About Us
Taxes in Iran
Tax Treaties
International Events
Research & Statistics
Relevant Links
Photo Gallery
Contact Us
14th ATAIC Conference
Saturday, June 19, 2021

Special Event

9 - 13 December 2017, Tehran

Recent Events
The High-level Virtual Conference of the Belt and Road Initiative Tax Administration Cooperation Mechanism (BRITACOM)
The High-level Virtual Conference of BRITACOM titled "New Challenges, New Opportunities and New Future, Development Planning of Tax Digitalization in the Context of the Global Pandemic" was held, with the participation of high-ranking tax officials of member states.
Read More
Service of Process of the Law on the Agreement between I.R. Iran and India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Law
Service of Process of the Law on the Agreement between I.R. Iran and India for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income Law
Read More
A final step on the Agreement for the Avoidance of Double Taxation between Iran and India
A final step on the Agreement for the Avoidance of Double Taxation between Iran and India, was stressed upon during the meeting between INTA President and Indian Ambassador to Tehran.
Read More
Measures that have recently been taken by the Iranian National Tax Administration (INTA) against the outbreak of Corona Virus (Covid-19) can be divided into two parts as follows: A) Intra-Organizational Measures (On the side of Employees) 1) Maintaining the social distancing strategy and moving towards the next...
Read More

Contact Now
Tel:  +98 21 3396 7446
       +98 21 3990 3822
Fax: +98 21 3396 7420 
Email: h.tajmirriahi@tax.gov.ir
Read More

Employment Income Tax

Employment Income Tax

1) Salary

The employment income of employees in both the public and private sectors is taxed at progressive rates ranging from 0 to 20% after deducting a basic annual allowance determined by the state annual public budget laws (See Art. 85 of DTA):


Table (1): Salary Tax Rates

Above 1,932,000,000

Payments made by employers to real persons other than their own employees who are not subject to payment of retirement or insurance contributions, under such titles as consultation fees, meetings attendance fees, teaching fees, or study and research fees, shall be taxed at the flat rate of 10%, without taking into account the basic annual allowance (See Note of Art. 86 of DTA).


The following income is specifically exempted from income tax on salaries (Art. 91 of DTA):


1) Salaries of foreign diplomats, embassy staff, etc. (subject to reciprocal treatment) and non-Iranian members of UN delegations and specialized agencies;

2) Salaries of foreign experts sent to Iran on aid programs;

3) Salaries of local employees of Iranian embassies, consulates, etc. subject to reciprocal treatment;

4) Pensions, retirement allowances and termination of employment payments;

5) Service-related travel expenditure and allowances;

6) 50% of the salary tax of employees working in villages and deprived regions;

7) Housing, on-site accommodation, food and transport allowances and other non-cash benefits provided for manual workers;

8) Compensation from medical insurance, accident insurance, etc;

9) New Year bonuses and year-end allowances up to a maximum of one twelfth of the basic annual allowance;

10) Housing provided for civil servants;

11) Employees’ medical expenses met by employers;

12) Salaries paid to members of the armed forces, Intelligence Ministry employees, war veterans and former prisoners-of-war; and

13) Non-cash allowances provided to employees up to a maximum of two twelfth of the basic annual allowance.


The employment income of foreign workers has often been subject to tax on the basis of a notional scale of remuneration rather than by reference to the actual employment contract. On 11 May 1998, a directive was issued requiring expatriate workers to pay income tax on the total salary, allowances, and benefits earned during the employment period in Iran with effect from 22 June 1998.


Expatriate employers are now required to submit full details of the remuneration of their expatriates, plus details of any tax withheld and copies of the relevant employment contracts to the local tax district within 2 weeks of a request by the said tax district. The report requires completion of a special specified form, which must be signed by both employer and employee. In the case of non-resident foreign employers, the expatriate is required to supply the information within 2 months of the start of employment.


The employment contract must reflect all the benefits included in the employment package. The contract must also be:


1) Authenticated by the employer’s head office; and

2) Verified by competent government authorities and by the Iranian embassy in the country where the employer’s head office is located.


Failure to comply may lead to a tax assessment initially on a presumptive basis using specified notional pay scales. If the tax assessed on the presumptive basis later proves to be less than the tax due on the actual remuneration, the additional tax will be assessed and penalties shall be imposed. Tax will be refunded, if the actual remuneration proves to be less than the notional figure.


The Council of Ministers also passed a resolution on 17 December 2000, unifying the basis of expatriate salary charges, exchange rates of the contract, withholding taxes and compensation for increases in statutory charges. As a result, the following were implemented:


1) The salary tax and work permit charges of expatriates are now computed based on the salaries and fringe benefits reported in the employment contract. The employer is required to report such amounts to the tax authorities, and to the Ministry of Cooperatives, Labor and Social Welfare;

2) If the expatriates salary and fringe benefits are not specifically mentioned in the employment contract, then the basis for computing the salary tax and work permit charges will be via a "unified list" which is to be prepared by the Ministry of Cooperatives, Labor and Social Welfare together with the relevant ministry or employer. This list must also be approved by the Council of Ministers; and

3) The exchange rate to be used when computing the tax and work permit charges is the rate stipulated in the employment contract unless the employer purchases the hard currency at a different rate, in which case the actual rate will be used.


No expenses are specifically listed as deductible in arriving at income subject to the tax on salaries. Direct Taxes Act does, however, provide for the general deductibility of two categories of expenditure in arriving at the taxable income of individual taxpayers. The two categories are “health and treatment expenses” and “payments for health and life insurance of employees or for insuring them against accidents arising out of work” (See Art. 148 of DTA).


Also, as of 21 March 2001, employees may deduct from taxable income any payments made for housing loans, provided that the following criteria are met:


1) The relevant house must be less than 120 sq m in area and must be purchased or built between March 2000 and March 2004; and

2) The employer must be provided with a statement from the relevant bank confirming the amount of the monthly installment payment and the period of the loan.


The tax on salaries is collected by deduction at source. Employers are obliged to calculate and withhold the relevant tax on the basis of the employee’s annual salary. The tax so deducted must be sent to the local Tax Affairs Office up to the end of the next subsequent month together with a list of the names and addresses of the payees and their respective salaries in the first month. For subsequent months, only changes to the original list need to be reported. Where the payer of an amount subject to the tax on salaries is not the payer of the recipients’ basic salary, wage, etc., he must deduct the tax at the rate of 10% and pay it to the local Tax Affairs Office up to the end of the next subsequent month together with a form including the particulars of the payees (See Art. 86 of DTA).


Persons receiving a salary paid from abroad are required to pay, up to the end of the next subsequent month following the date of receiving such salary, the due tax the Tax Affairs Office of the district where they are domiciled. They are also obligated to submit, until July 22 (the end of the month of Tir) of the next year, a tax return on the salary received by them to the same Tax Affairs Office (See Art. 88 of DTA).


Exit visas and extensions of residence permits and work permits will only be issued to foreigners on to presentation of a tax clearance or a written commitment by the Iranian legal person employer that is the party to the contract with the employer of expatriate employees or with the third party Iranian legal entities (See Art. 89 of DTA). So, the expatriate will not be barred from leaving the country, when such a contractual commitment has been entered into force, even if the taxes have not been settled.


In cases where the payers of salary fail to remit the applicable tax on stipulated time, or pay a sum below the actual amount, the competent Tax Affairs Office is required to calculate the applicable tax together with the fines thereof, and to claim the same, by means of an assessment notice, from the payers of the salary who will be treated as taxpayers (Art. 90 of DTA). This rule shall also be applicable to the taxpayers who receive a salary from abroad but fail to remit the tax due within the legal time limit. 


The penalty for failure to comply with salary tax withholding requirements is a fine equal to 10% of the unpaid tax (See Art. 199 of DTA). In addition, failure may be regarded as tax crime whereby the employer or the director(s) of the employing enterprise shall be sentenced to grade-six penalties (See Art. 274 of DTA).


Claims for the refund of an overpaid salary tax must be made in writing by the recipient of the salary to the Tax Affairs Office local to his place of residence after the July 22 (expiry of the month of Tir) of the next year up to the end of the same year (See Art. 87 of DTA).


2) Benefits in kind


The assessable value of benefits in kind is normally the cost to the employer but in the following cases the assessable value is calculated as a percentage of salary and other regular remuneration paid in cash (net of deductions):


1) Furnished housing: 25%;

2) Unfurnished housing: 20%;

3) Chauffeur-driven car: 10%; and

4) Car without chauffeur: 5% (See Note of Art 83 of DTA).




3) Pension income


Pensions, retirement allowances, and termination of employment payments are exempt from taxation (See Art. 91 of the DTA.


4) Directors remuneration


Directors remuneration is added to their annual salary obtained from employment payments and is subject to tax.


Related Pages
A Review of the Iranian Tax System
Corporate Income Tax
Full-Text of VAT Act
Individual Business Income Tax
Letters of Circular
Property Taxes
Real Estate Income Tax
Tax on Incidental Income
Home  ||   News  ||   Contact Us
Check site in another language: English