Direct Taxes Law

Direct Taxes Law

Article 1

The following persons are subject to tax payment:

1. All owners, whether natural persons or legal entities, in respect of their assets or properties located in Iran, in accordance with the provisions of Book Two.
2. Any Iranian natural person resident in Iran, in respect of all income earned in Iran or outside Iran.
3. Any Iranian natural person resident outside Iran, in respect of all income earned in Iran.
4. Any Iranian legal entity, in respect of all income earned in Iran or outside Iran.
5. Any non Iranian person, whether a natural person or legal entity, in respect of income earned in Iran, and also in respect of income earned from Iran through the assignment of concessions or other rights, the provision of training and technical assistance, or the assignment of motion pictures, whether received as consideration, screening fees, or under any other title.

Book One: Taxable Persons

Article 2

The following persons are not subject to the taxes provided under this Law:

1. Ministries and governmental institutions.
2. Bodies whose budgets are funded by the Government.
3. Municipalities and rural councils.

Note

This Article applies from the date of establishment of rural councils. Taxes that were due to and collected by rural councils prior to the effective date of this Law are not subject to the exemption. Foundations and institutions of the Islamic Revolution that have exemption authorization issued by Imam Khomeini or the Supreme Leader are also exempt.

Note 1

Companies whose capital is wholly or partially owned by the persons and institutions listed above shall not be covered by this Article with respect to their share of income or profit. This Note does not prevent such companies from benefiting from other exemptions provided in this Law, where applicable.

Note 2

Income derived from economic activities, including industrial, mining, commercial, service, and other productive activities, earned by the persons covered under this Article, even if earned other than through a company, shall, in each case separately, be taxed at the rate set forth in Article 105 of this Law. In such cases, the officials in charge of administration are required to perform the relevant obligations under this Law with respect to the share of such activity. Otherwise, they shall be jointly liable with the taxpayer for payment of the relevant tax.

Note 3

The tax exemption under this Article, for cases authorized by Imam Khomeini or the Supreme Leader, is based on the determination of the Supreme Leader.

Article 2

The following persons are not subject to the taxes provided under this Law:

1. Ministries and governmental institutions, bodies whose budgets are funded by the Government, municipalities, and institutions affiliated with the Government and municipalities that have been established under laws in a form other than a company.
2. The Iranian Red Crescent Society, the Social Security Organization, retirement savings funds, Islamic seminaries, Jame’e al Imam al Sadeq (AS), and Islamic Revolution institutions, as long as the income of the Endowment Development Fund is spent on endowment development and on covering the costs of the Hajj and Endowments Organization and charitable affairs. Determination of Islamic seminaries is entrusted to the Management Council of the Qom Seminary, and determination of Revolution institutions is entrusted to the Council of Ministers.
3. Public endowments whose income, in accordance with Islamic rules, is spent on purposes such as Islamic propagation, cultural, scientific, religious, technical and research activities, inventions, discoveries, education and training, health, construction, repair and maintenance of mosques, prayer halls, Islamic schools, mourning ceremonies and charitable meals, restoration of historical monuments, development and public works, assistance to the disadvantaged and victims of floods, earthquakes, fires, war, and other unforeseeable incidents, provided that such income and expenditure are certified by the Hajj and Endowments Organization and charitable affairs.
4. Registered public benefit institutions whose income is, under their statutes, spent on the purposes stated in item 3, as well as professional associations formed under special laws, provided that their income and expenses are supervised by the Supreme Leader or the Supreme Leader’s representative, the Government, or municipalities.
5. Religious associations or boards related to religious minorities are recognized in the Constitution, provided that their official status is approved by the Ministry of Interior and their income and expenses are confirmed by the Hajj and Endowments Organization and the Ministry of Charitable Affairs.

Note 1

Companies whose capital is wholly or partially owned by the persons and institutions listed above shall not be covered by this Article with respect to their share of income or profit. This Note does not prevent such companies from benefiting from other exemptions provided in this Law, where applicable.

Note 2

Any portion of the income of endowments referenced in item 3 that accrues to individuals shall not be covered by the exemption applicable to endowments.

Note 3

Any portion of income of the endowments, public benefit institutions, and associations referenced in items 3, 4, and 5 that is not allocated to the prescribed purposes within three years after the end of the fiscal year shall be taxable under relevant regulations, unless the necessity of retaining such amounts beyond that period is confirmed by the Hajj and Endowments Organization and charitable affairs or other supervisory authorities, as applicable.

Note 4

The executive bylaw related to this Article shall be prepared by the Ministries of Economic Affairs and Finance, Interior, and Culture and Islamic Guidance, and shall be implemented after approval by the Council of Ministers.

Note 5

In any fiscal year where the conditions and procedures prescribed in this Article and its executive bylaw are not observed, the tax exemption provided for the persons mentioned in items 3, 4, and 5 shall not apply for that year, and their income for that year shall be taxable under the relevant regulations.

Book Two: Wealth Tax

Chapter One: Annual Property Tax

Article 3

All owners, whether natural persons or legal entities, with respect to the aggregate value of their properties and, where applicable, the properties of their dependent children, including residential and other properties located within the boundaries of cities and townships, excluding one residential unit of a natural person, whether a house or apartment at the owner’s choice, shall be subject to annual tax as follows:

1. Up to IRR 20,000,000: exempt.
2. Up to IRR 40,000,000: 2 percent on the excess over IRR 20,000,000.
3. Up to IRR 60,000,000: 3 percent on the excess over IRR 40,000,000.
4. Up to IRR 80,000,000: 4 percent on the excess over IRR 60,000,000.
5. Up to IRR 100,000,000: 6 percent on the excess over IRR 80,000,000.
6. Over IRR 100,000,000: 8 percent on the excess.

Property values shall be calculated based on the transaction value referred to in Article 64 of this Law. For purposes of determining annual tax, the value of trees shall not be included.

Note 1

Villa, summer, and winter residences in general, and properties located on the Caspian Sea coastline, excluding the above residential unit, which are located outside the boundaries of cities and townships, shall be subject to the provisions of this Chapter.

Note 2

Properties belonging to companies whose capital is wholly or partially owned by the Government, in proportion to the Government’s share, properties belonging to housing cooperatives allocated for members’ housing, and properties belonging to embassies subject to reciprocity, are exempt from the tax under this Chapter.

Note 3

Where a property has been purchased or constructed using individual bank facilities or loans from Qard al Hasan funds, the owner’s outstanding debt to the bank or such funds, up to an amount equal to the transaction value of the property, shall be deducted from the value of the property.

Article 4

Properties used for industrial, agricultural, and livestock production, and for cultural, educational, sports, health, medical, care of persons with disabilities, hotels, motels, guesthouses, cinemas, theaters, film dubbing institutions, as well as organizational housing for workers and employees, cold storage facilities, and properties whose owners have been prohibited from transacting by judicial orders, or where, for reasons certified by competent governmental authorities or Revolution institutions, exploitation is beyond the owner’s capacity, or where use is granted free of charge to the persons and institutions mentioned in Article 2, shall not be subject to the tax under this Chapter for as long as such conditions exist.

Article 5

Where ownership of a property is transferred, the transferred property shall not be subject to the tax under this Chapter in the year of transfer.

Article 6

Properties for which building permits are issued after the enforcement of this Law, and that are completed within the prescribed or extended period in the permit, shall be exempt from the tax under this Chapter from the date of issuance of the building permit until two years after the year of completion, based on certification by the competent authority. This rule also applies to properties for which permits were issued prior to the above date, provided that completion occurs within one year from the enforcement date or within the permit period, whichever is longer.

Note

Residential units leased for residence in accordance with government determined rules and through a formal deed shall be exempt from the tax under this Chapter during the lease term. The executive bylaw for this Note shall be proposed jointly by the Ministry of Housing and Urban Development and the Ministry of Economic Affairs and Finance and approved by the Council of Ministers.

Article 7

All natural persons and legal entities, or their legal successors, are required each year to prepare a tax return for their properties and, where applicable, the properties of their dependent children located in Iran and subject to this Chapter, according to the form prepared by the Ministry of Economic Affairs and Finance, and submit it, together with copies of ownership documents, by the end of Ordibehesht of the following year to the tax office of their legal domicile or place of residence, and pay the relevant tax. If they own property outside the jurisdiction of such a tax office, they must also submit a copy of the return to the tax office in whose jurisdiction the property is located.

Article 8

The tax assessor of the taxpayer’s legal domicile or place of residence is required to examine submitted returns and, where the properties are outside the jurisdiction, to determine and claim the relevant tax after obtaining the property value from the competent tax office. If no return is submitted, the assessor must identify, evaluate, determine, and claim the due tax.

Article 9

The assessor of the tax office in whose jurisdiction the properties are located must review copies of the returns submitted by owners residing outside that jurisdiction, evaluate the properties listed therein, and report the results to the tax office of the owners’ legal domicile or residence. Where owners fail to submit the required copy on time, the assessor must report the specifications and value of such properties, if aware of the owners’ domicile or residence, to the relevant tax office, and otherwise to the central tax registry.

Chapter Two: Tax on Vacant Residential Properties

Article 10

Where residential properties located in provincial capitals and cities with a population of more than one hundred thousand are ready for lease but, without legal impediment, are kept vacant and unused for more than six consecutive months, they shall, after the expiration of such six months, be subject to tax as follows:

1. Up to one year: two per thousand of the transaction value of the property for each month.
2. Beyond one year: four per thousand of the transaction value of the property for each additional month beyond the said one year.

Note

If the vacancy is due to reasons beyond the owner’s control, the property shall be exempt from the tax under this Chapter for the relevant period.

Article 11

Taxpayers subject to this Chapter are required to file an annual tax return for their vacant residential properties, according to the form prepared by the Ministry of Economic Affairs and Finance, and submit it by the end of Ordibehesht of the following year to the tax office in whose jurisdiction the property is located, and pay the due tax. If no return is submitted, the assessor must identify, determine, and claim the tax.

Note 1

Where two or more vacant residential properties subject to this Chapter fall within the jurisdiction of one tax office, the owner may submit one return for all of them.

Note 2

If the owner keeps only their sole residence vacant, that property shall not be subject to the tax under this Chapter.

Chapter Three: Tax on Uncultivated Lands

Article 12

All uncultivated lands located within city limits that remain uncultivated without a justified excuse are subject to annual tax as follows:

1. Lands kept uncultivated for up to 2 years from the enforcement date: 2% of the value for each year.
2. Lands kept uncultivated for up to four years: four percent of the value for each additional year beyond the said two years.
3. Lands kept uncultivated for more than four years: five percent of the value for each additional year beyond the said four years.

Article 13

Owners of uncultivated lands subject to this Chapter must file an annual tax return for each plot, according to the form prepared by the Ministry of Economic Affairs and Finance, and submit it by the end of Ordibehesht of the following year to the tax office in whose jurisdiction the land is located, and pay the due tax as provided in this section. If no return is submitted, the assessor must identify, determine, and claim the tax.

Note 1

Where two or more plots of uncultivated land are within one tax jurisdiction, the owner may submit one return for all plots.

Note 2

For purposes of this Law, “uncultivated land” shall have the definition provided in the Urban Lands Law.

Article 14

The value of uncultivated lands shall be determined based on the transaction value referred to in Article 64 of this Law and shall form the basis for tax calculation.

Article 15

Where uncultivated lands, as certified by competent authorities, cease to fall within the foregoing definition, they shall not be subject to this Chapter from the year of such change.

Article 16

Owners of uncultivated lands for which competent authorities issue permits for construction or development shall be exempt from the relevant tax from the date of permit issuance until the end of the period specified therein, and, if extended, until the end of the extended period, provided that construction is completed or development is carried out within the prescribed periods as certified by competent authorities.

Note 1

If, after applying for a construction or development permit, issuance is not possible due to reasons beyond the owner’s control and such reasons are confirmed by the competent authority, the owner shall be exempt from the tax from the application date until the reasons are removed, except where issuance is legally prohibited.

Note 2

Owners who declare readiness to sell their uncultivated lands to the Ministry of Housing and Urban Development and, as certified by the Ministry, take the necessary measures, shall be exempt from the relevant tax from the date of such declaration. This Note also applies if the Ministry declines to purchase the land.

Note 3

A person who, together with their dependents, lacks suitable housing but owns one or more plots of uncultivated land shall not be subject to the tax under this Chapter up to the threshold set in the Urban Lands Law adopted on September 13, 1987. Amounts above the threshold shall be taxable. Where this exemption applies, the local tax office must report the details of the land to the central tax registry.

Note 4

Uncultivated lands belonging to companies whose capital is wholly or partially owned by the Government, in proportion to the Government’s share, uncultivated lands belonging to housing cooperatives allocated for members, and uncultivated lands belonging to embassies subject to reciprocity, are exempt from the tax under this Chapter.

Note 5

Where transfer of ownership is involuntary, the transferee of uncultivated lands shall not be subject to the tax under this Chapter until reaching twenty years of age.

Note 6

Uncultivated lands where the owner is prohibited from transacting, or where, for reasons certified by competent governmental authorities or Revolution institutions, exploitation is beyond the owner’s capacity, or where the lands fall within municipal plans, as well as lands where, due to ownership disputes raised by the Hajj and Endowments Organization, the Government, municipalities, or their affiliated institutions, the owners are prohibited from intervention by certification of the competent authorities, shall not be subject to the tax under this Chapter for as long as such conditions exist.

Frequently Asked Questions about the Direct Taxes Law