Rymand Co.

1. JURISDICTION
Individuals and companies in Iran are taxed based on the Direct Taxation Act. This was ratified in 1988 and has been last amended in 2002.
Based on this act and its by-laws and other regulations, all individuals, corporate bodies and legal entities are taxed on the income they earn in Iran. Certain governmental organizations, organizations funded by the government through the country’s annual budget, and municipalities are not subject to taxation. A corporation’s taxable income is normally assessed on the basis of investigation of its statutory books (in cases where no other procedures are foreseen in the DTA for the assessment) or in case of rejection of the books, on deemed basis. This means assessment of taxable income on the bases of revenue indications (e.g. annual sales) and by applying certain coefficients prescribed in the by-laws to the DTA.
Rejection of the books incurs when a company’s statutory books are deemed not appropriate for investigation.

2. 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.

3.ORGANIZATIONS TAXABLE AS CORPORATION
In addition to corporations, other forms of legal entities are also taxable on the bases of the DTA. These include governmental companies, public or private companies, limited companies as well as other forms of companies foreseen in the commercial code.

4.TAXABLE INCOME OF RESIDENT CORPORATIONS
- Taxable income of a resident corporation is determined through investigations of its statutory books on the bases of its revenues less acceptable expenses as defined in the DTA, after deduction of exemptions and losses from non-exempted sources (or on deemed basis under certain conditions).

- 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.

- 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.
Normally, companies use the same for their financial reporting purposes too.

- 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.

- 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.

5. 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. Various sources of income of foreign entities specified in the DAT are:

- For contractor work in Iran (construction, technical installations, design, transfer of technical know-how etc.), taxable income thereto will be calculated based on the contractors books of accounts (previously it was on deemed basis).

- For transfer of rights, royalties, etc. as well as rights to show movies, taxes are from 20 per cent to 40 per cent of payments made in each financial year. Such taxes must be calculated and withheld by the payers.

- For “exploitation” of capital and other business activities, taxable income is calculated on the basis of the books of accounts (or on deemed basis in case of rejection of the books).

- 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.

- 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.

- 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.

6. LIQUIDATIONS
Bases for calculations 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 are previously paid. The last directors are to declare the assets and liabilities of a liquidating entity in accordance with the relevant regulations.

7. REORGANIZATIONS
In case of companies formed as a result of mergers or consolidations 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 earned as a result of the merger or consolidation.

8. TAXATION OF SHAREHOLDERS
No additional taxes are imposed on shareholders for dividends received. Taxes withheld by the investee company is final. Normally, the investors record dividend received at the net amount and deduct it in calculation of taxable income as exemptions.

9. RETURNS
Tax year is one solar year in accordance with the Iranian calendar (starting March 21) or based on the articles of incorporation of a company. All companies must submit their tax returns within four months after each fiscal year end to the relevant tax district 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.
“Official Accountants” can also do taxation audit in accordance with the regulations.

10. INVESTMENT INCENTIVES
Earnings of an industrial or mineral company, which is apportioned for development or renovation of the existing plants or for construction of new plants, are exempted from 50 percent of the taxes thereon, given certain conditions are met.

11. OTHER SIGNIFICANT TAXES
At the present time, there are no sales taxes. Social security is not a tax; rather it is an insurance premium. Employers share of the premium is 23 per cent while employees share is 7 per cent of the salary or wage.

12. TAX TREATIES AND WITHHOLDING TAXES
There are withholding taxes on salaries and wages based on the relevant rates.
There are withholding taxes on fees for certain services equal to 5 percent of the fees in addition to other withholding taxes mentioned above.
There are taxation treaties with certain foreign governments to avoid double taxation. Scope of such treaties may differ.

13. CORPORATE TAX CALCULATIONS
The following is a simple chart for determination of taxable income in cases where books of accounts of a taxpayer are accepted and certain expenses and exemptions are not accepted by the tax authorities:

	Rls.
Self-assessed net income	×××
Add: Self-assessed exemptions	×× ×××
Add: Expenses not accepted by tax examiners	×× ×××
Less: Exemptions realized by tax examiners Taxable income	(××) ××
Taxes (25% × Taxable income)	××