Amendment to the Taxation Procedure Applicable to Foreign and Iranian Second-hand Contractors.

Nouraei & Mostafavi Law Offices – March 12, 2023- Tehran- The Iranian government has amended the rules regarding the deduction and collection of the taxes applicable to the assignment of contracts to third parties. Our unofficial translation of the ruling:


20/12/1401 (March 11, 2023)

Ministry of Economic Affairs and Finance –  Ministry of Energy – Ministry of Petroleum

The Council of Ministers, in its meeting held on 14/12/1401 (March 5, 2023), concerning the proposal No. 2/185774 dated 09/09/1401 (November 30, 2022) of the Ministry of Economic Affairs and Finance and based on Article 138 of the Constitution of the Islamic Republic of Iran approved as follows:

Note (2) of Article (2) of the bylaw of Article (107) of the amendment of the Direct Taxation Act subject to decree No. H 52882 T/32336 dated 19/03/1395 (June 8, 2016) and its subsequent amendments subject to decrees No.H54629 T /17424 dated 20/02/1397 ( May 10, 2018) and No. H 59237 T / 152089 dated 27/11/1400 (January,16 2022 ), is modified as follows:

Note 2 – In contracts concluded with foreign contractors if the foreign contractor assigns all or part of the subject matter of the contract to third parties as a

second-hand contractor, the amounts paid for the provision of the supplies and

equipment mentioned in the first-hand contract to the second-hand contractors is

deducted from the calculation of the taxable income of the first-hand contractor, and the balance according to the rate mentioned in part (p), row (1) of the table

of the subject of this Article is determined as taxable income. In the event

that the second-hand contractor is a foreign legal entity, deduction of the amounts paid to the second-hand contractor is conditional on deduction and collection of the tax foreseen in Article (107) of the Direct Taxation Act respecting payments to second-hand contractors.

Mohammad Mokhber

Vice President

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