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Administrative By-Law of Article (107) of the Amended Direct Taxes Act

Islamic Republic of Iran

President

Approval Made by the Council of Ministers

 

Reg. No.: H52882T/32336

Reg. Date: June 8, 2016

 

Addressed at:

Ministry of Economic Affairs and Finance and Ministry of Petroleum

 

The Council of Ministers approved as follows the Administrative By-Law of Article (107) of Direct Taxes Act, in its session of June 1, 2016, upon the proposal made by the Ministry of Economic Affairs and Finance under No. 200/3348/40000 on May 29, 2016 and on the strength of Article (107) of the Amended Direct Taxes Act approved in 2015:

 

Administrative By-Law of Article (107) of the Amended Direct Taxes Act

 

Article (1):

In this By-law, the following terms shall mean as described below:

  1. “Income in Iran” refers to the income derived for their activities in Iran by nonresident foreign real or legal persons ; 
  2. “Income from Iran” refers to the income derived without any activities in Iran, by nonresident foreign real or legal persons
  3. “Nonresident foreign persons” refers to real or legal persons who are not resident of Iran.
  4. “Other rights” refers to the rights that nonresident foreign real or legal persons, transfer the authority for their use and such rights are used and exploited in Iran, including also the right to use and exploit properties and assets, demurrage for containers, registered  right, patents for invention and copyright  for scientific documents; and
  5. “Act” refers to the Direct Taxes Act and its subsequent amendments. 

 

Article (2):

The coefficients to be used in assessing the taxable income of foreign persons who are resident out of Iran in respect of the income they derived for their activities in Iran are hereby determined as follows:

 

 

Row

 

Type of Activity

Taxable Income for Gross Amounts Received

 

Remarks

 

 

 

 

 

1

A) Contract-based activities and technical services in Iran in respect of operating in any types of road works and constructional activities, development, exploitation, supervision and designing buildings and installations, surveying, drawing and technical calculations;

 

B) Contract-based activities and technical services, exploration, development and exploitation of upstream hydrocarbon fields; and

 

C) Income from contract work for supplies and equipments in cases where the price of such supplies and equipments has not been included in the contact as separate from other items.

20%

 

 

 

 

 

 

15%

 

 

 

10%

 

 

 

 

 

 

 

 

 

---

 

 

2

A) Cargo and passenger transportation through railways or roads from Iran to destinations abroad; and

 

B) Railway, road, water and air transportation within Iran.

20%

 

 

 

18%

Waged activity: 25%

of the amounts received

3

Education, training and technical assistance.

15%

---

 

4

Income derived from exploiting investments on economic activities in Iran except for cases mentioned in items above.

20%

 

---

5

Medical diagnostic and treatment services.

30%

---

6

Other services.

30%

---

 

Note (1): Incomes derived from service provision activities such as education, training, technical assistance and other services as well as medical diagnostic and treatment services where the place of service provision is out of Iran are not considered as “income in Iran” or “income from Iran”. Services which are not delivered in person but are provided to Iran through electronic systems and the like are considered as “delivery of services in Iran”.

 

Note (2): In upstream oil and gas contracts concluded by the Ministry of Petroleum (i.e. its subsidiary companies) with foreign contractors, if the foreign contractor wholly or partially subcontracts the subject of contract to third parties as operators or second-hand contractor, then the amounts so paid to second-hand contractors shall be deducted from the taxable income of the original contractor and the balance shall be subject to the rate mentioned in Section (B) under Row (1) of the Table above in order to assess his taxable income; however, when the sub-contractor is a foreign legal person, then the deduction of amounts paid to such a subcontractor shall be authorized if the taxes pursuant to Article (107) of the Act on payments made to the sub-contractor have already been withheld and collected.

 

Article (3):

The coefficients to be used in assessing the taxable income of foreign persons who are resident out of Iran in respect of income they derive from Iran without any activities in Iran are hereby determined as follows:

 

Row

 

Type of Activity

Taxable Income for Gross Amounts Received

 

1

Designing buildings and installments, surveying, drawing, supervision and technical calculations.

20%

 

 

 

2

Granting their licenses and other rights to:

 

A) Owners of manufacturing and mineral enterprises providing that the licenses and rights in question are exclusively related to manufacturing and mineral activities;

 

B) Ministries, organizations, government enterprises, and municipalities;

 

C) Other entities.

 

 

20%

 

 

 

 

20%

 

 

30%

3

Transfer of cinematograph films whether the income or profit is derived under the title of film prices or screening fees, or under any other titles.

 

20%

 

 

Article (4):

In contracts (whether first hand or second hand contracts), if the price of the supplies and equipments is not separated from the contract total price, then that total price shall be subject to tax pursuant to Article (107) of the Act. If, however, the price of the supplies and equipments is separated from the contract total price through subsequent amended or annexed contracts, then the relevant exemption of the supplies and equipments shall be applicable in respect of the payments made after the conclusion of those amended or annexed contracts.

 

Article (5):

Those making payments shall be required to withhold the applicable tax by taking into account the payments made from the beginning of the year up to the date of each relevant payment. They should remit the withheld amounts, up to the end of the next subsequent month, to the relevant Tax Affairs Office. Otherwise, the above-said payers and the receivers shall be jointly and severally liable for the payment of the basic tax and the fines related thereto.

 

Article (6):

In cases where the persons subject to the provisions of this By-Law have agencies in Iran, the agency shall be required, as per Note (2) under Article (177) of the Act, to file the tax return of such persons and to pay the applicable tax after deducting the taxes already paid pursuant to Article (5) of this By-Law in accordance with the provisions of Article (107) of the Act.

 

Article (7):

If the activities subject to this By-Law are performed in Iran through the agencies, such as branches, representatives, brokers and the like, then the taxable income of foreign persons resident out of Iran shall be determined as per the provisions of Note (4) under Article (107) of the Act. The rule of this provision shall not apply to contracts which are directly concluded by the original foreign company (central office) but their coordination affairs are made by the agencies.

 

Note: Branches and representatives of foreign companies in Iran shall be obliged to observe the provisions related to withholding and collecting the withholding taxes and the salary income tax of their employees in respect of the activity which is the subject of the original company in Iran.

 

Article (8):

In cases where there are other provisions, as per Direct Taxes Act and relevant regulations, for assessing the taxable income or the applicable tax of activities [of foreign persons who are resident out of Iran], those relevant provisions, as the case may be, shall be taken into consideration.  

 

Article (9):

All persons referred to in the preamble of Article (107) of the Act who have paid the applicable taxes for the income they derive in Iran or from Iran or such taxes have been paid on their behalf as per the provisions of this by-Law, shall not be subject to any other taxes pursuant to this Act.

 

 

Article (10):

In partnership contracts concluded between foreign persons resident out of Iran and Iranian persons, the taxable income of foreign persons shall be assessed in proportion to their share of partnership with due regards to the provisions of this By-Law whereas the taxable income of the Iranian persons shall be assessed as per the provisions of Articles (94) and (106) of the Act. In such a case, the payers shall only be obliged to withhold the applicable tax relevant to payments made to foreign persons and are required to remit the same to the account of the Iranian National Tax Administration with due regard to relevant rules and regulations.

 

Signed by:

Ishaq Jahangiri 

Vice-President of the Islamic Republic of Iran

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