1. www.rymand.com Rymand & Co. Members of the Iranian Association of Certified Public Accountants

2. Payroll Tax VAT Tariffs Inheritance Tax Tolls, Fees & Duties Income Tax Other Taxes Property Tax TAXATION IN IRAN Types of Taxes 1

3. Payroll Tax VAT Income Tax TAXATION IN IRAN Types of Taxes 2

4. TAXATION IN IRAN Income Tax JURISDICTION Individuals and companies in Iran are taxed based on the Direct Taxation Act. of 1988. A new amendment to the above has been recently ratified which will go into effect from the start of this Iranian calendar year (i.e. starting March 21, 2016). Revisions are pending upon certain by- laws, etc. which have not yet been partly finalized. JURISDICTION Individuals and companies in Iran are taxed based on the Direct Taxation Act. of 1988. A new amendment to the above has been recently ratified which will go into effect from the start of this Iranian calendar year (i.e. starting March 21, 2016). Revisions are pending upon certain by- laws, etc. which have not yet been partly finalized. 3

5. TAXATION IN IRAN Income Tax Certain governmental organizations, organizations funded by the government through the country’s annual budget, and municipalities are not subject to direct taxation In cases where no tax return is presented by a tax-payer within the deadline foreseen in the regulations, the State Taxation Organization shall assess the tax-payer's taxable income on the basis of its "activities" and information provided through the "Comprehensive Taxation System" All individuals, corporate bodies and legal entities are taxed on the income they earn in Iran or abroad 4

6. Taxation in Iran Based on the previous code, taxable income of legal entities was to be calculated on the bases of the statutory books and in case of rejection of the books, on deemed of arbitrary bases. Tax indications (Annual sales, purchases, productions, ………..) Taxable Income Coefficients 5

7. TAXATION IN IRAN Income Tax MAJOR TAXES ON CORPORATIONS Corporations, as well as other legal entities are basically taxed on income earned from profit-making activities from various sources in Iran or from abroad. MAJOR TAXES ON CORPORATIONS Corporations, as well as other legal entities are basically taxed on income earned from profit-making activities from various sources in Iran or from abroad. 6

8. TAXATION IN IRAN Income Taxes ORGANIZATIONS TAXABLE AS CORPORATION Public, Private Companies Limited Liability Companies Government Companies Branches & Liaison Offices of Foreign Companies Other Entities 7

9. TAXATION IN IRAN Income Taxes TAXABLE INCOME OF RESIDENT CORPORATIONS Taxable income of a resident corporation is determined on the bases of its tax return, statutory books and its actual profitability (revenues less acceptable expenses including depreciation as defined in the DTA) after deduction of exemptions and losses from non-exempted sources. TAXABLE INCOME OF RESIDENT CORPORATIONS Taxable income of a resident corporation is determined on the bases of its tax return, statutory books and its actual profitability (revenues less acceptable expenses including depreciation as defined in the DTA) after deduction of exemptions and losses from non-exempted sources. Based on the amended code, the State Taxation Organization can accept the tax-payer's tax returns at face value and as presented; however, may select some on random basis (or criteria and indications prescribed) for further investigation 8

10. TAXATION IN IRAN Income Tax Depreciation of fixed assets is an acceptable expense in determination of taxable income. Depreciation methods and rates are prescribed in the by-laws to the DTA. Usually, companies use the same for their financial reporting purposes Capital Gain A fixed tax of 0.5 per cent of sales value is levied on all security transactions in the organized stock exchanges. No other taxes are claimed on the sale of such securities. For other companies, there is a flat tax, equivalent to 4 percent of the nominal or par value of shares transferred, regardless of the actual capital gain or loss Capital Gain A fixed tax of 0.5 per cent of sales value is levied on all security transactions in the organized stock exchanges. No other taxes are claimed on the sale of such securities. For other companies, there is a flat tax, equivalent to 4 percent of the nominal or par value of shares transferred, regardless of the actual capital gain or loss Loss Carry-backs There are no loss-carry-backs. However, losses, if accepted by tax authorities based on the statutory books and in accordance with the relevant regulations, could be deducted from taxable income of subsequent periods Loss Carry-backs There are no loss-carry-backs. However, losses, if accepted by tax authorities based on the statutory books and in accordance with the relevant regulations, could be deducted from taxable income of subsequent periods Tax Rates Except for instances where other tax rates are foreseen in the Act, the taxable income, thus determined, is taxed at a flat rate of %25. Tax Rates Except for instances where other tax rates are foreseen in the Act, the taxable income, thus determined, is taxed at a flat rate of %25. 9

11. TAXATION IN IRAN Income Taxes TAXATION OF NON-RESIDENT CORPORATIONS Basically, foreign legal entities, as well as organizations residing outside Iran, are taxed on the income they earn in Iran and at certain instances on income earned from Iran 10

12. TAXATION IN IRAN Income Taxes TAXATION OF NON-RESIDENT CORPORATIONS Various sources of income of foreign entities earned in or from Iran as specified in the DAT surveying technical drawings technical supervision and calculations provision of technical training and assistance other services transfer of technical know-how, rights and concessions movies taxable income 10 percent to 40 percent of the receipts depending on the type of activity and its profitability and based on the relevant executive by-laws ( to be withheld by the payers and reimbursed to the relevant tax department) preparation of buildings and installations plans = Relevant by-laws to be prepared 11

13. TAXATION IN IRAN Income Taxes TAXATION OF NON-RESIDENT CORPORATIONS For “exploitation” of capital and other business activities carried- out by branches or liaison offices, taxable income is calculated on the basis of their actual profitability, tax returns, revenues and expenses Branches of foreign banks and companies who are active in Iran in such fields as marketing and collection of information and have no right to take part in any transactions, are not taxed on what they receive from the parent company against their expenses in Iran For construction contracts, the portion of contract value used for purchase of material and installations, is exempt from payment of taxes (up to the value realized by the customs, given such items are separately specified in the contract) 12

14. TAXATION IN IRAN Income Taxes TAXATION OF NON-RESIDENT CORPORATIONS Foreign insurance companies which re-insure policies issued by Iranian insurance companies are subject to a 2 per cent tax on the premium. This must be withheld by the relevant Iranian insurance company (Exemptions for countries with reciprocal arrangements). Tax of foreign shipping companies, airlines and other carriers is 5 percent of their receipts. Their branches or representative offices are responsible for provision of list of such receipts and payment of tax 13

15. TAXATION IN IRAN Income Tax LIQUIDATIONS Bases for calculation of a legal entity’s taxable income in its last period of operation is the current value of its assets less its liabilities, capital and such reserves or retained earnings on which taxes were previously paid. The last directors are to declare the assets and liabilities of a liquidating entity in accordance with the relevant regulations LIQUIDATIONS Bases for calculation of a legal entity’s taxable income in its last period of operation is the current value of its assets less its liabilities, capital and such reserves or retained earnings on which taxes were previously paid. The last directors are to declare the assets and liabilities of a liquidating entity in accordance with the relevant regulations 14

16. TAXATION IN IRAN Income Tax REORGANIZATIONS In case of companies formed as a result of merger or consolidation of other entities, transfer of the assets of the merging entities are not taxed, given such transfer is made at book value. The merged entities are not subject to the tax regulations pertaining to liquidation. Depreciation of the assets transferred must be continued on the previous methods and rates. The shareholders of merging entities are subject to tax on any income they realize as a result of the merger or consolidation REORGANIZATIONS In case of companies formed as a result of merger or consolidation of other entities, transfer of the assets of the merging entities are not taxed, given such transfer is made at book value. The merged entities are not subject to the tax regulations pertaining to liquidation. Depreciation of the assets transferred must be continued on the previous methods and rates. The shareholders of merging entities are subject to tax on any income they realize as a result of the merger or consolidation 15

17. TAXATION IN IRAN Income Tax TAXATION OF SHAREHOLDERS No additional taxes are imposed on shareholders for dividends received. Taxes paid by the investee company is final. Usually, the investors record dividend received at the net amount and deduct it in calculation of taxable income as "exemptions" TAXATION OF SHAREHOLDERS No additional taxes are imposed on shareholders for dividends received. Taxes paid by the investee company is final. Usually, the investors record dividend received at the net amount and deduct it in calculation of taxable income as "exemptions" 16

18. TAXATION IN IRAN Income Tax RETURNS Tax year is one solar year in accordance with the Iranian calendar (starting March 21) or based on the articles of incorporation of the tax- payer company. All companies must submit their tax returns (tax declaration forms) within four months after each fiscal year-end to the relevant tax bureau and pay their self-assessed taxes. The taxation authorities should investigate the tax returns, thus submitted, within the relevant deadlines and with due attention to the investigation procedures. Tax assessment notice must be issued by the tax district within one year after the deadline for submission of the tax return. Any taxes in addition to the self-assessed tax is thus assessed and claimed. Protests are possible within deadlines with due attention to other regulations. 17

19. TAXATION IN IRAN Income Tax INVESTMENT INCENTIVES Self-assessed taxable income of manufacturing or mining activities for which "exploitation license" is issued by the relevant authority is exempt from 80% to 100% of taxes for a period of ten years (depending on the location) INVESTMENT INCENTIVES Self-assessed taxable income of manufacturing or mining activities for which "exploitation license" is issued by the relevant authority is exempt from 80% to 100% of taxes for a period of ten years (depending on the location) 18

20. TAXATION IN IRAN Withholding Taxes & Tax Treaties There are withholding taxes on salaries and wages based on the relevant rates. Rental Payments by companies are also subject to withholding tax. Such withholding taxes constitute on-account payment of the lessor's taxes There are taxation treaties with certain foreign governments to avoid double taxation. Scope of such treaties may differ 19 Certain activities are exempted from tax namely agriculture, fisheries, poultry, live stock, forestry, bee farms, silk farms, pastures maintenance and revitalization

21. TAXATION IN IRAN Payroll Tax Employers share : 23% Employees share : 7% Employers share : 23% Employees share : 7% Expats enjoying similar insurance coverage in their home country are exempt from double-payment of premium; given proof of payment of premium and similar coverage ! 20

22. TAXATION IN IRAN Payroll Tax Wage and salary received by an employee is subject to salary tax Employers must withhold taxes from employees and reimburse it to the Ministry of Finance based on and along with monthly payrolls Annual salary tax exemption is each year announced by the government Non-cash compensation is also subject to salary tax based on the relevant regulations 21

23. TAXATION IN IRAN Payroll Tax Salary tax of expatiates is ( at the present time) calculated in accordance with pre-defined salary levels which are based on the expats nationality, position etc. 22

24. TAXATION IN IRAN Value Added Tax Value Added Tax Act is implemented from September 23, 2008 The ACT covers all transactions including sale of all goods and services (except for the exempted transactions) as well as their exports and imports 23

25. TAXATION IN IRAN Value Added Tax Exempted Transactions -Consumer goods included in households consumption basket e.g., bread, sugar,... etc. -Agricultural products (un-processed) and inputs. -Live stock and poultry -Medication and medical services -Research and training services -Banking services -Passenger transportation services -Rental and sale of property. -Tax-payers with annual sales below bln Rls.3 -Export of goods and services are subject to zero tax rate; any paid VAT shall be reimbursed to the tax-payer Exempted Transactions -Consumer goods included in households consumption basket e.g., bread, sugar,... etc. -Agricultural products (un-processed) and inputs. -Live stock and poultry -Medication and medical services -Research and training services -Banking services -Passenger transportation services -Rental and sale of property. -Tax-payers with annual sales below bln Rls.3 -Export of goods and services are subject to zero tax rate; any paid VAT shall be reimbursed to the tax-payer 24

26. TAXATION IN IRAN Value Added Tax The basis for calculation of VAT will be the price of goods and services reflected in the invoice The general VAT rate currently is 6 percent. This will be in addition to the 3 percent (9 percent total) charged for municipality duties 25

27. TAXATION IN IRAN Value Added Tax Taxpayers Obligation Suppliers of goods and services must register themselves with the State Taxation Organization; the first groups : A-All Importers B- All Exporters C- Economic entities with turn-over of bln Rls.3 or more Taxpayers Obligation Suppliers of goods and services must register themselves with the State Taxation Organization; the first groups : A-All Importers B- All Exporters C- Economic entities with turn-over of bln Rls.3 or more 26

28. TAXATION IN IRAN Value Added Tax Taxpayers are required to submit every three months a VAT return, in accordance with the procedures prescribed by the State Taxation Organization. Certain penalties are foreseen in the law for the taxpayers failing to comply with these regulations. Taxpayers are required to calculate the tax stipulated in the Act and collect it from the other party to the transaction (recipient of goods and services). 27

29. TAXATION IN IRAN Value Added Tax Taxpayers subject to these regulations are required to use books, forms, systems, etc., prescribed by the State Taxation Organization. Recognition and collection of the tax referred to above is vested upon State Taxation Organization. Taxpayers are required to put their books and documents at the disposal of the relevant inspectors. Non-presentation of the relevant documents will result in deemed assessment of the tax as well as penalty charges Taxpayers subject to these regulations are required to use books, forms, systems, etc., prescribed by the State Taxation Organization. Recognition and collection of the tax referred to above is vested upon State Taxation Organization. Taxpayers are required to put their books and documents at the disposal of the relevant inspectors. Non-presentation of the relevant documents will result in deemed assessment of the tax as well as penalty charges Branches of foreign entities are to pay VAT on money received from their parent (main office) for their expenses Other Regulations 28

30. TAXATION IN IRAN For Further details please visit our site www.rymand.com For Further details please visit our site www.rymand.com