Iran Income Taxes and Tax Laws

Article by Dayarayan Auditing & Financial Services Tax in Iran,

The aggregate income of companies, and also the income from the profit-making activities of other juridical persons, derived from different sources in Iran or abroad, less the losses resulting from non-exempt sources and minus the prescribed exemptions, shall be taxed at the flat rate of 25%, except the cases for which separate rates are provided under the present Act.

Note 1: with regard to the Iranian noncommercial juridical persons that are not established for distribution of profits, should they engage in profit-making activities, the total taxable income derived from such activities shall be taxed at the rate set forth in the present Article.

Note 2: Foreign juridical persons and entities residing abroad, except those subject to the Note 5 of the Article 109 or Article 113 hereof, shall be taxed at the rate set forth in this Article in respect of the aggregate taxable income derived from the operation of their investment in Iran or from the activities performed by them, directly or through the agencies like branches, representatives, agents and the like, in Iran, and also with regard to the income received by such persons and entities from Iran for granting of licenses and other rights, or for transfer of technology or provision of training and technical assistance and cinematographic films. The representatives of such foreign persons and enterprises in Iran shall be subject to taxation, according to the provisions of this Act, with respect to the income they may earn under any titles in their own account.

Note 3: At the time of computation of the income tax of juridical persons, whether Iranian or foreign, the pre-paid taxes shall be deducted from the applicable tax according to the pertinent regulations, and any overpaid amount shall be refundable.

Note 4: The persons, whether real or juridical, shall not be subject to any other taxes on the dividends or partnership profits they may receive from the capital recipient companies*.

Note 5: In cases where according to the enacted law some payments other. than income tax are to be collected on basis of taxable income, the tax of relevant taxpayers shall be computed at prescribed rates after deduction of such non-tax charges.
How are foreigner's companies' taxes calculated according article (107) of direct taxes act?
The taxable income of foreign juridical persons and enterprises residing abroad shall be assessed as follows:

(a) In case of contracting business in Iran with regard to all types of work in the fields of construction, installations and technical installations, including procurement and setting up of the same, and also in the fields of transportation, preparation of design for buildings and installations, topography, drawing, supervision and technical calculations, provision of training and technical assistance, transfer of technology and other services, the taxable income in all cases will be 12% of total annual receipts.

(b) In case of income derived from Iran for granting of licenses and other rights or transfer of cinematographic films, whether the latter income is received as the price or the fee for the screening of the films, or under any other titles, the taxable income shall consist of 20% to 40% of all payments received by them during a tax year. The applicable coefficients for determination of taxable income in each of the cases mentioned in this paragraph shall be determined on basis of the proposal of the Ministry of Economic Affairs and Finance and approval of the Council of Ministers. Those making the said payments or the payments mentioned in the paragraph "an of this article, shall be required to withhold, from each payment, the applicable tax by taking into account the total payments made from the beginning of the year up to the date of each relevant payment. They should remit the withheld amounts, within ten days, to the tax affairs office local to their residence. Otherwise, the receivers shall be jointly and severally liable for payment of the basic tax and other payments related thereto.

(c) As for the operation of capital and other activities performed by the aforesaid legal persons and enterprises in Iran through the agencies such as branches, representatives, agents and the like, the regulations of the Article 106 of this Act shall apply.

Note 1: In cases where the contract operations subject to paragraphs (a) and (b) of this article are wholly or partly assigned to Iranian legal entities as contractors, those making payments to such Iranian contractors should withhold 2.5% of each payment as their on account tax and remit it, within thirty days from the date of payment, to the account to be determined by the State Organization of Tax Affairs.

Note 2: If the relevant employer of the contract subject to the paragraph (a) of this article is a ministry, a government institution, a state company or a municipality, then that part of the contract price which is used for purchase of supplies and equipment from domestic or foreign sources shall be exempt from taxation, provided the amounts relevant to those supplies and equipment are included, apart from other items, in the contract or in its further amendments or supplements.

Note 3: Branches and agents of foreign companies and banks in Iran that are engaged in gathering information or finding markets in Iran for their parent entities, without having the right to make transactions, and receive remuneration from them against their expenditures, shall not be subject to taxation in respect of such remuneration.

Note 4: In cases where foreign contractors assign, wholly or partly, the contract subject to the paragraph (a) of this article to Iranian legal entities as subcontractors, any part of the receipts of the main contractor in respect of the supplies and equipment that are mentioned in the first hand contract but purchased by the subcontractor, will be exempt from taxation.

Note 5: The taxable income of the activities subject to the paragraph (a) of the Article 107 hereof, the contracts of which will be concluded from the beginning of the year 1382* onwards, shall be assessed according to the regulations of the Article 106 of this Act. The rule of this Note shall not apply to the remaining part of the activities of the contracts concluded before the year 1382*.

Important note: non-residing foreign juridical persons (article (5) above) have not legal ledger (non-registered branch in Iran) they include article (104) and the rate of with holding tax is 5%.

What are the rates of income tax from real persons in direct taxes act?
According to article (131) of direct taxes act the rates of income tax of real persons, except where separate rates are provided under the present act, shall be as follows:

Annual taxable income			Rates	of the excess over
up to	IRR	30,000,000	15%	--
up to	IRR	100,000,000	20%	IRR 30,000,000
up to	IRR	250,000,000	25%	IRR 100,000,000
up to	IRR	1,000,000,000	30%	IRR 250,000,000
over	IRR	1,000,000,000	35%	IRR 1,000,000,000

How is the tax situation in Iran Free Trade- industrial Zones in Iran?
According to Article (13) of the Law Concerning the Manner of Administering the Free Trade Industrial Zone of the Islamic Republic of Iran, natural persons and legal entities economically active in such areas, are exempt from payment of direct income tax for a period of 15 years, from the date of operation as stated in their license.

What are the legal facilities for investment at free trade & industrial of Iran (Kish, Qeshm, Chahbahar, Jolfa, Anzali, Abadan & Khoramshahr?

Unlimited foreign & domestic participation for investment as desired

Simplified & suitable work procedures

Full guarantee for foreign investment & accrued benefits

Free movement of capital

Minimal administrative formalities for the foreigners. Issuing visa for foreign nationals upon their arrival at the airport

15 years tax exemption for economic activities

Customs duties and commercial charges exemptions for import of raw materials and machineries used in production of goods in the zone

Sale and lease of land for domestic investors and lease of land for foreign in investors

Favorable conditions for foreign and domestic banking operations

Customs duties exemption for the import of goods into the country , made in the free zone based on the added value obtained

Possibility of 100% foreign ownership

Protection of registered trade marks and intellectual property rights

Active management support

Availability of qualified manpower

Other Advantages
Known as the Persian Gulf, the Island has a moderate climate for 8 months of year , sightseeing coastal scenery , recreational and water sports facilities are among a number of attractions, which made Kish an appropriate place for tourism expansion.

What is law-permitting registration of Branches or representative office in Iran?
Law Permitting Registration of Branches or Representative Offices of Foreign Companies Official Gazette No. 15384, dated 17.12.1997 (26.9.1376)
Letter No. Gh- 1592, dated 25.11.1997 (4.9.1376)

Sole Article- The foreign companies which are being considered to be legal corporate bodies in their country of registration, in case of reciprocal treatment by the country governing the said companies, may register their branches or representative offices to carry out businesses determined by the Government of Islamic Republic of Iran within the framework of the prevailing laws and regulations.

Note: The executive regulations of this Law shall be drawn up by the Ministry of Economy and Finance through coordination with other authorities concerned and shall be presented to the Council of Ministers for approval.

The above Law, comprising a Sole Article and one Note was approved by the ICA in the open session of Wednesday November 12, 1997 and was confirmed by the Guardians Council on November 19, 1997.

The Executive By- Laws of the Law Authorizing Registration of Branches or Representative Offices of Foreign Companies in Iran. The Council of Ministers, in the course of a meeting held on March 31, 1999 (11.1.1378) pursuant to a proposal by the Ministry of Economy and Finance and in compliance with the Note appended to the Single Article of the Law ratified in 1997 authorizing registration of branches of representative offices of foreign companies (in Iran), approved the Executive By- laws of the said Law as follows:

Article 1: A foreign company which is known and admitted as a legal company in the country of registration shall be authorized to have its branch or representative office registered in Iran for the activities listed below, by observing the principle of reciprocal action and also with due regard to the requirements intended herein, as well as the other pertinent regulations:

After- sale services for goods and services supplied by the foreign company.
Executive works of the contracts signed between Iranian and foreign companies.
Review and preparation of grounds for investment by foreign company in Iran.
Cooperation with technical and engineering companies in Iran, for performance of works in a third country.
Promotion of Iranian non-oil exports.
Technical and engineering services and transfer of technology and technical know- how to Iran.
Activities legally licensed by Iranian government authorities which are duly authorized to issue such permits, in such areas as transportation, insurance, goods inspection, banking, marketing and the like.

Article 2: A branch office of a foreign company shall be the local office of the principle company, which directly functions and attends to business within the objectives and duties undertaken by the principle company. Therefore, and business activity by such branch office shall be in the name and under the responsibility of the principle office of the company.

Article 3: A foreign company wishing to have registered its branch office in Iran shall provide the Registrar of Companies and Industrial Ownership, with the following information and documents, to be submitted along with a written application:

Company's article of association, notice of incorporation, and the last change(s) registered with competent authorities.
The last confirmed fiscal report of the company.
A feasibility report containing information on the company's activities, by mentioning the reason(s) for registering the branch office in Iran, nature and scope of its authorities and area of activities, as well as the number of Iranian and foreign manpower needed for such activities and the intended source of Rial and foreign currency supply.

Article 4: The representative of a foreign company shall be a natural person or legal entity who, by signing a contract, undertakes the performance in Iran of a certain part of the duties of the head office.

Article 5: Iranian natural persons and juridical entities applying for registration of agent office of a foreign company in Iran shall submit, along with a written application, a Persian translation of the original copies of the following documents. to Register of Companies and Industrial Ownership:

Attested Photostat of the contract to in Article 4 above.
Identity papers of the applicant; for natural persons, a Photostat of their birth certificate together with their legal address, and for juridical entitles, the company's articles of association and the last change(s) made in the company registered with the competent authorities.
A profile of the Applicant's previous business activities, relative to the area(s) of activities intended for the contract signed for registering the representative office in Iran.
The articles of association of the foreign company, notice of establishment and the last change(s) made in the company registered with the competent authorities.
A report on the foreign company's activities, by mentioning the reason (s) for establishing the branch office in Iran.
The last confirmed fiscal report of the foreign company, which intends to open its agent office in Iran.
A letter of introduction from the ministry concerned.

Article 6: Those whose license of activity shall be revoked by the competent authorities shall take the necessary actions through Registrar of Companies & Industrial Ownership, for winding up their branch or representative office, within the period specified for the same purpose.

Note: The companies whose license of activity shall not be extended will be given a period of 6 months to wind up the registered company and proceed with liquidation.

Article 7: The branch office of a foreign company registered and working in Iran shall submit every year to the authorities concerned, a report on their principle company, including their annual fiscal report audities by independent auditors in the country of origin.

Article 8: Natural persons and juridical entities falling under the requirements hereof shall be required to submit a report on their branch office activities in Iran together with audited account statements, within four (4) months starting the end of each fiscal year. As long as the Executive Regulations of Note (4) to the Single Article of the Law approved in 1992, for using the services of specialized and professional accountants known as "Official Accountants" are not ratified, the intended auditing may be handled by accounting organizations and auditing firms whose partners being natural persons are acceptable to the supervisory office of the State Auditn Organization.

Article 9: The branch or representative office of a foreign company registered in Iran pursuant to the regulations set forth herein be operated by one or more natural persons residing in Iran.

Article 10: To enable foreign companies to fully enjoy the benefits and advantages foreseen by this present Regulation and to perpetuate their activities in Iran, foreign companies already operational in Iran prior to the date of entry into force of this Decree, shall be are required to provide the authorities concerned with documents and information required pursuant to Articles 3 and 5 above, and also take the necessary steps for adjusting their statues to the requirements set forth by this regulation.

Iran Historical Review| Iran Calendar| Iran Taxes and Tax laws| Iran company Formation| Iran Labor Laws

Go Back

Homepage | Security Policy | Terms of Service