Tax and Customs Issues

What is income tax rate for legal entities in Iran?

The income tax rate for legal entities in Iran is 25 percent of the income liable to tax (article 105 of Direct Tax Act).

Is the tax rate similar for any companies including Iranian and foreign companies?

Tax rate for any types of company including Iranian and foreign companies (branches and representatives) is 25 percent. This rate is the same for all companies.

Are branches and representatives of foreigncompanies that are only engaged in marketing operations and information collection for holding companies outside Iran also subject of income tax payment?

No, branches and representatives of companies and foreign banks without transaction rights, that only perform marketing and collect economic information in Iran for holding company and receive money from holding company for their expenses will not be subject of income tax law for that income (note 2, article 107 of Direct Tax Act).

What is the tax calculation procedure for foreign shipping and airline companies’ incomes?

The tax for the foreign shipping and airline companies for their passenger and cargo fright charge or such incomes in Iran is five percent of any amounts they receive for such services, regardless of the collection place- received in Iran, in destination or in the route (article 113 of Direct Tax Act).

Are incomes gained by technology transfer contracts such as know-how, technical and engineering services, license and royalty rights and such subject of tax payment?

Yes, income gained by transferring royalties, rights and such credits in those contracts which can be considered as income source for foreign persons will be subject of tax payment in 20 to 40 percent of the total amounts received by those persons within one tax year. Their tax rate is 25 percent (note 2, article 105, clause B, Article 107 of Direct Tax Act).

What is the procedure of receiving tax from contractor contracts?

The income liable to contractor tax of foreign contractors in Iran is a proportion of the operations for any construction, technical and installation work including preparation and mounting those items, transportation, preparation of buildings and installations designs, drawing, surveying supervision, technical calculations, presenting technical instructions and aids, know-how transfer and other services in all cases in 12% of total annual amounts they received (clause A, article 107 of Direct Tax Act). For contractor operations in which, ministry, institutes, governmental companies or municipalities serve as employer, the portion of the amount of contract which is consumed for purchasing equipment and facilities through local or foreign purchase, provided the amount of the equipment and devices have been already printed separated from other items of the contract in the contract or its subsequent addendums and appendixes, will be exempted from income tax (note 2, article 107 of Direct Tax Act). Of course, by virtue of note 5 of article 107 of the same law, income liable to tax for activities subject of clause A, article 107 the contractor agreement of which is concluded from March 2003 and on will be assessed from legal account books in view of provisions of article 106.

How is the method of calculating the income liable to tax and rate exercised in the projects which are performed in building, operation and transfer (BOT) template?

Assessing foreign investors’ income who invest in Iran via concluding BOT contracts is carried out through investigating their legal books and is claimed after deducting acceptable expenses, by exercising the fixed rate of 25 percent. (Articles 105 and 106 of Direct Tax Act).

What is the procedure of calculating foreign experts’ salary tax?

The salary income tax rate is the same for Iranian and foreign workers.

How much is the stocks transfer tax for companies enlisted in Securities Exchange Organization (SEO)?

A net tax of half a percent sale value of the stocks or priority in stocks transfer in SEO is assessed as stock transfer and priority [tax payment] rates (note 1, article 143 of Direct Tax Act).

How much is the tax rate for transfer of other companies’ stocks?

Of each transfer of stocks and equity share, priority rights of stocks and the equity of shareholders, a fixed tax of 4 percent of the nominal value of stocks is collected (note 2, article 143 of Direct Tax Act).

What is goods arrival duty?

The total customs rights and the commercial profit is called arrival duty. The customs duty is equal to 4 percent of customs value of goods. Commercial profit is printed in the annual exports and imports regulations by the council of ministers.

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