Iran Corporate Tax Guide 2026

Overview — Corporate Taxation in Iran

The Iranian corporate tax system is governed by the Direct Tax Law (قانون مالیات‌های مستقیم), as amended. Resident companies are taxed on their worldwide income, while non-resident companies are taxed only on Iranian-source income. A company is considered tax resident in Iran if it is incorporated under Iranian law or has its place of effective management in Iran. The corporate tax rate of 25% applies to all resident companies, with certain exceptions noted below. The tax year is the Iranian calendar year, though companies may apply to adopt a different fiscal year.

Corporate Tax Rate — 25%

The standard corporate income tax rate in Iran is 25% of taxable profits. Key features:

• The 25% rate applies to all resident legal entities (joint stock companies, LLCs, etc.)
• Taxable profit is calculated as accounting profit before tax, adjusted for non-deductible expenses, exempt income, and special allowances
• No surtax, no alternative minimum tax
• Withholding tax on dividends paid to resident shareholders is generally 0%
• Branch profits of foreign companies are taxed at the same 25% rate

Tax-Exempt Entities and Reduced Rates

Certain entities and activities benefit from reduced rates or full exemptions:

• Cooperative companies (شرکت‌های تعاونی): Subject to a reduced rate. The standard 25% rate is reduced by a percentage depending on the cooperative's activities and the number of members. Some cooperatives may qualify for full exemption on a portion of their income
• Agricultural activities: Income from agricultural, animal husbandry, fishing, and forestry activities is generally exempt from corporate tax for both corporate and individual taxpayers
• Export activities: Export income may qualify for partial tax exemption under the Export Promotion Law, subject to annual budget law provisions
• Educational and cultural institutions: Non-profit educational and cultural institutions may be exempt on their non-commercial income
• Charitable and religious organisations: Exempt on their primary activity income

Depreciation and Capital Allowances

Iranian tax law allows depreciation on fixed assets used in business operations. The declining balance method is most commonly used, with the following annual rates:

• Buildings: 5–10% (depending on construction type)
• Plant and machinery: 10–20%
• Office equipment and furniture: 20%
• Computer hardware and software: 33%
• Vehicles: 25–30%
• Intangible assets (goodwill, patents): Amortised over useful life, generally 10–20 years

Depreciation is calculated from the date the asset is put into use. Iranian tax law does not generally allow for accelerated depreciation, though certain industries (e.g., manufacturing) may apply for special depreciation schedules.

Thin Capitalisation Rules

Iran has thin capitalisation rules (قواعد سرمایه‌سازی نازک) that limit interest deductibility on related-party debt. Key provisions:

• Interest paid on loans from related parties (shareholders, affiliates) is non-deductible if the debt-to-equity ratio exceeds 2:1
• Interest on excessive debt is recharacterised as a dividend distribution
• These rules apply to both domestic and cross-border related-party debt
• Arm's length interest rates must also be applied to related-party loans

Transfer Pricing

Iran's transfer pricing (قیمت‌گذاری انتقالی) rules are still developing. The Direct Tax Law includes general provisions requiring that related-party transactions be conducted at arm's length prices. Key points:

• Iran has formally adopted the arm's length principle in its tax legislation
• Detailed transfer pricing documentation regulations were introduced in phases from 2020 onward
• Taxpayers with related-party transactions exceeding specified thresholds must maintain transfer pricing documentation
• The INTA has the authority to adjust prices and make secondary adjustments
• Iran does not yet have Country-by-Country Reporting (CbCR) requirements, though adoption is under consideration
• Transfer pricing audits are increasing, particularly for multinational groups operating in Iran

Branch Profits of Foreign Companies

Foreign companies operating in Iran through a branch or permanent establishment are subject to corporate tax at the standard 25% rate on Iranian-source profits attributable to the PE. Key considerations:

• Branch profits are taxed at 25% (no separate branch remittance tax)
• Repatriation of branch profits may be subject to withholding at 0–5% depending on tax treaty
• Branches must file annual tax returns and maintain separate Iranian books

Loss Carryforward and Group Taxation

Tax losses can be carried forward for up to 5 years from the year the loss is incurred. No carryback is permitted. There is no group taxation or consolidation regime in Iran — each legal entity is taxed separately.

FAQs

What is the effective corporate tax rate in Iran?

The statutory rate is 25%. The effective rate may be lower due to exemptions (agricultural, export, cooperative) and deductions (depreciation, interest). For most companies, the effective rate is close to the statutory rate.

Are foreign companies required to have a tax representative in Iran?

Yes, foreign companies with a taxable presence in Iran must appoint a tax representative (نماینده مالیاتی) who is resident in Iran and responsible for tax compliance. The representative may also be required to maintain books and records.

Can a foreign company set up a subsidiary in Iran?

Yes, foreign investors can establish various legal entities including joint stock companies (سهامی خاص) and LLCs (شرکت با مسئولیت محدود). The process requires registration with the Companies Registration Office and obtaining a tax identification number.

Are there any tax incentives for manufacturing in Iran?

Yes, manufacturing activities may qualify for tax incentives under the Law on Attraction and Protection of Foreign Investment (LAPFI) and the Production Support Law, including partial tax holidays and reduced rates for investments in less-developed regions.

Disclaimer

This guide provides general information about Iranian corporate tax for the 2026 tax year (1405 Iranian calendar). Tax laws and rates may change. Always consult with a qualified Iranian tax advisor (مشاور مالیاتی) or the INTA directly for advice specific to your business. InvestmentKit does not provide tax advice.