Iran Rental Income Guide

rental income taxation in Iran for 2026. The guide covers: the progressive IIT rate of 0-35% on the net rental income; the standard 25% deduction for expenses; the property tax registration certificate requirement; the notarial lease registration; the rental contract stamp duty of 0.5%; and the non-resident landlord withholding tax of 25-35% on the gross rent.

Taxation of Rental Income

IIT progressive rates — 0 to 35%: The rental income is classified as "income from real estate" (the "درآمد املاک" — the "property income") under the Iranian Individual Income Tax (IIT). The net rental income is subject to the progressive tax rates ranging from 0% to 35%, depending on the taxpayer's total annual income bracket.
2026 tax brackets (IRR): Income up to IRR 1,000,000,000: 0% (exempt). Income from IRR 1,000,000,001 to IRR 3,000,000,000: 15%. Income from IRR 3,000,000,001 to IRR 6,000,000,000: 20%. Income from IRR 6,000,000,001 to IRR 12,000,000,000: 25%. Income above IRR 12,000,000,000: 35%.
Net rental income: The tax is calculated on the net rental income (the gross rent minus the allowed deductions). The rental income from the residential and the commercial properties is treated the same for the tax purposes.

Standard 25% Deduction for Expenses

Automatic 25% deduction: The landlord may claim a standard deduction of 25% of the gross rental income to cover the expenses (the "هزینههای نگهداری و استهلاک" — the "maintenance and depreciation costs"). The 25% deduction is a flat-rate allowance and does NOT require the actual expense receipts.
Actual expenses alternative: The landlord may elect to deduct the actual expenses instead of the standard 25% deduction. The actual expenses may include the property maintenance, the repairs, the insurance, the management fees, and the depreciation. The election must be made on the annual tax return and the supporting documents must be retained.
Non-deductible expenses: The mortgage interest, the capital improvements (which are depreciated separately), and the personal use periods are NOT deductible against the rental income.

Property Tax Registration Certificate

Mandatory registration: The property owner must obtain a Property Tax Registration Certificate (the "گواهی ثبت مالیاتی ملک" — the "property tax registration certificate") from the Tax Affairs Organization before the lease agreement is registered.
Certificate requirements: The application for the certificate requires the property deed (the "سند مالکیت" — the "ownership deed"), the tax clearance from the previous year, and the payment of any outstanding property tax liabilities.
Penalty for non-registration: The failure to register the property may result in a penalty of up to 20% of the annual rental value, in addition to the tax on the undeclared income.

Notarial Lease Registration and Stamp Duty

Notarial registration required: All lease agreements for the residential and the commercial properties must be registered with a Notary Public (the "دفتر اسناد رسمی" — the "official documentation office"). The notarial registration is a legal requirement for the validity of the lease agreement against third parties.
Rental contract stamp duty — 0.5%: The lease agreement is subject to a stamp duty (the "حق تمبر" — the "stamp fee") of 0.5% of the total annual rent. The stamp duty is payable at the time of the notarial registration and is typically split equally between the landlord and the tenant.
Registration timeline:The lease must be registered within 30 days of the signing. The late registration attracts a penalty of IRR 500,000 to IRR 5,000,000 depending on the rent amount.

Non-Resident Landlord Withholding Tax

WHT on gross rent — 25-35%: The non-resident landlord (the "مالک غیرمقیم" — the "non-resident owner") is subject to a final withholding tax on the gross rental income. The rate is 25% for the residential property and 35% for the commercial property.
Tenant obligation: The tenant (or the property manager) is responsible for withholding the WHT from the rent payment and remitting it to the TAO within 30 days. The failure to withhold makes the tenant liable for the unpaid tax.
No deductions for non-residents: The non-resident landlord is NOT entitled to the standard 25% deduction or the actual expense deduction. The WHT is calculated on the gross rent without any deduction.
Treaty relief: The non-resident landlord from a treaty country may apply for the reduced WHT rate under the applicable tax treaty. The treaty relief application must be submitted to the TAO before the rent payment is made.

FAQs

Is rental income subject to VAT?

No. The residential and the commercial rental income is exempt from the VAT. The landlord does NOT charge VAT on the rent and cannot claim the input VAT on the property expenses.

What if the property is vacant for part of the year?

The rental income is taxable only for the periods when the property is actually rented. The vacancy periods are not subject to tax. However, if the property is available for rent but the landlord chooses not to rent it, a notional rental value (the "مالیات بر درآمد اجاری" — the "deemed rental income") may be assessed at 50-70% of the market rent.

Can a non-resident landlord appoint a tax representative?

Yes. The non-resident landlord must appoint a tax representative (the "نماینده مالیاتی" — the "tax agent") in Iran to handle the tax filings and the communications with the TAO. The appointment must be notified to the TAO within 30 days of the first rental income.