DIRECT TAXES ACT Approved on February 22, 1988 (INCLUDING ALL AMENDMENTS up to MARCH 20, 2010)
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University of Economic Sciences DIRECT TAXES ACT Approved on February 22, 1988 (INCLUDING ALL AMENDMENTS UP TO MARCH 20, 2010) (INTEGRATED TEXT) Translated by: Dr. Mohammad Tavakkol Updated and Edited by: Morteza Mollanazar WITH AN INTRODUCTION AND DEFINITION OF DIFFICULT TERMS UNIVERSITY OF ECONOMIC SCIENCES Iranian National Tax Administration Email: [email protected] All rights reserved. Tehran, March 2012 TABLE OF CONTENT 3 Introductory Remarks by the INTA President Undoubtedly, a strong intention exists for the development of the Taxation System in the framework of the Iran's Economic Development Plan and in this way, great, wide and complicated measures are to be taken. One of the basic areas in the realm of the aforementioned measures is the taxation law of the country, which is of significance as the charter for the administration of the tax system. The Direct Taxes Act, in English, is the subject of this Book, which is aimed at the reflection of updating of the Act, and public information dissemination. Its first translation was made to English, based on the Direct Taxation Act approved on February 22, 1988. Its edition and retranslation to English is provided in this Book in a manner that in addition to the translation of the new Articles, amendments made in the Articles of the aforementioned Act are also translated and provided in English: ‐ Making promotional and correctional changes in phrases, words, names and manner of dates indication; ‐ Providing footnotes for tracing the minor amendments made in the Act during the history; ‐ Using expressions for the due adjustment of the text to the international tax dialogue; and ‐ Using the coordinated terminology and structure in a manner to promote the readability of the text. Finally, for his valuable efforts in the translation of the texts of this Act into English, Mr. Morteza Mollanazar, the Head of the Taxation Team in the Directorate General of International Agreements and Relations of the Iranian National Tax Administration is duly thanked. Ali Askari February 8, 2012 PREFACE Table of Contents TITLE A - TAXABLE PERSONS ........................................................................... 1 TITLE B - PROPERTY TAXES .............................................................................. 3 Chapter I - Annual Tax on Real Properties (Articles 3 through 9) deleted. ........ 3 Chapter II - Tax on Unoccupied Residential Immovable Properties (Articles 10 and 11) deleted. ............................................................................................... 3 Chapter III - Tax on Undeveloped Lands (Articles 12 through 16) deleted. ...... 3 Chapter IV - Inheritance Tax ............................................................................... 3 Chapter V - Stamp Duty .................................................................................... 14 TITLE C - INCOME TAX ................................................................................ 19 Chapter I - Real Estate Income Tax ................................................................... 19 Chapter II - Tax on Income from Agriculture ................................................... 31 Chapter III - Tax on Salary Income ................................................................... 33 Chapter IV - Tax on Individual Business Income ............................................. 38 Chapter V - Tax on the Profits of Legal Persons ............................................... 52 Chapter VI - Tax on Incidental Income ............................................................. 62 Chapter VII - Tax on Aggregate Income Derived from Different Sources ....... 65 TITLE D - ON MISCELLANEOUS PROVISIONS .............................................. 67 Chapter I – Exemptions ..................................................................................... 67 Chapter II - Acceptable Expenses and Depreciations ........................................ 79 Chapter III - Tax Indicia and Coefficients ......................................................... 86 Chapter IV - General Provisions ........................................................................ 89 Chapter V - Taxpayers' Duties ........................................................................... 99 Chapter VI - Third Parties' Duties ................................................................... 101 Chapter VII - Tax Incentives and Fines ........................................................... 104 Chapter VIII - Serving of Process .................................................................... 109 PREFACE 5 Chapter IX - Collection of Tax ........................................................................ 112 TITLE E TAX ASSESSMENT ORGANIZATION AND TAX FORA ......... 117 Chapter I - Tax Assessment Authorities and their Duties and Powers ............ 117 Chapter II - Manner of Examination ................................................................ 121 Chapter III - Forum for Settlement of Tax Disputes ........................................ 124 Chapter IV - Supreme Tax Council and its Duties and Powers ....................... 129 Chapter V - High Tax Disciplinary Board and its Duties and Powers ............. 132 Chapter VI - Tax Disciplinary Prosecutor and his Duties and Powers ............ 134 DEFINITIONS ...................................................................................................... 141 6 DIRECT TAXES ACT PREFACE (By Dr. M. Tavakkol for the 2002 Edition) The first edition of the English translation of the Direct Taxes Act, the country's main tax law, was published in February 1988. Since then, the Act was subjected to few alterations, till the amendment of March 2002 that introduced vast changes into the tax law, from considerable amelioration of rates and tax burden to restructuring of the organization of the tax administration. A number of taxes were abolished, several new concepts of modern tax literature found their way into the law and certain exemptions, especially those granted to the public sector, were repealed. The amendment in question includes 133 Articles, each annulling or amending one or more Articles of the previous text of the DTA, or introducing new provisions thereto. Thus, the volume of changes has been very sizeable and the need is felt for revision of the translation published in 1999. This new edition of the English translation of DTA has been prepared and published in response to that demand. The book is structured in the same way as the first edition. A revised list of definitions of difficult terms is added. The difference between the Iranian legal system and that of the Anglo-American nations has resulted in variance of legal concepts and relationships, a factor that would make the conveyance of exact meaning of some terms, by employing the terms used in those countries, quite difficult and in some cases even impossible. Therefore, it was considered appropriate to define such terms and concepts at the end of the translation. An asterisk identifies the defined words and phrases and the reader may refer to the list of definitions in respect of such particular cases. As before, the months, years and dates are given according to the Iranian calendar and the names of months are also in Persian. The corresponding dates in Gregorian calendar can be found under the headings "Iranian PREFACE 7 Calendar" and "Iranian Dates and Years" among the terms defined at the end of the book. As regards the transliteration of certain terms, the Iranian pronunciation of words is reflected, while most of the relevant terms are etymologically derived from Arabic. The words 'diyeh', 'mozarebeh' and 'eddeh' are some examples of this type of transliteration, which would have been presented as 'diya', 'modharaba' and 'idda' if the Arabic pronunciation had to be followed. As in case of the first edition, the only abbreviation used in this book1 is IRR, which stands for "Iranian Rials" (national currency of the country). At the end, we would like to reiterate that this translation is provided as an aid to foreign readers, and the law will, obviously, be interpreted by the competent authorities on basis of the Persian version of the Direct Taxes Act. Meanwhile, any possible errors and shortcomings of the translation are wholly the translator's responsibility. Mohammad Tavakkol 1 2002 edion TITLE A – TAXABLE PERSONS 1 DIRECT TAXES ACT Approved on February 22, 1988 (INCLUDING ALL AMENDMENTS UP TO MARCH 20, 2010) TITLE A - TAXABLE PERSONS Article 1 The following persons shall be liable to taxation: (1) All the owners, whether real or legal persons, with regard to their personal and real estates located in Iran, in view of the provisions of Title B; (2) Every Iranian real person, residing in Iran, on all his incomes derived in Iran or abroad; (3) Every Iranian real person, residing abroad, on all his incomes derived in Iran; (4) Every Iranian legal person on all its profits derived in Iran or abroad; and (5) Every non-Iranian person (whether real or legal) on the incomes or profits derived by such person in Iran, as well as from Iranian sources for granting of licenses or other rights, and or for the provision of trainings and or technical assistance, and for the transfer of cinematograph films (whether the latter income or profit is derived under the title of film prices or screening fees, or under any other titles). Article 21 The following persons shall not be liable to taxes provided in this Act: (1) Government ministries and institutions; (2) Government budgeted