Taxation in Iran is levied and collected by the Iranian National Tax Administration under the Ministry of Finance and Economic Affairs of the Government of Iran. In 2008, about 55% of the government's budget came from oil and natural gas revenues, the rest from taxes and fees. An estimated 50% of Iran's GDP was exempt from taxes in FY 2004. There are virtually millions of people who do not pay taxes in Iran and hence operate outside the formal economy. The fiscal year begins on March 21 and ends on March 20 of the next year.
As part of the Iranian Economic Reform Plan, the government has proposed income tax increases on traders in gold, steel, fabrics and other sectors, prompting several work stoppages by merchants. In 2011, the government announced that during the second phase of the economic reform plan, it aims to increase tax revenues, simplify tax calculation method, introduce double taxation, mechanize tax system, regulate tax exemptions and prevent tax evasion.
Government's budget
The government can increase its tax revenues 2.5 times by enacting tax reforms. As at 2012, taxes account for 43% of the government's revenues and 7% of Iran's GDP. The Expediency Council's report recommended increasing that share to 15% of the GDP. As of 2014, the share of direct taxes from the total tax revenues was around 70%. Top ten percent earners in Iranian society pay 3% of all income taxes, while in the United States the top 10% pay more than 70% of the total income taxes. Contradicting this, the head of the Majlis Economic Commission says that 85% of Iran's tax revenues “come from barely 3% of taxpayers”.
Tax evasion
According to the Expediency Council, more than 60% of economic activity in Iran avoids or evades taxation: 40% of the economic activity falls under an exemption and the remaining 21% are conducted off-the-books (2012). Iran is losing between $12–20 billion a year through tax avoidance and evasion. However the Iranian National Tax Administration only identified and collected through audit unpaid taxes worth 184 trillion rials ($1.5 billion) in FY 2018. Starting in 2015, Iran's parliament decided to tax Setad and the Islamic Revolutionary Guard Corps.
Tax evaders typically are either involved in activities in the gray sector of economy or in the underground market which they do not divulge. Others are engaged in smuggling and the black market. The loses are equivalent to 20% to 25% of the country's gross domestic product revenue. In 2014, international medias reported Iranian nationals and companies to be listed among the tax evaders in Switzerland and other offshore centers.
In 2019, Iranian tax revenues increased by 35% because of reported taxation evasion crackdown. As of 2021, tax authorities estimated tax cheats are costing the country $4.5 billion a year.
Income tax
There are five categories of income earned by individuals. Each category is taxed separately and has its own computational rules.
Salaries (tax rate for public sector employees: 10%; other sectors: 10-35%); Income from professions, trades, and miscellaneous sources; (More info here) According to the Iranian direct tax rolls article no 84. all employees salary tax rate from the beginning of the 1396 fiscal year is as below:
Every year annual salary exemption from tax will be announce by Iranian tax organization up to this level the salary tax rate is zero.
Up to the 5 times more than annual exemption salary tax rate is 10%.
In excess of above level salary tax rate is 20%.
Incidental or windfall earnings; (More info here) Real estate income (see also under "Real estate tax" section below) Income derived from agriculture (see also under "Tax exemptions" section below)
For taxable income consisting of salary and benefits, employers are required to make the necessary tax deductions from their employees’ payroll and submit them to the tax authorities. However, when calculating taxable income, exemptions and deductions are allowed. As of 2009, only government employees were paying their fair share of income taxes.