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General
1- The Direct Taxation Act the basis of
which was established in 1967, has undergone
many changes and alterations. The latest
change thereto was passed by the parliament
in March 2003 . This latest amendment to the
Act is probably the most important piece of
legislation in the past two decades
transforming Iran from one of the highest
taxing countries to one of the lowest.
2- The Act deals with taxes on properties,
agricultural activities, salaries,
professions, corporation, incidental and
inheritance taxes. It consists of 273
Articles dealing with the above subjects and
exemptions, depreciation rates and basis,
duties of tax payers and the Taxation
Organisation and the hierarchy of the
taxation system.
3- What is next most important to the Act
itself is the interpretations to the
articles made by Tax Commission and High
Council of Taxation . These are what makes
the taxation system in Iran a rather complex
one. With the new approach adopted by the
Authorities, reflected in the new Act, it is
hoped that there shall be less ambiguity and
complexity in such interpretations.
4- In general every person, real or legal,
is liable to taxes on income earned in Iran.
The applicability of taxes extends to
Iranians earning income from abroad,
Iranians resident abroad earning income in
Iran and foreign persons earning income in
Iran or from Iran on granting of concessions
and rights and provision of training and
technical assistance.
5- Capital gains and losses are added to or
deducted from net taxable income and taxed
accordingly.
6- Taxes payable on business operations in
or with Iran depend both on the types of
operation and also the nature of the
entities carrying them out, as regards the
ascertainment of taxable income.
Income tax
rates
7- The taxable income of companies and other
legal entities, be it Iranian or foreign ,
is subjected to taxation using a flat rate
of 25% irrespective of whether the profit is
distributed or retained or of bearer shares
or registered shares.
8- Investment income in the hand of
recipient is not subjected to any additional
taxes.
9- Income tax payable by companies quoted on
Tehran Stock Exchange is reduced by 10
percent as long as they remain in the list.
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