• Sunday 01st February 2026
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Tax Skills Course

What is tax?

Tax is a type of social cost that the people of a nation are required to pay in order to exploit the facilities and resources of a country in order to provide the replacement capabilities of these facilities and resources.

What is meant by tax? In fact, tax is the transfer of part of the income of the society to the government or part of the profit of economic activities that goes to the government, because the government has provided the means and facilities to achieve income and profits.

Economists typically advocate consumption taxes over income taxes, for example in tax research, cigarettes are among the goods that governments impose heavy taxes on to discourage consumption, or diesel consumption taxes. According to a report by the Bloomberg charity recently published by Reuters, the tobacco industry accounts for 10 percent of China's tax revenues, tobacco companies such as Philip Morris employ about 6 million Indonesians and pay more than $6 billion in indirect taxes to the government alone.

What is the purpose of imposing taxes and what are the consequences of not paying taxes?

Governments act to compensate for the costs of services they provide to citizens through taxation, and of course, the purpose of imposing taxes for most countries is not to compensate for costs, because through various types of taxes, liquidity changes, which is the most important factor in imposing taxes after compensating for costs.

But in general, the government makes it possible to cover part of the public expenses of society and maintain social and economic interests through various types of taxes. It can be said that providing the necessary capital to carry out projects, provide public services, and finance government activities are the main goals of imposing taxes.

According to the law (Iranian tax laws), payment of the imposed tax is mandatory and failure to pay taxes will result in punishment. Tax payment is also carried out only by centers under the supervision of the government.

What is the tax rate?

What is the tax rate? The tax rate is determined by law and the government. The tax rate in Iran is actually the amount that a company or an individual must pay at the legal time. Tax rates are determined based on detailed information and details and cannot be set at a fixed amount. If the prevailing tax system is an efficient tax system, the types of taxes are determined based on the real ability of the taxpayers so that paying taxes does not lead to bankruptcy of a business. In an efficient tax system, the tax rate determined for the rich should be heavier than the tax rate collected from the low-income groups.

Introducing Types of Taxes; Classification of Types of Taxes

Now that you know what tax means, we can introduce you to the types of taxes. According to Iranian tax laws, taxes are divided into two forms: direct and indirect. Each type of tax, in turn, has a specific division, which we will discuss below.

To calculate the tax of individuals and businesses, several things must be specified in detail:

1. Progressive tax rate:

According to what was said above, in order to achieve tax justice, progressive tax rates are used to collect taxes from higher incomes, and the tax rate also increases with the increase in the annual income level. In Article 131 of the Direct Taxes (Amended) Law approved on 17 February 2001, the income tax rate from various sources is progressive and is as follows:

Up to 30 million rials of annual taxable income at a rate of 15 percent.

Up to 100 million rials of annual taxable income over and above 30 million rials at a rate of 20%

Up to 250 million rials of annual taxable income over and above 100 million rials at a rate of 25%

Up to one billion rials of annual taxable income over and above 250 million rials at a rate of 30%

2. Tax Coefficients:

The important thing to know is that not all of the income you earn from your business in a year is taxable, and only a portion of it is taxable. In fact, your annual sales or the income you earn from services in a year is considered your net profit. In other words, income minus expenses equals your net profit. Since these expenses vary in different jobs, the best way is to use different coefficients for different jobs. So, in simple terms, the tax coefficient is a percentage that is multiplied by your annual income and shows your profit from your income.

If you submit your tax return to the relevant tax authorities at the end of each fiscal year (by the end of July of each year) or prepare your financial books in accordance with the laws, regulations, and bylaws of the Tax Affairs Organization and accounting standards and submit them to the relevant tax authority, your tax will be calculated according to specific and approved coefficients. Otherwise, the relevant tax expert must calculate your annual income on your own.

For example, if you are a chipboard manufacturer, your coefficient is 12 percent. This coefficient means that, for example, your tax expert determines that your daily income is 200,000,000 rials and you work an average of 300 days a year. So your annual income is 600,000,000 rials, which should be multiplied by 12 percent. That is, your calculated income will be 72,000,000.

To determine the coefficient table, a commission consisting of representatives of the State Tax Affairs Organization, the Central Bank, and a representative of the Central Council of Guilds, a representative of the medical system for medical-related jobs, and a representative of the Iranian Chamber of Commerce, Industries, and Mines for other jobs is formed every year in the State Tax Affairs Organization. It determines the relevant coefficients for different taxpayers according to the type of job, taking into account the flow of transactions and economic conditions. The decisions of this commission are prepared and communicated through the State Tax Affairs Organization as a coefficient table.

3. Tax Exemption:

For the same reason as mentioned earlier, every year, legislators set aside a percentage of the income of all segments of society for subsistence and therefore exempt a certain level of income from tax every year. For example, in 2007, incomes up to 2,740,000 Tomans were exempted from tax.