Taxation in Iran is levied and collected by the Iranian National Tax Administration under the Ministry of Finance and Economic Affairs of the Government of Iran. In 2008, about 55% of the government's budget came from oil and natural gas revenues, the rest from taxes and fees.Iran: Crude price pegged at dlrs 39.6 a barrel under next year's budget Retrieved 30 January 2008 An estimated 50% of Iran's GDP was exempt from taxes in FY 2004. There are virtually millions of people who do not pay taxes in Iran and hence operate outside the formal economy. The fiscal year begins on March 21 and ends on March 20 of the next year.
As part of the Iranian Economic Reform Plan, the government proposed income tax increases on traders in gold, steel, fabrics and other sectors, prompting work stoppages by merchants.
Government's budget
The government can increase its tax revenues 2.5 times by enacting tax reforms. As at 2012, taxes account for 43% of the government's revenues and 7% of Iran's GDP. The Expediency Council's report recommended increasing that share to 15% of the GDP. As of 2014, the share of direct taxes from the total tax revenues was around 70%. Top ten percent earners in Iranian society pay 3% of all income taxes, while in the United States the top 10% pay more than 70% of the total income taxes. Contradicting this, the head of the Majlis Economic Commission says that 85% of Iran's tax revenues “come from barely 3% of taxpayers”.
Tax evasion
According to the Expediency Council, more than 60% of economic activity in Iran avoids or evades taxation: 40% of the economic activity falls under an exemption and the remaining 21% are conducted off-the-books (2012). Iran is losing between $12–20 billion a year through tax avoidance and evasion. However the Iranian National Tax Administration only identified and collected through audit unpaid taxes worth 184 trillion rials ($1.5 billion) in FY 2018. Starting in 2015, Iran's parliament decided to tax Setad and the Islamic Revolutionary Guard Corps.
Tax evaders typically are either involved in activities in the gray sector of economy or in the underground market which they do not divulge. Others are engaged in smuggling and the black market. The loses are equivalent to 20% to 25% of the country's gross domestic product revenue. In 2014, international medias reported Iranian nationals and companies to be listed among the tax evaders in Switzerland and other offshore centers.
In 2019, Iranian tax revenues increased by 35% because of reported taxation evasion crackdown. As of 2021, tax authorities estimated tax cheats are costing the country $4.5 billion a year.
Income tax
There are five categories of income earned by individuals. Each category is taxed separately and has its own computational rules.
Salaries (tax rate for public sector employees: 10%; other sectors: 10-35%);A Review of the Iranian Tax System -2014 . Organization for Investment Economic and Technical Assistance of Iran. Retrieved March 14, 2014. Income from professions, trades, and miscellaneous sources; (More info here) According to the Iranian direct tax rolls article no 84. all employees salary tax rate from the beginning of the 1396 fiscal year is as below:
Every year annual salary exemption from tax will be announce by Iranian tax organization up to this level the salary tax rate is zero.
Up to the 5 times more than annual exemption salary tax rate is 10%.
In excess of above level salary tax rate is 20%.
Incidental or windfall earnings; (More info here) Real estate income (see also under "Real estate tax" section below) Income derived from agriculture (see also under "Tax exemptions" section below)
For taxable income consisting of salary and benefits, employers are required to make the necessary tax deductions from their employees’ payroll and submit them to the tax authorities. However, when calculating taxable income, exemptions and deductions are allowed. As of 2009, only government employees were paying their fair share of income taxes.
Individuals of Iranian nationality resident in Iran are subject to tax on all their income whether earned in Iran or abroad. Foreign nationals working in Iran are also subject to the same income tax based on their salary. Non-resident individuals are liable to pay tax only on their Iranian-sourced income. Foreign employees cannot obtain an exit visa from Iran unless they provide proof that they have paid their due taxes, and since they need to obtain an exit permit when their presence in Iran is based on a work permit, the government can easily enforce this rule. The government assumes a certain salary for employees depending on their position and country of origin. The assumed minimum monthly salaries in 2004 range from US$2,500 for unskilled European workers to US$7,000 for European managing directors.
According to the 131 note of Iranian tax rolls, from the beginning of the 1395 Iranian year tax rates of the individual business income have changed:
up to 500.000.000 IRR is 15%
500.000.000 to 1.000.000.000 IRR is 20%
In excess of 1.000.000.000 IRR is 25%
+Monthly Individual Business Income - Tax Rates Income in IRR Income Tax Rate Up to 40,000,000 (US$160) exemption 40,000,000 to 80,000,000 (US$320) 10% 80,000,000 to 120,000,000 (US$480) 15% 120,000,000 to 180,000,000 (US$720) 20% 180,000,000 to 240,000,000 (US$900)25%240,000,000 to 320,000,000 (US$1200)30%In excess of 320,000,000 (US$1200)35%
Islamic taxes
In addition to these mandatory taxes, as of 2007, Islamic taxes were collected on a voluntary basis. These included an individual's income tax (Arabic khums, “one-fifth”); an alms-tax (zakat), which has a variable rate and benefits charitable causes; and a land tax (kharaj), the rate of which is based on the principle of one-tenth (ushr) of the value of crops, unless the land is tax-exempt.
Al Khums or the Fifth of excess income paid as a form of Zakat (alms-giving), which is usually reserved for Aal-Al-Bayt, Muhammad’s Household. The black turban of Ali Khamenei signifies that he belongs to Imam Ali Ibn Abi Talib and Fatima’s household and being Al Wali Al Faqeeh (guardian of Islamic jurists with full control of the society's affairs) gives him the majority share of the Fifth, as was the case with Ayatollah Khomeini. The amount is worth hundreds of millions of dollars accrued annually and added to Setad’s revenues.
Real estate tax
Rental income is subject to real estate income tax in Iran. A fixed deduction of 25% of the gross income is extended to all taxpayers to account for income-generating expenses. The net income, which is 75% of the gross rent, is then subject to the same rates as in the above table (max. 35%). Rental income is exempted from real estate tax if the property is a residential property leased as such and measures up to 150 sq. m. if it is located in Tehran (up to 200 sq. m. if it is located in other parts of the country).
According to the presented above rate for individual business tax rate: -If the landlord is a company the rental income after deducting 25% as exemption will be-multiply 25% because the income tax rate for companies is 25% -If the landlord is a person rate of calculating tax on rent is as below from the beginning of the 1395 fiscal year:
up to 500.000.000 IRR is 15%
500.000.000 to 1.000.000.000 IRR is 20%
In excess of 1.000.000.000 IRR is 25%
In Iran the transfer of land, not the land itself, is subject to taxation. Transfer of properties: 5% of the transaction value (15% for new buildings).
Capital gains tax As of 2020, Iran has no capital gains tax on the sale of real estate assets.
Capital markets
Starting April 2014, all companies have to report their short-term investments at fair value instead of cost.Iran Investment Monthly . Turquoise Partners, June 2014. Retrieved July 12, 2014. As of July 2010, taxes on TSE transactions were as follows:
Cash dividend: none (22.5% at source from Company).Tehran Stock Exchange: FACT BOOK . Retrieved July 31, 2010 Share transfers: the Tax Amendment has changed the regulations regarding calculation of tax on transfer of shares and their rights in Iranian corporate entities. In the case of shares listed on the Tehran Stock Exchange (TSE) the tax on transfer of such shares and other rights is 0.5 per cent of the sales price. In the case of transfer of the shares and their rights to other corporate entities (i.e. those not listed on the TSE) a flat rate of four per cent of value of the shares and rights transferred applies. No other taxes will be charged. The Amendment has removed the requirement to value the shares in this category.
Exemptions Capital gain: no tax (bonds or equities). Interest income: no tax. Participation papers: Profit and awards accrued are tax exempt. Listed companies: 10% tax exemption, companies holding 20% free loat shares are provided 20% tax exemption. Foreign investors: Foreign investors in TSE are tax-exempt.
Inheritance tax Inheritance taxes are levied at progressive rates depending on the relationship between the deceased and the heir.
Category I: (first degree heirs) parents, spouse, children, grandchildren Category II: (second degree heirs) grandparents, siblings, nieces, nephews Category III: (third degree heirs) uncles, aunts, children of uncles and aunts
According to Article (17) has approved 2015, any estate or property left from an individual, because of his death, whether actual or presumptive, shall be subject to taxation as follows: (1) In respect of bank deposits, partnership bonds and any other negotiable papers, excluding those mentioned under Paragraph (2) of this Article, and their allocated interests, as well as dividends and partners’ shares till the date of registration of transfer to the name of the heirs and or the date when the same is paid and delivered to them, at the rate of 3%; (2) In respect of shares and partners’ shares and their priority rights, at a rate which is 1.5 times higher than the rates stipulated in Note (1) under Articles (143) and (143 bis) of the present Act, as per relevant provisions at the date of registration of transfer to the name of the heirs; (3) In respect of royalties and other properties, as well as financial rights not stipulated in the aforementioned paragraphs, at the rate of 10% of their market value at the date of delivery or registration of transfer to the name of the heirs; 1 In view of Article (2) of the Act Partially Amending the Direct Taxes Act, approved on February 16, 2002, the provisions related to the collection of the Annual Tax on Real estates (subject to the previous text of Articles (3-9), Tax on Unoccupied Residential Immovable Properties (subject to the previous text of Articles (10-11) and Tax on Undeveloped Lands (subject to the previous text of Articles (12-16) were deleted. 2 In view of Paragraph (12) of the Single Article Amending Direct Taxes Act approved on July 22, 2015, provisions concerning the taxation of unoccupied residential units were stipulated through Article (54 bis) annexed to the present Act. 3 Refer to the footnote (1) above. 4 In view of Article (15) of the Act on the Organization and Support of the Production and Supply of Housing, approved on May 14, 2008, a 12 percent tax shall be applied to the transactional value of the undeveloped lands with residential use. 5 Refer to the footnote (1) above. (4) In respect of different types of motor vehicles, whether ground, marine or aerial ones, at a rate of 2% of the price declared by the Iranian National Tax Administration at the date of registration of transfer to the name of the heirs; (5) In respect of real estates and goodwill, at a rate 1.5 times higher than the rates stipulated in Article (59) of this Act, applicable to the transactional value of the real estates for tax purposes, or the market value of the goodwill at the date of registration of transfer to the name of the heirs, as the case may be;
Corporate income tax