Direct Taxes Act: Income Tax on Legal and Natural Persons
This domain tests how the Direct Taxes Act (قانون مالیاتهای مستقیم, DTA) applies to natural persons (اشخاص حقیقی) and legal persons (اشخاص حقوقی): who is taxable, what income is included, which expenses are deductible, how rates work, and when returns are filed.
Core rules
- Iranian residents are taxed on worldwide income; non-residents on Iran-source income. Residence and source rules matter before any rate is applied.
- Legal persons are generally taxed at a flat 25% on taxable income under Article 105, with statutory exceptions. Taxable income is revenue less deductible expenses, subject to depreciation and non-deductible-item rules.
- Natural persons pay progressive tax on business income under Article 131, salary tax under Articles 84–86, and separate rules apply to rent, capital gains and incidental income. Personal exemptions belong to natural persons, not companies.
- Filing deadlines are statutory: legal persons generally file within four months of fiscal year-end, and individuals within three months of the end of the tax year under Article 110, with monthly salary withholding.
- Accounting profit must be reconciled to taxable profit: add back non-deductible expenses, remove exempt income, and apply tax depreciation.
Worked example
A company has revenue of 1,200 million rials and deductible expenses of 900 million. Accounting profit is 300 million. It paid a 20 million fine, which is non-deductible, so taxable income is 320 million. Corporate tax is 25% × 320 million = 80 million rials. If the company also had 30 million of exempt income already included in revenue, taxable income would fall to 290 million and tax to 72.5 million.
Traps
Do not apply personal exemptions to a legal person; do not treat every accounting expense as deductible; do not ignore withholding, which is usually an advance rather than a final tax; and do not miss the difference between fiscal year-end and the actual filing deadline.