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Property Taxes

PROPERTY TAXES

1. Transfer Tax

2. Inheritance Tax

3. Stamp Duty

4. Tax on Unoccupied Residential Immovable Properties


1. Transfer Tax


Immovable property

 

The final transfer of real properties, as well as the transfer of goodwill shall be subject to taxation at the time when such transfers take place by the owner of the substance of the property or by the possessor of the right of goodwill. The basis of taxation shall be the taxable value of the real properties (i.e. the transactional value for tax purposes that is to be determined by Real Estates Valuation Committee) and the market price of the goodwill, and the applicable tax rates will be 5% and 2%, respectively (see Art. 59 of DTA)

 

Income derived by real or legal persons from constructing and selling any kind of buildings shall also be subject to the regulations of “Tax on Individual Business Income” and “Tax on the Profits of Legal Persons” (i.e. coporate tax) (see Art. 77 of DTA) unless such buildings are located in cities with a population of less than 100,000 (see Note 4, Art. 77 of DTA). The first transfer of aforementioned constructions shall be subject to tax at an on account rate of 10% on the basis of the transactional value for tax purposes of the transferred property, in addition to the final tax applicable on the transfer of real estates (see Note 1, Art. 77 of DTA). As for real persons, however, the provisions of income tax imposed on constructing and selling buildings shall only be applicable to cases where not more than three years are elapsed from the date of issue of Certificate of Completion of Construction for such buildings (see Note 2, Art. 77 of DTA).

 

Shares, bonds and other securities

 

A flat tax of half percent (0.5%) of the sale value of shares and preemptive rights shall be applied to any transfer of shares and priority rights of shares of companies, whether Iranian or foreign, in the stock exchanges or in the licensed OTC markets, shall be collected and, in this respect, no more tax on the income from the transfer of shares and preemptive rights and value added tax on the purchase and sale shall be claimed (see Art. 143-bis of DTA).

 

Brokers of stock exchanges and OTC markets shall be required to collect the aforesaid tax from the transferor during each transfer and settle it to the account assigned by the Iranian National Tax Administration and within ten days from the transfer date, shall send the relevant receipt along with a list containing the number and amount of shares sold and the preemptive rights so transferred to the local Tax Affairs Office (see the same Art.).

 

Out of each transfer of shares and the partners’ shares, priority rights of shares and the partners’ share in other companies, a flat rate of 4% of their nominal value are collected. No any other payment is due, as the tax on the above mentioned transfers. Transferors of shares, partners’ shares and preemptive rights shall be required to settle the due tax to the Iranian National Tax Administration before the transfer (see Note 1, Art. 143 of DTA). Transferors of shares, partners’ shares and preemptive rights shall be required to settle the due tax to the Iranian National Tax Administration before the transfer (see the same Note). 

 

The flat rate of 0.5% of tax shall be applied to the share premium reserve of the joint stock companies and no any other tax shall be applied to the aforesaid gain. Companies shall be required to settle to the Iranian National Tax Administration Account, the applicable tax, up to the end of the next subsequent month following the date of registration of the capital appreciation (see Note 2, Art. 143).

 


2. Inheritance Tax

Any estate or property left from an individual, because of his death, whether actual or presumptive, shall be subject to taxation as follows (see Art. 17 of DTA):

 

(1) In respect of bank deposits, partnership bonds and any other negotiable papers, excluding those mentioned under Paragraph (2) below, and their allocated interests, as well as dividends and partners’ shares till the date of registration of transfer to the name of the heirs and or the date when the same is paid and delivered to them, at the rate of 3%;

(2) In respect of shares and partners’ shares and their priority rights, at the rates of 6% (if sold in the Commodity Stocks and domestic or foreign stock exchanges, or if sold through OTC transactions of domestic or foreign stock exchanges) and 0.75% (for any transfer of shares and priority rights of shares of companies, whether Iranian or foreign, in the stock exchanges or in the licensed OTC markets), as per relevant provisions at the date of registration of transfer to the name of the heirs;

(3) In respect of royalties and other properties, as well as financial rights not stipulated in the aforementioned paragraphs, at the rate of 10% of their market value at the date of delivery or registration of transfer to the name of the heirs;

(4) In respect of different types of motor vehicles, whether ground, marine or aerial ones, at a rate of 2% of the price declared by the Iranian National Tax Administration at the date of registration of transfer to the name of the heirs;

(5) In respect of real estates and goodwill, at the rates of 7.5% and 3%, respectively, applicable to the transactional value of the real estates for tax purposes, or the market value of the goodwill at the date of registration of transfer to the name of the heirs, as the case may be; and

(6) In respect of properties and assets belonging to an Iranian decedent, located outside of the Country, after deducting the inheritance tax already paid to the State of situs of the decedent’s properties and assets, at the rate of 10% of the value of the inheritance, which formed the basis for inheritance tax assessment at that State. In cases where such properties and assets have not been subject to taxation in that State, the basis of taxation shall be the value on the day of transfer to the name of heirs or delivery to them.

 

The rates stipulated above shall apply to the first-class heirs. In case of the second or third class heirs, the rates of this Article shall respectively be doubled or quadrupled (see Note 2, Art. 17 of DTA).

 

The rights on the lands and built areas of real estates that arise from hire purchase contracts concluded with banks or other financial and credit institutions in regard to the built area and land of such properties, shall be appraised on the basis of transactional value for tax purposes at the date of registration of transfer to the name of the heirs (see Note 5, Art. 17 of DTA).

 

If a property is transferred through vowing or willing to the heirs, it will be taxed at the rates stipulated above and if it is transferred to persons other than the heirs excluding the ministries, government institutions, municipalities, foundations of the Islamic Revolution, or the government companies whose capital is entirely owned by the government, then it will be subject to tax on incidental income (see Art. 38 of DTA).

 

Where the profits of the property are vowed or willed or the profits of the property are transferred through endowment or tying up, then the beneficiaries, excluding the ministries, government institutions, municipalities, foundations of the Islamic Revolution, or the government companies whose capital is entirely owned by the government shall be subject to the income tax in respect of the annual profits (see the same Art.).

 

The bequeathed property shall be subject to taxation after the will finalization upon the death of the testator (see Note of Art. 38 of DTA).

 

Taxable persons

 

The heirs are divided into three classes (see Art. 18 of DTA):

  (a) The first class heirs are the father, mother, wife or husband of the decedent and his/her children and grandchildren;

  (b) The second class heirs are the grandparents as well as the brother and sister of the decedent and their children; and

  (c) The third class heirs are the paternal uncle and aunt and maternal uncle and aunt of the decedent, as well as their children.

 

If the decadent and the heirs are foreign nationals, the decadent’s properties and assets located in Iran shall be subject to taxation at the rates applicable to the first-class heirs (see Note 3, Art. 17 of DTA).

 

Exemptions and personal allowances

 

If any part of the estate of the decedent becomes subject to expropriation on the strength of laws or special verdicts, or it is put gratuitously at the disposal of ministries, government institutions, municipalities, foundations of the Islamic Revolution, or the government companies whose capital is entirely owned by the government, such properties shall be excluded from the application of the Inheritance Tax, upon the certification of those persons (see Art. 21 of DTA). If, however, any consideration is paid against the expropriation of such property, either the value of the consideration or the price of the expropriated property, whichever is lower, shall be considered as a part of the estate subject to the Inheritance Tax (see the same Art.), pursuant to relevant paragraphs mentioned at the top of the present page.

 

The first and second-class heirs of the martyrs of the Islamic Revolution shall not be subject to the inheritance tax with respect to the martyrs’ properties subject to the confirmation of one of the branches of the Armed Forces of the Islamic Republic of Iran or the Martyr Foundation of Islamic Revolution (see Art. 25 of DTA).

 

The decedent’s funeral expenses as the custom and usage may require, and his financial and ritual obligations according to the rules of the religious law, as well as the decedent’s ascertained liabilities shall be deducted from his inheritance value (see Art. 26 of DTA and its Note 1).

 

The following properties are also excluded from the inheritance tax (see Art. 24 of DTA):

 

  (a) Funds relating to retirement pension and surviving pension, service-related savings, termination of employment benefits, claims for dismissal compensation, buying out of services and unused accrued leave, social security payments, as well as the payments made by the insurance or insured institutions or by employers - such as life insurance or by employers- such as life insurance, death compensation, diyeh (i.e. the blood-money or the compensation for intentional / unintentional injury or for murder) and the like - that are paid to the heirs of the decedent as a lump sum or in the form of regular payments;

  (b) Movable properties belonging to persons subject to the paragraph (4) of the Article (39) of the Vienna Convention of 1961, Article (51) of the Vienna Convention of 1963, and paragraph (4) of the Article (38) of the Vienna Convention of 1975, by due regard to the provisions of the said convention and subject to reciprocal treatment;

  (c) Properties endowed, vowed, tied up for the benefit of ministries, government institutions, municipalities, foundations of the Islamic Revolution, or the government companies whose capital is entirely owned by the government, provided that such dedications are confirmed by the said organizations and institutions; and

(d) Household goods and furniture located at the decedent’s domicile.  

 

Tax returns, assessment & payment

The heirs (individually or collectively) or their vali (i.e. the father and grandfather of the children who are under the legal age or are wards), trustee, guardian or legal representative shall file, within one year of the decedent’s death, their tax return with the competent Tax Affairs Office (see Art. 26 of DTA). The tax return shall contain all items of the estate at the death time market prices, including claims and debts and shall have attached any supporting documents required (see the same Art.).

 

The relevant Tax Affairs Office shall be obliged to examine the tax return so filed within the due time limits and act as follows (see the same Art.):

 

  1. If the total market value of the decedent’s estates is less than the decedent’s ascertained liabilities, his financial and ritual obligations and the funeral expenses, then the decedent’s properties and assets shall not be taxed at the rates stipulated above (at the top of the present page)
  2. and the surplus taxes already paid shall be refunded to the payer, provided that it is substantiated by the relevant supporting documents;
  3. If the market value of the decedent’s estate is more than his ascertained liabilities, his financial and ritual obligations and the funeral expenses, then the amounts thereof shall respectively be deducted from the market value of properties and assets pursuant to the regulations stipulated above (at the top of the present page) and the balance of the estate shall be subject to taxation, and the surplus taxes already paid shall be refunded to the payer against relevant supporting documents; and
  4. If the whole or part of the decedent’s estate is not subject to taxation as per the provisions of Paragraphs (a) and (b) above, then the Tax Affairs Office shall be obliged to issue to the concerned authorities the required certificate indicating the permissibility of the registration or transfer or payment or delivery to the heirs of the decedent’s non-taxable properties and assets pursuant to relevant provisions.

 

The administrator in case of endowment, the vower or the person tying up the property in these two latter cases, and the executor in case of a will, are required to draw up a tax return containing the details and values of the properties endowed, tied up, vowed or willed and file the same together with related documents, not later than three months as of the date of conclusion of respective contracts or the testator’s death, as the case may be, to the competent Tax Affairs Office against a receipt. They shall also be obliged to pay the due tax within three months of the expiry date of filing the tax return (see Art. 39 of DTA). 

 

Whenever the subject of endowment, tying up, vowing or willing is among the ministries, government institutions, municipalities, foundations of the Islamic Revolution, or the government companies whose capital is entirely owned by the government, or it is subject to the provisions of Tax on Incidental Income, the bequeather or the administrator, vowing or tying persons or the executor, as the case may be, shall record the particulars of properties subject to endowment, tying up, vowing or willing, and the specifications of beneficiaries, in a form to be prepared by the Iranian National Tax Administration; such persons shall submit it, within three months of the date of conclusion of relevant contracts or of the date of the testator death, to the competent Tax Affairs Office against a receipt (see Note under Art. 39 of DTA).


3. Stamp Duty

An amount of IRR 200 shall be collected as stamp duty against each sheet of check printed by banks at the time of printing (see Art. 44 of DTA).

 

A stamp duty of 0.05% shall be collected in connection with the bills of exchange, promissory notes and documents of similar nature, in proportion with the amount of such documents (The stamp duty of the aforesaid documents in respect of the amounts below IRR 1000 shall be fixed to the duty applicable to IRR 1000) (see Art. 45 of DTA).

 

The stamp duty shall be IRR 5000 with respect to all negotiable commercial instruments issued or negotiated and employed in Iran (except for those stated in the previous paragraph and those related to stocks and partnerships of all Iranian companies excluding cooperative companies) and also with regard to documents denoting title to merchandise such as air and sea bills of lading as well as the merchandise insurance policies (see Art. 46 of DTA). The stamp duty on land bills of lading and passengers statements shall be IRR 1000 (see the same Art.).

 

Transport enterprises shall be responsible for drawing up of bills of lading in a careful manner and should insert correct identity and address of the owner of the merchandise and other relevant information therein; they should keep sufficient copies of such documents for not less than 5 years from the date of issue (see the same Art.).

 

The following documents and papers shall be subject to stamp duties specified as follows (see Note under Art. 46 of DTA):

 

  1. IRR 10,000 on exemption cards issued for individuals exempted, in any forms, from military services;
  2. IRR 50,000 on international driving licenses ;
  3. IRR 200,000 on transit license plates of all kinds of motor vehicles and also for numbering of temporarily imported transport vehicles;
  4. IRR 1,000 on driving licenses of all kinds of motor vehicles per each year of validity of respective licenses;
  5. IRR 1,000 on report cards and diploma certificates of students of primary and junior and senior high schools;
  6. IRR 10,000 on diplomas and diploma certificates of associate s, bachelor s, master s, doctorate and higher degrees;
  7. IRR 20,000 on certificates of educational value of foreign elementary and junior and senior secondary courses of study;
  8. IRR 50,000 on certificates of educational value of foreign technical, vocational and university courses of study;
  9. IRR 20,000 on permits issued to obstetricians and also on diplomas of associate s degree and experimental dentistry;
  10. IRR 100,000 on permits issued to physicians, dentists, paramedics, veterinarians, and pharmacists;
  11. IRR 100,000 for the issuance and IRR 50,000 for the renewal of licenses and identity cards for industrial and mining enterprises, and also for issuing commercial cards and other business permissions (However, the issuance and renewal of licenses for first grade attorneys, second grade attorneys, third grade attorneys, official translators to the judiciary and certified experts shall be subject to stamp duties for IRR 5,000,000, IRR 3,000,000, IRR 2,500,000, IRR 3,000,000 and IRR 3,000,000, respectively; on the strength of the approval of the 15th session of the Working Group of 1393 Budget Bill Combination Commission dated 14/01/2014).

 

The following agreements and similar instruments that are exchanged between banks and their clients or undertaken by the clients shall be subject to a stamp duty of IRR 10,000, provided that they are not registered with notaries public (see Art. 47 of DTA):

 

  (a) The form of acceptance of general conditions of current accounts;

  (b) Loan agreements or the agreements for granting of all kinds of facilities, and also different binding forms and documents that banks get them signed by their clients to sign them upon making transactions;

  (c) Agreements for various types of investment deposits;

  (d) Deeds of power of attorney drawn up in the offices of banks, under which the clients assign their right of signing to other persons;

  (e) Other agreements concluded between banks and their clients, under which the parties undertake commitments and responsibilities with regard to banking affairs;

  (f) Letters of guarantee issued by banks;

  (g) Applications for letters of guarantee, after they are accepted by the bank and guarantees are issued; and

  (h) Applications for letters of credit in favor of domestic or foreign parties, after the acceptance of application by the bank and opening of the credit.

 

Stocks and partnership shares of all Iranian companies referred to in the Commercial Law, except those of cooperative companies, shall be subject to stamp duty at the rate of two per thousand of their face value. Fractions of IRR 100 shall be treated as IRR 100 (see Art. 48 of DTA).

 

The stamp duty of stocks and partnership shares of companies must be paid through cancellation of stamps, within two months from the date of legal incorporation of the company, and in case of capital increase and additional shares from the date of registration of capital increase, with the office of Companies Registrar (see Note under Art. 48 of DTA). Any increase in the capital of the companies that previously decreased their capital shall be exempt from the stamp duty, up to the amount on which the stamp duty has previously been paid (see the same Note.).

 

Whenever the instruments subject to stamp duties are issued in Iran, the drawers have to affix and cancel the stamps applicable thereto (see Art. 49 of DTA). If they are issued abroad, the first person in possession thereof has to take the same measure, before signing them for any purposes, whether for indorsing, negotiating, accepting or paying the amount of such documents (see the same Art.) All institutions or persons negotiating, receiving or paying such instruments in Iran, shall, at any event, be jointly and severally liable for the payment of the stipulated duties (see the same Art.).

 

In case of infringement of the provisions of paying stamp duties, the infringer shall be fined for twice the amount of the chargeable stamp duty plus the payment of the principal thereof (see Art. 51 of DTA).


4. Tax on Unoccupied Residential Immovable Properties


Residential units located in cities with a population exceeding 100,000, which are identified as “Unoccupied” based on the information derived from the National Database of Real Estates and Housing, shall be subject to “real estate income tax” (see the page for “real estate income tax” on this site) as of the second year as follows (see Art. 54-bis of Direct Taxes Act):

  • For the second year: an amount equivalent to one-half of the due real estate income tax;
  • For the third year: an amount equivalent to the due real estate income tax; and
  • For the fourth year onward: an amount equivalent to 1.5 times the due real estate income tax.
Related Pages
A Review of the Iranian Tax System
Corporate Income Tax
Employment Income Tax
Full-Text of VAT Act
Individual Business Income Tax
Letters of Circular
Real Estate Income Tax
Tax on Incidental Income
VAT
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