LAWS AND REGULATIONS

ON SALARY TAXES OF FOREIGN NATIONALS

Official Gazette No.16272, dated 3 January 2001 (14.10.1379)Decree

No. H20790T/44337, dated 4.10.1379 (24.12.2000)

To: The Ministry of Finance and Economic Affairs

The Ministry of Labor and Social Affairs

The Council of Ministers in their session of 27.9.1379 (17.12.2000) approved the following by virtue of Articles 134 and 138 of the Islamic Republic of Iran's Constitution and Article 6 of the "Government Punishment (Ta'zirat) Law for Smuggling Goods and Foreign Currency" approved in 1374.

In order to bring about coordination in calculating the salaries and fringe benefits of foreign nationals in Iran and to regulate the criteria relating to the use of foreign currency by the said persons and the method of considering the unforeseeable costs during contract negotiations, the respective organizations should comply with the following regulations.

1. For the purpose of complying with para (b) of Article 26 of the "Law on Collecting some of Government's Revenues and Expending same in Specific Cases" and subsequent amendments therefore, as well as Direct Taxation Act, calculation of the salaries and fringe benefits of foreign nationals shall be based on amounts specified in their respective contracts which are confirmed by the relevant executive organizations and advised to the appropriate tax assessor and the Ministry of Labor and Social Affairs.

Note: In cases where the salaries fringe benefits of foreign national are not specifically separated in their contracts, calculation of the said salaries and fringe benefits for the purpose of uniform application by the ministry of labor and Social Affairs as well as the Ministry of Finance and Economic Affairs shall be made on the basis of a joint recommendation to be made by the said ministries and the ministry or independent organization concerned and approved by the Council of Ministers.

2. For determining the amount of tax, calculation should be made on the basis of the rate of exchange used at the time of contract conclusion with due consideration of the appropriate rules and regulations, unless the relevant executive organization, (the employer) of the projects, in compliance with the contract conditions and the prevailing rules and regulations, pays the equivalent amount in Iranian Rials to the banking system, in which case the latter rate shall be applicable.

3. The executive organization (the employer) may provide, in the contract it concludes with the foreign contractor that when making each payment to he contractor, the Employer will pay the applicable tax according to rules and regulations to the tax authorities and will debit the same amount to the contractor's account.

4. The executive organization concerned, in the contract it concludes with the foreign contractor for the purpose of calculating the Social Security Organisation (SSO) premium, tax and other government charges which are not predictable and which are imposed after contract signature on the grounds of changes in the rules and regulations, may apply either of the following procedures.

a. In case of lump - sum contracts any additional amount of SSO premium, tax and other government charges should be paid by the executive organization (the employer).

b. In cases other than lump - sum contracts, the said additional amount of SSO premium, tax and other government charges shall be taken into account when escalating the contract price.

5. In the case of those foreign national for whom payment of tax shall be undertaken by the Employer, there shall be no prohibition to leave Iran without obtaining tax clearance certificate and they may leave the country with no need to produce tax clearance certificate.