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Real Estate Income Tax

Real Estate Income Tax

The income of real or legal persons derived from the transfer of rights in real properties situated in Iran, less the exemptions granted under Direct Taxes Act, shall be subject to Real State Income Tax (see Art. 52 of DTA).

Taxable persons

The taxable persons are owners (real or legal persons) who have rented their real properties to other persons (see the same Art.).

In case of the mortgage in possession, the mortgagor shall be subject to taxation according to the provisions stipulated below (see Art. 53 of DTA).

Taxable income

The taxable income of the leased real property consists of the total rent, whether in cash or otherwise, less a deduction of 25% to cover expenses, depreciations, and commitments of the owner, with regard to the leased property (see Art. 53 of DTA).

The taxable income in respect of the first hand lease of real properties that are endowed or tied up shall also be computed on basis of the above-mentioned method (see the same Art.).

Where the lessor is not the owner of the leased property, his taxable income shall be the difference between the rents that he receives and pays in connection with the same leasehold (see Art. 55 of DTA).

For the purposes of rental income taxation, each apartment unit shall be deemed as a separate real estate (see Note 3 under Art. 53 of DTA).

Where some furnishings or machineries are leased in conjunction with a real property, the rental income attributable to such fittings and machinery shall be included as a part of the income of the property, and shall be taxed under the present regulations (see Note 4 under Art. 53 of DTA).

Additions made by the lessee, in conformity with the lease agreement, to the leased property for the benefit of the lessor shall be appraised on the basis of taxable value of the date of delivery of the same to the lessor, and 50% thereof shall be treated as a part of taxable rental income of the year of delivery (see Note 5 under Art. 53 of DTA).

The expenses that are to be borne, under the law or the agreement, by the landlord, but are made by the tenant, as well as the expenses undertaken by the tenant in conformity with the terms of lease agreement, while customarily are to be paid by the landlord, shall be appraised at the price of the date of occurrence of such expenses, and will be added, as non-cash rent, to the sum of the rental income of the year in which such expenditures are made (see Note 6 under Art. 53 of DTA).

If the owner of any built areas created over a leased land lets the property, wholly or partially, the rental paid by him for the land, in proportion to the estate he lets, shall be deducted from the rental he receives, and the balance will be taxed (see Note 7 under Art. 53 of DTA).

Where the residential units belonging to housing companies are delivered to buyers according to ordinary agreements, but not yet being transferred in a final manner, and this situation is approvable by demonstrative documents and records, such properties shall not be deemed to be leaseholds as long as they are in possession of the buyers (see Note 10 under Art. 53 of DTA). In these cases, the buyer shall be treated, for tax purposes, as owner, provided that the tax on final transfer of the property, as applicable at the date of possession, is paid in view of relevant regulations (see the same Note).  

The owners of residential complexes with more than three leased units that are or will be constructed, in conformity with the consumption model of housing, as declared by the Ministry of Housing and Urban Development, shall be exempt during the term of lease, from 100% of the tax on the income from lease of properties (see Note 11 under Art. 53 of DTA).  In other cases, the income of a person from the lease of residential unit(s) shall be exempt from taxation up to a total acreage of 150 square meters of useful built area for the units in Tehran and up to 200 square meters in other places (see the same Note).  

Personal deductions, allowances and credits

The rule of this tax category shall not govern in respect of the employer-provided houses belonging to legal persons, provided that their taxes are assessed on basis of statutory books of accounts (see Art. 53 of DTA).

The real estates that are put, free of charge, at the disposal of the government organizations and institutions shall not be considered as leaseholds (see Note 2 under Art. 53 of DTA).

If the owner sells his dwelling place and a respite is granted to him, under the relevant transfer deed, for evacuation of the same without payment of rental, then the property shall not be deemed as leasehold up to six months, if it is occupied by the transferor during such period of respite, unless it is proved, on account of some documents and instruments, that a rental is being paid (see Note 8 under Art. 53 of DTA). The same rule is applicable in case of optional sale as long as the sold property remains at the disposal of the seller by virtue of the conditions of the transaction (see the same Art.).

The annual taxable rental income of individuals with no other source of income shall be exempted from taxation up to the level of the annual basic allowance, and the balance thereof shall be subject to taxation; however, the retirement pension, survivors’ pension, bonuses and interests received on bank deposits shall not be deemed as income (see Art. 57 of DTA). The rule of this provision shall not apply in respect of minor children who are under the guardianship of their fathers (see Note 1 under Art. 57 of DTA).


The real estate income tax to be paid by individuals will be calculated at the rates stipulated in Article (131) of Direct Taxes Act ranging from 15 to 25 percent (see Table below):

Table (1): General Individual Tax Rates

Annual Taxable Income (in IRR)


Up to 500,000,000


Exceeding 500,000,000 to 1,000,000,000


Exceeding 1,000,000,000


As for legal persons, however, a flat rate of 25% shall apply (see Art. 105 of DTA).

Tax returns, assessment & payment

The taxpayers subject to the real estate income tax are required to submit their tax returns together with related documents to the Tax Affairs Office of the district where the property is situated, and to pay the applicable tax in conformity with the relevant regulations. The said measures are to be taken up to the end of end of Tir (July 20 or 21) of the following year (see Art. 80 of DTA).

The rental income shall be determined based on official or unofficial contracts; however, the amounts included in the Similar Properties Schedule shall form the basis for the assessment of the rental income in the following cases: absence of such contract; refraining from the submission of the contract; the rental mentioned in the contract is less than 80% of the rentals provisioned in the Similar Properties Schedule, determined and announced by the Iranian National Tax Administration (see Art. 54 of DTA).

In cases where the tenant is one of ministries, government institutions and companies, establishments whose budget is wholly or partially financed by the government, foundations of the Islamic Revolution, municipalities and their affiliated companies and firms, on any other legal persons, the rental paid by that tenant shall form the basis for the assessment of the rental income (see Note 1 under Art. 54 of DTA).

In the event of later discovery of demonstrative documents and instruments, which shows that the actual rental income exceeds the amount constituting the base of assessment of taxable income, the difference in the tax due shall be collectible in view of the provisions of this Act (see Note 2 under Art. 54 of DTA). If the taxpayer makes a complaint against such a tax, then the Tax Dispute Settlement Authorities referred to in the present Act shall settle the issue (see the same Note).

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
Property Taxes
Tax on Incidental Income
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