Estate tax, is a levy imposed on the transfer of assets upon the death of an individual. Estate tax in Iran is regulated by the Direct Taxation Act (DTA), which mandates the payment of a percentage of the deceased’s estate to the government. While estate tax can be a complex and daunting subject, understanding the intricate details and seeking legal guidance can ensure a smooth and compliant process.
A brief history
Before 2016, the heirs of deceased individuals were obliged to pay inheritance tax based on the number of heirs. The tax was calculated by first valuing the deceased’s property, and then deducting any outstanding debts. The remaining assets were divided among the heirs. The exact amount of tax due was determined according to the laws governing direct taxes.
Inheritors could only transfer the estate after paying the determined tax amount and presenting a certificate of deposit to the government. In 2023, the estate tax rules are revamped. Assets left by the deceased are now categorized based on their type.
Today, Estate tax varies depending on factors such as the value of the estate, the type of asset left behind, and the number and relationship of the heirs. Therefore, it is impossible to provide a fixed figure for the inheritance tax amount. Heirs must consider these factors to determine the appropriate tax amount.
Key Aspects of Estate Tax in Iran
- Levy and Rates: Inheritance tax in Iran is levied at progressive rates, ranging from 0.75% to 40%, depending on the relationship between the deceased and the heir. For instance, spouses and children are subject to a lower rate compared to other relatives or individuals.
- Exemptions: Certain assets or categories of estate are exempt from estate tax. These include pension funds, severance pay, unused paid leave, as well as social insurance, all types of life insurance, death and bodily injury damages, Waqf property of government institutions, the furniture of the deceased’s residence, funeral expenses, debts of the deceased
- Appraisal of Assets: The DTA mandates the appraisal of all assets included in the deceased’s estate by a qualified appraiser. This ensures a fair and accurate valuation for tax assessment purposes.
- Estate Tax Declaration and Payment: Within six months of the deceased’s passing, the heirs are obligated to file an estate tax declaration with the State Taxation Affairs Organization (STAO). The tax amount is then calculated and must be paid within the specified timeframe.
| Type of taxable asset | Tax for the first class of heirs % | Tax for the second class of heirs % | Tax for the third class of heirs % |
| Bank deposits | 3 | 6 | 12 |
| Deposit of financial and credit institutions | 10 | 20 | 40 |
| Residential properties | 7.5 | 15 | 30 |
| Stores and commercial properties | 3 | 6 | 12 |
| In-store Goods | 10 | 20 | 40 |
| Office | 3 | 6 | 12 |
| Cars | 2 | 4 | 8 |
| Stock exchange shares | 0.75 | 1.5 | 3 |
| Non-stock exchange stakes | 6 | 12 | 24 |
| Agricultural property | 7.5 | 15 | 30 |
| Bonds | 3 | 6 | 12 |
| Royalties | 10 | 20 | 40 |
| safety-deposit | 10 | 20 | 40 |
| Other Assets | 10 | 20 | 40 |
Estate Tax Process
Estate tax in Iran involves a multi-step process, encompassing probate, tax payments, and document issuance.
The first step is to obtain a probate certificate, which confirms the legal right of the heirs to inherit the deceased’s assets. This process typically involves gathering documentation and presenting it to a court or notary office.
- Tax Payments:
After receiving the probate certificate, the heirs must settle the estate tax by visiting the tax affairs office. They will receive a tax settlement document, which serves as proof of tax payment. This process typically takes two months.
- Document Issuance:
To legalize the estate and enable the sale of the property, the heirs must obtain a single-page Deed from the notary office. This involves submitting the probate certificate and tax settlement document to the notary office. The notary office then forwards these documents to the registry office, where a single-page Deed is issued in the names of the heirs. This document typically takes two months to be issued and is mailed to the heirs’ address.
Considerations for Iranian Nationals Abroad
For Iranian nationals residing abroad, the estate tax is assessed on the portion of the estate located in Iran. The DTA provides for a 25% deduction from the estate tax payable for any tax already paid to the foreign government where the assets are held.
Navigating Estate Tax: Seeking Expert Legal Assistance
Navigating the intricate world of inheritance tax in Iran can be challenging, especially for non-native speakers or individuals unfamiliar with the legal complexities. Consulting a reputable law firm like MJK Law Firm can provide invaluable assistance in the following aspects:
- Tax Planning and Preparation: MJK Law Firm can advise on tax planning strategies to minimize estate tax liability and ensure compliance with the DTA.
- Asset Valuation and Appraisal: MJK Law Firm can connect you with qualified appraisers to ensure an accurate valuation of the deceased’s assets for tax assessment purposes.
- Inheritance Tax Declaration and Payment: MJK Law Firm can assist in preparing the estate tax declaration, calculating the tax liability, and facilitating the payment process.
- Resolving Disputes: If estate tax-related disputes arise among heirs, MJK Law Firm can provide expert legal representation to navigate the complexities of inheritance law and reach amicable solutions.
MJK Law Firm: Your Trusted Partner for Inheritance Tax Matters
With its extensive experience in handling estate tax matters, MJK Law Firm is committed to providing expert legal guidance and support to Iranian nationals both domestically and internationally. Our team of experienced lawyers is proficient in Persian and English, ensuring seamless communication and understanding of your specific needs.
If you are an Iranian national or a foreign national with estate interests in Iran, seeking legal counsel from MJK Law Firm is a prudent step towards a smooth and compliant inheritance tax process. Our team is here to assist you in navigating the intricacies of Iranian estate tax law and ensuring your rights are protected.
Contact MJK Law Firm today to schedule a consultation and discuss your specific estate tax concerns.