iran insight


A Review of the Iranian Tax System
1. Tax Bases and Rates
The Iranian tax system is divided into two general categories of direct and indirect taxes. The share of direct taxes from the total tax revenues is almost 68% currently. There are two major types of direct taxes including income taxes and property taxes.  Each category of direct taxes, in turn, is divided into sub-parts. Indirect taxes include taxes on imports and Value Added Tax (VAT). Taxes on imports are currently collected by the Iranian Customs and are not within the jurisdiction of INTA. Table 1 briefly shows various types of taxes in the Iranian taxation system

                                                                             Table (1):  The Iranian Tax System

Tax Category

Tax Type

Tax Base



Taxable Income

Taxable Persons

Tax Rates

Direct Taxes

Income Taxes

Real Estate Income Tax

DTA - C/I/52-58

Income of persons derived from transfer of rights in immovable properties situated in Iran, less the exemptions: total rent, less a deduction of 25% for expenses, depreciations, and commitments of the owner in regard to the property.

Owners who have rented their immoveable properties to others


Employment Income Tax

DTA -C/III/82-92

Salaries, wages or any other remuneration received by individuals in respect of their employment services. Payments for works conducted out of Iran, shall be subject to the tax, provided that the payer is an Iranian resident.  


10% for public sector employees and the others 10-35%

Individual Business Income Tax

DTA -C/IV/ 93-104

Unincorporated business activities (aggregate sale of goods and services) less the exemptions provided in the DTA



Corporate Income Tax

DTA -C/V/105-118

Aggregate profits of companies, and the profits from the profit-making activities of other legal persons, derived from sources in Iran or abroad, less the losses from nonexempt sources and minus the provisioned exemptions

Legal Persons


Tax on Incidental Income

DTA -C/VI/11119-131

Income earned ex gratia or through favoritism or as an award.

Real or legal person


Property Taxes

Tax on Transfer of Real Properties

DTA -C/I/59-80

Final transfer of real estates & goodwill shall be subject to taxation at the date of transfer.  

Real or legal person

5% & 2%

Tax on Transfer of Shares

DTA -D/I/143

Nominal value of transfer of shares

Joint Stock Companies and other Companies

0.5% & 4%

Inheritance Tax

DTA -B/IV/17-43

Any estate left from the deceased individual.

Real person


Stamp Duties

DTA -B/5/44-51

Each sheet of check printed by banks (Rls. 200), bill of exchange, promissory notes (0.3%), and other documents and negotiable papers with specified amounts.  


As provisioned in Articles 44-51

Indirect Taxes


Value Added


Value added resulting from the sale of all goods and services and their imports, except 17 items listed in Article 12 of the VAT Act (VATA) as the exempted ones

Real and Legal Persons

6% currently, to be annually increased for 1% up to 8% by the end of the 5thDevelopment Plan


Taxes on Imports

Currently collectible by the Iranian Customs Organization.  

Some of the most important tax rates are as follows:

                                                                     Table (2):  Most Important Tax  Rates

Tax bases


Tax rates

Company Income Tax



Real Persons Income Tax

Rates of the Article 131

Up to IRR 30,000,000


30,000,000 to 100,000,000


100,000,000 to 250,000,000


250,000,000 to 1,000,000,000


Over 1,000,000,000


Public Sector Salaries Income Tax


10% on annual income

Private Sector Salaries Income Tax

Up to IRR 42,000,000

10% on annual income

Over IRR 42,000,000

Rates of Article 131

Rental Income Tax


Rates of Article 131

Transfer Tax



Real properties



0.5% (listed companies' shares)

4% (other companies)

Value Added Tax



  1. Taxation from foreign investors in Iran
    Direct Taxes
    All non-Iranian real or legal entities for the income earned in Iran and also for the income gained through granting of license or other rights, technical and educational assistance or movie contracts in the territory of Iran are subject to taxation. Depending on the type of activity of the foreign investor, various taxes and exemptions are applicable, including profit tax, income tax, property tax, etc.
    Foreign investors in Iran enjoy the same supports and privileges that are offered to the Iranian investors. This means both Iranian and foreign investors pay the same amount of taxes. Tax exemptions and discounts are also equally granted to domestic and foreign investors.
    Since foreign investments are usually active as legal entities, we will hereunder focus on rules and regulations for Corporate Income Tax.

    Corporate Income Tax
    a) General Issues
    Foreign legal entities residing abroad shall be taxed at the flat rate of 25% 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 in Iran.
    The legal entities shall not be subject to any other taxes on the dividends or partnership profits they may receive from the capital recipient companies.
    Legal entities are obligated to, even within the exemption period, submit declaration and profit and loss balance sheets, provided from their official statutory books, maximum four months after the tax year (March 21 each year until March 20 next year)  along with the list of partners and shareholders, their shares and addresses to the tax department within the area of the activity of the legal entity. If these legal entities do not submit the documents within the stipulated time span, the tax exemption will be null and void
  2. b) Exemptions

    The Direct Taxation Law and other pertinent legislations have considered certain exemptions for the legal entities as table (3):

                                                                                                 Table (3):  Highlights of Tax Exemptions


Level  of  Tax Exemption

Duration of   Exemption

Legal Basis

(Act- Article)  

Incentive Type




IDTA- Article 81

Permanent Exemption

Industry and Mining


4 Years

IDTA- Article 132

Tax Holiday

Industry and  Mining  in Less-Developed  Areas


20 Years

IDTA- Article 132; Paragraph B of Article 159 of the 5th Year Development Plan

Tax Holiday




IDTA- Article 132- Note 3

Tax Credit

Export of Services & Non-oil Goods


During 5thDevelopment Plan

IDTA- Article 141

Tax Holiday




IDTA- Article 142

Permanent Exemption

Educational & Sport Services



IDTA- Article 134

Permanent Exemption

Cultural Activities



IDTA- Article 139- Paragraph L

Permanent Exemption

Salary in Less-Developed  Areas



IDTA- Article 92

Tax Credit

All Economic Activities in Free Zones


20 Years

Article 13- the Free Zones Act

Tax Holiday

Profits of Private and Cooperative Companies used for development, reconstruction and renovation of existing industrial and mining units




Paragraph A of Article 159 of the 5th Development Plan, 15% was added to the exemption as of 2010

Tax Credit

  1. c) Deductions
    Expenses which are deductible in the assessment of taxable income are listed in the Direct Taxes Act. These expenditures must be supported to a reasonable degree by documentary evidence and are exclusively connected with the earning of income during the year in question.
    The categories of deductible expenditure are as follows:
    Table (4):  Deductible Expenses

The cost of goods and raw materials

Expenses incurred in the maintenance and upkeep of the premises owned by the enterprise

Personnel costs

Transportation expenses

Rental of enterprise's premises in case of being rented

Expenses related to transportation and entertainment for employees, and warehousing costs

Rent of machinery and equipment

Fees paid in proportion to the services rendered

Costs of fuel, electricity, lighting, water and communication

Interest and fees paid for the carrying out of the enterprise operation

Business insurance

Cost of repair and maintenance of machineries and business equipments

Royalties, duties, rights and taxes paid

Abortive exploration expenditures for deemed mines

Research, development and training expenditure

Membership and subscription fees connected with the business operations

Compensation paid for damages resulted from the business operations

Bad debts, if proved

Cultural, sports and welfare expenditures paid to the Ministry of Labour and Social Affairs in respect of workers

Currency exchange losses computed in accordance with accepted accountancy practice

Reserves against doubtful claims

Normal wastage of production

Losses of legal persons

The reserve related to acceptable expenses of the assessment period

Minor expenses incurred in connection with the rented premises of the enterprise

Expenses for purchasing of books and other cultural and art goods for employees and their dependents

Other expenses that are not referred to in the above Table, but are related to the earning of the enterprise's income, shall be accepted as deductible expenses on basis of the proposal of the INTA and approval of Ministry of Economic Affairs and Finance.

  1. d) Losses
    Losses sustained by all taxpayers engaged in trading and other activities are accepted by the tax authorities; will be carried forward and written off against future profits for a period of three years.
  2. e) Withholding taxes
    Five percent of every contract payment may be withheld by the payer and accounted for to tax authorities. Such a withheld tax constitutes an advance payment of the final tax due.
    ● The payers of salaries are obliged, when paying or allocating the same, to compete and withhold therefrom the applicable taxes and to remit, within thirty days, the deducted amounts together with a list containing the names and addresses of recipients and the amount of the payments, to the local tax assessment office.
  3. f) Depreciation
    Depreciation of assets is deductible in the assessment of taxable income. Depreciation rates range from 5% to 100% and the period over which assets may be depreciated ranges from 2 to 15 years.
  4. 3. Value Added Tax (VAT) in Iran
    The VAT in Iran is levied on the sale of all goods and services and their imports, except 17 items listed in Article 12 of the VAT Act (VATA) as the exempted ones. The VATA, however, does not include the export of goods and services through official Customs gates. Therefore, the taxes paid for the export of goods and services will be refundable by submitting the Customs clearance sheets and valid documents.
    Currently, the VAT rate stands at 6% (VAT rate for two special goods of cigarettes and jet fuel is relatively higher). To reduce the country’s dependency on oil revenue, the Law on the Fifth Five-Year Development Plan provisioned an annual one-percent increase in the VAT rate to put it at 8% at the end of the Plan, i.e. 2016.
    Economic activities in free trade and industrial zones are exempted from the VAT.
  5. Agreements for the Avoidance of Double Taxation
    To facilitate cooperation between Iranian and foreign residents and to promote trade and economic exchanges with foreign countries, the Government of the Islamic Republic of Iran has applicable mutual Agreements for the Avoidance of Double Taxation:

 Table (5):  List of Iran's Applicable Agreements for the Avoidance of Double Taxation  




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