On June 28th, 2022, Iranian National Tax Administration (INTA) announced the tax regime stipulated under the Law on Knowledge-Based Production Surge (the “Law”) which was passed earlier by the Parliament on May 1st, 2022. This law targets facilitation of knowledge-based activities, supporting innovators and setting the scene for further investment in elite human resources. This law provides for various incentives for Knowledge-Base Enterprises (KBEs), one of which being tax incentives.
Article 11 of the Law not only provides for a specific tax regime for KBEs in the form of tax credit, but also allows for that credit to be transferred to future fiscal years. This so-called exemption is an equivalent of the cost incurred by KBEs as R&D cost.
According to the tax rules announced by INTA, KBEs’ R&D costs will be considered as tax credit which can be transferred to future fiscal years. KBEs must apply for such incentive and INTA will grant such incentive subject to meeting all necessary conditions by KBEs. INTA’s acceptance of such application will mean that accepted R&D costs will be deducted from the respective definitive tax of the current fiscal year or future fiscal years.
In another part of the announced rules, INTA introduced additional incentives in the form of tax credit with the possibility to be transferred to future years. These include: 30% of Direct Investment by enterprises accepted in Tehran Stock Exchange or otherwise first and/or second markets in Iran Fara Bourse (OTC), or companies with the registered capital of at least 1/30 of the capital owned by Iran National Innovation Fund (INIF) in knowledge and technology-base companies. The indirect investment of aforementioned companies in establishing or increasing the capital of research and technology funds can also benefit from this incentive.
In addition to above incentives, the new rules provide further incentives with respect to R&D contracts. For instance, agreements concluded between executive organizations with KBEs in the field of knowledge-based production and services may be subject to tax and social security exemptions if the KBEs are located in Science & Innovation Parks and growth centers.
Our tax experts at MSLI are ready to furnish our clients with further analysis and assistance in this specific and emerging area. Please do contact us should you need further details and advice on potential incentives your company may benefit from under the above scheme.
