Section 4 (Sundry Provisions)

Chapter 1: Exemptions

Article 132 : The declared income resulting from industrial production and mine activities by industrial production and mining units affiliated with the private and cooperatives sectors to which exploitation permits shall be issued or with which exploitation and sale contracts shall be concluded, as of the beginning of Iranian year 1381 (March 21, 2002), by the ministries concerned, shall be tax exempt up to the maximum amount of 80% for a period of four (4) years, and in less developed regions up to 100% of the tax prescribed in Article 105 of the present Act for a period of ten (10) years.

Note 1: The list of less developed areas for the remaining period of implementation of the Third Economic Social and Cultural Development Plan of Islamic Republic of Iran, and upon commencement of implementation period of subsequent development plans, shall be prepared and drawn up by the State Management and Planning Organization and the ministries of Economy and Finance, Industries, and Mines, and to be subsequently approved by the Council of Ministers.

Note 2: The tax exemptions set forth in the above Article 132 shall not apply to the incomes of industrial and mine exploitation entities/units located within a radius of 120 Km from the center of Tehran, 50 Km from the center of Esfahan, and 30 Km from the center of the provinces and the cities with more than 300,000 of population, on the basis of the latest census carried out.

Note 3: All traveling and tourism institutes to which exploitation permits have been issued by the Ministry of Culture and Islamic Guidance shall be exempt from the payment of 50% of the applicable yearly tax.

Note 4: The criteria pertaining to the determination of the commencement date of exploitation by the tax-exempt entities and units mentioned in Article 132 above, as well as demarcation and specification of the boundaries mentioned in Note 2 under the present Article shall be laid down and duly notified by the ministries of Economy and Finances, Industries, and Mines.

Article 133 : 100% of the income earned by rural, tribal, agricultural, fishery, labor, employee, university, or student cooperatives, and unions shall be exempt from taxation.

Note: The government is required to return and deposit, in the account of Iran Rural Cooperatives Headquarters (IRCH), an amount equal to the income tax applicable to the portion of the profit which shall be declared by IRCH and which shall be allocated, upon the approval of its general meeting of shareholders, for investment in rural cooperative companies. The government will utilize the credit allocations mentioned under an Item Number specifically stipulated for the same purpose in the National Budget Bill, only after having collected the said tax, and after having deposited the same in the Public Revenues Account.

Article 134 : The income earned through training and education given by non-profit schools, including primary, guidance, secondary, technical and vocational schools, non-profit universities and higher education institutes, as well as the income earned by the rehabilitation centers and institutes in charge of the mentally-handicapped and physically disabled individuals, to which the relevant permits and authorizations have already been issued by the forums and authorities concerned and the income of athletic institutes and sports clubs, with their authorizations and licenses issued by Iran Physical Training Organization, which may be earned exclusively through athletic activities, shall be exempt from tax.

The executive by-laws of the present Article 134 shall be proposed by the Ministry of Economy and approved by the Council of Ministers.

Article 135: No longer exists.

Article 136 : Amounts paid out by insurance companies as life insurance to the beneficiaries as a result of signed contracts shall be exempt from payment of tax.

Article 137 : Medical expenditures incurred by any taxpayer as a result of treatment of self, dependents, wife, children, father, mother, brother, or sister in any fiscal year as well as the insurance premium paid by any natural person to Iranian insurance companies and institutes for the life and medical treatment policies shall be deductible from the taxpayer’s taxable income, provided that the recipients of such medical expenses, in the case they are hospitals or physicians domiciled in Iran, duly certify the receipt. Also, in cases where medical treatment has taken place outside Iran due to lack of facilities, as certified by the Ministry of Health, Medical Treatment and Education, payment of medical expenses shall be certified by either the officials of the government of the Islamic Republic of Iran in the country where the medical treatment has taken place or the authorities of the Ministry of Health, Medical Treatment and Education.

Concerning the physically-disabled, mentally-handicapped, and the patients suffering from rare and incurable ailments, in addition to the expenses and costs mentioned above, the expenditures incurred for their rehabilitation shall be deductible from the taxable income of the handicapped individual or the person who has undertaken the care of such patients or handicapped persons.

Article 138 : The portion of the declared profit of private and cooperative companies which shall be utilized either for the development, reconstruction, renewal, or completion of the existing industrial and mine exploitation entities/units, or the establishment of new industrial and mine exploitation entities/units during a fiscal year, shall be exempt from payment of 50% of the tax laid down in Article 105 of the present Act, provided that they have obtained a prior authorization for development, completion, or establishment of the new industrial or mine exploitation entities/units in the form of investment projects from the ministry in charge. In cases where either the costs and expenses for the implementation of the said project(s) in a year shall exceed the amount of the profit declared for the same year, or if such expenses shall be less than the expenditure of investment project, the company shall be authorized to benefit from the said exemption when assessing the tax on declared profit of the subsequent years, maximally for period of three (3) years and equal to the amount in excess of the balance of the cost of full implementation of the project.

Note 1: If the company should proceed to suspend the implementation of the project prior to its completion, or if the company should fail to attain the operation phase of the project, within one (1) year after expiration of the period of respite stipulated in the investment project, or if, within five (5) years after commencement of the operation of the project, the company shall proceed to dissolve, terminate, or transfer, the company shall be liable to pay an amount equal to the tax exemptions stipulated in the present Article 138 for implementation of the project, as well as the fines and penalties mentioned in Article 190 of the present Act.

Note 2: The new industrial units that have taken advantage of the exemptions determined in this Article will not be able to benefit from exemption laid down in Article 132 of this Act.

Note 3: Factories falling within the conduit area of the City of Tehran whose employees are not less than 50 in number, and that move their total installations beyond 120 kilometers of the radius of Tehran shall be exempted on the income derived from the relative activities for a period of ten (10) years beginning as of the commissioning date in the new location, in accordance with the regulations drawn up and confirmed by the Ministry of Economy and Finance and the ministry concerned.

Factories located in a radius of 120 kilometers of Tehran and other large cities (Mashad, Tabriz, Ahvaz, Arak, Shiraz, and Esfahan) that have completely transferred their institutions to approved industrial towns, from the date of operation in the new location, shall be granted half the length of the exemption period on the taxes mentioned in this Clause.

Note 4: From the standpoint of the present Act, the conduit area of Tehran shall comprise the western conduit of the river Hableh and the river Garmsar and the eastern conduit, the river of Ziyaran and the entire conduit districts of the rivers Damavand, Jajrood, Darabad, Darband, Evin, Farahzad, Klan, Karaj and Kordan and its boundaries are as follows: On the north, the straight line of the mountains of Alborz, the waters of which fall into the central Kavir (desert); on the east, the western bank of the river Hablah Rud Garmsar, on the west, the western bank of the river Ziyaran. On the south, the line running from west to east from intersection point of the river Ziyaran and the river Shoor continued to the deepest channel of the Daryacheh Namak (Salt Lake) leading to the west to the intersection point of the stream course of Hablah Rud Garmsar.

Article 139: 

a. The endowments, oblations, dedications, aids, gifts and charities, both in cash or in kind, donated to the Holy Shrine of Imam Reza (AS), holy Shrine of Abdul Azim Al- Hassanian (AS), Holy Shrine of Hazrat-e Masoumeh, Holy Shrine of Ahmad Ibn-e Mousa (AS) (Shah-e Cheragh), Holy Shrine of Imam Khomeini, the mosques, any other holy shrines and the like shall be exempt from payment of tax. The Endowments and Benevolent Affairs Organization shall, to this end, duly specify the holy shrines.

b. The financial aids and gifts in cash or in kind, donated to the Red Crescent Society of Islamic Republic of Iran shall be tax exempt.

c. The financial aids and gifts in cash or in kind, donated to the retirement pension funds,  Medical Treatment Insurance Organization and the Social Security Organization (SSO), as well as the employers’ and employees’ share of insurance and retirement premiums, and the fines and penalties collected by the said organizations shall be tax exempt.

d. The financial aids and gifts in cash or in kind, donated to Islamic Sciences Schools shall be tax exempt. However, such schools shall be duly specified by Qum School of Theology Management Council.

e. The financial aids and gifts in cash or in kind, donated to Islamic Revolution institutions shall be tax exempt. However, such institutions shall be duly specified by the Council of Ministers.

f. Such portion of the income earned by the State Fund for Development of Endowments, which shall be utilized for the development of endowments shall be tax exempt.

g. The incomes earned by legal entities or natural persons utilizing the credits of benevolent contributions and charities of Vali-e-Faghih as well as Khoms (i.e. 1/5 of what is left over from the earning of an individual at the end of his fiscal year) and Zakat (religious tax, poor-rate or alms as prescribed by Islam) shall be tax exempt.

h. Such portion of the income derived from public endowments which, in conformity with the principles of Shari’a shall be utilized in connection with affairs including Islamic propagation, cultural, scientific, religious researches, discoveries, inventions, education and training, health and medical treatment, construction, repair and maintenance of mosques, theology schools, Islamic sciences schools, government schools and universities, Moharam mourning ceremonies, public feeding of the poor (Et’aam), repair of archeological buildings, development affairs, tuition fees and educational loans to university and high school students, payment of financial aids to the oppressed and those damaged in the course of force majeure incidents such as floods, earthquakes, blazes, wars and unprecedented events, shall be exempt from payment of taxes, provided however that such incomes and expenditures shall be duly confirmed by the Endowments and Charity Affairs Organization.

i. The financial aids and gifts in cash and in kind, donated to the registered charity and benevolent organizations shall be exempt from payment of tax, provided that such incomes shall be utilized, as per their articles of association, in connection with the affairs mentioned in Clause (h) above amid that the State Taxation Affairs Organization shall exert supervision and control over the incomes and expenditures of such organizations.

j. The financial aids and gifts in cash and in kind, as well as the subscription fees of the members of guilds, vocational associations, parties, non-government societies and organizations which have already obtained the required authorizations from the forums and authorities in charge, and the sums which shall be deducted from the subscription fee paid by their members and which shall subsequently be deposited in the account of the said entities, in conformity with the relevant rules and regulations, shall be tax exempt.

k. The endowments, financial aids and the gifts, both in cash and in kind, donated to religious societies and boards established by religious minorities mentioned in the Constitution of Islamic Republic of Iran, shall be exempt from payment of tax, provided that the facts and circumstances in connection with the official recognition of such religious minorities, societies and boards shall be confirmed by the Ministry of the Interior.

l. The publication, press, journalistic, cultural and artistic activities which shall be carried out and performed by virtue of the authorizations and permits issued by the Ministry of Culture and Islamic Guidance, shall be exempt from payment of tax.

Note 1: The sums which shall be earned by the legal entities mentioned in Article 139 above, with the purpose being to attain the objectives and aims of such entities, through non-profit activities including offering training and educational courses, holding seminars, publication of books and periodicals, etc., and which shall be earned in compliance with their articles of association, shall be exempt from payment of tax, provided that the State Taxation Affairs Organization shall duly exert control and supervision over their incomes and expenditures.

Note 2: The provisions made in Note 2 under Article 2 of the present Act shall apply to the taxable income of the legal entities mentioned in Article 139 above.

Note 3: The executive by- laws of the present Article 139 shall be prepared by the State Taxation Affairs Organization and shall be proposed by the Ministry of Economy and Finance, to be subsequently approved by the Council of Ministers.

Note 4: As for the instances and cases concerning which prior authorizations/permissions have been given by the Late Imam Khomeini or the Supreme Leader of Islamic Revolution, the provisions made in Article 139 above shall be approved by the Supreme Leader.

Article 140 : No longer exists.

Article 141: 

a. One hundred percent (100%) of the income earned through export of finished industrial products, as well as the products of the agriculture sector (including farm and orchard produces, livestock and poultry, fishery products, forest and pasture products) and those of conversion and complementary industries, as well as fifty percent (50%) of the income earned through the export of other commodities whose export shall contribute to the achievement of national objectives relating to the promotion of non-oil exports shall be exempt from taxation. The list of commodities which shall be subject to the present Article, during the implementation period of each and every Development Plan, shall be prepared upon a proposal by the ministries of Economy and Finance, Commerce, Agriculture, Construction Jihad and the industrial ministries, and shall subsequently be approved by the Council of Ministers.

b. One hundred percent (100%) of the income earned through the export of various goods and commodities which have already entered or shall enter into Iran on transit, without making any changes therein or without any process or work performed thereon, shall be tax exempt.

Note: The loss and damage sustained from the export of goods exempted from taxation shall not be included in the assessment of tax applicable to other activities by the natural persons or legal entities who are also engaged in activities other than export affairs.

Article 142: The income earned by workshops engaged in the production of hand-knitted carpets and handicrafts as well as that of cooperative companies and related production unions shall be exempt from payment of tax.

Article 144 : The moveable dowry and the marriage portion, whether moveable or immovable, as well as scientific awards, scholarships and the income earned through sale of inventions or discoveries by scientists in general, and also the income earned through research activities of the centers possessing a research license from the competent ministries, shall be exempt from payment of tax for a period of ten (10) years beginning as of the date of enforcement of the present Amendment, in conformity with the criteria stipulated in the by-laws, which shall be jointly proposed by the ministries of Science, Research and Technology; Health, Medical Treatment and Education; and Economy and Finance, to be subsequently approved by the Council of Ministers.

Article 145: The profit received through any method in the following instances shall be exempt from tax payments:

1. Profit accruing on deposits concerned with the pension and saving funds, contributions of staff, employees and workers with Iranian banks, within the limits laid down under the employment regulations of their respective institutions.

2. Profit or bonus accrued on fixed deposit accounts and/or saving accounts with Iranian banks or authorized non-bank credit institutes. This exemption shall not apply to the deposits that banks and authorized non-bank credit institutes place with one another.

3. Bonus accrued on government debentures and bonds as well as treasury bonds.

4. Interest paid by Iranian banks to banks abroad on overdrafts and fixed deposits on condition of the reciprocal treatment.

5. Profit and bonus accrued on contribution bonds.

Note: In the instances where within the provisions of the Direct Taxation Act a reference is made towards the banks, the facilities, concessions, privileges, preferences, and the duties mentioned shall also apply to the non-bank credit institutes which were or shall be established in conformity with either the relevant laws and regulations or the authorizations granted by the Central Bank of Iran.

Article 146 : All time-based exemptions that are currently established in accordance with former tax laws and regulations shall continue to remain in force up to the date of their expiry.

Note: The interest payable on Land Reform Bonds shall continue to be tax exempt.

Chapter 2: Deductible Expenses and Deprecation Charges

Article 147 : For the purpose of assessing the amount of taxable income, deductible expenses, as set forth under the provisions of the present Act, shall consist of such expenditures that are to a reasonable extent supported by documents and are exclusively connected with the earnings of the institution during the time period in question in due compliance with the prescribed limits. In the case that an expense has not been accounted for in the present Act or is higher than the limits provided, but its payment has taken place in accordance with Law or a decree by the Council of Ministers, the expense shall be deductible.

Note: For the purpose of the provisions set forth in this Chapter, the term “institute” is defined as all natural persons, legal entities, and artisans mentioned in Clauses (a) and (b) of Article 95 of the present Act.

Article 148 : Expenses that meet the requirements mentioned in Article 147 shall be considered as deductible items for tax purposes as described below:

1. The price of goods sold and/or the cost of consumables used in the goods sold or the services rendered.

2. Personnel expenses corresponding to the services rendered by personnel on the basis of employment regulations of the institute as follows:

a. Basic salaries and wages and continuous benefits whether pecuniary or otherwise (non-pecuniary benefits on the basis of the final price for the employer).

b. Non-recurring benefits, whether pecuniary or otherwise, such as groceries, alimentation and utility benefits, allowances, new year bonuses, overtime pay, and traveling expenses. The limits for traveling expenses of directors, inspectors, and personnel abroad, in order to meet the requirements of the institute, shall comply with the regulations which shall be drawn up by the Ministry of Economy and Finance and the State Management and Planning Organization. The said regulations shall subsequently be approved by the Council of Ministers.

c. Hygiene and medical treatment expenses and the insurance premiums regarding hygiene, life, and work related accidents.

d. Pension, stipend, end of service benefits, in conformity with the employment regulations of the institute concerned, dismissal and termination compensation, in excess of the balance of the relevant reserves, in conformity with the statutory laws.

e. Amounts contributed to Social Security Organization (SSO), in conformity with the relevant regulations, and up to 3% of the annual salary on the account of personnel savings, as per the regulations which shall be proposed by the State Taxation Affairs Organization and to be approved by the Minister of Economy and Finance.

f. An amount equaling the wage or salary of the last month of employment as well as the difference resulting from the adjustment of the salary paid during the preceding years which shall be reserved in order to provide the pension, stipend, end of service pay, dismissal compensation and termination compensation of the personnel recruited with the institute.

  This provision shall also be applicable to the reserves which have so far been deposited into bank accounts.

3. If the institute’s premises are rented, the amount of the rent shall be the same as indicated in the notarized lease agreement, and in case no lease agreement is present, the amount of the rent shall fall within the standard range.

4. Rental of the institute’s machinery and equipment, if they shall be rented.

5. Charges for fuel, electricity, lighting, water supply, communication and transportation.

6. The sums and premiums paid on the account of the insurance relevant to the operations and assets of the institute.

7. Royalties and similar charges paid by the institute, duties, and taxes paid to the municipalities or to the government on account of the institute’s activities (excluding income tax and its supplements and other taxes which the institute shall be required, under the provisions of the present Act, to deduct from other parties and to pay on their behalf, as well as any lines and penalties paid to the government or to the municipalities).

8. Cost of research, experiments, tests, training and educational activities relevant to the operations of the institute, purchase of books, periodicals, compact discs (CDs), the costs and expenses incurred for marketing, advertisement and exhibition halls in connection with the operations and activities of the institute, in conformity with the regulations proposed by the State Taxation Affairs Organization, and to be subsequently approved by the Minister of Economy and Finance.

9. The expenditure relevant to the compensation for damages caused in connection with the operations and assets of the institute, provided: Firstly, that the occurrence of the damage shall be unquestionable; Secondly, that the nature and extent of the damage shall be determined; and thirdly, that under the provisions of a law or an agreement, the responsibility to compensate the damage shall not rest with any other party or such damage has not been compensated by other parties. The regulations on the establishment and satisfaction of the three conditions set forth in Clause 9 shall be proposed by the State Taxation Affairs Organization to subsequently be approved by the Minister of Economy and Finance.

10. Cultural, athletic, sports, and welfare expenses of the workers payable to the Ministry of Labor and Social Affairs up to 10,000 rials per worker.

11. Reserves set aside against doubtful accounts, provided that, Firstly, such accounts shall be connected with the operations of the institute, Secondly, that there shall exist strong likelihood that it shall not be recovered, and thirdly, that the amount thereof shall be entered under a special heading in the accounts books of the institute until such time when the claim shall either be recovered or be definitely considered as unrecoverable. The regulations pertaining to Clause 11 shall be proposed by the State Taxation Affairs Organization, to be subsequently approved by the Minister of Economy and Finance.

12. The amount of loss sustained by natural persons or legal entities established through examination and review of their account books in conformity with the provisions of the law shall be liable to amortization against the incomes to be earned in subsequent year(s).

13. Petty expenses relevant to the maintenance and up-keep of the institute’s premises, generally borne by the lessee, where the premises have been leased.

14. Petty expenses relevant to the maintenance and up-keep of the premises of the institute, where the premises are owned by the institute.

15. Forwarding and transportation expenses.

16. Taxi services, transportation charges, as well as the charges relevant to transport of goods, personnel refreshments, and warehousing.

17. Fees paid out commensurate with the services rendered such as brokerage, lawyers’ fees, consultation fees, attendance fees, auditors’ fees, administrative and fiscal services and inspection fees, the fees and expenses relevant to development of the software, design and establishment of computerized systems required by the institute, as well as other expert fees in connection with the operations of the institute, and legal inspectors’ fees.

18. Profit and charges paid or allocable, for performance of operations of the institute, to banks, cooperative funds, and authorized non-bank credit institutes.

19. Cost of office supplies and such equipment as are consumed within a year’s time.

20. Cost of maintenance and repair of machineries and equipment, and cost of replacements that are not considered as thorough overhaul.

21. Cost of exploration of mines not resulting in production.

22. Membership and subscription fees relating to activities of the firm.

23. Bad debts, provided that the taxpayer concerned can furnish the necessary proof, in excess of the balance of doubtful account reserves.

24. Loss sustained due to rate of exchange on the basis of normal accounting practices provided that the taxpayer applied a similar procedure the previous years.

25. Normal waste products.

26. Reserves set aside for deductible expenses as related to the fiscal year in question.

27. Acceptable expenses related to the previous years that the appropriation or payment became due in the fiscal year concerned.

28. The expenses relevant to the procurement of books, text books and other cultural artistic materials for the personnel and their dependents maximally equal in amount to the 5% tax exemption mentioned in Article 84 of the present Act per one person.

Note 1: Other expenses which are not specified in this Article and are not considered as costs incurred by a firm for earning income, shall be considered part of deductible expenses, subject to the proposal of the State Taxation Affairs Organization and approval of the Minister of Economy and Finance.

Note 2: Directors and stockholders of legal entities shall be considered as personnel in case they shall have a salaried position in the firm concerned. However, in firms which are not considered to be legal entities, the salary and wages of the owner of the firm and his/her dependent(s) (children and spouse) shall not be considered as deductible expenses, with the exception of travel expenses and travel allowances. Such expenses and allowances shall be subject to provisions of Paragraph (b) of Clause 2 of this Article.

Note 3: When assessing the taxable income of cooperatives companies and unions, the reserves mentioned in Clauses 1 and 2 of Article 50 of the Law on Cooperatives Companies approved in June 5, 1971 (16/3/1350) and its Amendments, and that of the companies and unions which have already adapted or shall proceed to adapt their legal status with the provisions made in the Law on the Cooperatives Sector of the Economy of Islamic Republic of Iran, approved in September 3, 1991, the reserve mentioned in Clause 1 as well as the cooperation and training premium, mentioned in Clause 3 of Article 25 of the latter law, shall be considered as deductible expenses.

Article 149 : When assessing taxable income, the depreciation of assets, establishment expenses, and capital expenses shall be calculated with due observance to the following rules:

1. The part of the fixed assets that as a result of the lapse of time, usage, or other causes, is liable to a decline in value, regardless of price fluctuations, is subject to depreciation.

2. The basis for depreciation is the finalized price of the asset concerned.

3. Depreciation shall be calculated from the date any depreciable asset is held at the disposal of a firm in a usable condition. In the instance that a depreciable asset has been held at the disposal of a firm during part of a month, the depreciation shall not be calculated for the whole of that month. Movie films imported from abroad shall be depreciable with the first screening of the film. In the case of factories, the period of test-run shall not be considered as the period of operation of the factory.

4. Expenses incurred for the establishment of the firm such as registration fee, consultation fees and other similar expenses and the expenses in excess of income derived during the period prior to commencement of operations (test-run), except in cases which shall be specifically enumerated in the Schedule prescribed under Article 151 hereof, shall be written off in equal yearly amounts divided over a maximum period of (10) years beginning as of the date of commissioning of the firm.

5. In the event of any loss sustained by a firm as result of selling away some depreciable asset or having some machinery and plant rendered unfit for further use, the resultant loss representing the un-depreciated portion of the asset, excluding the proceeds of the sale (if sold), shall be debited as a lump sum to the firm’s profit and loss account for the same year.

Note: When assessing the taxable income of the producers of Iranian films produced in Iran, the final cost of the film shall be taken as basis for computing their taxable income for the first year of screening; and if the income derived from the film should prove inadequate, the taxable income shall be assessed in subsequent years.

Article 150 : Depreciation shall be calculated in the following manner:

a. In the case of items for which specific rates shall be determined in the Schedule prescribed under Article 151 of this Act, the rates shall be fixed, and for each year they shall apply to the difference between the initial cost price of the items, excluding the amounts of depreciation charges on the item in previous years.

b. In instances where a definitive period of time will be designated under the Schedule mentioned in Article 151 of this Act, the depreciation charge shall be calculated on the basis of the prescribed period and deducted from the cost price in equal yearly portions.

Note 1: Expenses incurred in connection with total replacement or overhaul of depreciable assets shall be added to the cost price of such assets.

Note 2: institutes shall be authorized to amortize their software expenditures within a Period of five (5) years.

Note 3: The institutes shall be authorized to amortize, at the rate twice the rate or in the period of time one half of the amortization period stipulated in amortization schedule prescribed under Article 151 of the present Act, such portion of their fixed assets liable to amortization which shall be procured for either reconstruction, replacement, development, expansion or completion of their production lines.

Note 4: When capital renting the fixed assets is liable to amortization, the manner of registering amortization expenses in the accounts books of the parties to a transaction shall comply with accounting standards and criteria.

Article 151 : The Schedule of depreciation charges on the basis of approved criteria shall be prepared by the State Taxation Affairs Organization and shall be put into effect after approval and ratification by the Minister of Economy and Finance.

Chapter 3: Tax Assessment Indications and Coefficients

Article 152 : Tax Assessment Indications shall be such factors that are employed, when making assessments on a direct basis, to determine the amount of taxable income of each line of business or profession with due regard to their particular situation. Such factors are as listed hereunder:

1. Annual purchases

2. Annual sales

3. Gross income

4. Volume of production for factories

5. Value of transfer of the place of business

6. Total amount of receipts by notaries-public as fees for recording and registration, collection of taxes, duties and charges, or the amount of stamp used by them.

7. Other factors as determined by the Coefficient Council

Article 153 : Coefficients for assessment of taxable income are specific figures, which in instances of estimated assessment of tax, shall be multiplied by the above Tax Indication in order to obtain the amount of taxable income.

Note: Where Coefficient is applied to several Tax Indications, the average of the products obtained by such multiplication shall constitute the amount of taxable income.

Article 154 : The Schedule of Coefficients for assessment of taxable income shall be drawn up and notified in the following manner:

a. In order to determine the coefficients, a committee shall be formed every year at the State Taxation Affairs Organization, composed of the representatives of the State Taxation Affairs Organization, the Central Bank of Iran, the Union of Guilds (in the case of guilds), a representative of the Medical Disciplinary Board (in the case of professions relating to medicine) and also a representative from the Chamber of Commerce, Industries and Mines (in the case of other professions). This committee shall determine with due regard to the trends of business and economic conditions, the coefficients for Tehran Taxation District, indicating separately the coefficient applicable to each of the taxpayers mentioned under Article 152 of this Act, according to the nature of their professions. The committee shall submit such itemized schedule to the State Taxation Affairs Organization as “the Schedule of Coefficients” enforceable in Tehran Taxation District.

b. The Schedule mentioned under Clause (a) above shall be sent to the provincial Taxation Affairs Administration by the State Taxation Affairs Organization. Immediately after receipt of the above schedule, a committee shall be set up which shall be composed of the head of the provincial Taxation Affairs Administration, the manager of Bank Melli Iran, the representative of Chamber of Guilds in case of guilds, a representative of the Medical Disciplinary Board in case of professions relating to medicine and the representative of the Chamber of Commerce, Industries and Mines in the case of other professions. The committee in question shall take the said schedule as the basis of their studies and then in the light of the particular economic conditions prevailing in their respective taxation area shall, whenever necessary, make appropriate modifications in the Schedule figures, giving their reasons thereof. The result of such studies by the said committees shall be sent to Tehran where they shall be examined by the State Taxation Affairs Organization which shall amend the Schedule figures to such extent as it finds the reason raised by provincial committees as convincing, and shall then notify such amended schedule to the respective provincial Taxation Affairs Administration as the Schedule of Coefficients.

Note 1: In places where the Chamber of Guilds, or the Chamber of Commerce, Industries and Mines of Iran, or the Medical Disciplinary Board does not exist, the governor shall nominate and recommend an experienced and well informed individual to participate in the Coefficient Committee instead of the representatives of the said Chambers or the Board, as the case may be.

Note 2: Presence of the representative of the State Taxation Affairs Organization or the head of the provincial Taxation Affairs Administration as well as the representative of the Central Bank of Iran (CBI) or Bank Melli Iran, as the case may be, is mandatory for the purpose of establishing the quorum of the meetings of the committee. Resolutions of the committee shall be valid and binding when they are passed by majority of votes of those present at the meetings.

Note 3: Where the coefficient of such taxable incomes falling under the provisions of this Act shall be determined and assessed arbitrarily, and there has not been envisaged any coefficient for such income in this Act or the Coefficient Schedule, such coefficient shall be determined by the local Board of Settlement of Tax Disputes (BSTD) with due regard to coefficients determined for similar professions.

Note 4: The committee shall invite the representatives of the unions of each profession or guild for giving explanations at the meetings of the Coefficients Committee.

Chapter 4: General Provisions

Article 155 : The Tax Year is a solar year which begins from 1 st Farvardin (21st March) and closes at the end of Esfand of the same year (20th March of the following year); however, in the case of such legal entities liable to taxation whose fiscal year according to their Articles of Association does not correspond with the above tax year, their own fiscal year’s income is to be taken as the basis for tax assessment and the time-limit for submitting their tax declaration, balance sheet, and profit/loss account, as well as the deadline for payment of their applicable tax, shall be four (4) solar months after the close of their respective fiscal year.

Article 156 : The Taxation Affairs Administration shall be required to examine, within a maximum period of one (1) year after the expiry of the respite prescribed for tendering tax declarations, all the income tax declarations received within the prescribed period from the taxpayers, excluding those covered by Article 63, concerning their various sources of income. If the Taxation Affairs Administration shall fail to issue notice of tax assessment within the above period or if they fail to serve to the respective taxpayers the said notice of assessment within three (3) months after the aforesaid one- year period, the tax declaration submitted by the taxpayer shall be considered as finalized.

If, after finalization of the declaration, or after verification and issuance and notification of the tax assessment sheet, whether such sheet has become final or not, it shall be known that the taxpayer concerned has had unreported income or concealed activities and that applicable taxes have not been claimed. Only the tax pertaining to the said activities may be claimed with due regard to provisions of Article 157 hereof. In this case, as well as in cases where the declaration of a taxpayer shall become final due to failure in verification thereof, the Taxation Affairs Administration shall send a copy of the assessment sheet together with an explanatory report to the Taxation Disciplinary Prosecutor within ten (10) days after the date of issue.

Article 157 : Concerning the taxpayer whose income that has not been submitted by the prescribed time limit, tax declaration does not indicate their source of income, or individuals whom, under the provisions of this Act, have been placed under no obligation to submit tax declaration by the prescribed due date for tax payments; their liability to taxation becomes statute barred after a lapse of five (5) years from the tax payment deadline. After five (5) years any applicable taxes may not be claimed unless such taxpayer’s income is duly assessed and the relevant notice of assessment is issued within this period. The assessment should then be duly served and notified to the taxpayers within three (3) months after the expiry of the said 5- year period.

Note: In cases where the amount of a tax due has been claimed from anyone other than the taxpayer concerned, such claim shall, upon confirmation by the Board of Settlement of Tax Disputes (BSTD), be withdrawn no matter on what stage it may be. In this case the Taxation Affairs Administration shall be under the obligation to make a proper claim from the actual taxpayer within a period of one (1) year from the date of judgment by the BSTD without taking the date of time barring into consideration, otherwise the claim shall be time barred.

Article 158 : The State Taxation Affairs Organization shall be authorized to accept the tax declarations filed within the prescribed respite without verification of the accounts books of the taxpayers concerned and by investigating a few of the declarations which shall be selected on random basis. Such practice shall only be permitted in full or partially with regard to certain tax sources in locations deemed appropriate by the State Taxation Affairs Organization pursuant to a notice published during the first half of each year notifying that the above procedure shall be carried out during the following year.

Article 159 : Such sums that shall be paid, as the tax applying to any source of income, either directly to the account designated by the State Taxation Affairs Organization or by stamps cancelled, shall be taken into consideration when assessing and calculating the final income tax of a taxpayer, and where any sums have been paid over and above the applicable tax amount, the excess payment shall be refundable.

Note: The State Taxation Affairs Organization shall be authorized, in the case of non- Iranian taxpayers and persons domiciled abroad, to collect the entire amount of their applicable tax and at the rates applying to the source of the income.

Article 160 : For the collection of applicable tax and the relevant fines and delayed payment of interest from taxpayers or from those responsible for payment of (others) taxes, the State Taxation Affairs Organization shall have priority over all other creditors, except those having rights to property held as securities, as well as workers and staff employees in respect of amounts due to them on account of their services. The regulations of the latter part of this Article shall not be preventive of collection of tax applying to transfer of the property held as security.

Article 161 : In cases where a taxpayer’s tax is yet to be finalized or the executive proceedings are yet to be completed, and if it shall be suspected that the taxpayer will waste the property concerned in order to evade tax payment, the Taxation Affairs Administration shall request the Board of Settlement of Tax Disputes (BSTD), presenting adequate proof, to issue a garnishment (attachment) order for collection of tax. If the BSTD shall find the issue of such an order mentioned above necessary, it shall indicate the amount to be attached and issue the order accordingly. The Taxation Affairs Administration shall then be required to levy distresses, to the extent of the said amount, on any of the taxpayer’s property or funds that may be in the latter’s possession or in the possession of third parties. In such cases the taxpayer and/or the third parties, after a notice in writing shall be served on them by the Taxation Affairs Administration, shall not be authorized to dispose of such attached property held in their possession unless they furnish a guaranteed equivalent to the amount demanded, and in the event of default, they shall be held responsible for the payment of the amount of taxes demanded in addition to being subject to the punishment provided under Note 2 of Article 199 of this Act.

Article 162 : In cases where several persons shall be responsible for payment of tax, Taxation Affairs Administrations shall have the right of recourse against all such persons collectively or to each one respectively in order to collect the tax amount. Making a demand from any of the individual cases shall not preclude the right of recourse to the others.

Article 163 : The State Taxation Affairs Organization shall be authorized to require of those taxpayers whose taxes shall not be deducted and paid at the time their income is accrued, either wholly or partially, to pay on account during each year the tax for the same year on pro rata basis of the last income tax figure fixed for them during the previous years or according to the volume of their activities during that fiscal year. If they fail to pay, the tax on account shall be collected according to the regulations of this Act.

Article 164 : The State Taxation Affairs Organization shall arrange, with a view to facilitating payment of tax and saving taxpayer’s repeated visits to the Taxation Affairs Administration, to open, through the Central Bank of Iran, a special account with Bank Melli Iran so that taxpayers may be able to call at the respective counters or branch offices of the said Bank and pay their tax amounts into the said account.

Article 165 : Where a certain part of the country, or certain taxpayer(s) due to incidents or acts of nature, such as earthquake, flood, fire, drought, pests, storm or other similar incidents, suffer damages and such damages and losses that are yet to be remedied by ministries, government organizations, municipalities, insurance companies or benevolent organizations, the Ministry of Economy and Finance shall be entitled to deduct an amount equal to the amount of losses sustained from the taxable income of the taxpayer(s) concerned in the year of occurrence of losses and in subsequent years. However, those taxpayers of whose assets more than 50% were destroyed as a result of the said incidents shall not be obligated to pay their tax debts, accordingly, whole or a part of their tax debts shall be written off or allowed in lengthy installments with the approval of the Council of Ministers. The executive by-laws of the above Article 165 shall be prepared by the Ministry of Economy and Finance, to be approved by the Council of Ministers.

Note: Taxpayers in war-stricken regions of west and south Iran, a list of which shall be notified upon the proposal of the Ministry of Economy and Finance and approval by the Council of Ministers, shall enjoy the following tax facilities:

a. 50% of the tax payable by the said taxpayers due on the income earned in the said regions shall be written off as of the beginning of Iranian year 1368 (March 21, 1989) through the end of Iranian year 1372 (March 20, 1994).

b. For each year of service in the aforesaid regions, from the enforcement date hereof one-third of their tax debts until the end of Iranian year 1367 (March 20, 1989) shall be written off in respect of the income earned in the said regions.

c. Out of the tax paid by the said taxpayers on the incomes earned in the said regions with effect from September 20, 1980 until March 20, 1989, up to one-third in each year shall be deducted from the taxes due by them in subsequent years in those very regions.

d. In cases where a taxpayer shall be unable to continue activities in the said regions, the whole or a part of the said tax liabilities shall be written off upon production of proofs and reasons acceptable to the Ministry of Economy and Finance.

Article 166 : The State Taxation Affairs Organization shall be authorized to print tax bonds and supply them to all taxpayers. The said bonds shall be registered and nonnegotiable. Taxpayers shall be authorized to submit the said bonds instead of cash payment at the time of paying tax. An amount equal to two percent (2%) of the advance payment per every 3 month advance payment shall be deducted from the relevant tax liability.

Article 167 : In respect of those taxpayers who shall be unable to settle their tax liability in total, including the actual tax amount and the fines imposed thereon, the Ministry of Economy and Finance or State Taxation Affairs Organization shall be authorized to arrange for such tax liabilities to be settled by installment, spread over a period not exceeding three years from the date of notification of finalized tax amount.

Article 168 : In order to avoid collection of a double tax and to enable exchange of information concerning the income and wealth of taxpayers, the government shall be authorized to conclude Taxation Treaties with foreign governments, and put such treaties into effect after ratification of same by the Islamic Consultative Assembly. Such taxation treaties as have been concluded with foreign governments and approved by the Judiciary or the Council of Ministers prior to the effective date of this Act shall remain in force until such time when they shall be otherwise cancelled. The government shall be under the obligation to verify and notify to ICA with justification within one year after the effective date of this Act, its opinion on continuation or cancellation of the said treaties.

Article 169 (BIS) : The State Taxation Affairs Organization shall be authorized to issue commercial cards, with a commercial code number on them, to natural persons and legal entities. The natural persons and legal entities which, upon a notification by the State Taxation Affairs Organization, shall be required to apply for a commercial card, shall be duty-bound to draw up and produce invoices when carrying out transactions, in compliance with the directives which shall be prepared and duly communicated by the said Organization. Further, they shall be required to register the economic code number so assigned on the invoices, forms, papers, vouchers and documents, and submit a list of the transactions carried out to the State Taxation Affairs Organization. Failure by such natural persons or legal entities to prepare and issue invoices or failure to register the code number of their own and that of the second party/parties to the transaction(s), as the case may be, or to let other individuals to use the code number assigned to such natural persons or legal entities, or to use the code number assigned to some other person or entity in one’s own transactions, shall render such persons and entities liable to a fine equal in amount to 10% of the value of transactions carried out without observing the provisions prescribed above.

Failure to produce and submit a list of the transactions to the State Taxation Affairs Organization, in conformity with the directives issued by the said Organization, shall make such persons and entities liable to a fine equal in amount to 1% of the value of the transactions a list of which has not been duly submitted. The said fines shall be claimed by the relevant Taxation Affairs Administration, duly observing the period of respite laid down in Article 157 of the present Act. Accordingly, the taxpayer shall be required to pay the amount so claimed, within thirty (30) days after notification of the claim. Otherwise, the taxpayer shall be considered a protestor and the issue shall be referred, for consideration and pronouncement of the final judgment, to the Board of Settlement of Tax Disputes (BSTD).

The judgment pronounced by the BSTD shall be final and binding. The said fines shall not be exempted and shall be duly collected in conformity with the executive regulations mentioned in the present Act.

Note 1: The natural persons and/or legal entities using the economic code number assigned to another entity, shall, collectively with the entities whose economic code number has been used, be responsible in respect of payment of the income tax as well as the fines laid down in above Article 169 BIS.

Note 2: If the parties to a transaction shall refrain from observing and complying with the duties laid down in the present Article when carrying out transactions, they shall collectively be held responsible. However, in cases where the purchaser shall refrain from producing and submitting its economic code number, if the vendor shall proceed to notify, within one (1) month, to the State Taxation Affairs Organization, the name and particulars of the purchaser as well as the object of transaction, the vendor shall not be liable to the fines and penalties mentioned above.

Note 3: The legal entities and the artisans mentioned in Clauses (a) and (b) of Article 95 of the present Act shall be required to keep and maintain the invoices relevant to the purchases carried out during the year of their revenue operations as well as the subsequent year, in order to submit same to the tax assessors if so requested, otherwise, they shall be liable to a fine equal in amount to l0% (ten percent) of the value of the invoices not so submitted.

Article 169: The State Taxation Affairs Organization shall be authorized to instruct certain taxpayers, through a notice to be published in a highly-circulated newspaper up to the end of the month of Dey (Jan. 20), to apply certain procedures in maintaining their accounts and to use certain equipment, statements and forms in order to facilitate assessment of their taxable income. The taxpayers shall be required to comply with the said instructions as of the first day of Farvardin (21 st March) of the next year. Failure to comply with these instructions shall result in invalidation of the accounts books of the taxpayers who shall be under the obligation to maintain statutory accounts books.

The other groups of taxpayers shall be subject to a line equal to 20% of the tax applicable at source.

Note: Should the BSTD determine that compliance with the said instructions was not possible for a taxpayer, such failure in compliance therewith shall not result in invalidation of accounts books and payment of lines as the case may be.

Article 170 : The Board of Settlement of Tax Disputes shall have competence to investigate and decide upon the disputes arising between a taxpayer and the Taxation Affairs Administration in assessment of applicable taxes provided in this Act except in cases where a different authority is provided for such purposes according to some other Articles of this Act.

Article 171 : The employees of the Ministry of Economy and Finance and those of the State Taxation Affairs Organization shall not be authorized to approach and seek recourse to the tax authorities in the capacity of attorneys or representatives of taxpayers, either during their term of office or when standing-by ready for service.

Article 172 : 100% of the sums which shall be paid to the accounts specified by the government for reconstruction, help and the like on gratuitous basis, and also the money paid or allocated, or aids in kind extended by both natural persons or juridical entities for the repair, mobilization, construction or completion of schools, universities, higher education institutes and health and medical centers, or training camps, sanatoriums and social welfare centers, libraries and (government) cultural and arts centers, shall be deducted from the taxable income of the turnover for the year of payment (from the source to be chosen by the taxpayer) in accordance with the criteria to be determined by the ministries of Education; Sciences, Research and Technology; Health, Medical Treatment and Education; and Economy and Finance.

Article 173 : This Act shall come into force from the first day of the month of Farvardin 1368 (March 21, 1989). The regulations of this Act shall cover any and all taxes and income taxes applicable to incomes earned after the effective date of this Act, as the case may be, and income tax of the natural persons and legal entities pertaining to the fiscal year which ends during the first year of implementation of this Act. All other tax laws and regulations being inconsistent with or contrary to the present Act shall stand null and void.

Note: Collection of evacuation duties laid down in Article 8 of the Law on Stabilization of Rentals, ratified in 1352, shall stand null and void upon enforcement of the present Act.

Article 174 : Taxes on incomes earned prior to Iranian year 1368 and after the Iranian year 1345 as well as the direct taxes accruing during the said period shall be considered as residuary taxes and shall be governed by regulations prevailing on the date of earning the relevant incomes in respect of the taxable income, tax rates, taxpayers duties, and statute of limitation. The present Act shall govern such matters as the procedure of investigation, verification, and liquidation.

Note 1: The taxes applying to incomes earned and accrued prior to 1967 (1345) which still remain unsettled, as of the date of approval of this Act, cannot be claimed any longer.

Note 2: The transfers mentioned in Article 180 of the Direct Taxation Act of Esfand 1345 and its subsequent amendments carried on prior to the effective date of this Act, shall be added to the inheritance of the heirs concerned in case of death of the transferor and the applicable tax shall be collected according to the provisions of this Act after deducting therefrom the sums previously paid on account of the inheritance.

Article 175 : The taxable limits laid down in the present Act shall be adjusted biennially, commensurate with the inflation rate, upon a proposal which shall be submitted by the Ministry of Economy and Finance and subsequently approved by the Council of Ministers.

Article 176 : The State Taxation Affairs Organization shall be authorized to collect the taxes under the Present Act through cancellation of stamp after finalization or arbitrary assessment.

The executive by-laws of the present Article shall be prepared by the State Taxation Affairs Organization, and shall go into effect after ratification thereof by the Minister of Economy and Finance

Chapter 5: Duties of Taxpayers

Article 177 : Taxpayers shall be authorized to submit to the Taxation Affairs Administration situated in their residential district, separate tax declarations which are required to be filed according to the provisions described in the present Act, for each of their sources of income and obtain the receipt thereof. In such cases, the Taxation Affairs Administration shall record the facts and circumstances in the dossier of the taxpayer concerned and forward, within three (3) days, the tax declaration for the necessary action to the relevant Taxation Affairs Administration. Submission of tax declaration to the Taxation Affairs Administration located in one’s residential district shall have the same resultant effect as submission to the relevant Taxation Affairs Administration. The provisions made in the present Article shall be applicable to such taxpayers who have erroneously submitted to the Taxation Affairs Administration of another district located in the relative township.

Note 1: In cases where the last day of respite provided for filing a tax declaration or production of other papers and documents which the taxpayer is required to submit as per the applicable regulations, shall be a public holiday, the first working day after the holiday shall also be included in the period of respite for filing tax declarations or submission of the said Papers and documents.

Note 2: The responsibility to submit tax declarations and to pay the tax applicable to the taxpayers domiciled outside Iran as well as such institutes and company’s whose head office or headquarters is situated abroad, shall rest with their representatives in Iran, if any.

Note 3: Artisans shall be duty-bound to notify in writing the Taxation Affairs

Administration of the facts in connection with commencement of their operations and activities within four (4) months after such commencement. Failure to do so within the respite prescribed above shall render them liable to a fine equal in amount to 10% (ten percent) of the fixed tax. Such failure shall render them deprived of all tax facilities and exemptions, effective as of the date they shall be recognized and identified by the Taxation Affairs Administration. However, this provision shall not apply to the artisans to whom the required permits and authorizations for the activities and operations have already been issued.

Article 178 : In cases where the tax declaration or other papers and documents, which the taxpayer is required to submit in conformity with the relevant rules and regulations, shall be received through post offices, the date of submission of the same to the post office, if such facts shall duly be sustained and established, shall be considered as the date of submission of the tax declaration to the authorities concerned.

Article 179 : Should a taxpayer have several places of residence, he shall be required to designate one of them as his main residence; otherwise the Taxation Affairs Administration shall be authorized to consider any one of these places as the taxpayer’s main residence.

Article 180 : Any natural person of Iranian nationality who by producing testimonial from the Islamic Republic of Iran’s financial or diplomatic representatives or missions abroad shall prove that he, as a resident in a foreign country, has already paid the tax on his income earned in a foreign country during tile fiscal year concerned, shall be considered as having been domiciled abroad; except, however, in the following instances:

1. When during the fiscal year in question he has had an occupation in Iran.

2. When he has resided in Iran either continually or at intervals for at least six (6) months of the fiscal year in question.

3. When the sojourn abroad has been for the purpose of carrying out an assignment or undergoing treatment or for other similar objectives.

Note: Any Iranian natural person or legal entity residing in Iran who shall earn income abroad and shall pay the applicable taxes to the government of the place of earning the income and shall declare the said income according to the provisions of this Act in his tax returns, balance sheet, or profit/loss account, as the case may be, the amount of tax paid abroad, or the tax applying to the income earned abroad, whichever shall be less, shall be deducted from his income tax in Iran.

Article 181 : In order to exert control and supervision over the enforcement of tax laws and regulations, the State Taxation Affairs Organization shall be authorized to dispatch committees or boards consisting of 3 members who shall examine and control the statutory books of the taxpayers, in conformity with the regulations which shall be proposed by the said Organization for the same purpose, and which shall subsequently be approved by the Minister of Economy and Finance.

Should a taxpayer refrain from producing his statutory books, the taxable income applicable to the relevant fiscal year shall be assessed on estimated basis, with the approval of the Board mentioned in Clause 3 of Article 97 of the present Act.

Note: The boards mentioned in the above Article 181 shall be authorized, upon a permission to be issued by the State Taxation Affairs Organization, to examine the books, documents and financial papers of the taxpayers, including the ones related to the fiscal year under reference or to the preceding years in order to secure the necessary information and to present the same to the Taxation Affairs Administration concerned. If necessary, they shall be authorized to transfer the books, documents and papers of preceding years to the Taxation Affairs Administration, against submission of the receipt thereof to the taxpayer.

Chapter 6: Duties of Third Parties 

Article 182 : Those responsible under the provisions of this Act for payment of other taxpayer’s taxes, as well as any person who shall undertake or guarantee the payment of some other person’s tax, and also such persons who, as a result of their failure in discharging the obligations prescribed under this Act shall be found liable to lie, shall all be deemed as taxpayers and shall, for the purpose of recovering tax liabilities, be dealt with according to the statutory requirements of the law concerning the executive proceedings for collection of taxes.

Article 183 : In cases where the conveyance of property shall be effected by the Registrar of Deeds and Estates, the tax applying to final transfer of property shall be paid in advance, and the Registrar shall record the reference number of the relevant tax settlement certificate issued by the Taxation Affairs Administration concerned on the deed of conveyance.

Article 184 : The departments of Registrar of Companies shall be required to send to the local Taxation Affairs Administration at the end of each month a complete list of the names of the companies and institutes which were registered during the month and any changes made in the existing companies and institutes, as well as the names of natural persons and legal entities who registered their accounts books with the departments of Registrar of Companies, indicating the number of books registered and the registration n umbers.

Article 185 : In all instances where the transactions mentioned in Chapter 4 of Book II as well as Chapters 1 and 6 of Book III of this Act shall be effected by means of notarial deeds, the notaries-public shall be required to submit, by the end of the following month and against formal receipt, a summary statement of the month’s transactions to the local Taxation Affairs Administration.

Article 186 : The issuance, renewal or extension of the commercial card and business license or work permit of natural persons or juridical entities by competent authorities shall be subject to production of a certificate from the relevant Taxation Affairs Administration, demonstrating payment or arrangement for payment of finalized tax liability. In the event of nonobservance of this order, the officials in charge shall have joint liability with taxpayers for payment of the applicable taxes.

Note 1: Banking facilities shall be extended to the juridical entities as well as artisans and professionals by banks and other credit institutes, subject to production of the following certificates:

1. A certificate demonstrating payment of finalized tax liability or an arrangement for payment of the same.

2. A certificate from the relevant Taxation Affairs Administration, showing receipt of a copy of the financial statements presented to banks and other credit institutes. The executive criteria of the above Note 1 shall be drawn up by the State Taxation Affairs Organization and the Central Bank of Iran and shall subsequently be publicized.

Note 2: The State Taxation Affairs Organization shall be authorized to collect an amount equal to one per mill (0.001) of the finalized taxable income of artisans and professionals and deposit same in a special account with the Treasury, in order to pay to the expert societies, guilds and associations, in conformity with the credits approved and mentioned in the annual budget bills, which cooperate with the said Organization in connection with the assessment and collection of taxes. The sums paid in conformity with the above Article 186 shall not be subject to taxation and other contradictory rules and regulations.

Article 187 : In all cases where the transactions described in Chapter 1,4,and 6 of Book II of the present Act shall be carried out through notarial deeds, the notaries public shall be required to inform the Taxation Affairs Administration, prior to registration, cancellation or annulment of the deed of transaction, of the full details and nature of the transaction and the location of the Property that is the subject of the transaction and/or the place of residence of the taxpayer, as the case may be. The notaries public shall be authorized to register, cancel or annul the deed of transaction only after obtaining the certificate demonstrating performance of the transaction, by recording the number and the authority issuing the certificate in the deed of transaction. The above certificate shall be issued within a maximum period of 10 days after the date of notification by the notary public concerned, and in case of payment of tax dues pertaining to the property being subject of transaction by the taxpayer concerned. Such tax dues include tax on rental and tax on transfer of key- money (goodwill), vocational taxes accruing on the property that is the subject of transaction, windfall earning tax and tax applying to final transfer of property.

Note 1: Should there arise a dispute in connection with the amount of the applicable taxes, the relevant file shall be referred, out of turn, to the authorities in charge of settlement of tax disputes provided hereunder. Should the taxpayer concerned be willing to obtain the required certificate prior to investigation and pronouncement by the above said authorities, the taxpayer shall be authorized to pay the amount of acceptable tax and deposit the balance or provide sufficient guarantees such as promissory note, bill of exchange, insurance policy, negotiable instruments, stocks and shares or real estate security for the balance due and obtain the required certificate.

Note 2: In cases where pursuant to a judgment issued by competent courts, sums of money relevant to the key- money shall be deposited with courts of justice, the authorities concerned shall be required to communicate with the Taxation Affairs Administration concerned and inquire about the applicable taxes, and subsequently withhold the said taxes and pay same to the account of the State Taxation Affairs Organization.

Article 188 : Functionaries in charge of the sale and cancellation of stamps shall be required to cancel stamps on every power of attorney to the amount prescribed under the provisions of this Act, and to record and attest the amount thereof in a special register which shall be maintained by every lawyer for recording the amounts of stamps used by him/her. The said register shall be produced to the Taxation Affairs Administration when the lawyer’s tax accounts shall be verified; and failure to do so shall constitute ground for such lawyer’s book to be rejected for the purpose of taxation.

Chapter 7: Tax Awards and Penalties 

Article 189 : In the case of legal entities and natural persons mentioned in Clauses (a) and (b) of Article 95 of the present Act, if the balance sheet, profit/loss account, accounts books,  and vouchers shall be accepted and approved during 3 consecutive years and the taxes payable by them shall be settled in the same year of filing the tax return without recourse to the boards in charge of settlement of tax disputes, a sum equal to 5% of the amount of the principal tax of the said 3 years shall be awarded to them on account of being good pay. The said sum shall be paid to the said taxpayers out of the current collections or it shall be credited to the account of their tax in the following years. The said award shall be tax free.

Article 190 : The amount paid on an account as the tax applicable to the operations of any fiscal year prior to the expiry of the period of respite laid down in the present Act for the payment of operation Tax, shall render the taxpayer entitled to receive an award equal in amount to 1% of the sum paid per month up to the end of respite prescribed in this Act. The said award shall be deducted from the tax applicable to the operation of the same year. However, the taxes paid after the expiry date shall be charged a monthly penalty equal to 2.5% of the taxes due. The starting date for calculation of the penalty in the case of taxpayers who shall be required to submit tax returns with respect to the amount stated in the declaration, shall be from the date of expiry of the respite for submission of the tax return. The balance falling due shall be from the date of claim. In the case of taxpayers who shall refrain from submitting the tax declaration or who are not required to submit a tax return, the starting date shall be the date of expiry of the respite authorized for production and submission of declaration or the due date for payment of tax, as the case may be.

Note 1: The taxpayers who shall carry out their legal duties and obligations with respect to timely production and submission of the tax return or balance sheet and profit/loss account, and who have already made or shall make the necessary arrangements to make the taxes due according to the tax return or the balance sheet and profit/loss account and, if necessary, who shall in a timely manner submit their books of accounts, documents and vouchers, under the cases and circumstances prescribed in Article 239 of the present Act; if they shall accept the tax assessment sheet or come to some agreement with the Taxation Affairs Administration, or in cases where they shall pay or arrange payment of the applicable taxes, such taxpayers shall be rendered exempt from payment of 80% of the amount of the fines set for the in the present Act.

In cases where such taxpayers shall proceed to pay or to arrange payment of the applicable tax, within one month after the date of notification of the final tax assessment sheet, they shall become exempt from payment of 40% of the amount of the fines laid down in the present Act.

Note 2: If the span of time between the date on which the taxpayer shall file an objection to the tax assessment sheet and the date on which the tax shall be rendered final shall exceed one year, a monthly fine of 2.5% mentioned in the present Act, which shall apply to the period of time exceeding the one year up to the date of the final tax assessment sheet shall be notified, shall not be claimed from the taxpayer. The State Taxation Affairs Organization shall be duty-bound to made the necessary arrangements so that consideration and finalization of the taxes due by taxpayers shall not take more than one year after submission of their objection.

Article 191 : It shall be authorized to exempt the whole or any part of the fines provided in this Act, at the discretion of and upon agreement by the State Taxation Affairs Organization at the request of the taxpayer and with due regard to the proofs and evidence furnished by the taxpayer concerned, verifying that the taxpayer was not able to fulfill his legal obligations and by taking into consideration his records of good payment.

Article 192 : In the cases of a taxpayer or his representative who, according to the provisions of this Act, shall be required to submit a tax declaration for the purpose of tax payment, and who shall fail to do so within the time limit prescribed herein, shall be subject to payment of a fine equal to 10% (ten percent) of the applicable tax.

Note: Failure by the legal entities and those subject to the provisions made in Clause (a) and (b) of Article 95 of the present Act, to submit the tax return, shall make them liable to payment of a fine equal to 40% (forty percent) of the applicable tax and accordingly they shall be denied exemption. In the case of taxpayers who shall proceed to submit their tax return, the provisions made in the present Note shall apply to both the tax applicable to the incomes not declared as well as non-actual expenditures which shall also be non-deductible.

Article 193 : With regard to taxpayers who, in accordance with the provisions of this Act, are required to maintain statutory accounts books, in case of non-submission of balance sheet and profit/loss accounts, or in case of non-production of books, the fine for failure shall be 20% of the tax, and in case of rejection of the books the fine for violation shall be 10% of the tax.

Note: Non-submission of tax declaration, balance sheet and profit/loss account during the period of enjoying tax exemption, shall result in cancellation of tax exemption arrangements during the fiscal year.

Article 194 : In the case of taxpayers whose returns shall be examined according to Article 158 of this Act, if their taxable income finally assessed shall have a difference of 15% or more with the taxable income declared by them through their returns, such taxpayers shall, in addition to becoming subject to applicable penalties, be deprived of any taxation facilities and exemptions provided in this Act for a period of three years after notification of their final tax.

Article 195 : The fine for default on the part of the last directors of a legal entity to submit the declaration referred to under Article 114 within the prescribed time limit or submission of a false declaration shall respectively be 2% and 1% of the paid-up capital of the legal entity concerned on the date of liquidation.

Article 196 : The fine for default on the part of the liquidator(s) in connection with distribution of the property of the legal entity prior to settlement of taxation affairs of the legal entity or before depositing the securities laid down in Article 118 of the present Act shall be equal to 20% of the applicable tax which shall be duly collected from the liquidator(s).

Article 197 : With respect of those who are bound, as set forth under the provisions of this Act, to submit statements, lists, contracts, or any particulars concerning taxpayers, and fail to furnish these within the prescribed time limit or if they submit false information, the applicable fine in their case shall be a sum equal to 2% of the salaries paid, in case of salaries, and a sum to 1% of the total contract value in case of contracts. Such persons, in any case, shall, jointly with the taxpayer concerned, be responsible to compensate the losses inflicted upon the government.

Article 198 : In addition to a legal entity being responsible for payment of applicable taxes, in the case of wound up and dissolved companies, the directors of legal entities shall jointly or severally be liable to pay the income tax accruing on the income of the legal entity concerned as well as for payment of any taxes the legal entities shall be liable to withhold and collect in connection with their term of office.

Article 199 : Any natural person or legal entity who, according to the provisions of this Act, shall be obligated to withhold or collect and pay the taxes of another and who shall fail to fulfill his obligations hereunder shall, in addition to being jointly (with the original taxpayer) liable for payment of applicable taxes, be subject to a fine equal to 20% of the amount of unpaid tax.

Note 1: In cases where the withholding party shall be a ministry, a government company or organization, or a municipality, the responsible officials shall be subject to punishment provided under the Law on Administrative Offenses.

Note 2: In cases where the withholding party shall be a non-government legal entity, the director(s) responsible shall; in addition to being held jointly responsible (with the original taxpayer) to the applicable taxes, be subject to imprisonment ranging in term from three (3) months to two (2) years. The provisions of this Note shall not apply to director(s) of a legal entity who shall deposit with the State Taxation Affairs Organization an amount equal to the amount of taxes described above.

Note 3: In cases where the withholding party shall be a natural person, he/she shall be subject to imprisonment ranging in term from three (3) months to two (2) years.

Note 4: The responsibility of instituting legal actions before the judicial forums against the offenders described in Notes 2 and 3 above shall rest with the Director General of the State Taxation Affairs Organization.

Article 200 : In case of non-compliance with provisions of this Act by notaries public in carrying out their obligations hereunder, in addition to having joint liability with the original taxpayer in paying the applicable taxes, a fine equal to 20% of the said taxes shall be imposed on them and in case of repetition, they shall be subject to a punishment according to Note 2 of Article 199 and the pertinent regulations.

Article 201 : Any taxpayer who, with the intent being to evade tax knowingly and intentionally shall cite and invoke as evidence the balance sheet and profit/loss accounts or such accounts books, documents and vouchers as normally constitute the basis for tax assessment but are actually prepared in fictitious or falsified way, or if he shall refrain, for 3 consecutive years, from submitting tax return and balance sheet and profit/loss account, he shall be deprived from all legal exemptions applicable to the said period, in addition to the fines and penalties set forth in the present Act.

Note: Legal prosecution and institution of legal actions against such offenders before the judicial forums shall be initiated by the Director General of the State Taxation Affairs Organization.

Article 202 : The Ministry of Economy and Finance or the State Taxation Affairs Organization shall be authorized to arrange for prevention of exit from Iran of those tax debtors whose final tax debt shall exceed Rls.10,000,000 (ten million rials). The provisions of this Act shall also apply to the finalized tax liability of director(s) of private legal entities accruing, during their term of office, for the taxes payable by the legal entity concerned on account of income tax or on account of taxes which, in conformity with the Law, shall be bound to be withheld and collected from other persons. The relevant authorities shall be obligated to execute the provisions made in this Article, upon notification by the said Ministry or Organization.

Note: In cases where a taxpayer, with the intention being to evade payment of tax, shall transfer his property to his/her spouse or children, the State Taxation Affairs Organization shall be authorized to have the relevant deeds of ownership cancelled and nullified by competent judicial authorities.

Chapter 8: Notices

Article 203 : Tax notices, shall, as a general rule, be served on the taxpayer himself and a receipt or other tax notices obtained on the duplicate copy thereof shall be served at his domicile or place of work or on one of his relatives or servants, if the taxpayer himself cannot be reached, provided that in the opinion of the serving officer, the said persons shall seem to be old enough to realize the importance of such notices and provided that no conflict of interest shall exist between the taxpayer and the person who shall receive the said tax notices.

  Note 1: If the taxpayer, or in his absence, his relatives or servants refuse to accept such notices being served on them, or if none of these persons shall be present, the serving officer shall have their refusal or absence certified by a policeman, a gendarme, or two local residents and record these facts on both copies of the notice, affixing the original on the door of the taxpayer’s domicile or place of work. All tax papers served in the above mentioned manner shall be deemed to have been legally served on the taxpayer on the date they shall be affixed.

Note 2: The State Taxation Affairs Organization shall be authorized to take advantage of registered mail in order to serve tax notices on the taxpayers. The postmen shall serve tax notices at the place of business or domicile of the taxpayer, either on the taxpayer himself or on one of his relatives or servant present at the place, and shall obtain a receipt thereof on the duplicate copy. However, if the taxpayer or the said persons shall refrain from receiving the tax papers, the postman concerned shall record the facts concerning their refusal on both copies of the notice, affixing the second copy on the door of the taxpayer’s domicile or place of business, and shall return the first copy to the Taxation Affairs Administration. If none of the said persons shall be present at the place, the postman shall record, on both copies of the tax notice, both the current date of seeking recourse to the place of the taxpayer concerned as well as the phrase reading “Next recourse shall be sought fifteen (15) days alter the present date” and shall affix the second copy on the door of the taxpayer’s domicile or place of business, returning the first copy to the Taxation Affairs Administration. Upon the second recourse, if none of the said persons shall be present, the postman shall record the facts and circumstances in this regard on both copies of the tax notice, affixing the second copy on the door of the taxpayer’s domicile or place of business, and shall return the first copy to the Taxation Affairs Administration. The tax notices and papers which shall be served in the above manner shall be deemed to have been legally served on the taxpayer on the date they shall be affixed.

Article 204 : The serving officer shall specify the following details on the duplicate copy of tax papers being served and shall sign them:

a. Place and date of serving, giving the day, the month and the year in letters and digits.

b. Name of the person on whom the papers were served, giving his/her relationship with the taxpayers.

c. Names and particulars of witnesses with their full addresses in the cases referred to under the Note to Article 203 above.

Article 205: Where the taxpayer shall be a government department or an institution affiliated with the government, tax papers shall be served on the head or deputy head of the secretariat of the department or institution.

Article 206 : Where the taxpayer shall be a business firm or one of the other corporate bodies, the tax papers shall be served on the manager or other persons who shall be authorized to sign on behalf of the firm.

Note: The provisions of Article 203 above shall also apply to business companies and other corporate bodies (legal entities).

Article 207 : In cases where the taxpayer has already given an address as his place of work or domicile or the place at which tax papers may be served, and in cases where the tax papers shall be served at a place known to be the taxpayer’s place of work or domicile and there is proof and indication in the relevant file that the taxpayer has not made any objection to such places being used for serving tax papers, the serving of the tax papers at the said addresses shall be deemed to be legal and proper, until such time when the taxpayer shall give another address.

Article 208 : In cases where the taxpayer’s address shall not be known, notices shall be published once in the highly-circulated newspaper of the jurisdiction area of the Taxation Affairs Administration concerned, and if no newspaper shall be published in the jurisdiction area of the Taxation Affairs Administration concerned, the tax notices shall be published either in a highly-circulated newspaper of the place being closest to the Taxation Affairs Administration concerned, or in the highly-circulated papers of the capital city. Notices thus published shall be deemed to have been duly served on the taxpayer.

Note 1: In addition to the relevant particulars, the place of referring, the specified time limit, and the legal duty of the taxpayer shall be mentioned in the tax notices served.

Note 2: In the case of real estate taxpayers whose address, as specified in Article 207 of this Act, shall not be clear, the tax notices shall, as stated in Article 203, be served at the real estate on which the tax is being claimed.

Article 209 : The provisions of the Civil Procedure Code concerning the serving of notices shall, except in cases specified in this Act, apply to serving tax papers as well.

Chapter 9: Collection of Taxes

Article 210 : If a taxpayer shall fail to pay his finalized tax within ten (10) days from the date of receipt of the final notice, the Taxation Affairs Administration will serve on him a Tax Executive Order giving him one month’s time from the date of such notice to pay out all his tax liabilities or to arrange payment thereof with the Taxation Affairs Administration.

Note 1: The Tax Executive Order shall specify the type and amount of the tax, documents for the final tax liability, tax year, amount of tax already paid, and applicable fine.

Note 2: The part of the tax which shall be accepted by the taxpayer and stated in the declaration or balance sheet submitted to the tax authorities shall be recoverable through executive proceedings.

Article 211 : In case the taxpayer shall fail to pay the entire amount of tax demanded or to arrange payment thereof with the Taxation Affairs Administration within the prescribed grace period after receipt of the Tax Executive Order, his movable and/or immovable property to the amount of his entire tax liability, including the applicable fines plus 10% of such tax liability, shall he forfeited. The Forfeiture Order and the instruction for enforcement of such order shall be issued by the Executive Office of the Taxation Affairs Administration.

Article 212 : The forfeiture of the following property shall be forbidden:

1. Two-thirds (2/3) of the salary of salaried persons and three-quarters (3/4) of the monthly pension (of retired persons or their dependents).

2. Articles of clothing and other personal effects belonging to the taxpayer and/or his dependents as well as stocks of foodstuff and the subsistence of those entitled thereto.

3. Agricultural and industrial tools and implements as well as equipment required for the business of the taxpayer in order to earn his livelihood.

4. Accommodation to the normal extent.

Note 1: If the value of the property to be forfeited shall register more than the amount of the tax liability of the taxpayer and if the said property shall be indivisible, the entire property shall be sold and the excess money shall be refunded to the taxpayer unless he offers another indisputable property the value of which shall be equal to the said tax liability.

Note 2: Should the taxpayer be a married person and living in the same house with his/her spouse, household articles normally used by women shall be deemed as belonging to the wife and the rest as belonging to the husband, unless the contrary is proved.

Note 3: Forfeiture of production units whether agricultural or industrial shall not be done in such a way as to result in closing down of the production unit.

Article 213 : The forfeited property shall be evaluated by the appraiser of the Taxation Affairs Administration. However, the taxpayer shall be authorized to deposit the evaluation fee in accordance with the regulations governing the fees of the official appraisers of the Ministry of Justice and request that his property be evaluated by official appraisers.

Article 214 : All the necessary actions in connection with publication of notice for auction, sale of the forfeited property (whether movable or immovable) by auction, shall be taken by the person in charge of Executive Office of the Taxation Affairs Administration. In the case of immovable property, if the taxpayer refuses to sign the transfer deed, after the sale formalities shall be completed and the purchaser determined, the person in charge of Executive Office of the Taxation Affairs Administration shall, on the strength of the relevant documents, request the local Registration Department to effect the transfer of the property in the name of the said purchaser and the Deeds and Estates Registration Department shall be required to comply with his request.

Article 215 : In the case of forfeited immovable property, if after publication of two auction notices (the second notice shall not specify a minimum price for the property) no offers shall be received from prospective purchases, the State Taxation Affairs Organization shall be authorized to transfer to its ownership part of the said property, the value of which as assessed by the official appraiser shall be equal to the total tax liability of the taxpayer plus the applicable cost, and shall credit the tax account of the taxpayer with the value thereof

Note 1: In the event that before the said property shall be transferred to the State Taxation Affairs Organization or in the name of a third party, the taxpayer volunteers to pay his outstanding liability, the State Taxation Affairs Organization shall be required to restore the property to him upon receipt of the taxpayer’s liability plus 10% and the applicable costs.

Note 2: The ex-owner of a forfeited property shall have preemptive right in purchasing his property in cases where the State Taxation Affairs Organization decides to dispose of the property.

Article 216 : The Board of Settlement of Tax Disputes (BSTD) shall be the authority to handle complaints arising from executive proceedings relating to amounts due by the government from natural persons or juridical entities, which according to tax executive procedures, can be demanded and collected. The said complaints shall be dealt with urgently and out of turn and the verdict issued in this connection shall be final and binding.

Note 1: In the case of direct taxes, if the complaint shall be to the effect that the execution proceeding, for collection of tax, have been taken before finalization of the tax, and if the BSTD shall consider the complaint as justified, it shall rule for cancellation of the execution proceedings and at the same time shall order for investigation to be made and the necessary action to be taken, or it shall make inquiries about the taxable income of the taxpayer and then issue its verdict thereon. The verdict issued by BSTD shall be final and binding.

Note 2: As regards the indirect taxes, if the complaint shall be to the effect that the tax demanded is illegal, such a complaint shall be considered by BSTD. The decision of BSTD in this connection shall be final and binding. The provisions of this Note shall not apply to offenses in respect of smuggling of goods which are sources of income for the government, as well as the value of the goods destroyed and also that part of the indirect taxation which, under special rules and regulations is to be settled by reference to specific authorities.

Article 217: The Ministry of Economy and Finance shall be authorized to deposit one percent (1%) of the amounts collected as taxes and fines according to this Act (excluding the income tax of government companies) in a special account with the Treasury. The mentioned amount shall be spent on the training of officials in taxation affairs and in expert auditing and to pay on account of incentives to the personnel and individuals who shall actively serve the objective of tax collection. The sums paid under this Article shall be considered as bonus and shall not be subject to any taxation or contrary regulations. The Ministry of Economy and Finance shall be required to submit a report, every six months, to the Economy and Finance Committee of the Islamic Consultative Assembly on the volume of taxes collected and allocation thereof among various layers and strata of income.

Article 218 : The regulations concerning the part of this Act dealing with tax collection shall be approved by the Ministries of Economy and Finance and Justice and shall be enforced by the Ministry of Economy and Finance. 

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