Rental Income Tax in Iran: How It Is Calculated and Where It Can Be Reduced

If you rent out residential, office or commercial property in Iran, this article explains exactly what the tax authority will assess, and which parts of that number you can legitimately reduce. In the files I have handled, disputes rarely turn on the rate itself — they turn on how the rent base was determined and whether exemptions were documented in time.

Who is in scope

Any individual or legal entity that grants use of Iranian property in exchange for cash or non-cash consideration falls under the property income chapter of the Direct Taxes Act. Residential or commercial, notarised deed or private contract, resident landlord or absentee owner — the treatment is the same. Renting out part of a unit counts too.

Two cases are commonly misread. Property occupied by the owner's parents, spouse, children or siblings is treated as not leased, provided the occupancy is genuine and correctly recorded in the national housing registry. Housing provided by an employer to an employee is not rental income at all; it is a non-cash employment benefit assessed under payroll rules.

The calculation base: why 25 percent comes off

Article 53 defines taxable property income as total rent — cash and non-cash — less 25 percent for expenses, depreciation and the owner's obligations. This is a statutory coefficient, not a claim for actual costs. You do not need receipts, and you cannot deduct more.

The third row catches people out: someone who leases a property and sub-lets it at a higher rent is taxed only on the margin, but loses the 25 percent deduction entirely.

Contracts, imputed rent and full-deposit leases

The tax office takes the rent figure from the notarised deed first. Where there is no notarised deed, or the contract figure is visibly below the comparable rental value table for that district, the assessor may set the base from the table instead. Writing an artificially low number into the lease therefore rarely reduces tax — it mostly costs you credibility during the audit.

Full-deposit arrangements work the same way. The office imputes a market rent. The strongest defence is documentary evidence of the real rent level in that neighbourhood: comparable leases, a statement from the local realtors' union, and where the amounts justify it, a formal expert valuation.

Exemptions worth documenting

Floor area exemption. Rental income from residential units is exempt up to a combined 150 square metres of usable floor area in Tehran and 200 square metres elsewhere in the country. Two practical points: the cap applies to the owner's total holdings, not per unit, and the measure is usable floor area, not plot size or common areas.

Rent the landlord pays. If you rent out your property while renting your own home, the rent you pay is deducted from your taxable rental income, provided you produce the lease for your residence.

Individuals with no other income. An individual with no other source of income can apply the annual personal allowance under Article 84 against rental income. The ceiling is set each year in the budget law — check the latest circular from the Iranian National Tax Administration for the current figure. This relief is activated by filing a return; skip the return and you lose it.

Tenant withholding

Where the tenant is a legal entity or a business subject to withholding obligations, the payment duty shifts. The tenant deducts tax from each rent payment, remits it to the tax office of the district where the property sits, and hands the landlord a receipt. Failure by the tenant leaves the tenant liable for the principal and the penalty. If you lease an office or warehouse for your company, put this alongside your other withholding tax obligations in the monthly compliance calendar.

Vacant home tax

Identification runs off the national housing and property registry, cross-checked against utility connection data and other databases. A residential unit in a city of more than 100,000 people that stays vacant beyond the prescribed period becomes taxable from the second year onward, at escalating multiples of the ordinary rental tax, rising again in the third year and beyond. These multiples and periods have been amended more than once, so confirm the current position before acting.

The cheapest protection is administrative: keep each property's occupancy status current in the housing registry. Most vacant-home assessments I have seen came from missing or incomplete registration rather than genuine vacancy — and correcting the record at the objection stage costs far more than filing it on time.

Practical sequence

1. Secure the lease or notarised deed with its tracking code.
2. Extract usable floor area for each unit from the completion certificate or title deed.
3. Keep your own residential lease if you intend to claim that deduction.
4. Collect withholding receipts from corporate tenants.
5. Update occupancy status for every unit in the housing registry.
6. File the property income return by the end of Tir following the tax year.
7. Pay or formally request instalments within the same deadline to avoid late-payment penalties.
8. Note the 30-day objection window from service of the assessment notice; it is not extendable.

Key takeaways

• Tax applies to 75 percent of gross rent; the 25 percent deduction is automatic and needs no receipts.
• Individuals pay progressive rates, legal entities pay 25 percent.
• The floor-area exemption is measured across all of an owner's units and requires a filed return.
• Corporate tenants carry a direct statutory duty to withhold and remit.
• Accurate housing registry data is the simplest defence against a vacant home assessment, and worth reviewing alongside legitimate tax planning for multi-property owners.