People, Travel

Tax Exemption for Travel Establishments

Tax Exemption for Travel EstablishmentsTax Exemption for Travel Establishments

To boost competition and Iran’s economy, the Majlis voted in favor of granting travel establishments, including hotels, temporary tax exemption.

The new law, which contains 15 articles and four clauses, will go into effect on March 20, 2016—the start of the Iranian New Year.

The private sector had long been asking for tax relief to facilitate investment in Iran’s booming tourism industry and finally, the Iranian Parliament stepped forward to help the country’s emerging travel market, the Persian travel news website Donyaye Safar reported.

According to the law, establishments in developed regions will be exempt from paying taxes for five years, while those in less developed areas may start paying taxes after 10 years.

The law contains two specific articles written to encourage foreign investment. The first article stipulates that joint projects, which include one foreign investor, receive 10% of financial incentives for every 5% share of foreign investment. The incentives go up to 50%.

In other words, if a foreign firm invests $250 million in a billion-dollar project, the government injects 50% of that amount, in this case $125 million, into the project.

The second article stipulates that if an international company uses Iran’s capacities to set up a business and exports 20% of the products it makes in Iran, it will enjoy temporary tax-exempt status for five to 10 years.

Once the exemption period is over, the company will only pay only half the income tax rate as required by the government.