air conditioning equipment, any kind of construction works, technical installations, various establishments, designing and planning of buildings and installations, topography and cartography services, supervision and technical calculations of various kinds, transportation, as well as any fees paid on account of royalties for movie films. The withheld tax shall be deposited in an account to be specified by the State Taxation Affairs Organization within thirty (30) days and the receipt shall be submitted to the original taxpayer. The persons and entities withholding such taxes shall also be obligated to inform the respective Taxation Affairs Administration of the names and address of the said original taxpayers within thirty (30) days.
The banking facilities granted by banks through contracts of reward (ji ‘ala) for agricultural purposes and for the repair and completion of residential units shall not be subject to deduction of provisional five percent (5%) tax, as stipulated in the present Article. In such cases the banks shall be required to dispatch to the respective Taxation Affairs Administration, a copy of the reward contract (ji’ala) concluded with the agent within thirty (30) days after the date of signing and conclusion of the contract.
Note 1: In cases where a contract shall be made for carrying out the activities mentioned in the present Article, the employer shall be required to submit a copy of the contract to the local Taxation Affairs Administration and to obtain a receipt.
Note 2: In cases where the original income earned through carrying out any of the activities stated in the above shall be exempt from payment of taxes, withholdings will not be necessary provided that the a prior written agreement from the local Taxation Affairs Administration is obtained.
Note 3: In cases where the amounts referred to above shall be deposited in advance into the Treasury of the Ministry of Justice or other similar government departments, or when they shall be collected and paid by executive forums or authorities, the obligations set forth under the above shall be carried out by those officials who authorize the aforesaid payments, and the party depositing the sums shall not be required to withhold the applicable taxes.
Note 4: Concerning the contracts and their amendments mentioned in Article 76 of this Act, approved in Esfand 1345 (March 1967), the proposals which have been made prior to the date above shall require the employers to comply with the provisions made in Article 76.
Note 5: The State Taxation Affairs Organization shall, before the end of the month of Dey of each year (January 20), prepare a list of new cases which shall be added, as of the beginning of subsequent Iranian year, to the ones stipulated in Article 104. The newly added cases will be notified to the public through notifications in highly-circulated newspapers and the Official Gazette.
Note 5 (Amended): The cases described below shall be obligatory from the beginning of the year 2007 for individuals mentioned above:
1. Repair and maintenance of any type of motorized land, air, or sea vehicles, machinery and equipment, whether administrative or other, that takes place as a result of a contract.
2. Employee housing services, whether state employees or other, in hotels or other locations in addition to any other on side services that takes place as a result of a contract.
3. Any form of training and educational services.
4. Services related to exhibitions in order to use the facilities of the exhibition.
5. Insurance services (whether health or therapy).
6. Any form of services related to management.
7. Services related to maintaining green landscapes/spaces.
8. Packing services (any product with any form and material).
9. Fees related to carrying out support services, as well as any interest or profits gained from the use of passenger and cargo terminal facilities/equipment, whether land, air, or sea.
10. Any fees related to the treatment and conversion of sugar.
11. Fees related to the use of facilities/equipment of telecommunication institutions.
Note 6: The State Taxation Affairs Organization shall be authorized, in case the taxpayers mentioned in Article 104 shall refrain from carrying out the duties and undertakings laid down therein, to seek recourse in order to claim the taxes due after having carried out the required investigations. If taxpayers refrain from paying the applicable taxes, the said Organization shall be authorized to collect the taxes due through the executive operations mentioned in Chapter 9 of Rook IV of the present Act. The State Taxation Affairs Organization shall be authorized to draw down the applicable taxes from the bank accounts of government executive organizations and bodies, non-government public institutions, as well as the organizations, bodies, entities and institutes which, in some form, benefit from government credit allocations and other mentionable organizations and legal entities.
Chapter 5: Tax on Income Earned by Legal Entities
Article 105 : The aggregate income earned by companies, and the income earned from various sources in Iran or abroad, through profit-making activities by other juridical entities shall, after levying the losses resulting from non-exempt sources and after having deducted the exemptions as prescribed, excluding the cases subject to different rates under the provisions made in the present Act, shall be liable to 25% tax rate.
Note 1: Concerning non-commercial Iranian juridical entities which have not been established for earning profit, in the case that they engage in profit-yielding activities, tax shall be collected on all their profit earning activity according to the rates mentioned in this Article (105).
Note 2: Foreign juridical entities and the entities domiciled outside Iran, excluding the ones liable under Note 5 of Article 109 and Article 113 of the present Act, tax liability shall be at the rates mentioned in the present Article 105 and on the basis of the total amount of taxable income earned by them in Iran and arising from use of their capital or the activities carried out directly by them or through their agencies such as branch offices, representatives, agents and the like, or on such incomes as they earn in Iran through the assignment of their concessions, turning over of their rights, transfer of technical know- how, or providing technical training or assistance and concession of Iranian movie films.
Note 3: At the time of the assessment of tax on the income of judicial entities, whether Iranian or foreign, all taxes that have been paid beforehand will be deducted according to the appropriate provisions and any amount that has been overpaid shall be refunded.
Note 4: Legal and judicial entities shall not be liable to any other taxes in respect to the dividend or the contribution they may collect from the stocks and company shares.
Note 5: In cases where, in conformity with the approved laws and regulations, certain sums, under any title or name, except the income tax, shall be collectible out of the taxable income of natural persons or legal entities, tax liability of such persons or entities, after deductions have been made, shall be calculated at the rates set forth.
Note 6: There shall be a twenty five percent (25%) deduction from the rate mentioned in this Article on the tax liable income of both standard and shareholder cooperative companies and unions.
Article 106 : The taxable income of legal entities, except for the incomes that based on the provisions of this Act are assessed in a different manner, shall be assessed by verifying their legal documents according to the regulations laid out in Article 94 and clause A of Article 95 of this Act. The taxable incomes for cases mentioned in Article 97 of this Act shall be estimated.
Article 107 : The taxable income of foreign legal entities and the institutes domiciled outside Iran shall be assessed in the following manner:
a. Concerning the contracts in Iran, in proportion to the operations of any construction works, technical establishments including supply, construction and installation, as well as transportation and the operations relevant to preparation of the design of buildings and various establishments, topography, cartography, supervision, technical calculations, providing training and giving technical assistance, transfer of technical knowledge, as well as other services, 12% tax rate shall apply to the aggregate of the amounts collected annually.
b. In regards to the transfer of rights, assignment of concessions arising from Iran and the concession of movie films, and the income which shall be earned by them as the price or royalty or any other title, an income tax ranging between 20% to 40% shall apply to the aggregate of the sums earned through the methods listed above during one fiscal year. The coefficient for determination of taxable income applicable the cases mentioned in the present Clause (b) shall be proposed by the Ministry of Economy and Finance and shall subsequently be approved by the Council of Ministers. The entities bound to pay the sums mentioned above as well as the ones which shall pay the sums described in Clause (a) of the above Article 107 shall be required to deduct and withhold, from any payment they shall make, the tax applicable to the sums they have paid as of the beginning of the year up to the date they shall effect a new payment, and shall pay, within ten (10) days, such withheld amounts to the Taxation Affairs Administration of their place of residence. Otherwise, the ones collecting such sums shall collectively be liable to pay the original tax as well as any other sum applicable thereto.
c. In regards to the exploitation and utilization of the capital as well as other activities which shall be rendered in Iran by the said legal entities and institutes, through their branch offices, representatives, agents and the like, the provisions laid down in Article 106 of the present Act shall apply.
Note 1: In cases where the operations of the contracts mentioned in Clauses (a) and (b) of Article 107 above shall be assigned, either totally or partially, to Iranian legal entities acting as contractors, on payment of any sums by such entities to Iranian contractors, an amount equal to 2.5% shall be deducted, and withheld as “Tax on Account”, and shall be deposited, within thirty (30) days after the date of payment, in an account to be specified and determined by the State Taxation Affairs Organization.
Note 2: In the case of contracts mentioned in Clause (a) of Article 107, if the employer shall be included among the ministries, government institutes and companies or the municipalities, the portion of the contract price which shall be allocated for the purchase of equipment and accessories through local or international procurements, shall be tax exempt, provided that the sums allocated to the supply of equipment and accessories shall separately be cited and recorded either in the contract, or in the amendments or addenda made subsequently thereto.
Note 3: The branches and representative offices of foreign companies and banks in Iran which shall proceed to render activities for marketing and gathering of economic data and information in Iran for the holding company, without having the right to enter into a transaction in Iran, and which shall collect amounts from the holding company in order to meet the relevant expenses and its financial requirements, shall not be liable to income tax.
Note 4: In cases where foreign contractors shall assign, either totally or partially, to Iranian legal entities acting as sub-contractors, the contracts mentioned in Clause (a) of Article 107, equal to the amount which is allocated in the original contract for the supply of equipment and accessories, and which shall be expended by the sub-contractor for the procurement of equipment and accessories, shall be exempt from payment of income tax due by the original contractor.
Note 5: The taxable income of the activities mentioned in Clause (a) of Article 107 of the present Act, concerning which contracts shall be concluded, as of the beginning of Iranian year 1382 (March 21, 2003), shall be assessed in conformity with the provisions made in Article 106 of the present Act. Accordingly, the provisions made in the present Note 5 shall not apply to the activities which shall be rendered in connection with the contracts concluded before the beginning of Iranian year 1382 (March 21, 2003).
Article 108 : Tax on reserves that has not been paid by the effective date of this amendment, in the case that they are divided or transferred to a capital account, shall be tax exempt. However, if such reserves shall be divided or transferred to profit/loss account, or if the capital shall be reduced by the amount of the reserve added to the capital account, they shall be added to the taxable income of the year in which such reserves were divided or transferred or in which the capital was reduced. This provision shall not apply to the reserves of profits derived from tax-free activities of the institute during the exemption periods and the reserves mentioned in Article 138 of the Direct Taxation Act, approved on February 21, 1988, and its later amendments up to the date of approval and ratification of the present amendment, after the relevant requirements have been established.
Reserves for which their tax has been collected by the effective date of this amendment shall not be liable to any further taxation in the case that such reserves have been divided or transferred to profit/loss or capital accounts, or if the institute has been dissolved.
Article 109 : Taxable income of Iranian insurance institutes consists of:
1. Technical reserve funds at the end of the preceding fiscal year.
2. Premiums received on direct insurance after deducting therefrom the rebates.
3. Premiums of the collected re- insurance policies after deducting therefrom the rebates.
4. Commissions and shares of profit in the assigned re- insurance transactions.
5. Profit accruing on the deposits of the re- insurer kept by assignor insurer.
6. The shares of profit of the re- insurers on account of indemnity paid on account of any policies other than life- insurance and redemption capitals and stipends of life insurance.
7. Other incomes.
After deducting therefrom:
1. Stamp duty paid for the policies.
2. Medical expenses incurred for life insurance.
3. Commissions paid for direct insurance transactions.
4. Premiums paid for the assigned re- insurance policies.
5. Contribution paid to the Physical Injury Compensation Fund out of the premiums received on the compulsory insurance covering the civil liability of the land motor vehicles against third party.
6. Amount paid on account of redemption, capital and stipend of life insurance and indemnity paid on account of policies other than life insurance.
7. Shares of the participation of the insured in profits.
8. Commissions and profit sharing of the insurers in the profits of the accepted reinsurance policies.
9. Interest accruing on the deposits of assigned re- insurance policies.
10. Technical reserve funds at the end of the fiscal year under consideration.
11. Other deductible expenses and acceptable depreciation.
Note 1: Various types of technical reserve funds of insurance institutes (the technical reserves funds constituting the subject-matter of Article 61 of the Act Governing the Establishment of the Central Insurance of Iran and the Insurance Activities) for each branch of insurance, the scope and the manner of their calculation shall be in conformity with an Administrative Regulation which shall be prepared by the Central Insurance of Iran, approved by the High Council of Insurance and finally ratified by the Minister of Economy and Finance.
Note 2: The scope and the manner of calculation for various types of technical reserves of the Central Insurance of Iran for each branch of insurance shall be determined by the General Meeting of the Central Insurance of Iran.
Note 3: In direct insurance transactions, the premiums, commissions, reduction on premiums and share of insurers in the profits and the manner of calculation thereof shall be in conformity with the regulations laid down by the High Council of Insurance. All the items mentioned above, with the exception of commission, shall be specified in the insurance agreement.
Note 4: The items concerning reinsurance transactions, whether accepted or assigned, shall be subject to the terms and conditions stipulated in the contracts or agreements reached between the relevant insurance institutes.
Note 5: Foreign insurance companies which shall earn any profit through reinsurance transactions with Iranian insurance companies, shall be subject to a tax at the rate of 2% of the premium they collect and the interest accruing on their deposit in Iran. In cases where Iranian insurance companies shall be active in the respective country of a reinsurance company, and if the Iranian insurance company shall be exempt from payment of taxes on income earned through reinsurance transactions, the foreign insurance company shall be tax exempt as well. The Iranian insurance companies shall be under the obligation to withhold 2% of the amount they pay to a foreign reinsurance company covered by provisions of this Article and pay, within a maximum period of thirty (30) days, the amounts withheld during each month to the local Taxation Affairs Administration together with a list containing the particulars of the reinsurer and the amount of the applicable premium.
Article 110 : Legal entities are required to submit the tax declaration, balance sheet and profit/loss account supported by the accounts books, documents, evidences and vouchers, together with a list of particulars and addresses of their partners and shareholders with the amount of participation or thee number of shares of the said partners and shareholders, and to pay the applicable tax to the Taxation Affairs Administration of the place where the principal place of activity of the legal entity is situated no later than four (4) months after the end of each fiscal year. After the submission of the first list mentioned above, it shall be sufficient to only submit changes to the list for the following years. The location where tax declarations are to be submitted and paid by foreign legal entities and institutes domiciled abroad which have no representatives or a place of residence in Iran shall be Tehran.
The provisions of the present Article shall also apply to the owners of factories and legal entities during the period of their tax exemption.
Note: Legal entities in respect to their incomes that, based on the provisions of this Act, a different tax assessment method has been established for them are not required to submit separate tax declarations (determined in the relevant Chapters of this Act) concerning their incomes.
Article 111 : The companies that by establishing a new company or by retaining the legal entity of the company undergo a merge or consolidate, for taxation purpose, shall be liable to the following provisions:
a. Establishment of a new company or an increase in the capital of the existing company, equaling to the amount of the registered capital of merged or consolidated company, shall be exempt from payment of 0.002 (two per mill) stamp duty mentioned in Article 48 of the present Act.
b. Transfer of the assets of merged or consolidated companies to the new company or the existing one, as the case may be, on the basis of their book value, shall not be liable to the taxation laid down in the present Article.
c. The operations of the companies merged or consolidated into a new company or the existing one shall not be subject to the Dissolution Period Tax mentioned under income tax in the present Act.
d. Depreciation of the assets and properties transferred to the new or existing company shall comply with the procedures and methods in effect prior to the merge or consolidation.
e. In cases where, as a result of the merge or consolidation, an income shall be allocated to the shareholders of the merged or consolidated company, such income shall be subject to taxation in conformity with the relevant provisions.
f. All tax undertakings and obligations of the merged or consolidated companies shall be transferred to the new company or the existing one, as the case may be.
g. The executive bylaws of above Article (111) shall be jointly proposed, no later than six (6) months after the date of approval of the present Amendment, by the ministries of economy and finance, industry, and mining, and shall subsequently approved by the Council of Ministers.
Article 112 : The verdict of Article 99 and its amendment shall hold true concerning contractual activities of legal entities whether Iranian or foreign.
Article 113 : Income tax of all shipping and airway agencies on passenger, freight, and merchandise fares shall be collected at a fixed rate of 5%, irrespective of whether such amounts are received in Iran, en route, or at the final destination. The representatives or branch offices of the agencies mentioned are required to submit to the local Taxation Affairs Administration by the 20 th day of each month a statement of their receipts for the previous month and to pay the applicable tax accordingly. The agencies mentioned shall not be liable to any other forms of income tax on the income gained through the methods mentioned above.
If the branch offices or representatives of the agencies mentioned fail to submit the above statement in a timely manner, or if the statements submitted by them shall not be factual, the tax in question shall be estimated according to the number of passengers and the volume of freight handled.
Note: In cases that the tax applying to the income of Iranian shipping and airways companies in a foreign country shall exceed 5% on the amount of fares collected, the Ministry of Economy and Finance shall be required, upon notification by the Iranian entity concerned, to increase the rate of tax applied to the income of shipping and airway companies of the said countries up to the amount of tax collected by tax authorities in the said countries.
Article 114 : The last director or directors of a legal entity shall have joint responsibility to submit a declaration demonstrating the assets and liabilities of a legal entity, to the respective Taxation Affairs Administration, prior to the date of a general meeting or other gatherings held by competent authorities of the company to decide on the termination of the legal entity. Such declarations shall be provided by the State Taxation Affairs Organization. A declaration signed by the authorized signatories of the legal entity and stamped by the institution according to the statute of the legal entity shall be valid for the Taxation Affairs Administration.
Article 115 : The basis for calculation of the tax applicable to the last term of operation of a legal entity that is to be terminated shall be the value of the assets and liabilities, paid capital, capital reserves, as well as the balance of the profit on which the tax has already been paid of the legal entity.
Note 1: The value of the assets of a legal entity shall be determined based on the sale price of the relevant items sold in the past, as well as any paid capital, reserves, and remaining profits where their applicable taxes has been paid.
Note 2: In cases where, among the assets of a legal entity which is to be dissolved, there shall be assets, shares, contributions or right of priority of the shares of companies mentioned in Chapter 1 of Book III of the present Act, and if upon the final transfer and conveyance of such assets they shall be subject to the regulations of Article 59 and the Notes under Article 143 of the present Act, when determining the basis for calculation of the tax applicable to the last term of operations of dissolved legal entities, the book value of the said assets shall not be included among the assets and properties of dissolved legal entities. However, an amount equal to the book value of such assets shall be deducted from the total amount of the capital and liabilities of such entities. The tax applicable to such asset(s) shall be calculated and claimed in conformity with the provisions made in Article 59 and the Notes under Article 143 of the present Act.
Note 3: The section of the assets and properties of a dissolved legal entity that based on the provisions above on the date of dissolution are subject to tax mentioned in Article 59 and the Notes under Article 143 of the present Act, shall not be liable to taxation on the first transfer that takes place after the date of the termination.
Article 116 : Directors of liquidation are required to prepare a tax declaration for the last term of operations of the legal entity in compliance with the provisions made in Article 115, and to submit it to the Taxation Affairs Administration concerned within six months of the date of termination of the entity (the date of finalization of the termination of the legal entity with the office of registration of the companies). All applicable taxes must also be paid within the time frame mentioned above.
Note 1: The applicable taxes mentioned in this law will be calculated based on the rates mentioned in Article 105 of this Act.
Article 117 : The Taxation Affairs Administration is required to give priority to the examination of the declarations submitted in respect to the last term of operations of a legal entity according to the provisions of this Act. In the case that the mentioned Taxation Affairs Administration has any objections to the contents of the declarations, the amount of tax owed is to be determined through a Tax Assessment Notice followed by a release of a notification to the appropriate individuals within one year after the assessment of the tax declarations, otherwise the applicable tax as given in the declaration submitted by the liquidators shall be considered as finalized. In the case that it is later discovered that the some of the belongings of the legal entity has not been mentioned in a tax declaration, the appropriate tax will be collected on that amount within the time frame mentioned in Article 118 of this Act.
Article 118 : The distribution of assets of legal entities who have been terminated, before obtaining a tax settlement certificate or giving security equaling the amount of the applicable tax, shall not be permissible.
Note: The last directors of a legal entity, in case of failing to submit the tax return mentioned in Article 114 of this Act, or if a faulty tax return is submitted, as well as the liquidators failing to observe the provisions laid down in Article 116 of this Act and the above Article 118, and the guarantor(s) of the legal entity and the guarantor partners (as described under the Commercial Code) and all the individuals to whom the assets of the legal entity were apportioned, commensurate with their share of the legal entity’s assets, shall be jointly and severally liable for the payment of the tax and the fines applicable to the legal entity, provided that the tax shall be claimed within the period of respite laid down in Article 157 of this Act, beginning as of the date of publication of the termination notice through the Official Gazette.
Chapter 6: Incidental Income (Windfall Earning) Tax
Article 119 : Income in cash or otherwise by natural or legal entities earned gratuitously, gained through an act of kindness, awarded as a prize, or earned through any other methods related to the examples above shall be liable to incidental (windfall) tax at the rates determined in Article 131 of the present Act.
Article 120 : The income liable to taxation under the present Chapter shall consist of 100% of the income earned, and in the case of non-pecuniary income, it shall be assessed according to the provisions of the present Act at the rate prevailing on the day the income is earned, excluding property for which the transactional value has already been fixed under the terms of Article 64, in which case the transactional value shall be taken as the basis for tax assessment purpose.
Note: In case of settlement against consideration (exchange) and donation against consideration, except for instances enumerated in Article 63, the income liable to tax under this Chapter shall be the difference between the value of the objects of transaction as determined according to the Provisions of this Article and considered to be earned by the party profiting from the transaction.
Article 121 : Settlement against consideration (exchange) with the option to cancel and revoke donations shall, for the purpose of taxation, be deemed as a final transfer. However, should a cancellation, termination by mutual consent, or revocation take place within six (6) months from the effective date of the transaction, any amounts collected as tax under this Chapter shall be refundable.
If in such cases any profits shall accrue to the transferee during the interim between the execution of the transaction and the date of cancellation, termination by mutual consent or revocation, the transferee shall be subject to tax in respect of the profits thereof.
Article 122 : In the case of settlement of a property where the profits shall be granted for life, or for a specific period on the grantor, or some third party, the value of the property in question, assessed on the basis of the aggregate value of the property and the profit on the date, shall be the basis of tax liability for the grantee on the mentioned date.
Note: In the case that a transfer takes place before profits have been accrued, the value of the property as indicated on the deed of such transfer shall be taken as the basis for taxation and the applicable taxes shall be determined based on the provisions mentioned in this Chapter. However, the basis for assessment of taxes applying to the last party to whom the property shall be transferred and receive the profits accruing on the property shall consist of the difference between the price of the property under the above ruling and the sum which the transferee shall pay as mentioned in the deed of transfer.
Article 123 : In case that the profits of a property shall be transferred gratuitously on temporary or permanent basis to any individual, the transferee is required to pay the applicable yearly tax on the profits every subsequent year.
Article 124 : Property transferred to certain persons under a will, as far as a will is legally effective and after the will has become definite, shall be liable to taxation. In the case of heirs, the said property shall be added to their inheritance and the total sum shall be subject to inheritance tax. In the case of non-inheritors, the entire property shall be liable to taxation under this Chapter.
Article 125 : The transfers that are liable to tax based on the provisions mentioned in the Chapter regarding inheritance tax shall not be liable to the taxes mentioned in this Chapter (Windfall Earning).
Article 126 : Income earners who fall under this Chapter are required to file with the local Taxation Affairs Administration a tax declaration containing the details of their profits subject to Article 123 of each year by the end of the month of Ordibehesht (April 21-May 21) of next year and in other instances within thirty (30) days after the date of earning the income or profit and to pay the applicable taxes. It shall not be required to file a tax return in case of transactions carried out through notaries-public for which taxes are collected.
Article 127: The following incomes shall not be subject incidental income tax:
a. Gratuitous cash or non-pecuniary allowances given by charity or benevolent organizations, ministries, government organizations and companies, municipalities, or organs of the Islamic Revolution to individuals, except for cases which are subject to taxation under the Chapter pertaining to salary tax.
b. Sums or financial aids donated to victims of war, earthquake, flood, fire or other acts of nature.
c. The bonus paid by the Government to promote exports or the production and purchase of agricultural produce.
Note: Executive criteria for implementation and enforcement of Clauses (a) and (b) shall be based on the regulations that have been prepared by the ministries of Economy and Finance as well as the Interior Ministry.
Article 128 : The taxable income of legal entities earned as incidental income shall be assessed through examination of the accounts books of legal entities. The taxes which shall be paid at source according to the provisions of this Chapter shall be considered an advanced payment on the taxes of the mentioned legal entities.
Chapter 7: Tax on Aggregate Income Earned Through Various Sources
Article 129 : No longer exists.
Article 130 : The past liabilities mentioned in Articles 3 to 16 and Note 3 under Article 59 as well as Article 129 of the Direct Taxation Act approved on February 21, 1988 and its amendments shall not be claimed and collected.
Note: The Ministry of Economy and Finance shall be authorized to exempt, either totally or partially, up to Rls.1,000,000 (one million) rials for every taxpayer in the regions and areas where it shall be deemed expedient and appropriate, the payment of tax liabilities on the incomes which have been earned or date back to the years before the Iranian year 1368 (1989).
Article 131: The tax rates on the income of natural persons, excluding the instances for which a separate rate has been provided in conformity with the provisions made in the present Act, shall be as follows:
|Amount of Annual Taxable Income||Taxation Rates|
|Up to Rls. 30,000,000||15%|
|Up to Rls. 100,000,000||20% on sums in excess of Rls. 30,000,000|
|Up to Rls. 250,000,000||25% on sums in excess of Rls. 100,000,000|
|Up to Rls. 1,000,000,000||30% on sums in excess of Rls. 250,000,000|
|Over Rls. 1,000,000,000||35% on sums in excess of Rls. 1,000,000,000|