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Information presented in this booklet is intended for general use and may change without prior notice. For up-to-date and detailed data, please consult your legal adviser .
First edition 1995 
Second edition 1997
Published by :

In February of 1988, the Iranian Parliament passed a new Law of Direct Taxation. In April of 1992, it amended the said law mainly to harmonize it with the requirements of more recent economic policies. Foreigners interested in investing or working in the Islamic Republic of Iran, should be informed of the highlights of this legislation. 







What are the various types of direct taxes?

According to the Law of Direct Taxation, there is s direct tax on real property, undeveloped land, inheritance, income earned from agricultural activities, salary, professions, corporations, incidental income, and aggregate income acquired through various sources. However, depending on specific cases, exemptions and discounts are also available. 



Who is liable to pay taxes in Iran? 

1. Companies and all legal entities of Iranian nationality, with respect to all income earned in Iran or abroad. 
2. Every natural person of Iranian nationality residing in Iran, with respect to income earned in Iran or abroad. 
3. Every natural person of Iranian nationality residing abroad, with respect to all income earned in Iran. 
4. Any non-Iranian natural person or legal entity with respect to income earned in Iran, as well as income gathered through the transfer of a license or right, provision of training and technical assistance, and royalties on movie films.



What type of tax facilities are provided to non-Iranians investing in Iran ? 

According to Article 3 of the Law Concerning the Attraction and Protection of Foreign Investment, all capital invested in Iran and the profits that accrue therefrom, shall be subject to government protection. All rights, tax exemptions, and facilities accorded to domestic and private productive enterprises, are also available to foreign capital and corporations. 




What are the most important tax exemptions?

Articles 132 of the law of Direct Taxation specify the major tax exemptions are as follows: income earned by productive enterprise and mining units which have obtained an establishment license, or an identification card from the Ministry of industry, Ministry of Mines and Metals or the Ministry of Jihad-e-Sazandegi, shall be exempt from taxation for a period of eight, six, or four years from the commencement date of their operation . If such units are developed in deprived regions of Iran, an equivalent of half of the aforementioned periods of tax exemptions shall be added to their legal period of tax exemption. In addition, 20 percent of taxable income earned from manufacturing, mining which have or will receive an operating license from the said ministries, are exempt from taxation. One hundred percent of income earned through the export of finished industrial goods, and 50 percent of income gained from the export of other items and goods, shall be exempt from taxation. income earned from all agricultural activities, farming, animal husbandry, fisheries and the like are also exempt from taxation. in addition to the above cases, other exemptions and tax breaks have been outlined in the Law of Direct Taxation. Ministries, governmental organizations, municipalities, some public Utility institutions, cultural, religious and scientific foundations are also exempt from taxation. 




How are corporate taxes calculated?

An initial 10 percent of the total taxable income of companies and other legal entities, earned from various sources in Iran or abroad, is deducted as a corporation tax, and the remainder is calculated on the basis of rates set by Article 131 of the Law of Direct Taxation. Non-commercial Iranian legal entities and companies whose shares are offered on the stock exchange market, shall be exempt from the 10 percent corporation tax . The rates set by Article 131 which begin at 12 percent of the annual taxable income and rise to 54 percent, are as follows

 Up to Rials. 1,000,000
 annual taxable income
 Up TO Rials. 2,500,000
 Annual taxable income
On sums in excess
of Rials. 1,000,000
 Up TO Rials. 4,000,000
 Annual taxable income
On sums in excess
of Rials. 2,500,000
 Up TO Rials. 9,000,000
 Annual taxable income
On sums in excess
of Rials. 4,000,000
 Up TO Rials.25,000,000
 Annual taxable income
On sums in excess
of Rials. 9,000,000
 Up TO Rials. 50,000,000
 Annual taxable income
On sums in excess
of Rials. 25,000,000
 Up TO Rials. 100,000,000
 Annual taxable income
On sums in excess
of Rials. 50,000,000
 Up TO Rials. 100,000,000
 Annual taxable income
On sums in excess of
of Rials. 100,000,000
 On sums in excess of




What is the situation of foreign companies operating in Iran, concerning taxes?

According to Article 105 of the Law of Direct Taxation, foreign legal entities must pay taxes on all taxable income earned through investments in Iran or from direct or indirect (through agents, branch offices, etc.) activities, assignment of their royalties or other rights, or by providing training and technical assistance in Iran, at the rates stated in Article 131. Nevertheless, direct taxes on income earned by foreign airlines and shipping companies through transporting passengers and cargo from Iran, is a flat rate of five percent on all sums received from these activities in Iran, en route, or at the final destination. Where the tax applying to the income of the Iranian exceeds five percent of the fare collected, the Ministry of Economic Affairs and Finance shall be required, upon notification by the Iranian entity concerned, to increase the tax rate applying to the income of the airline and shipping companies of the said country, to the amount of tax collected in that country . 




Are there any other flat rate taxes ?

Yes. Taxable income of foreign contractors in Iran, active in areas such as construction, technical installations, transportation, designing plans for buildings and installations, topographical surveying , drawing, supervision and technical calculations, is a flat rate of 12 percent of their annual receipts in all instances. With respect to contracting work performed by foreigners, when the employers are ministries, governmental organizations and companies or municipalities, the portion of the contract price utilized on the purchase of supplies and equipment received from abroad, is exempt from the payment of income tax. The taxable income of foreign legal entities earned by the assignment of their royalties and other rights, provision of technical training and ceding of movie films ( earned as price, screening rights, or otherwise), depending on the case, shall be from 20 to 90 percent of the total sum acquired by the the entity within one fiscal year. The rate set for each case is determined according to the regulations approved by the Council of Ministers. When training and technical assistance is provided to governmental organizations, the scale of payment of the taxable income of the entity concerned may be set at lower than 20 percent. Foreign insurance companies which earn their profit through reinsurance may be subject to a tax at the rate of two percent of the premium collected and the interest accrued from their deposits in Iran. In cases where Iranian insurance companies acting in the country of citizenship of the foreign reinsurance company, are exempt from payment of taxes on reinsurance activities, the foreign establishments shall also be exempted from payment of taxes to the Iranian government 




What type of tax incentives are there for invest   and activities in the Free Trade-Industrial Zones in Iran? 

According to Article 13 of the Law Concerning the Manner of Administering the Free Trade - Industrial Zones 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.





Are there safeguards against being retaxed in the law of Direct Taxation? 

In order to prevent double taxation, the government of Iran has signed agreements with Germany and France. Also under the rules of reciprocity, airlines and shipping companies of certain countries are exempt from taxation on income earned in Iran, by carrying passengers and cargo.





Are the activities of agents of foreign companies in Iran also taxable?

Branches and agencies of foreign companies which have been registered according to the relevant regulations in iran, and by virtue of their articles of association are not authorized to engage in profitable activities but can do marketing and collect economic Information, are not liable to any taxation on the sums received from the mother company as a revolving fund. However, if it is proven that the said branches and agencies are engaged in profitable activities in iran and are acquiring an income therefrom, the sums earned shall be subject to taxation according to the respective regulations.




What regulations are taxes on salaries of foreigners working in Iran subject to? 

In principle, issuance of a permit to leave Iran, or extension of a residence permit or work permit for expatriates, except for those who are exempt from the payment of taxes, shall be subject to the submission of a tax clearance certificate on salary received. the taxable Income earned as salary, consists of the salary ( wages, or the basic salary) and fringe benefits related to the job, be it temporary or permanent after deducting exemptions determined by the law. The value of non-pecuniary benefits such as housing, private auto mobiles and the like, put at the disposal of salaried individuals, are calculated and added to the salary paid to them.