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Labour and tax laws in Iran govern the employment and fiscal contributions of people working and living in Iran. For a topic outline on this subject see List of basic Iran topics. Roughly one-fourth of Iran's labour force is engaged in manufacturing and construction. For a topic outline on this subject see List of basic Iran topics. Manufacturing (from Latin manu factura, "making by hand" is the use of tools and labor to make things for use or sale In the fields of Architecture and Civil engineering, construction is a process that consists of the Building or assembling of Infrastructure Another one-fifth is engaged in agriculture, and the remainder are divided almost evenly between occupations in services, transportation and communication, and finance. Agriculture refers to the production of goods through the growing of plants and fungi and the raising of domesticated Animals The study of agriculture A service is the non-material equivalent of a good. A service provision is an economic activity that does not result in Ownership, and this is what differentiates Transport or transportation is the movement of people and goods from one place to another Communication is the process of conveying information from a sender to a receiver with the use of a medium in which the communicated information is understood the same way The field of finance refers to the concepts of Time, Money and Risk and how they are interrelated Women are allowed to work outside the home but face restrictions in a number of occupations, and the number of women in the workforce is relatively small in light of their level of education. Education encompasses both the Teaching and Learning of Knowledge, proper conduct, and technical competency Some of the numerous refugees in the country are allowed to work but, with the exception of a highly skilled minority, are generally restricted to low-wage, manual labour positions in construction and agriculture. According to the 1951 Convention Relating to the Status of Refugees, a refugee is a person who owing to a well-founded fear of being persecuted for reasons of race Manual labour (or manual labor) is physical work done with the hands especially in an unskilled job such as fruit and vegetable picking road building or any Generally speaking, Iranians have the reputation to be industrialist and entrepreneurial. A business magnate, sometimes referred to as a mogul, tycoon, baron, or industrialist, is a person who has reached a prominent place in An entrepreneur is a person who has possession over a company enterprise, or Venture, and assumes significant accountability for the inherent risks and the outcome

In 2006, Iran’s labor force was estimated at 26. Year 2006 ( MMVI) was a Common year starting on Sunday of the Gregorian calendar. For a topic outline on this subject see List of basic Iran topics. 2 million, of which women accounted for 33 percent. A continuing strong labour force growth unmatched by commensurate real economic growth is driving up unemployment to a level considerably higher than the official estimate of 14%. Economic growth is the increase in the amount of the goods and services produced by an economy over time Unemployment occurs when a person is available to work and currently seeking work but the person is without work. According to experts, annual economic growth above 5% would be needed to keep pace with the 900,000 new labour force entrants each year. In 2006, the average annual salary in Iran was US$2,700. A salary is a form of periodic payment from an Employer to an Employee, which may be specified in an Employment contract.

In 2004, about 45 percent of the government's budget came from exports of oil and natural gas revenues, although this varies with the fluctuations in world petroleum markets and 31 percent came from taxes and fees. "MMIV" redirects here For the Modest Mouse album see " Baron von Bullshit Rides Again " Government spending as percent of total budget was 6% for health care, 16% for education and 8% for the military in the period 1992-2000 and contributed to an average annual inflation rate of 14 percent in the period 2000-2004. Budget (from French bougette, purse generally refers to a list of all planned expenses and revenues Health care in Iran and medical sector's market value was almost US $240 billion in 2002 and is forecast to rise to US $310 billion by 2007. Iran's educational system comprises many schools and universities scattered throughout the country Iran's military industry has In Economics, the inflation rate is a measure of Inflation, the rate of increase of a Price index (for example a Consumer price index)

In 2008, about 55% of the government's budget came from oil and natural gas revenues and Iran's GDP was estimated at $852.6 billion at PPP ($12,300 per capita). The informal economy is also important. Because of these figures and the country’s diversified but small industrial base, the United Nations classifies Iran's economy as semideveloped (1998).
In 2008, about 55% of the government's budget came from oil and natural gas revenues [1] and Iran's GDP was estimated at $852. 6 billion at PPP ($12,300 per capita). The purchasing power parity ( PPP) theory uses the long-term equilibrium Exchange rate of two currencies to equalize their Purchasing power. Per capita is a Latin phrase meaning for each head with Per meaning 'through' or 'by' The informal economy is also important. In Economics, the term informal economy (or second economy in the South African context refers to all economic activities that fall outside the formal Because of these figures and the country’s diversified but small industrial base, the United Nations classifies Iran's economy as semideveloped (1998).

Contents

Labour Law

There is a minimum national wage applicable to each sector of activity fixed by the Supreme Labor Council. A wage is a compensation workers receive in exchange for their labor. In 2005 the minimum wage, determined by the Supreme Labor Council, was about US$120 per month (US$1,440 per year). A minimum wage is the lowest hourly daily or monthly Wage that employers may legally pay to employees or workers Membership in the social security system for all employees is compulsory. Social security primarily refers to a Social insurance program providing social protection or protection against socially recognized conditions including poverty old

Although Iranian workers have, in theory, a right to form labour unions, there is, in actuality, no union system in the country. A trade union or labour union is an organization of workers who have banded together to achieve common goals in key areas such as wages hours and working conditions forming Workers are represented ostensibly by the Workers' House, a state-sponsored institution that nevertheless attempts to challenge some state policies. Guild unions operate locally in most areas but are limited largely to issuing credentials and licenses. The right of workers to strike is generally not respected by the state, and since 1979 strikes have often been met by police action. Strike action, often simply called a strike, is a work stoppage caused by the mass refusal by Employees to perform work. Police are agents or agencies usually of the executive, empowered to enforce the law and to effect public and social order through the legitimatized use of force

The comprehensive Labor Law covers all labor relations in Iran, including hiring of local and foreign staff. The Labor Law provides a very broad and inclusive definition of the individuals it covers, and written, oral, temporary and indefinite employment contracts are all recognized.

The Iranian Labor Law is very employee-friendly and makes it extremely difficult to layoff staff. Employing personnel on consecutive six-month contracts is illegal, as is dismissing staff without proof of a serious offence. Labor disputes are settled by a special labor council, which usually rules in favor of the employee.

The Labor Law provides the minimum standards an employer must adhere to when forming an employment relationship. The minimum age for workers in Iran is 15 years, but large sectors of the economy (including small businesses, agricultural concerns, and family-owned enterprises) are exempted.

Provisions of Employment Contract

To have a valid contract concluded under the Law, the following provisions must be included:

The employer may require the employee to be subject to a probationary period. However, the probation time may not exceed one month for unskilled workers and three months for skilled and professional workers. During the probation period, either party may immediately terminate the employment relationship without cause or payment of severance pay. The only caveat being that if the employer terminates the relationship, he must pay the employee for the entire duration of the probation period.

Suspension of Employment Contract

The fact that the employment contract can be suspended by an employee under certain conditions presents yet another challenge to employers. What this allows is suspension of the employment contract under the following conditions:

Once the conditions giving rise to the suspension of the contract are removed, the employer must allow for return of the employee to work. If the position is filled or eliminated, the employer is obligated to provide a similar position for the employee. Failure to do the above is considered wrongful discharge and subject to legal action.

Termination of Employment Contract

The Law allows for termination of the employment contract only under the following instances:

The employer is bound to pay benefits under all of the above scenarios according to the years of service.

Dismissal of an Employee

An employee may only be dismissed upon approval of the Islamic Labor Council or the Labor Discretionary Board. Grounds for dismissal include an employee's neglect in carrying out his/her duties of violation of disciplinary by-laws of the employer. The employer must have provided written prior notice of the employee's violations. If the board is not convinced that the employee's dismissal is justified, the employer must reinstate the employee. Once an employee is dismissed, the employer is obligated to provide the legal severance package.

Severance & Termination Benefits

The Law mandates the following compensation for terminated, disabled and suspended employee:

Working Hours & Overtime

The workweek in Iran is based on a 44-hour week. Typically, employees work Saturday through Wednesday (8 hours per day) and a half a day on Thursday (4 hours). Any hours worked beyond these will entitle the employee to overtime. The Law mandates a payment of 40% above the hourly wage to employees for any accrued overtime. The employee must consent to overtime work.

Holidays & Leave

See also: Iranian calendar

Employees are entitled to leave on all official state holidays (approximately 22 days a year) and Fridays. The Iranian calendar or Solar Hejri (تقویم هجری شمسی؛ سالنمای هجری خورشیدی Taqwim Hejri Shamsi Salanmay Hejri Khurshidi) is an astronomical Any employee working during these holidays will be entitled to overtime pay. Additionally, employees are entitled to one-month holiday per annum. The annual leave for those employees engaged in hard and hazardous employment shall be five weeks per annum. Employees are entitled to save up to 9 days of their annual leave.

In case of termination, disability or redundancies, employees must be compensated for any accrued leave. Finally, employees are entitled to 3 days of paid vacation for marriage or death of a spouse, father, mother or child.

Maternity Leave

Women employees are entitled to 90 days of maternity leave. The employee's salary during maternity leave will be paid according to the provisions of the Social Security Act. Maternity leave must be considered part of an employee's service record. Employers must provide returning employees with the same position.

Employment of Foreign Nationals

See also: Iranian citizens abroad

The Law forbids employment of foreign nationals without a proper work permit. The term Iranian citizens abroad refers to the Iranian people born in Iran but living outside of Iran and their children Work permit is a generic term for a legal authorization which allows a person to take employment Diplomats, United Nations employees and foreign press reporters are exempt from this requirement. A work permit to a foreign national will be issued only if the following conditions are met:

Work permits will be issued, renewed or extended for a maximum period of one year. Moreover, no exit visa will be granted to the foreign national unless the national has paid all due taxes, duties, etc.

Exemption

A very recent law provides that workshops with less than five employees will not be subject to the labor laws.

Health care

Main article: Health care in Iran

The Iranian constitution entitles Iranians to basic health care, and most receive subsidized prescription drugs and vaccination programs. Health care in Iran and medical sector's market value was almost US $240 billion in 2002 and is forecast to rise to US $310 billion by 2007. The Constitution of the Islamic Republic Health care is the prevention treatment and management of illness and the preservation of mental health through the services offered by the medical, Nursing A drug, broadly speaking is any chemical substance that when absorbed into the body Vaccination is the administration of Antigenic material (the Vaccine) to produce immunity to a disease An extensive network of public clinics offers basic care at low cost, and general and specialty hospitals operated by the Ministry of Health provide higher levels of care. A hospital is an institution for Health care providing treatment by specialised staff and equipment and often but not always providing for In most large cities, well-to-do persons use private clinics and hospitals that charge high fees. A clinic (or an outpatient clinic) is a small private or public health facility that is devoted to the care of Outpatients, often in a community in contrast Specialized medical facilities are concentrated in urban areas, but rural communities have relatively good access to primary care physicians at clinics in villages, where the government-sponsored primary health care system has raised the level of health education and prenatal care since the late 1990s. A village is a clustered human settlement or community, larger than a hamlet, but smaller than a Town or City.

Social Protection

See also: Bonyad

Iran has a comprehensive social protection system with some 28 social insurance, social assistance, and disaster relief programs benefiting large segments of the population. Bonyads are controversial Charitable trusts in Iran that dominate Iran's non-petroleum economy controlling an estimated 20% of Iran's GDP. These programs include training and job-search assistance, health and unemployment insurance, disability, old-age and survivorship pensions, and in kind- or in-kind transfers including subsidies (e. g. , housing, food, energy), rehabilitation and other social services (e. g. , long-term care services for the elderly), and even marriage and burial assistance.

Despite significant achievements in human development and poverty reduction, serious challenges to growth call for reform. While labor-market pressures continue to increase because of demographic dynamics and increased participation of women in the labor force, Iran’s economy is still unable to generate enough needed jobs to absorb the new flows into the labor market and at the same time reduce unemployment extensively.

In addition to income tax, employers are required to contribute to the State Social Security Fund and the Employment Fund. Social security primarily refers to a Social insurance program providing social protection or protection against socially recognized conditions including poverty old For social security and unemployment insurance, the employee pays 7% of salary (between the ages of 18-65), employer (20 to 23%), the State (3%). Unemployment benefits are payments made by Governments to unemployed people Independent workers pay 12-18%, depending on the type of coverage sought. In Business, an independent business as a term of distinction generally refers to privately-owned companies (as opposed to those companies owned publicly through a distribution In 2003 the minimum standard pension was 50 percent of the worker’s earnings but not less than the amount of the minimum wage. A pension is a steady income given to a person upon Retirement, typically in the form of a guaranteed annuity.

The social security makes it possible to ensure the employees against unemployment, the disease, old age (retirement pension), the occupational accidents. Social security primarily refers to a Social insurance program providing social protection or protection against socially recognized conditions including poverty old Unemployment occurs when a person is available to work and currently seeking work but the person is without work. A disease is an abnormal condition of an organism that impairs bodily functions and can be deadly Retirement is the point where a person stops employment completely A pension is a steady income given to a person upon Retirement, typically in the form of a guaranteed annuity. An accident is a specific identifiable unexpected unusual and unintended external event which occurs in a particular time and place without apparent or deliberate Iran did not legislate in favour of a universal social protection, but in 1996, the Center of the statistics of Iran estimates that more than 73% of the Iranian population is covered by a Social Security. The Organization of the social security, managed by the Ministry of social protection, delivers also family benefits and of maternity under certain conditions. Maternity is the social and legal acknowledgment of the parental relationship between a Mother and her Child. Iran spent 22. 5 percent of its 2003 national budget on social welfare programs. More than 50 percent of that amount covered pensions.

Welfare programs for the needy are managed by more than 30 individual public agencies and semi-state organizations called Bonyad, as well as by several private non-governmental organizations. "Social welfare" redirects here For other uses see Welfare A social welfare provision refers to any program which seeks to provide Bonyads are controversial Charitable trusts in Iran that dominate Iran's non-petroleum economy controlling an estimated 20% of Iran's GDP. In 2003 the government began to consolidate its welfare organizations in an effort to eliminate redundancy and inefficiency.

Tax Laws

All foreign investors doing business in Iran or deriving income from sources in Iran are subject to taxation. For a topic outline on this subject see List of basic Iran topics. Depending on the type of activity the foreign investor is engaged in, various taxes and exemptions are applicable, including profit tax, income tax, property tax, etc [1]. Profit tax in Hong Kong is Direct tax and also classified into Income tax. Property tax, or millage tax, is an Ad valorem tax that an owner pays on the value of the property being taxed The Ministry of Finance and Economic Affairs is the government agency authorized to levy and collect taxes.

According to the Economist Intelligence Unit, Iranian taxation laws are highly complex and inconsistently applied. The Economist Intelligence Unit ( EIU) is part of The Economist Group. Iranian taxation generates particular unease among foreign firms because they appear to be arbitrarily enforced – tax bills are initially based on 'assumed earnings' calculated by the Finance and Economy Ministry according to the size of the company and the sector in which it operates. Factors such as the quality and location of a company's offices are also widely believed to have an impact on tax assessment.

There are virtually millions of people who do not pay taxes in Iran and hence operate outside the formal economy. In Economics, the term informal economy (or second economy in the South African context refers to all economic activities that fall outside the formal [2]

Sales tax

Sales tax rate in Iran is 3%. A sales tax is a Consumption tax charged at the Point of purchase for certain goods and services

Property tax

History of Income tax

Income tax was initiated during the times of Mohammad Reza Pahlavi. The last adjustment of corporate tax has been done on 02/16/2001.

Personal Income Tax of Local Employees

Taxable income consists of salary and benefits. As presented in the following table, income is taxed at 0-35% (maximum).

Employers are required to make the necessary tax deductions from their employees’ payroll and submit them to the tax authorities. However, when calculating taxable income, exemptions and deductions are allowed.

Local Employees Salary Tax Rates (2007)

Annual Income/Profit (Rials)Tax Rate
Up to 27,240,0000%
27,240,000 to 42,000,00010%
42,000,000 to 100,000,00020%
100,000,000 to 250,000,00025%
250,000,000 to 1,000,000,00030%
In excess of 1,000,000,00035%

Personal Income Tax of Foreign Employees

Foreign nationals working in Iran are also subject to income tax based on their salary. Foreign employees cannot obtain an exit visa from Iran unless they provide proof that they have paid their due taxes, and since they need to obtain an exit permit when their presence in Iran is based on a work permit, the government can easily enforce this rule.

The government assumes a certain salary for employees depending on their position and country of origin. The assumed minimum monthly salaries range from US$2,500 for unskilled European workers to US$7,000 for European managing directors. Managing director is the term used for the Chief executive of many limited companies in the United Kingdom, Commonwealth and some other English The income of foreign nationals are subject the tax rate of 35%.

Share transfer tax

The Amendment has changed the regulations regarding calculation of tax on transfer of shares and their rights in Iranian corporate entities. In the case of shares listed on the Tehran Stock Exchange (TSE) the tax on transfer of such shares and other rights is 0. The Tehran Stock Exchange (TSE (بورس اوراق بهادار تهران is Iran 's largest stock exchange which first opened in April 1968 5 per cent of the sales price. No other taxes are payable (i. e. capital gain taxes).

In the case of transfer of the shares and their rights to other corporate entities (ie. those not listed on the TSE) a flat rate of four per cent of value of the shares and rights transferred applies. No other taxes will be charged. The Amendment has removed the requirement to value the shares in this category.

Corporate and Profit Tax

A new flat rate corporation tax of 25 per cent payable on the profits of corporate commercial entities has been introduced. This rate replaces the old corporation tax of 10 per cent and progressive rates of income tax (12-54 per cent) on reserves and distributable income. Apart from the 25 per cent corporation tax and the 0. 3 per cent Chamber of Commerce tax no more taxes will be payable by the corporate entity or the shareholders. [2]

The new rate of corporation tax will also apply to joint venture corporate entities registered in Iran. A joint venture (often abbreviated JV) is an entity formed between two or more parties to undertake economic activity together The tax incidence will therefore be on the corporate entity and not on the shareholder. The calculation of the tax has been simplified.

All contracting work performed by foreign contractors, whether or not the company is registered in Iran, is taxed. For contracts signed before March 21st 2003, gross taxable income is calculated as gross contract receipts less the cost of imported material. Year 2003 ( MMIII) was a Common year starting on Wednesday of the Gregorian calendar. Income is then taxed at 12% of gross taxable income less contract retention. For contracts signed after March 21st 2003, taxable income is the gross contract receipts less contract expenses. Year 2003 ( MMIII) was a Common year starting on Wednesday of the Gregorian calendar. Income is taxed at 25 per cent less 5 per cent taxes withheld at source.

Taxation of foreign companies

See also: Foreign Direct Investment in Iran

The Tax Act had divided the source of income earned by foreign companies either direct or through their branches in Iran into three main categories [3]:

[Note: The Amendment has introduced certain changes in the tax treatment of the above activities. Foreign Direct Investment in Iran has been hindered by unfavorable or complex operating requirements and by international sanctions, although in the early 2000s the ]

Income from royalty and licensing fees received from industrial and mining companies, government ministries and municipalities, and income from film-screening rights are subject to a deemed taxable coefficient on income of 20 per cent. The verb license or grant license means to give permission The noun license is the document demonstrating that permission All other income from royalties and licences from foreign companies is subject to a deemed taxable coefficient on income of 30 per cent. The coefficients are based on the standard corporate tax rate of 25 per cent, so that the effective tax rate is either 5 per cent or 7. 5 per cent. [4]

[Note: The Amendment has removed the confusion surrounding 'technical assistance contracting' by including 'technical assistance' and 'transfer of technology' in contracting operations subject to tax on the basis of 12 per cent of annual fees. ]

Tax on Liaison, Representative and Branch Offices

The same corporate and profit taxes will be applied to the taxable income of branches of foreign companies (contractors, consultant engineers, et al. ).

Other income earning activities of foreign branches will be subject to taxation on an actual basis, ie. based on their income tax return as filed and supported by their statutory accounting books. [5]

Expenses incurred in Iran by Iranian registered branches and representative offices of foreign companies that are not authorised by their head offices to engage in any trading activity but are only authorised to conduct marketing and market research in Iran are tax deductible upon presentation of receipts from their head office.

Tax Advantages & Exemptions

Income tax exemptions are available to new factories established in special areas, and last from four to eight years, from the first day of operations. In addition, 20% of the reported profit of all manufacturing, mining, assembly plant and related engineering companies are exempt from income taxes. Tax incentives, meanwhile, are available to manufacturing, mining, agricultural activities, exports and investment in special areas [6].

Tax Exemption - Major changes

The exemptions on exports of manufactured and agricultural goods remain in force, but an ambiguity has occurred in the Amendment regarding exemptions extended to the public sector (Iranian Government owned entities). Agriculture refers to the production of goods through the growing of plants and fungi and the raising of domesticated Animals The study of agriculture Government owned enterprises and their shares in the private sector entities were excluded from all exemptions granted under the Tax Act.

This exclusion has been removed from the relevant texts in the Amendment. Until clarification is provided, it is not certain whether or not the government minority shares in the private sector manufacturing, mining and exports activities would enjoy the exemptions granted. Manufacturing (from Latin manu factura, "making by hand" is the use of tools and labor to make things for use or sale Mining is the extraction of valuable Minerals or other geological materials from the earth usually (but not always from an Ore body

The 50 per cent tax exemption previously granted to tourism enterprises has been extended to include five-star hotels. Tourism is Travel for Recreational or Leisure purposes The World Tourism Organization defines tourists as people who "travel A hotel is an establishment that provides paid lodging usually on a short-term basis

Losses

Losses sustained by all taxpayers engaged in trading and other activities, who are required to keep proper books of account, provided they are accepted by the tax authorities; will be carried forward and written off against future profits without any limitation. [7]

Municipal Tax

This tax only applies to companies, which are subject to a municipal tax at the rate of three per cent of their taxable income.

Islamic taxes

In addition to these mandatory taxes, Islamic taxes are collected on a voluntary basis. This is a sub-article of Islamic economical jurisprudence. Zakaat ( زكاة zækæːh zakaat or zakāh, has the implied These include an individual's income tax (Arabic khums, “one-fifth”); an alms-tax (zakat), which has a variable rate and benefits charitable causes; and a land tax (kharaj), the rate of which is based on the principle of one-tenth ('ushr) of the value of crops, unless the land is tax-exempt.

Appeals procedure

It is noteworthy to point out that the Amendment has removed the second stage of appeal process. Appeals to the High Council of Taxation could only be made on questions of non-compliance with the provisions of the Tax Act rather than questions of fact.

Official accountants

See also: List of Major Iranian Companies

The Amendment has for the first time after 1979 reintroduced the concept of the tax audit to be undertaken by 'official accountants' and their designated firms. The most general definition of an audit is an evaluation of a person organization system process project or product The taxpayer or the tax administration can choose to appoint an official accountant or a designated firm of official accountants to examine his records and report to the tax authorities.

Tariff rates

Following is an indicative listing of import tariff rates in 2006:

Note: excessive tariffs on consumer goods has favoured contraband into the country in recent years. For other uses of this word see Tariff (disambiguation. A tariff is a tax imposed on goods when they are moved across a political boundary Year 2006 ( MMVI) was a Common year starting on Sunday of the Gregorian calendar. Agriculture refers to the production of goods through the growing of plants and fungi and the raising of domesticated Animals The study of agriculture A machine is any device that uses Energy to perform some activity Vehicles, derived from the Latin word vehiculum, are non-living Means of transport. The English word contraband, reported in English since 1529 from Medieval French contrebande "a smuggling" derived via Italian contrabando from Latin Inversely, large scale state subsidies (accounting for about 40% of government spendings in 2007) for basic commodities like gasoline, cement, wheat, etc. In Economics, a subsidy (also known as a subvention is a form of financial assistance paid to a business or economic sector Government spending or government expenditure is classified by economists into three main types In the most general sense of the word a cement is a binder a substance which sets and hardens independently and can bind other materials together have favoured domestic over-consumption and contraband (exports) with other countries, thus draining huge sums from the government's coffers (See also: Ministry of Petroleum of Iran#Gasoline subsidies). Over-consumption is a concept related to Overpopulation, referring to situations where Per capita The English word contraband, reported in English since 1529 from Medieval French contrebande "a smuggling" derived via Italian contrabando from Latin The Iranian constitution prohibits the granting of petroleum rights on a concessionary basis or direct equity stake

See also

References and notes

  1. ^ Iran: Crude price pegged at dlrs 39.6 a barrel under next year's budget Retrieved 30 January 2008
  2. ^ Ahmadinejad's Achilles Heel: The Iranian Economy

Useful links

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