INDIVIDUAL TAXES
SIGNIFICANT DEVELOPMENTS
As of March 21, 1999 the employer of an expatriate employee is required to provide the tax office with the employee's salary agreement, the amount of which should not be less than the deemed salary taxable of US$1,000 to US$7,500(depending on the employee's job description and nationality).
TERRITORIALITY AND RESIDENCE
All Iranians residing in Iran are subject to tax on their worldwide income. Iranians resident abroad and foreigners resident in Iran are subject to national taxes on income earned in Iran. Iranian nationals are considered resident in Iran if they have a place of residence in Iran or have resided for a total of more than six months in Iran during any one year.
In computing worldwide income, an Iranian resident in Iran must include the net amount of income received abroad or remitted from abroad. This implies that relief for tax paid tin other countries is given by deducting such tax from gross income. It is noteworthy that foreign national in Iran will be subject to tax only on income earned in Iran and not on worldwide income.
In the case of income earned from sources in Germany and France, with which there are double taxation treaties, either the income is excluded from income tax or the gross amount will be taken as income and tax paid at source will be taken as an advance payment.
Foreign nationals who work in Iran and have obtained a work permit are treated as resident. The resident permit is issued accordingly.
Foreign currency transfer/An expatriate working in Iran as an employee of a registered company or branch is, in certain special cases, allowed to transfer part of salary abroad in foreign currency, on the basis of the floating exchange rate(permission to be issued by the government). Board of directors' members, branch managers and employees of a bank's
representative office are not permitted such transfers.
The net salary of an expatriate working for a branch office in Iran is payable in foreign currency, provided(1) the foreign currency funds are transferred from the head office to cover local expenses or (2) the funds are purchased from a bank or an authorized money dealer at the floating or export rate of exchange. In practice, expatriate employees collect their
salary in rials, and their agreement with the head office is kept separate from the branch.
GROSS INCOME
Employee gross income/Taxable income is deemed to include, for both foreign and Iranians, all of their income(as limited above), together with free housing (as explained below), cost-of-living allowances of other cash payments, tax payments made by the employer on behalf of the employee, bonuses(less a Rls.150,000 exemption), and a free car(as explained below).
The nonpecuniary income liable to salary tax is assessed and computed as noted below.
1. Free housing:
a. Furnished-Equal to 25% of salary;
b. Unfurnished-Equal to 20% of salary and taxable recurring
compensation after the relevant deduction, if any.
2. Allocated car with driver-Equal to 10% (without river ,equal to 5%)of salary and taxable recurring compensation after the relevant deduction, if any.
3. Such other nonpecuniary income as may at the proposal of the Ministry of Finance and with the approval of the Council of Ministers be considered as benefits received-An amount equal to the cost price incurred by the party paying the salary.
There are no concessions to foreigner working in Iran on a short-term or a long-term basis.
Note:
In practice ,since the expatriate's salary agreement is not sent to the Tax Office, taxable salary is assessed on a deemed-salary rather than on a reported-salary basis. The arbitrary amount of the salary subject to income tax is determined by the Tax Office for each year, on the basis of the expatriate's nationality. As of March 31,1999, the employer of an expatriate employees is required to provide the Tax Office with the
employee's salary agreement, the amount of which should not be less than the deemed taxable salary of US$1,000 to US$7,500(depending on the job description and nationality of the employee).
Capital gains and investment income/Capital gains and income from investments are taxable. For a short-term resident, this income is subject to income tax in Iran, provided the capital asset or investment has been acquired/made and reported during the stay in Iran and provided the income is realized during this period.
DEDUCTIONS
An annual basic deduction of Rls.4,800,000(Rls.400,000 per month)is allowed.
Business deductions/There are no specific business deductions except for(1)family medical expenses and (2)travel expenses and allowances paid to compensate for work in unfavorable climates or for lack of living facilities in specific areas
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