Labour and tax laws in Iran
From Wikipedia, the free encyclopedia
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.
There is a minimum national wage applicable to each sector of activity fixed by the Supreme Labour Council. Workers and employers have the right to establish guild societies. Collective bargaining is allowed. Membership in the social security system for all employees is compulsory.
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[edit] Labour
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%. According to experts, growth annual economic growth above five per cent would be needed to keep pace with the 900,000 new labour force entrants each year.
In 2004 Iran’s labor force was estimated at 26.2 million, of which women accounted for 33 percent. Unemployment stood at about 15 percent. The agriculture and service sectors employed the greatest number of workers. Although there are numerous government-affiliated trade associations, there are no independent labor unions in Iran.
Although Iranian workers have, in theory, a right to form labour unions, there is, in actuality, no union system in the country. 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.
Roughly one-fourth of Iran's labour force is engaged in manufacturing and construction. Another one-fifth is engaged in agriculture, and the remainder are divided almost evenly between occupations in services, transportation and communication, and finance. 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. 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.
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. The workweek is six days (48 hours), and the day of rest—as in many Muslim countries—is on Friday.
Foreigners with special expertise and skills have little difficulty in obtaining permits. Work permits are issued, extended or renewed for a period of one year. In special cases, temporary work permits valid for a maximum period of three months may be issued. An exit permit must be obtained for a stay longer than three months.
[edit] Tax laws
Income from petroleum and natural gas exports typically provides the largest share of government revenue, although this varies with the fluctuations in world petroleum markets.
The Amendment has substantially reduced the rates of taxation on individual salary earners (including expatriate employees). It must be noted that all allowances and the '30 per cent absorption allowance' have been repeated. The tax is calculated on an annual basis, deducted from the gross monthly salary and paid to the tax authorities within 30 days by the employer. Late payments incur penalties.
Taxes include those on corporations and import duties. In addition to these mandatory taxes, Islamic taxes are collected on a voluntary basis. 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.
[edit] Individual taxes
All foreign investors doing business in Iran or deriving income from sources in Iran are subject Depending on the type of activity the foreign investor is engaged in, various taxes and exemptions applicable, including profit tax, income tax, property tax, etc. The Ministry of Finance and Economic the government agency authorized to levy and collect taxes.
[edit] Corporate taxes
Corporate and Profit Tax Prior to the distribution of profits, a company must pay a flat 10% of its taxable profit as corporate. Additionally, the company must calculate each shareholders tax liability (25%) plus 3% municipality public companies listed on the Tehran Stock Exchange are exempt from the 10% corporate tax.
[edit] Taxation of foreign companies
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:
- Income earned in Iran by way of contracting operations
- Income earned from Iran by way of royalties and licensing fees
- Other activities - trading operations, etc
- The Amendment has introduced certain changes in the tax treatment of the above activities.
