While the Iranian corporate income tax has a flat rate set at 25%, there is a 0% corporate income tax for foreign investors who invest in certain industries, including mining, services related to construction of hospitals or hotels and tourism-related services. More specifically, investors can use a 100% tax exemption during the first five years. This period can be extended up to 20 years if the investment is located in an industrial park, a special economic zone, a less developed area or a free trade zone in Iran.
Tax exemptions for certain sectors (including mining and provision of various services) in different zones of Iran are granted for the following periods:
Furthermore, income derived from agricultural activities and export of services, non-oil goods and agricultural products is 100% tax exempt while 20% of income derived from export of unprocessed goods is also tax exempt.
Companies with more than 50 employees can extend the duration of the exemption by one year provided they increase the employment volume by 50% in comparison to the previous year.
Additionally, there is also a 50% exemption on the tax rate on income from sale for foreign globally recognised brand name companies manufacturing goods while using Iranian company's capacities and exporting at least 20% of their production. This means that a foreign company is liable to pay only 12.5%, instead of 25% tax of income after the tax exemption period.
Foreign companies can use the custom exemption when they import manufacturing line machines and equipment as well as raw materials used for production of export commodities. An additional advantage is the lack of duties and tax for export.
Iran has more than 35 special economic zones and seven free trade zones, which are located across the country with different availability of resources and in different climates. Free trade zones are located by the Persian Gulf, the Oman Sea in south and the Caspian Sea in north and in the north-east and south east of Iran.
The advantages of free trade zones include the following:
By taking advantage of the above incentives as well as other benefits the Iranian system provides as well as paying particular attention to choosing the proper approach, foreign investors can utilise the attractive promotional programs and maximize their benefit from this developing market.
Ali Najm (firstname.lastname@example.org), Country executive, Eurofast IranTel: +357 22699222
|Corporate Income Tax||25%||A|
|Capital Gains Tax||25%||B|
|Net Operating Losses (years)|
|Royalties from, for example, patents, know-how||3%||7.5%||D|
|Branch Remittance Tax||0%|
A The corporate income tax rate for companies listed on the stock exchange is 22.5%
B No capital gains tax on sale of shares of resident companies (transfer tax is applicable). Capital gains from transfer or real property are taxed with 5% of value of the property per regional value tables.
C No withholding tax on interest paid on government bonds.
D The rate ranges from 5 to 7.5% Royalties paid to non-residents for use of rights in Iran are subject to 5% for manufacturing and government sector and 7.5% for all other royalties. May be reduced under a tax treaty.