Legal and Juridical Relations for the Investment Protection

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Tax Act

Taxable persons

Taxable persons
Article1: The following persons shall be liable to taxation:

  1. All the owners, whether real or legal persons, with regard to their personal and real estates located in Iran, in view of the provisions of Title B;
  2. Every Iranian real person, residing in Iran, on all his incomes derived in Iran or abroad;
  3. Every Iranian real person, residing abroad, on all his incomes derived in Iran;
  4. Every Iranian legal person on all its profits derived in Iran or abroad; and
  5. Every non-Iranian person (whether real or legal) on the incomes or profits derived by such person in Iran, as well as from Iranian sources for granting of licenses or other rights, and or for the provision of trainings and or technical assistance, and for the transfer of cinematograph films (whether the latter income or profit is derived under the title of film prices or screening fees, or under any other titles).

Tax on Income from Agriculture
Article 81: The income derived from all activities in the field of agriculture; animal rearing; stockbreeding; fish farming; bee-keeping; poultry husbandry; hunting and fishing; sericulture; revival of pastures and forests, horticulture of any type and palm trees, is exempt from payment of taxes.

The government is obligated to undertake appropriate studies and investigations on all agricultural operations and on those branches of such activities in respect of which the tax exemption status is to be continued, and to prepare the relevant bill of law not later than the end of the term of the Third Economic, Social and Cultural Development Plan of the Islamic Republic of Iran and submit the same to the Islamic Consultative Assembly.

Tax on Salary Income
Article 82: The income of a real person employed by another (real or legal) person, that is derived against services rendered by him with regard to his occupation in Iran, whether on the basis of the time spent or the work done, and whether paid in cash or noncash form, shall be subject to tax on Salary Income.

Note: Salary income derived from Iranian sources by individuals during their mission abroad (remitted either by the government of the Islamic Republic of Iran or by persons residing in Iran) shall be subject to Tax on Salary Income.

Article 84: The annual income tax exemption from one or more sources of taxable salary, is determined each year in the annual budget Act.

Article 85: Staff salaries and non-government income tax rate in excess of the amount specified in Article (84) of the Act and up to seven times annual taxable ten percent (10%) than its surplus twenty percent(20 %).

Article 86: The payers of salaries are obligated, when paying or allocating the same, to compute and withhold therefrom the applicable taxes in view of Article 85 of this Act and to remit By the end of next month, the deducted amounts, together with a list containing the amount of salaries, names and addresses of recipients, to the local Tax Affairs Office. In subsequent months, the changes of the list should only be reported.

Tax Exemptions

Article 91: The salary income shall be exempt from taxation in the following cases:
  1. Heads and members of foreign diplomatic missions in Iran and heads and members of the extraordinary delegations of foreign states with regard to the salary income received by them from their superior governments subject to reciprocal treatment, and the heads and members of delegations of the United Nations Organization and its specialized agencies in Iran in respect of the salary income received by them from the said organization and agencies, provided that they are not nationals of the Islamic Republic of Iran;
  2. Heads and members of foreign consular missions in Iran and the staff of the cultural institutions of foreign states with regard to the salary income received by them from their respective governments, subject to reciprocal treatment;
  3. Foreign experts sent to Iran with the consent of the government of the Islamic Republic of Iran under technical, economic, scientific and cultural gratuitous assistance programs of foreign states or international institutions, with regard to the salaries received by such experts from their respective governments or the said international institutions;
  4. Local employees of the Islamic Republic of Iran's embassies, consulates and missions abroad in connection with the salary income received by them from the government of the Islamic Republic of Iran, provided that they are not citizens of the Islamic Republic of Iran, and subject to reciprocal treatment;
  5. Retirement pension, survivors pension, regular annuities, termination of employment payments, dismissal compensation, payments for buying-out of services, pensions and annuities paid to the heirs, service term allowance and the salary of the period of unused leave payable to salary receivers at the time of becoming retired or disabled, unused vacation and severance pay and compensation
  6. Service-related travel expenditure and allowance.
  7. Accommodation provided on site of the factory or workshop for the benefit of workers and low price employer- provided houses outside the factory or workshop that are used by workers.
  8. Compensation received from insurers with regard to physical injury, medical treatment, and the like;
  9. New Year bonus or year-end bonus up to one twelfth of the tax exemption envisaged under Article 84 of this Act.
  10. Employer-provided houses put at the disposal of civil servants by virtue of a legal permission or according to special regulations.
  11. Payments made by the employer, directly or through the relevant employee, to a physician or hospital for the treatment of his employees and persons who are dependent on them, where such payments are substantiated by demonstrative evidence and documents;
  12. Non-cash benefits paid to employees up to two twelfths of tax exemption of Article 84 of this Act at maximum.
  13. Salary income of the members of the armed forces of the Islamic Republic of Iran, whether belonging to the military or disciplinary branches, and the salary of employees subject to the employment law of the Intelligence Ministry, and the salary income of invalids of Islamic revolution and imposed war and released prisoners of war.

Tax on the Profits of Legal Persons
Article 105: The aggregate profits of companies, and the profits from the profit-making activities of other legal 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 twenty-five percent (25%), except the cases for which separate rates are provided under this Act.

Note 2: Foreign legal persons and enterprises residing abroad, except those subject to Note 5 of Article 109 or Article 113 of this Act, 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 with regard to the profit received by such persons and enterprises from Iran for granting of licenses and other rights, or for transfer of technology or provision of training and technical assistance and cinematograph 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 profit they may derive under any titles in their own account.

Note 3: At the time of assessment of the Tax on Profits of Legal Persons, whether Iranian or foreign, the prepaid 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 legal, 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 in view of to the enacted laws some payments other than the profit tax are to be collected on the basis of taxable profit, the tax of relevant taxpayers shall be computed at prescribed rates after deduction of such nontax payments.

Article 106: Taxable income of legal entities (except for earnings in accordance with the provisions of the Act otherwise required to detect it is) on The profitability of activities and the provisions of Article (94) and (95) and (97) of the Act and its provisions will be determined

Tax on Aggregate Income

The tax rate on income of natural persons except in accordance with the provisions of this Act is a separate rate is as follows:
Article 131: The tax rate on income of natural persons except in accordance with the provisions of this Act is a separate rate is as follows:

  1. The amount of five hundred million (500,000,000) Rials annual taxable income at the rate of fifteen percent (15%)
  2. Surplus than five hundred million (500,000,000) the amount of one billion Rials (1000.000.000) annual taxable income at the rate of twenty percent (20%)
  3. Compared to a surplus of one billion (1000.000.000) Rials annual taxable income at the rate of twenty-five percent (25%)

Exemptions
Article 132: Declared income from manufacturing and non-manufacturing plants or mineral mining legal entities of the date of implementation of this provision of the exploitation license issued by the ministries concerned for their extraction and sale or contract entered into as well as revenues of hospital services, hotels, and the people the stay of tourists centers Remember that the stated date of the relevant regulatory authorities for their exploitation license or permit issued from the start date or mining operations or activities for five years and in less developed regions for ten years the zero rate is tax.

Note 2: The executive regulations of this material and its provisions within six months after the notification law by the Ministries of Finance and Industry, Mine and Trade in collaboration with the National Tax Administration prepared and approved by the Cabinet

Article 138 (blis) Those who have the cash to fund projects and initiatives and working capital in the form of contracts to provide manufacturing enterprises, at least expected profit of Money and Credit Council approved contracts are exempt from paying income tax and profit for the payer, of interest payment shall be considered as an acceptable cost of the tax

Note 1: The use of the exemption under this article up to two years can withdraw cash from manufacturing firms. The decrease in cash, to the value of the exemption is used, cash withdrawal tax year, will be added.

Note 2: Recognition of the use of cash to finance the realization of design projects or working capital related to tax affairs office area

Article 141:
One hundred percent (100%) of the proceeds from the export of non-oil goods and services and agricultural and twenty percent (20%) of export earnings. Raw materials are taxed at a zero rate. List of raw materials and petroleum-based products jointly by the Ministries of Economic Affairs and Finance, Industry, Mines and trade and oil and Chamber of Commerce, Industry, Mines and Agriculture is approved by the Cabinet.

Article 143: Ten percent of the Tax on Income derived from the selling of commodities accepted and sold in the Commodity Stocks, and ten percent(10%) of the Tax on Profits of companies listed in the domestic or foreign stock exchanges, and five present (5%) of the Tax on Profits of companies listed for OTC transactions of domestic or foreign stock exchanges, shall be rebated after the approval of the Stock Exchange Organization as of the year of enlistment until the year they are unlisted from the stock exchange. The abovementioned exemptions shall be doubled for companies listed in the domestic or foreign stock exchanges or OTC markets of domestic or foreign stock exchanges, provided that at the end of the fiscal period, and based upon the approval of the Stock Exchange Organization, they have at least twenty percent (20%) of free floating shares.

Note 1:Out of each transfer of shares and the partners shares, priority rights of shares and the partners' share in other companies, a flat rate of four percent(4%) of their nominal value are collected. No any other payment is due, as the tax on the abovementioned transfers. Transferors of shares, partners' shares and preemptive rights shall be required to settle the due tax to the Iranian National Tax Administration before the transfer.

Note 2:The flat rate of half percent(0.5%) of tax shall be applied to the share premium reserve of the joint stock companies and no any other tax shall be applied on the aforesaid gain. Companies shall be required to settle to the Iranian National Tax Administration Account, the applicable tax, at the end of next month of the registration of the capital appreciation.

Article 143 (bis):A flat tax of half percent (0.5%) of the sale value of shares and preemptive rights shall be applied on any transfer of shares and priority rights of shares of companies, whether Iranian or foreign, in the stock exchanges or in the licensed OTC markets, shall be collected and, in this respect, no more tax on the income from the transfer of shares and preemptive rights and value added tax on the purchase and sale shall be claimed.