The ruling of the Court of Administrative Justice
Case number: 1893
Date of the document: 4 ؍10 ؍1397
The subject of the complaint and request: cancellation of the circular No. 61 ؍93 ؍200-20 ؍5 ؍1393 of the Tax Affairs Organization
While presenting Circular No. 61-93-200-20-5-1393 of the Tax Organization, it is recalled that according to Article 119 of the Direct Taxes Law, cash or non-cash income that a natural or legal person receives free of charge or from acquired through goodwill transactions or as a prize or any other title of this kind will be subject to incidental tax at the rate prescribed in Article (131) of this law, the inclusion of the provisions of this law to the incidental income of legal entities is clear, the provisions of Circular No. 61, 93, 200 based on the inclusion of tax based on Article 105 of the Direct Taxes Law and at the rate of twenty five percent, it is contrary to Article 119 of the aforementioned law. Therefore, taking into account these defenses, I request that high authority to revoke the directive against the aforementioned law.
Text of the circular:
Subject: Tax rate on incidental income of legal entities
With regard to the questions and uncertainties raised regarding the tax rate on the incidental income of legal entities, hereby according to the majority vote of the meeting minutes No. 201-14302 dated 3-8-1388 of the Supreme Tax Council and considering that according to Article 128 of the Direct Taxes Law The taxable income of legal entities resulting from incidental incomes will be recognized through the examination of the books, and the taxes paid at the source according to the provisions of this chapter will be considered as prepayments of their taxes, therefore the taxable income of legal entities resulting from incidental incomes based on Article 105 of the aforementioned law will be taxed at a rate of twenty-five percent (25%).
The vote of the general board:
Based on Article 105 of the Direct Taxes Law, the profit-making activities of legal entities are subject to tax at a rate of 25%, except for cases that have a separate rate in this law. One of the exceptions to the ruling in this article is the tax on the incidental income of legal entities, whose rate is exempted from the general ruling stipulated in Article 105 of the Direct Taxes Law according to Article 119 of the Direct Taxes Law, and is subject to the three rates in proportion to the incidental income of legal entities. The rate prescribed in Article 131 of the Direct Taxes Law (15, 20 and 25%) is set. Considering that the complained circular made the tax rate on incidental incomes of legal entities still subject to the ruling stipulated in Article 105 of the Direct Taxes Law, the said circular is against the law and outside of its authority and is documented in paragraph 1 of Article 12 and Article 88 of the Organizations Law. And the procedure of the Administrative Court of Justice approved in 2013 is annulled./
Morteza Ali Eshraghi
Chairman of the General Board of the Court of Administrative Justice
@kanazspid
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