Iran Offers Wide-Ranging Tax Breaks to Prop Up Businesses

EghtesadOnline: Manufacturing and mining businesses are eligible for tax holidays for five to 10 years as part of incentives to shore up investment in these sectors, the head of Iranian National Tax Administration said.

News ID: ۷۴۲۶۶۸

11 July 2017

“As per Article 132 of Direct Taxation Law, these economic entities will enjoy a two-year tax break if they are set up in industrial towns or special economic zones. Their 100% tax exemption will be extended for another year provided they are located in underdeveloped industrial towns or special economic zones,” Seyed Kamel Taqavinejad was also quoted as saying by IRNA.

"Manufacturing, mining and services businesses with 50-odd employees will be entitled to additional one-year tax holidays, if they increase the number of their workforce by 50% during their exemption period compared to the year before," he added.

According to the INTA chief, the government has provided wide-ranging tax breaks for up to 15 years for startups and companies located in science and technology parks, according to Financial Tribune.

“Article 133 of Direct Taxation Law has also envisioned incentives for companies of the cooperatives sector. The law states that revenues generated by the Agriculture Development Supporting Fund of rural, nomadic, agriculture, fishing, blue and white collar workers, students and university students, cooperative companies and their unions enjoy 100% tax exemption," he said.

"Hand-woven carpet workshops and handicraft workshops as well as cooperative companies and manufacturing associations are also exempted from paying tax on their income.”

Taqavinejad noted that exports of services, non-oil goods and agricultural products are entitled to a 100% tax exemption, while 20% of the revenues gained through exports of raw materials will not be taxed.

Minister of Industries, Mining and Trade Mohammad Reza Nematzadeh said international companies, which embark on joint production with local firms, will be entitled to a 30% tax break in the current Iranian year (March 2017-18).

INTA also announced that the fight against tax evasion has led to the reimbursement of over 50 trillion rials ($1.33 billion) in tax revenues in the last fiscal year (March 2016-17).

“Over 300,000 new taxpayers and 3,000 front companies were identified across the country over the past year and about 33 trillion rials ($880 million) of their suspicious banking transactions were identified,” Taqavinejad has been quoted as saying.

The official noted that fewer than 20% of taxpayers in Iran pay 80% of all tax while about 65% of all taxpayers are either exempt or pay less than 10 million rials ($266) in tax.

One of the measures taken by Iran’s tax administration for promoting tax fairness has been to incrementally increase baseline tax exemption on a yearly basis.

In the fiscal 2013-14, those who earned 8.33 million rials per month (about $222) were exempt from paying income tax. This year (March 2017-18) employees earning 20 million rials ($about 534) are exempt from paying income tax.

INTA’s exceptional performance last year in generating 96% of revenues targeted in the budget drew the admiration of President Hassan Rouhani as well as economic elites last year.

More than 1,700 trillion rials ($45.33 billion) in value added tax had been collected by March 20, 2017, since the implementation of the VAT law.