Maliyat Journal, No. 33, Autumn 2001
In the Name of Allah
FROM THE PRESIDENT
We have always emphasized the need for the tax system to keep pace with
rapid changes of the modern time. The speed of the changes is, however, so
dramatic that has made it difficult, even for most advanced systems, to
encounter successfully the exigencies of new circumstances. All the same, there
is no escape from endeavoring to match the requirements of this overall
contest.
This is true in respect of all countries, whether developed or
developing, since developments in the field of trade and technology are not
confined to certain parts of the world, but spread throughout the world in a
swift manner.
A new phenomenon of the type described above, is the electronic
commerce, which is going to conquer majority of the world markets. Few years
ago, the terms "e-mail", "world wide web", "web
site" and "Internet" were largely unknown to the general public,
even in industrialized countries. Today, these words and terms represent the
daily lexicon of most people around the world. These developments have been
accompanied, by the breathtaking improvement of microprocessors, software and
fiber-optic connections.
The dynamic forces of the world trade have been eagerly attempting to
take benefit of all these facilities for gaining access to vast markets in most
unrestricted and practical manner. The Internet and innumerable web sites that
are attempting to attract viewers around the world, are serving the interests
of trade and economy more than any other field. Huge financial resources at the
disposal of these forces, give them power to get most and best of the said
facilities. According to the forecast of the World Trade Organization, the
world wide value of Internet e-commerce will be about $300 billion for the year
2001, the most of which would belong to industrialized countries. As an start, this is a sizeable amount, and we should look for
astronomical figures to appear in the near future.
For the time being, the e-commerce is conducted mainly in the form of
advertising and selling of tangible products, services and digital products
(including software). In the future, we may witness its expansion to other
fields of economic activities and transactions as well. All these cases may
have impact on taxation in one or another way, and are apt to raise various
ambiguities and problems.
Even now, at the beginning of the road, tax authorities are confronted
with many questions and dilemmas. Characterization of the amounts paid for downloading
a software is an example. How we should treat it? is it the price of goods sold and purchased through
e-commerce? Or else, it is a royalty paid to the owner of an intangible asset
for exploiting it under certain conditions?
What should be done in respect of transborder
transactions? For instance, can a web site, through which certain goods are
sold, be treated as a permanent establishment under the light of
double-taxation treaties, so that the local state may claim the tax accruable
to it under the tax treaty? If that would not be the case,
then what about the relevant server or Internet Service Provider? Are we
allowed to consider them as permanent establishments?
What are the arrangements that can be adopted with regard to the
collection of sales tax or value added tax on e-commerce transactions? What
kind of cooperation between tax authorities of different jurisdictions is
possible for prevention of tax evasion through e-commerce; and many other
similar questions.
So far,
e-commerce has not sufficiently developed in countries like
The first step for preparedness to cope with the future requirements, would probably be research and study in the
field of e-commerce and its repercussion on taxation. Maliyat journal may take
an appropriate part in this connection and will do so by presenting special
studies on the subject to its readership. Other research centers and academic
institutions, as well as the tax authorities and practitioners may also play
their due role with regard to the same issue.
Dr. Aliakbar Arabmazar
Introduction of
Periodical Adjustment Mechanism
into the Iranian Tax System
By: Dr. Mohammad Tavakkol
The inflation adjustment
mechanism is an expedient adopted by many countries to modify taxable income
brackets, tax allowances, etc., so that taxation is, as far as possible,
assessed on real profits and gains. But in spite of approaching the centennial
of establishment of modern tax system in this country, it is for the first time
that this issue is touched upon by the government.
The bill of the new
amendment of the tax law (Direct Taxes Act) submitted to the parliament
provides, inter alia, for this type of adjustment in
respect of monetary amounts of different rate brackets, stated amounts of
exemptions, duties and the like.
The wording of the
phrase employed in such cases, can be translated as follows:
“The monetary amounts of
this chapter will be adjustable every three years in harmony with the economic
conditions. The adjustment will be effected on basis of the proposal of the
Ministry of Economic Affairs and Finance and approval of the Council of
Ministers”
So, the adjustment in
question is to be effected by reference to the “economic conditions”. But this
latter term covers not only the inflation, but several other factors and
elements as well. Using a general term of this type may result in ambiguity and
lead to different interpretations.
The interval between
adjustments (three years) is also different from that of the countries who bring about this mechanism every year.
The Persian expression
in the above sentence meaning “will be adjustable” (and not: “shall be
adjusted”) may also be construed to the effect that as if the adjustment is not
compulsory and depends not only on requirements of economic conditions, but on
the discretion of the Ministry of Economic Affairs and Finance as well.
The cases of adjustment
envisaged under the bill of the amendment can be divided into the following
three categories:
Part A.
Adjustment of Monetary Amounts of Rate Brackets
Three sets of rate
brackets have become subject to adjustment in the new amendment:
1. Progressive rate brackets of
inheritance tax
The number of brackets
of inheritance tax is decreased from 5 to 4 and monetary amounts of all of them
are increased very considerably. The increment is between 620 to 1000 percent
(6.2 to 10 times). This measure can be considered a compensation for the
inflationary trend of past years. Nearly a decade has passed from the date the
current monetary amounts of the brackets were enacted.
Then, a Note is added to
the relevant article of the Direct Taxes Act (Article 20) with respect to the
adjustment mechanism. The text and content of this Note is the same as was
translated above.
2. Rate brackets of the tax of
juridical persons
The term “juridical
person” encompasses all types of companies and also other entities incorporated
under the Iranian law.
First, it should be
stated that the provisions of the Direct Taxes Act with regard to juridical
persons are considerably changed by the bill of amendment. A significant change
is introduction of a special set of rate brackets for the taxable income of
juridical persons. Currently they are subject to a common table of rates
envisaged under the Article 131 of the Direct Taxes Act (to which we shall
refer later).
Seven slices of taxable
income (from IRR – Iranian Rials – 20 million to IRR 1 billion) are
provided under the Note 2 of the amended Article 105, DTA. The monetary slices
of the Article 131 (presently applicable to the juridical persons) are much
smaller (between IRR one million to 300 million). This considerable increase is
obviously introduced to compensate for the accumulated inflation of the years
passed from the date of enactment of the current figures.
The rates of the
brackets are 20%, 32%, 36%, 40%, 42%, 44% and 45% respectively. The current
Article 131 has 9 rates between 12 and 54 percent.
It should be noticed,
however, that the new table of rates is applicable to cases where single flat
rates are not stipulated for corporate income tax.
In addition to the
increment of monetary amounts of income slices, a Note has also been added to
the Article 105, DTA, which provides for periodical adjustment of such monetary
amounts. The Note has the same text and content as described above in respect
of the inheritance tax. The comment presented there is applicable to the Note
of the Article 105 as well.
3. Rate brackets of the Article 131
The Article 131 of the
Direct Taxes Act provides for common taxable income slices and rate brackets
that are currently applicable to all taxpayers, whether individuals or
corporations, except the cases where single flat rates or special rate tables
are envisaged.
Now, the bill of
amendment has introduced separate rate brackets for juridical persons.
Therefore, the rates of Article 131 would apply to individuals (natural
persons) solely.
The rate brackets and
taxable income slices of the Article 131 are changed by the bill of amendment.
Two rate brackets are added, and thus the number of brackets
are increased from 9 to 11. They are better arranged, so that the
difference between consecutive rates is always 4 percent. The rates begin from
12% and end at 52%.
The monetary amounts of
taxable income slices are also raised in a considerable way. They are currently
between IRR one million to 300 million. The slices inserted in the amendment
are between IRR 4 million to IRR 1 billion. Beside this measure, which is for
compensation of past years’ inflation, again a Note (similar to those mentioned
in respect of inheritance and corporate taxes) is added to the Article 131. It
provides for periodical adjustment of monetary amounts of income tax slices
(exactly like the procedure described above).
Part B – Other
Monetary Amounts
A considerable number of
monetary amounts ( in addition to those of the income
slices of progressive rate tables) can
be found in different parts of the Direct Taxes Act. These are either amounts
of certain taxes collectible according to some provisions of the law, or the
amounts of exemptions granted to certain qualified taxpayers.
The adjustment mechanism
described above applies to the majority (all but one) of these scattered
monetary amounts as well. Here too the adjustment is not directly linked to
inflation, but reference is made to the general term of economic conditions,
instead. The adjustment (like all other relevant cases) will take place once
per each period of 3 years.
The permission of
adjustment is given in a way that makes it applicable to the current and future
provisions of the relevant chapters of the Direct Taxes Act alike. For
instance, if a new article providing exemption in certain monetary amount is
added to the chapter of inheritance tax in the future, then the same adjustment
mechanism would apply to such new monetary amount as well.
Beside the permission of
future adjustment, each of the current monetary amounts are also increased
noticeably, so that to compensate for the accumulated inflation of the past.
The cases of the
monetary amounts in question are as follows:
a) Cases relevant to inheritance tax
1. The last paragraph of
the Article 20, DTA states that “an allowance of IRR 2 million shall be
deducted from the inheritance share of each of the first class heirs as an
exemption”. The new amendment has increased this exemption to IRR 20 million.
2. The Notes 1 and 2 of
the current Article 20 have raised the amount of the said exemption to IRR 3
million and 1.5 million for two special categories of heirs. These two monetary
amounts are also increased by the new amendment to IRR 30 million and 10
million respectively.
3. A deductible amount
up to IRR 20 million has been envisaged under the current Note 3 of the Article
20, which applies to cases where certain conditions do exist in connection with
the family of the deceased person and the estate left by him. This latter
amount has also been increased to IRR 50 million.
The adjustment mechanism
described above is wholly applicable to all these monetary amounts as well.
b) Cases related to stamp duty
The chapter 5 of the
Title B of the Direct Taxes Act regarding the stamp duty has been completely
revised by the new amendment. Several new duties (in monetary amounts) are also
added by the same amendment.
By this revision, the
current monetary amounts of duties are raised considerably, so that the
negative effects of the past years’ inflation could be compensated.
Then, the revised
Article 51 states that all the monetary amounts of the aforesaid chapter will
be adjustable once per three years according to the procedure defined earlier.
The rule of this article applies to all monetary amounts of the chapter in
question, even if such amounts would be added in the future.
To have a general idea
of the stamp duty in the Iranian tax law, some examples are given below:
Stamp duty is levied on
each sheet of check printed by banks, bills of exchange, promissory notes,
negotiable commercial instruments, bills of lading, certain agreements and
instruments exchanged between banks and their clients, shares of joint stock
companies and partnerships, and the like.
The new duties added by
the amendment pertain to driving license, certain certificates and business
licenses.
c) Cases related
to the tax on income from real estates
The following points are
worth of mentioning with regard to the chapter 1,
title C of the Direct Taxes Act, which deals with the tax on income from real
properties:
I. The new amendment has
raised the monetary amounts of tax exemptions granted under the Articles 56 and
58 of the Direct Taxes Act in connection with the rental income of certain
owners of real properties. The monetary amounts have been increased from IRR
30000 and 5000 to IRR 300000 and 50000 respectively.
Another exemption of
rental income envisaged under the current Article 57, DTA (for the owners who
have no other sources of income), has been changed from IRR 125000 per month to
an annual exemption equal to the level of exemption provided for salary
receivers under the amended Article 84, DTA (shortly, we will discuss about
this new level of exemption).
II. But, the amendment
has ignored a similar exempted amount referred to in the Note 3 of the Article
57, DTA. The taxpayers having disabled or backward children under their custody
are granted an extra exemption of IRR 10000 per month with regard to their
taxable rental income. Nothing is mentioned in the bill of amendment in respect
of this particular monetary amount. This failure of the amendment cannot be
justified according to the author, since no difference can be found between
this specific amount and similar amounts envisaged under the law. Meanwhile,
the amount of IRR 10000 is so negligible that makes this part of the law
meaningless (it is equal to the price of one kilo of rice).
III. The amendment has
also failed to recognize the application of adjustment mechanism to this
particular chapter. Nor the above monetary amounts, neither the progressive
rate table of the Article 59 (of the same chapter) are being subjected to the
said mechanism by the amendment.
The Article 59 provides
a special progressive rate table, which applies to cases of transfer of real
properties and goodwill. Three tax rates of 4%, 8% and 12% are included in this
table for the amounts up to IRR 20 million, amounts between 20 to 60 million
and amounts above 60 million. This is a progressive rate table with taxable monetary
slices, like other rate tables of the Direct Taxes Act, and it is not clear why
this special table has been overlooked.
d) Cases related
to salary tax
1. The annual income of
salary receivers has been exempted by the current Article 84, DTA up to a
threshold equal to sixty times of the base minimum salary of a special schedule
envisaged in the Article 1 of the Law of 1991 concerning the Harmonized System
of Payments to Civil Servants. The amendment under discussion has increased
this threshold to 120 times of the same base minimum salary. It means doubling
of tax exemption of salary receivers.
The minimum salary
referred to above is adjusted from time to time by the Civil Employment
Organization to ameliorate the effects of the inflation on purchasing power of
employees. Thus, the amount of the threshold will also be changed. (The latest
available amount of the threshold is IRR 4 million per year)
So, one may conclude
that this particular adjustment (which takes place outside the tax
administration) is a substitute for the tax-related adjustment mechanism, which
is not envisaged by the bill of the amendment with regard to the chapter of
salary tax. This reasoning is correct in some degree, since the adjustment
effected through the Civil Employment Organization has always been short of
compensating for the effects of inflation. That is why the new amendment of the
tax law has not considered this specific adjustment enough and has doubled it.
2. Paragraphs “g” and
“j” of the Article 91, DTA provide for exemption of some kinds of fringe
benefits of employees up to certain amounts. These amounts have also been
increased by the bill of amendment. This increment is also for compensation of
the accumulated inflation of past years. But here too, the amendment has
overlooked the application of the adjustment mechanism to these figures.
e) Cases related
to the business income
To comprehend the
concept of business tax in the Iranian tax system,
One has to take into
account the following points:
- The business tax
applies to individual only. Corporations and other juridical persons are
subject to another type of taxation (tax on income of juridical persons).
- Any income derived by
individuals under any title (except the income from real estates, agriculture,
salary income and certain incidental incomes) can be treated as business income
for taxation purposes.
Thus, innumerable
persons may become subject to this chapter of the tax law. All people engaged
in buying and selling of goods and services are potential subjects of the tax
on business income, whether they are wholesalers or retailers, large or small.
Article 101 of the DTA
has exempted the taxable income of this category of taxpayers up to an annual
amount of IRR 1500000. The bill of amendment has changed these provisions and
linked the exemption in question to the annual exemption of salary receivers,
which was described earlier. The exemption envisaged for business income will
always be 50% of the annual exemption of salary income. (This amendment has been
criticized by some members of the parliament and it may be altered to equalize
the businesses with salary receivers in this respect).
No provisions are
stipulated by the amendment for applying the adjustment mechanism to the
taxpayers subject to the tax on business income.
f) Case of the Article 202
This Article allows the
Ministry of Economic Affairs and Finance to prevent the exit of the taxpayers
whose tax liability exceeds IRR 1 million from the country. The bill of
amendment has increased this minimum amount to IRR 10 million, and provided for
application of adjustment mechanism (as defined earlier) in respect of this
particular monetary amount in the future.
Part C –
Periodical Adjustment of Rates
As far as the author of
this article is aware, the adjustment mechanism in most cases applies to
monetary amounts and it scarcely deals with the rates applicable to taxable
amounts. The bill of amendment, however, has ruled for application of the same
mechanism in case of certain single and flat rates of the chapter pertaining to
the tax on the income of juridical persons. The rates in question are the
following ones:
1. According to the
amended version of the Article 105 (d) (i) (A) (3),
DTA, any part of the taxable income of the joint stock companies that is
allocated for distribution among the holders of bearer shares, shall be totally
subject to taxation at the flat rate of 50%.
2. The next paragraph of
the same article provides that the remaining undistributed income of the
company is also subject to the flat rate of 50%.
3. The Note 7 of the
same article 105 has provided an exemption equal to 50% for the taxable
dividends paid or allocated to small shareholders of the companies that are
accepted by the stock exchange.
Then the Note 10 of the
Article 105 stipulates that in all these cases, the rate of 50% “shall be
adjustable every three years in harmony with the economic conditions. The
adjustment will be effected on basis of the proposal of the Ministry of
Economic Affairs and Finance and approval of the Council of Ministers.
.
aibDfgc
An introduction to
the Iranian tax system
By: M.T. Hamadani
Our study on the Iranian Tax
system arrived, in previous issues, at the Chapter 4 of the Title C of the
Direct Taxes Act dealing with the tax on business income. We defined the
categories of taxpayers subject to this kind of income tax in last edition of
the journal, and now the rest our discussion:
Statutory Books and
Forms
Journal and ledger are most common
books of accounts. The Ministry of Economic Affairs and Finance may also
prepare and supply other special books of accounts called the "business
books or books of income and expenditure".
There exists a detailed statute
called the "Regulations concerning the Manner of drawing,
registering and keeping the Books of Accounts, Records and Documents".
The failure to observe these regulations would cause imposition of fine and
possibility of rejection of books of accounts.
Taxpayers may also become
obligated to use special forms in their transactions, etc. Note 2 of the
Article 95, DTA refers to "taxpayers whose business requires, for
tax purposes, use of special forms such as invoices for the sale of goods and
services, vouchers, warehouse orders and the like". If the Finance
Ministry considers that use of such forms would help the assessment and
collection of taxes, then it will prepare samples of the forms and publish them
in the press. "The taxpayers maintaining statutory books of accounts
are required to use these forms, the examples of which so advertised, in their
transactions and in registration thereof in their books of accounts, as from
the year subsequent to the date of advertising".
According to the Note 3 of the
same Article 95, The Ministry may also "agree to the maintaining of
alternative forms of books and other means of keeping the accounts".
The use of electronic means for keeping accounts and records of business may
also be allowed under the provisions of this latter Note.
Earlier we presented a list of
taxpayers who are required to keep statutory books of accounts.
Other taxpayers (those who are not
under such obligation) may voluntarily undertake the same duty of maintaining
statutory books of accounts. By doing so, they should follow the same procedure
as the first group is obligated to perform.
Submission of Tax Return
The taxpayers keeping books of
accounts should file their annual tax returns with relevant tax offices not
later than the end of the Iranian month of Tir (July
20), of the following year. The applicable tax, as assessed by the taxpayer,
should also be paid at the same time.
Other taxpayers (those who do not
keep books of accounts) should perform the same duty (submission of tax return
and payment of the tax) up to the end of the month Ordibehesht
(May 20) of the following year.
The tax return should be drawn up
on a form to be supplied by The Finance Ministry. In case of the taxpayers who
keep statutory books of account, the forms of balance sheet and profit and loss
account should also be completed and filed.
If a taxpayer fails to file the
tax return, a fine equal to 5% of the applicable tax shall be imposed on him.
In case of the taxpayers who keep books of accounts, the relevant fine will be
20% of the tax.
The tax return should also be
filed during the period of tax exemption, and the failure shall result in
deprivation from the tax exemption with regard to the relevant year.
Meanwhile, any taxes paid after
the time limit shall result in application of a fine equal to 2.5% of the
relevant tax per each month.
(In respect of the
fines see articles 190, 192 and 193, DTA).
Examination and Assessment
Taxable income of the taxpayers
who keep statutory books of accounts, and their books are not rejected, equals
to: aggregate sale of goods and services plus other incomes (those not handled
in other chapters of DTA), minus the acceptable expenses and depreciation.
The latter items (acceptable
expenditures and depreciation) are defined in a separate section of the law,
upon which we will touch in a later stage).
But if the books of accounts are
rejected, then different procedures will be followed in respect of two
categories of taxpayers: those who have duty to keep statutory books of
accounts, and others who do so voluntarily.
The first group will become
subject to ex officio assessment, and the second category will be treated
according to the procedure described under the Note 5 of the Article 100 of the
Direct Taxes Act (DTA).
Ex Officio Assessment
This term denotes the right of tax
authorities to issue a tax assessment (by virtue of their office or position)
on a taxpayer where one of the following situations takes place:
1. if the
tax return is not submitted before the expiry of the relevant time limit,
2. when
the taxpayer refrains from presenting his books or documents in spite of
written application of the relevant tax officer, and
3. where
according to the tax assessor, whose view is confirmed by the chief assessor,
the books of accounts and documents presented by the taxpayer, are considered
to be inappropriate for examination, or they are rejected due to non-observance
of legal criteria and relevant regulations. (Article 97, DTA)
Subsequent Procedure
In cases described above, the
issue shall be notified to the taxpayer and the file of the case will be
referred to a board consisting of three auditors for consideration. The
taxpayer may defend his case before the board and take actions for elimination
of problems hindered the examination of the file. The opinion of the board,
when rendered by the majority, will be valid and conclusive.
If the Board confirms the view of
the tax authority regarding the ex–officio assessment, then the procedure
described under the Article 98, DTA for this type of assessment will be
followed. The Article 98 reads:
“In
cases of ex-officio assessment, the tax assessment officer must, in first
place, perform necessary investigations and studies, and obtain needed
information from different sources, whether public or private. Then he should
select, from among the indicia set forth in the present Act, one or more
indications that conform to the conditions of the taxpayer and object of his
business. He should mention the reasons of choosing the relevant type of
indication or indications and their amounts, with sufficient justification, in
his report of examination. The tax assessment officer should, then, apply the
pertinent stipulated coefficient or coefficients to the selected indication or
indications for determining the taxable income of the taxpayer. In case of
applying coefficients to more than one indication, the average of products so
calculated, shall constitute the taxable income.
The tax indicia (or indications)
referred to above “are the factors employed, in respect of each business
line and with due regard to the conditions of each business, for ex officio
assessment of taxable income” (Article 152, DTA). Annual purchase,
turnover and gross income of the business are examples of such indicia.
Tax
coefficients are defined by the Article 153 and its Note:
“Article 153: Tax coefficients are
certain figures that when multiplied by the tax indications, the product will
constitute the taxable income in cases of ex officio assessment.
Note: When coefficients are applied to several
indications, the average product will constitute the taxable income.
Note 5 of the Article 100
The procedure of the Note 5
principally relates to the taxpayers who do not keep books of accounts and are
not legally bound to do so. As it was mentioned above, these taxpayers may opt
for keeping statutory books of accounts, in which case their tax liability will
be assessed on basis of the facts registered in their books. But if their books
are rejected, they also will become subject to the procedure of the Note 5 (of course, that part of the Note, which relates to rejection of
tax return).
According to the Note 5, the tax
assessor will examine the files of relevant taxpayers through investigation and
information gathering, whether the relevant tax returns are submitted on time
or not. He shall determine the taxable income of the taxpayer and shall prepare
a report thereon, which shall be sent, together with the file of the case, to
the relevant chief assessor.
The chief assessor should examine
the case and take appropriate measures in each of the following cases:
If a tax return is filed on time
and is acceptable to both the tax assessor and chief assessor, and also where
only the chief assessor is in favor of acceptance of the tax return, "the
taxable income as stated in the tax return shall become final and the tax
assessor shall issue the final assessment notice" (Paragraph (a) of Note
5).
But if the tax return is not filed
on time, the chief assessor will render his own opinion, (which may or may not
agree with the view of the tax assessor). The final assessment notice will be
issued on basis of chief assessor's opinion.
There remains another situation
where the tax return and the income tax mentioned therein is
not accepted. In this case the amount of tax will be assessed and declared to a
guild or syndicate whose domain of activity covers the business of the
taxpayer. The guild will give its own estimation of the income tax.
"Should the difference
between the taxable income assessed by the guild and the amount assessed by the
chief assessor, be not more than 20%, the tax assessment notice shall be issued
on basis of the guild's estimation... In case the difference is in excess of
20%, or no answer is received from the guild within one month, the assessment
notice will be issued on basis of the chief assessor's estimation" (ii, b,
Note 5, Article 100, DTA).
Mass Assessment
The Finance Ministry may decide
from time to time to refer the assessment of income tax of one or more groups
of businesses to their relevant guilds or syndicates. In this case the
estimation of the guilds will be taken into account for assessment of tax
liability of respective businesses (Note 6, Article 100).
Threshold and Rates
Up to IRR 1,500,000 of the annual
income of taxpayers is exempt from taxation and the rest of it is subject to
the rates of the Article 131 (which was listed earlier in connection with the
salary income tax).
According to a new bill of
amendment submitted to the parliament, certain changes are proposed to the
above threshold, and also to the structure of the rate table of the Article
131. For details see the article: “Introduction of periodical adjustment
mechanism into the Iranian tax system”, printed in this very edition of
the journal (pages 3-10)
Special cases and
provisions
1. Attorneys - at - law
"The attorneys - at - law and
those trying before specialized courts are required to mention in their power
of attorney the amount of their fees, and to affix and cancel tax stamps equal
to 5% thereof on the instruments of their power of attorney as an on account
payment of the applicable taxes" (Article 103, DTA).
This on account payment should not
be less than certain minimum percentages to be applied to the attorney's fees.
Depending on the type of lawsuits and cases, different percentages would apply
(detailed percentages are given under the Article 103, DTA).
2. Withholdings
The Article 104, DTA rules that
all government agencies and corporations, private companies, and also
individual business owners who are legally bound to
keep statutory books of accounts, should withhold 5% of the money they pay as
consideration for certain services and transactions, and remit the same to the
relevant tax offices within 30 days. Some of these cases are as follows:
Fees paid for medical, legal,
consulting and accounting services, consideration for art and literary works,
music composition, dramatic play and the like, cost of computer services,
maintenance of buildings, transportation, etc.
Our study on business income ends at this
point. In the next issue of the journal the corporate income tax under the
Iranian tax law will be dealt with.
The End