Expats require a work permit, or employment license, in Iran for any type of employment. The organ in charge is the “Department General for Employment of Foreign Nationals”, a division of the Ministry of Cooperative, Labor and Social Welfare. The requirements are set in articles 120-129 of Iran Labor Law. In general, a work permit will be issued to a foreign worker only if there are no Iranians having the same level of education or expertise. This sets the bar very high. Foreigners cannot apply for a work permit on their own, unless they establish an enterprise in Iran. Employers need to submit their request and documents as are listed and announced by the Department General for Employment of Foreign Nationals for verification. This list normally requires identification documents of applicant including resume and expertise documents, letter of request from the employer attached with company official documents (registration notice, latest changes, chart and etc.). Prior to this stage, employers cannot enter into an employment contract with foreigners. Then, the documents are sent to the Technical Board for Employment of Foreign Nationals which is very strict regarding issuance of work permits.
FIPPA (“Foreign Investment Promotion and Protection Act”) allows foreign investors, directors and experts and their immediate family members to acquire visa, residence permit and work permit. This was introduced in art. 35 of the executive directive to FIPPA. Yet, there are incentives for employment of Iranian nationals.
Work permits are, in any case, valid for one year. Renewal requires an application by the employer. The application, which must be written and should explain the need for renewal of the permit, must be handed by the employer at least one month before the work permit expiry date. Upon the end of the one-year validity of work permits, employers can refrain from renewing the contract. However, termination of work contract requires confirmation by the Ministry of Employment, which will result in termination of work permit. Working without a permit or employing an unlicensed employee are punishable by law.
According to the executive directive to FIPPA, the Ministry of Foreign Affairs has an obligation to ask Iranian embassies to issue a single or a multiple-entry visa clearance (with a validly of three years) and a three-month residence permit upon receiving a request from the Organization for Investment Economic and Technical Assistance of Iran (OIETAI), which is also in charge of issuing a FIPPA license for foreign investors. People who enter in Iran using this type of visa can obtain a three year residence permit and will get a work permit, which is valid for one year but is renewable once the FIPPA license of the investor is issued.
Employment insurance of foreigners is similar to the one for Iranian and can be obtained from the Organization of National Welfare (Ta’min Ejtemae’i) at similar rates. According to article 5 of Iran Social Welfare Law, when foreigners are insured in their own country, the employer might be exempted from their Iranian insurance if the foreign insurance covers work accidents, pregnancy, damages relating to wages, disability, retirement and death.
As mentioned above, in order to subject foreigners to Iranian taxation, they have to obtain work and residency permits from the Labor and Social Welfare Organization of Iran. In this light the long term multiple visa is also granted to foreigners to facilitate their entry and exit from the country. If foreigners without the necessary permits start working in Iran, even though through occasional trips to Iran, they will be subject to payment of fine and income tax as determined by the Tax and Organization and Labor and Social Welfare Organization of Iran. Iranian Law does not quantify the minimum number of days of presence in Iran to be considered as a working immigrant. Normally it is the duty of the Immigration Police to verify if a foreigner is working in Iran.
As far as taxation of foreigners’ income is concerned, the salary paid to foreign employees is taxable with the same rates of Iranian salaries. According to Art. 131 of Iran law on direct tax, income tax payable in Iran is between 15% and 35%, depending on income brackets.
|Annual Taxable Income||Rates||Of the excess over|
|Up to IRR 30,000,000||15%|
|Up to IRR 100,000,000||20%||IRR 30,000,000|
|Up to IRR 250,000,000||25%||IRR 100,000,000|
|Up to IRR 1,000,000,000||30%||IRR 250,000,000|
|Over IRR 1,000,000,000||35%||IRR 1,000,000,000|
Furthermore, Iran signed the Treaty on Avoidance of Gaining Double Taxation with many countries around the world, including Italy, France, Germany, Austria, Spain, China, Turkey and recently Cyprus. Under the rules of this Treaty, the amount of tax that has been paid by one applicant shall not be fully taxable again by the other country, but the percentage of difference between the tax rates of two countries shall be calculated on the whole income of the applicant.
The tax rate for foreign companies is also the same provided for Iran companies. Either the company is 100% owned by foreigners and is registered in Iran, or the company is a representative or a branch office of a foreign company, the same rules of tax are applicable. Some tax exemptions are provided for branch offices of foreign companies that only conduct research, feasibility study and marketing, without gaining incomes. Tax rate for companies in Iran is 25% of the annual profit.