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Letter of Circular on Salary Income Annual Allowance for 1395 (2016)


Reg. No.: 200/95/19

Reg. Date: June 15, 2016-06-20

 

Taking into consideration the provisions of Paragraph (A) under Note (6) of the 1395 [2016] State Public Budget Law whereby a ceiling of IRR 156,000,000 has been determined as the “basic annual income allowance” of 1395 [2016] pursuant to the provisions of Article (84) of the Direct Taxes Act approved on February 22, 1988 and its subsequent amendments, and since on the strength of Article (85) of the amendments to the Direct Taxes Act approved on July 22, 2015, the salary income of employees of both public and private sectors, exceeding the basic annual income allowance shall be subject to tax at an annual rate of 10% up to an amount seven times the annual allowance, but the amounts in excess shall be subject to a tax rate of 20%; therefore, public or private sector employers making salary payments to their employees shall be obliged in the year 1395 (i.e. March 20, 2016 – March 20, 2017), as per the provisions of Article (86) of the Direct Taxes Act, to withhold the salary income tax of their employees with due regards to the regulations envisaged under Article (85) of the aforementioned Act and to pay the same, up to the end of the next subsequent month, to the local Tax Affairs Office, observing any other relevant legal obligations.

It is hereby noted also that by virtue of the letter of circular No. 200/95/1 dated April 6, 2016, it was provisioned that the salary income tax of the first two months of the year 1395 be withheld and remitted as an on account tax on the basis of the annual income allowance of 1394 (2015); so, the employers shall be required to make final adjustments in the salary income taxes of the aforementioned two-month period in the next subsequent month(s).

 

Signed by:  Seyed Kamel Taghavi Nejad

President of Iranian National Tax Administration 

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