Tax provision for foreign investors in Iran – Law Firm In Iran
Marjan Tehrani Legal & Contracts Advisor ForsatMC Law Firm
As a General rule, all non-Iranian real or legal entities for the income earned in Iran are subject to taxation. Foreign legal entities shall be taxed at the flat rate of 25% in respect of the 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.
Likewise, 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 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, the tax exemption will be null and void.
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 according to the direct taxation Law.
The direct taxation Law and the other legislation are considered tax exemptions with rate of 0.0% for the legal entities as table below:
Transfer of Shares Tax (Share Transfer Tax)
Out of each transfer of shares and preemptive rights of shares, a flat rate of 4% of their nominal value will be collected. The tax due from the transfer of any shares and the preemptive rights shall be settled to Iranian National Tax Administration before transferring.
Each transfer of companies’ shares and priority right of shares, whether Iranian or foreign, in the stock exchanges or in the licensed OTC markets, shall be taxed at a flat rate of 0.5% of the sale value of such shares and priority rights of shares, (Article 143(bis), Direct taxes act).
Double Taxation Treaties (DTTs)
Iran is a signatory to a Treaty for the Prevention of Double Taxation with many countries all over the world. DTTs are international treaties regarding income taxes and capital taxes under which state parties agree to avoid double taxation. Therefore, international workers or companies do not have to pay tax twice on the same income.