Document Type : Research Paper

Authors

• Hamid Reza Salehi ¹
• Mohammadreza Abbasi ²
• Narges Bageri Motlag ³

¹ Assistant Professor, Department of Law, Payamnoor University, Tehran, Iran

² Ph.D, Private Law, Payame Noor University, Tehran, Iran

³ Ph.D, Private Law, Faculty of Law, Shahid Beheshti University, Tehran, Iran

Abstract

Introduction

The real estate rent is one of the significant sources of tax revenue. Although a considerable number of taxpayers fall under this category, rental tax continues to play a unique role in the cohesion of different tax sources, as other sources are typically identified based on the location of their activity. Understanding the concept, nature, and scope of this tax source is a key issue in tax law. What exactly is meant by rent in tax legislation? Does it refer strictly to the rental contract, sometimes defined as tamlik ‘ayn biʿawadh maʿlūm (acquisition as a known exchange of a tangible asset)? Or does it encompass a broader scope beyond that traditional concept?

Literature Review

Despite references in the literature, there has been limited in-depth analysis of the concept and scope of rent within tax law. In an article titled “Property Income Tax: Property Rental” Taghi-Nejad and Shayani (1993) explored only certain aspects of rental property taxation. Their discussion focused on taxable persons, the method for determining rental income, taxable rental income, tax rates, procedures for tax payment, municipal fees, the deadline for payment of rental income tax, the place for submitting tax declarations, tax incentives, tax crimes, and tax calculation. However, the literature has largely neglected to address the nature and scope of rent tax.

Materials and Methods

This research adopted a descriptive–analytical approach, drawing on the data from a variety of sources, including published books and articles. In addition to examining the scope of real estate rent tax, it also analyzed several key issues within tax law.

Results and Discussion

Some Islamic jurists (faqih) define rent as tamlik al-manfa‘ah bi-‘iwad (acquisition as transfer of benefit for compensation). Meanwhile, other experts in Islamic jurisprudence and law describe rent as the acquisition of a benefit in exchange for a certain amount. This latter definition differs from the traditional jurisprudential view by explicitly including the concept of exchange as a known category. This raises a key question: In tax law, is rent defined primarily as the acquisition of a benefit in return for compensation? Article 53 of the Civil Law states that in case of the mortgage in possession, the mortgagor shall be subject to taxation according to the provisions of this Chapter. Furthermore, it stipulates that taxable income, in cases of the first hand lease of real estates that are endowed or entailed, shall be calculated on basis of this Article. Note 1 of Article 53 clarifies that the residence of the owner’s dependents is not considered as leasehold, unless it is proved by evidence and documents that the rent is paid. According to Note 10, residential units owned by housing construction companies, which are handed over to buyers before the final transfer and remain in the buyer’s possession according to the terms of the contract and supporting documents, shall not be considered as rented during that interim period.  It is also stipulated in Note 8 that if the owner sells their residence and a deadline for vacating the property is set in the transfer deed without rent being specified, the property shall not be considered rented during the time it remains the residence of the seller—up to six months—and in a conditional sale (bay‘ al-shart), for as long as the property remains in the possession of the conditional seller according to the terms of the contract. However, if it is proven through documents and evidence that rent is being paid, it will be considered rental.

Conclusion

According to the findings, the scope of property rent in tax law is broader than its definition in civil law, Islamic jurisprudence (fiqh), and private law. In tax law, if a property is in the possession of another party—whether through a possessory mortgage or even unauthorized (aggressive) possession—it may still be considered rented for tax purposes. By clarifying the nature and scope of rent under tax law, several issues regarding property rent can be solved. It is thus recommended that members of the Tax Dispute Resolution Board, the Supreme Tax Council, and judges of the Administrative Court of Justice take into account the broader interpretation of lease within tax law when resolving disputes related to rental income taxation. For example, can the Tax Dispute Resolution Board also examine the tax on a possessory mortgage on the grounds that it does not reflect actual income? This question arises in light of Note 3 of Article 54, which states: In cases where the actual rental is less than the rental income assessed in accordance with the provisions of this Article and the taxpayer makes a complaint against it, then the Tax Dispute Settlement Authorities, referred to in the present Act, shall settle the issue. The Article refers only to the rent. However, if a property is mortgaged for 100 million tomans and the tax authority assesses 50 million tomans as taxable rental income based on estimated rental value, can the taxpayer object to this assessment? If the concept of property lease under tax law includes full mortgages, then such mortgages will also fall under the relevant tax provisions.

Keywords

• Tax Law
• Concept of Rent
• Scope
• Possessory Mortgage
• Aggressive Possession
• Entailment

Main Subjects

• Public Law