Iran Personal Income Tax Guide 2026

Overview — Iranian Tax Administration

The Iranian National Tax Administration (INTA, سازمان امور مالیاتی کشور) administers all direct taxes. Every taxpayer is assigned a Tax Identification Number (TIN, شناسه ملی). Iran operates a self-assessment system for self-employed individuals and businesses, while salaried employees have tax withheld by their employer under the PAYE system. The tax year is the Iranian calendar year (۱ فروردین to ۲۹ اسفند). Tax returns must be filed within three months of the end of the tax year (by 20 June). Iranian tax residents are taxed on worldwide income, while non-residents are taxed only on Iranian-source income. Tax residency is determined by physical presence (183+ days) or having a permanent home in Iran.

Progressive IIT Rates — 7 Brackets (0% to 35%)

Iran applies a progressive rate structure to the total taxable income of individuals. The brackets are adjusted periodically for inflation. For the 2026 tax year (1405 Iranian calendar), the approximate brackets and rates are:

• 0% (Exempt): Annual income up to approximately IRR 1,200,000,000 (exemption threshold)
• 10%: Next portion of income above the exemption threshold
• 15%: Next bracket
• 20%: Next bracket
• 25%: Next bracket
• 30%: Next bracket
• 35%: Income above the highest bracket ceiling

The exact bracket ceilings are announced annually by the INTA. The exemption threshold is adjusted each year to account for inflation. Agricultural income, certain handicraft income, and export income may qualify for partial or full exemptions.

PAYE System (Employer Withholding)

Under the PAYE (کسر مالیات از حقوق) system, employers are required to:

• Calculate the monthly tax due on each employee's gross salary after applying the annual exemption on a pro-rata basis
• Withhold the tax before paying the net salary
• Remit the withheld tax to the INTA within 30 days of the end of each month
• Provide employees with an annual tax certificate (گواهی مالیات) showing gross salary, deductions, and tax withheld

Employees earning below the monthly equivalent of the annual exemption threshold are not subject to withholding. Employees must still file an annual tax return if they have multiple income sources or wish to claim deductions and refunds.

Tax Deductions and Allowances

The Direct Tax Law allows the following deductions from taxable income:

• Life insurance premiums: Premiums paid on life insurance policies for the taxpayer, spouse, and dependants are deductible up to specified limits (typically 25% of taxable income capped at a fixed amount)
• Housing savings: Contributions to official housing savings schemes (e.g., Mehr housing accounts) are deductible up to a ceiling
• Charitable contributions: Donations to approved charitable organisations (خیریه‌های مجاز) are deductible up to 10% of taxable income
• Medical expenses: Certain out-of-pocket medical costs for the taxpayer and dependants may be deductible
• Educational expenses: Tuition fees for approved educational institutions may qualify for limited deduction

These deductions are subject to annual ceilings announced by the INTA and require supporting documentation.

Income Categories Under Direct Tax Law

The Direct Tax Law classifies income into several categories, each with specific rules:

• Employment income (درآمد حقوق): Subject to PAYE withholding, aggregated and taxed at progressive rates
• Self-employment/business income (درآمد مشاغل): Net profit after deductible business expenses, taxed at progressive rates. Presumptive taxation may apply for small businesses
• Professional income (درآمد اصناف): Bazaar merchants, tradespeople, and professionals — taxed on a presumptive or actual basis
• Rental income (درآمد اجاره): Net rental income after allowable deductions, taxed at progressive rates
• Agricultural income (درآمد کشاورزی): Generally exempt or subject to reduced rates
• Capital gains (سود سرمایه): Taxed as ordinary income at IIT rates (no separate CGT)

Social Insurance Contributions

Iran's social insurance system (سازمان تأمین اجتماعی) covers pensions, health insurance, and unemployment benefits:

• Employee contribution: 7% of gross salary
• Employer contribution: 20–23% of gross salary (varies by industry and risk category)
• Total combined rate: Approximately 27–30%
• Self-employed: May contribute voluntarily at reduced rates for basic coverage

Social insurance contributions are deductible for corporate tax purposes (employer portion) and reduce the employee's taxable income base for IIT purposes.

Filing Requirements

Iranian tax residents must file an annual tax return (اظهارنامه مالیاتی) by 20 June following the end of the Iranian tax year (20 March). Filing is done electronically through the INTA's online portal (سامانه سازمان امور مالیاتی). Key points:

• All individuals with taxable income exceeding the exemption threshold must file
• Employers file annual PAYE summaries (لیست حقوق) for all employees
• Late filing penalties range from 30% to 100% of the tax due, depending on delay
• Tax assessments can be challenged through the Tax Dispute Resolution Committees (هیأت‌های حل اختلاف مالیاتی)

Legal Framework — Direct Tax Law (1988, Amended)

The primary legislation governing personal income tax is the Direct Tax Law (قانون مالیات‌های مستقیم), originally enacted in 1988 (1367 Iranian calendar). Major amendments include:

• 2002 reform: Introduction of the modern progressive rate structure and PAYE system
• 2015 reform: Revised exemption thresholds, tightened anti-avoidance rules, and introduced e-filing
• 2020 amendments: Enhanced digital compliance, expanded presumptive taxation for businesses
• 2024–25 updates: Inflation-adjusted brackets, increased deduction limits

The Direct Tax Law is supplemented by annual budget laws (قانون بودجه) which may introduce temporary tax measures or adjust thresholds.

FAQs

What is the annual exemption threshold for IIT in 2026?

The annual exemption threshold is approximately IRR 1,200,000,000 for the 1405 tax year (2026–27), subject to final confirmation by the INTA. Income below this level is taxed at 0%.

Are married couples taxed jointly?

Iran does not have joint filing. Each individual files separately. However, certain deductions (e.g., life insurance for spouse) can be claimed by the primary earner.

Can I file my tax return in English?

The INTA online portal is in Persian (Farsi). Tax returns must generally be filed in Persian as well. Foreign taxpayers may need assistance from a local tax accountant (مشاور مالیاتی).

How are foreign taxes on foreign income treated?

Iran provides a foreign tax credit (اعتبار مالیاتی خارجی) for income taxes paid abroad on foreign-source income, limited to the Iranian tax attributable to that income. Double tax treaties may reduce or eliminate Iranian tax on certain types of foreign income. Iran has a limited number of DTTs in force.

Disclaimer

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