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Hiring in Iran

Iran, officially known as the Islamic Republic of Iran, is a country in Western Asia. Tehran is the capital and the largest city of Iran. Tourism, mining, manufacturing, biotechnology, pharmaceuticals and agriculture are some of the significant industries of Iran and drivers of economic growth. Iran’s main trading partners are China, United Arab Emirates (UAE), India and Turkey. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Iran’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. Labor Code stipulates that employees are entitled to a one-month annual leave. Both resident and non-resident individuals are subject to income tax on their Iranian source income. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Iran’s Labor Code and tax laws.

statutory labor requirements

Probation Period

  • The maximum duration of probation shall be one month for unskilled and semiskilled workers and three months for skilled and specialized workers.

Annual Leave

  • A worker's annual paid leave entitlement shall be a total of one month, including four Fridays.

Public Holidays

  1. Martyrdom of Fatima (28th to 29th January)
  2. Iranian Revolution (11th February)
  3. Birthday of Imam Ali (7th to 8th March)
  4. Oil Nationalization Day
  5. Nowruz (20th to 23rd March)
  6. Prophet's Ascension
  7. Islamic Republic Day (30th to 1st March)
  8. Birthday of Imam Mahdi (8th to 9th April)
  9. Martyrdom of Imam Ali
  10. Eid al-Fitr
  11. Death of Khomeini (3rd June)
  12. Revolt of Khordad 15
  13. Martyrdom of Imam Jafar
  14. Eid al-Adha
  15. Event of Ghadir Khumm
  16. Tasu'a
  17. Day of Ashura (Shia)
  18. Arbaʽeen
  19. Demise of Prophet Muhammad and Martyrdom of Imam Hassan
  20. Martyrdom of Imam Reza
  21. Prophet's Birthday

Maternity Leave

  • Women employees are entitled to 90 days of maternity leave.
  • The employee's salary during maternity leave will be paid according to the provisions of the Social Security Act.

Paternity Leave

  • There is no paternity leave

Sick Leave

  • The period of sick leave shall be considered a part of the service record and retirement of workers with the approval of the Social Security Organization.

Work Hours

  • The workweek in Iran is based on a 44-hour week. 
  • Typically, employees work from Saturday to Wednesday (8 hours per day) and half a day on Thursday (4 hours).

Overtime

  • The Law mandates a payment of 40% above the hourly wage to employees for any accrued overtime. 
  • The employee must consent to overtime work

Notice Period

  • Any worker who resigns shall be required to provide his employer with written notice of his registration, and to continue to work for one month.

Severance

  • In the event of termination of the agreement, completion of definite works or expiry of definite agreements, the employer shall be required to pay to a worker who has worked on the job for one year or in excess of it under an agreement, an amount equivalent to one-month salary for each year of continuous or alternate service at the rate of the last salary as severance benefits.

13th / 14th Month Pay

  • No
  • There is no statutory requirement to pay the 13th or 14th month salary.
  • Employees are entitled to standard holiday allowance.

income tax

  • In Iran, both resident and non-resident individuals are taxed 
    • on the income received from employment relationships within the territory of Iran and
    • on all other income received from sources in Iran.
  • Iranian tax legislation provides for the exemption of income derived by individuals from
    • employment relationships in free trade zones
    • business activities carried in less-developed regions; and 
    • profits derived through operating cooperative societies (e.g., rural-area, tribal, agricultural, and fishermen cooperative societies).
  • All salaries, wages and allowances paid to individuals (i.e., residents and non-residents working with a work permit in Iran) are subject to a personal income tax.
  • The tax rate is as follows: -

Income Tax Rate

Annual taxable income

From IRR 0 to 30,000,000

15%

From IRR 30,000,000 - 100,000,000

20%

From IRR 100,000,000  - 250,000,000

25%

From IRR 250,000,000 - 1,000,000,000

30%

IRR 1,000,000,000 and over

35%

deductible expenses

The most important personal deductions are as follows: 

    • donations to approved charities
    • social insurance fund contributions (and similar contributions paid abroad)
    • life insurance premiums; pension plan contributions; and medical fund contributions.

Deductible Expenses

  • The most important personal deductions are as follows: -
  • donations to approved charities
  • social insurance fund contributions (and similar contributions paid abroad)
  • life insurance premiums; pension plan contributions; and medical fund contributions.

 immigration

  • Temporary Work (type F) visa: - Visa for foreign citizens who have the intention to work in Iran
  • The following can apply for a type ‘F’ visa: -
    • Skilled workers
    • Specialists in the fields of medical, industrial
    • Engineers
  • Investment (type I) visa: - Visa for foreign investors whose investment permit is approved by the Organization for Investment Economic and Technical Assistance of Iran.
  • The following can apply for a type ‘I’ visa: -
    • Merchants
    • Investors

Type of Visa/Permit

Documentation

Validity

Eligibility

Type ‘F’ visa

  • Completed application form
  • Passport size photo
  • Copy of the passport
  • Obtaining the labor certificate from a sponsor employer in Iran, approved by the labor ministry

N/A

  • The Temporary Work visa is suitable for foreign citizens who intent to work in Iran. Foreigners applying for the Iran Temporary Work visa need to obtain a work permit from a sponsor employer in Iran, and it must be approved by the Labor Ministry.
  • The following can apply for a type ‘F’ visa: -
  • Skilled workers
  • Specialists in the fields of medical, industrial
  • Engineers

Type I visa

  • Completed application form
  • Passport size photo
  • Copy of the passport
  • Approval letter from the Organization for Investment Economic and Technical Assistance of Iran

N/A

  • Visa for foreign investors whose investment permit is approved by the Organization for Investment Economic and Technical Assistance of Iran.
  • The following can apply for a type ‘I’ visa: -
  • Merchants
  • Investors

value added tax

  • The standard rate of VAT is 7%
  • Excise duties on tobacco products and petrol taxed at rates of 12% and 20%, respectively.

VAT

Standard Rate

7%

Tobacco Products

12%

Petrol 

20%

withholding tax

Dividends

  • Iran does not levy withholding tax on dividends

Interest

  • Interest payments are subject to a withholding tax of 0%/5%

Royalties

  • Royalties are subject to a withholding tax of 0%/5%/7.5%

WHT

Dividends

0%

Interest

0%/5%

Royalties

0%/5%/7.5%

Technical Service Fees

0%/5%/7.5%

termination

The employment agreement may be terminated in any of the following cases:

    • Death of worker
    • Retirement of worker.
    • Total disability of worker
    • Expiry of duration of definite employment agreements and their non-renewal explicitly or implicitly.
    • Completion of work in the contracts for specific task.
    • Resignation of worker.
  • Upon completion of work, all claims arising out of the employment agreement and the period of employment in the above cases shall be paid to the worker, and in the event of his death, to his legal heirs.
  • Any worker who resigns shall be required to provide his employer with written notice of his registration, and to continue to work for one month.
  • In the event of termination of the agreement, completion of definite works or expiry of definite agreements, the employer shall be required to pay to a worker who has worked on the job for one year or in excess of it under an agreement, an amount equivalent to one-month salary for each year of continuous or alternate service at the rate of the last salary as severance benefits.

 statutory benefits

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, overtime pay, notice period, and severance pay
  • Statutory benefits also include social security benefits

Statutory Benefits

Probationary Period

Annual Leave

Public Holidays

Maternity Leave

Sick Leave

Overtime Pay

Notice Period

Severance Pay

Social Security Benefits

 

payments and invoicing

  • The fiscal year begins on March 21 and ends on March 20 of the next year according to Iranian calendar. 
  • The Ministry of Finance and Economic Affairs is the government agency authorized to levy and collect taxes.

ease of doing business

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Iran ranked 127th in the World in 2019 in terms of ease of doing business.

employee accruals

   
Christmas Bonus%


0%

Christmas Bonus Over Vacations %

0%

Severance per Year %

Employees are entitled to severance pay equal to one month's pay after completion of one year of employment (8.33% of annual salary)

Vacations % A worker's annual paid leave entitlement shall be a total of one month, including four Fridays (8.33% of annual salary)
Notice %

No statutory notice period

Christmas Bonus Over Notifications% 0%
Vacations Plus% 0%
Total percentage of Salary (yearly) The total employment accruals as a percentage of salary per anum are equal to 24.99%

employer accruals

Additional information (Country Accruals)

   
Social security 23.00%
Maternity leave 90 days
Vacations 14.52%
Description Termination terms should be laid out in an employee’s contract of employment. There are strict requirements for dismissals, and employers generally need to have a justifiable reason to terminate any employment contract or may risk legal action.
Navigating employee terminations and handling severance packages can be complicated for companies expanding overseas for the first time. New Horizons’ Iran PEO can mitigate risk for foreign companies and provide guidance through this process. 

 

Employer Accruals Additional information

    Employment Accruals
Annual Leave A worker's annual paid leave entitlement shall be a total of one month, including four Fridays. This equals 8.33% (1/12 months) of annual income
Maternity Leave Women employees are entitled to 90 days of maternity leave. This equals 24.6% (90/365 days) of annual income
Overtime The Law mandates a payment of 40% above the hourly wage to employees for any accrued overtime. Depends on the number of overtime hours worked
Severance In the event of termination of the agreement, completion of definite works or expiry of definite agreements, the employer shall be required to pay to a worker who has worked on the job for one year or in excess of it under an agreement, an amount equivalent to one-month salary for each year of continuous or alternate service at the rate of the last salary as severance benefits. This equals 8.33% (1/12 months) of annual income
Social Security An employer contributes 14% of monthly payroll to the Social Insurance System. Employers contribute 6% of earnings to the Social Insurance and Social Assistance System This equals 20% of annual income

 

 

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