Tax evasion in Iranian law – Definition and punishment Tax evasion


Tax evasion in Iranian law – Definition and punishment Tax evasion

Tax evasion is an illegal activity in which a natural person or legal entity refuses intentionally to pay tax debts. In Iran, tax evasion may happen in different forms.

Tax evasion in Iranian law is of different kinds and has been discussed in various rules of law.

To have an accurate understanding of tax evasion is very important because, sometimes, it will be difficult and costly to compensate for its consequent losses.


A definition of tax evasion according to Iranian law

Tax evasion is an illegal activity in which an individual or entity intentionally refuses to pay actual tax debt.

According to Article 274 of the Direct Taxes Laws, if a person commits the following acts with knowledge and awareness, and the intention of evading taxes, the crime of tax evasion will be committed and the perpetrator or perpetrators will be punished as the case may be:

  1. Adducing the balance sheet and profit and loss account or citing books and documents that are used as a criterion for tax recognition, but set differently;
  2. Failure to file and submit tax returns, balance sheet and profit and loss account for 3 consecutive years;
  3. The concealment of one’s income and economic activity;
  4. Prohibiting tax officials from having access to tax and economic information of an individual or third party;
  5. Failure to deduct or collect taxes from other taxpayers (if required to do so) and failure to perform this duty within the legal deadlines;
  6. Arranging one’s own transactions and contracts in other people’s names or setting up other people’s transactions and contracts in one’s own name;
  7. Using other people’s business cards with the intention of evading taxes.


Some examples of tax evasion in Iran for having a better understanding of the issue

Concealing the economic activities and the related income: Suppose people who engage in economic activities without registering a company and/or lodging a tax return, and so earning huge profits every year while not fulfilling any of their legal duties.


Hiding documents from the reach of tax auditors: Suppose some companies that have two commercial offices and secretly record a part of their income to avoid tax payment.


Presenting fake financial documents: Suppose some people who provide unreal documents for expenses and record them in their books to reduce their real income.


Collaborating with other people to hide the rate of real income: Suppose that buying and selling is done between two taxpayers and these people, in order to avoid tax performance and not pay Value-Added Tax (VAT), refuse to issue invoices for each other, and make payments through accounts other than the accounts of their own companies.


Stating healthy goods as waste materials and avoiding to register the sales of these goods in books, and also registering sales in the name of unidentified persons: For example, invoice registration for the buyer and seller is done with an unreal national code and name.



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