In this case study we are trying to describe different taxation scenarios a foreign company might confront when establishing a business in Iran.

In general, there are no major differences between a branch office/representative office and other forms of companies such as limited liability or a private joint stock companies when corporate income or wages and salary taxes are concerned. Besides, Customs, VAT, and SSO authorities treat a branch office/representative office and a limited liability or a private joint stock company in the same manner. However there are some key points that should be taken into consideration in different conditions.

Here we review some potential scenarios:

Scenario 1

Assuming that the project is signed between the headquarter in China (the contractor) and the Iranian Client, while the Chinese headquarter has no permanent establishment in Iran  and assuming that the income generated through the contract will be assigned to the Chinese headquarter, then, article 107 of Iran’s direct taxes act may apply on the contract.

This scenario may still be narrowed down to two option:  

Scenario 1-A

If, according to the contract, the contractor is required to provide the procurement, and procurement is priced separately in the agreement.

Scenario 1-B

If, according to the contract, the contractor is required to provide the procurement, but procurement is not priced separately in the contract.

Scenario 2

Assuming the Contractor has established a branch office in Iran, then:

Scenario 2-A

Assuming the Contractor has established a branch office in Iran…

Scenario 2-B

Assuming the Contractor has established a branch office in Iran, however, the contract is signed between…

Scenario 3

Assuming the contractor has established a branch office/representative office or a subsidiary in Iran, then:

In each scenarios different taxation articles may apply and you can find more information about it here