Pars Associates

Attorneys-at-Law

COPYRIGHTS RESERVED

December 5, 2007

Azar 14, 1386

LAWS AND REGULATIONS

- The Law on Change of Official Clock of the IRI ..... Page 1

- Maternity Leave Extended to Six (6) Months ..... Page 1

- Ban on Import of Counterfeit Products and Goods That

May Mislead Consumers ..... Page 3

- On Tax and Duties Payable on Expatriates' Salaries ..... Page 4

- Deemed Salaries of Expatriates Working for Armed Forces ..... Page 6

- Experimental Enforcement of Islamic Law of Punishments

Extended Until August 8, 2008 ..... Page 7

LEGAL NEWS

- Exemption from Payment of SSO Penalties Seems

to Be in the Pipelines ..... Page 8

- New Activities Becoming Subject to Withholding Taxes ..... Page 9

BUSINESS AND ECONOMY

- Evaluation of Government's Economic Management ..... Page 10

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LAWS AND REGULATIONS

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THE LAW ON CHANGE OF OFFICIAL CLOCK OF THE IRI

Official Gazette No.18242, Published on October 16, 2007

Letter no.662/92956 dated Sept.16, 2007

To His Excellency, Dr. Mahmood Ahmadinejad, the President of Islamic

Republic of Iran

Your Excellency,

Attached hereto, please find the Law on change of official clock of Islamic

Republic of Iran that was presented to the Islamic Consultative Assembly in

the form of a single asterisk urgency draft bill and was approved by ICA on

August 22, 2007 and subsequently confirmed by the Guardians Council.

Sole Article- The official clock of the country shall be brought, one hour,

advance at 24.00 on the first day of Farvardin (March 21) each year and shall

be returned to its original position again at 24.00 on 30th Shahrivar

(September 21).

The above Law comprising a Sole Article was approved by ICA in the open

session of Wednesday, August 22, 2007 and confirmed by the Guardians

Council of the Constitution on September 12, 2007.

ICA Speaker- Gholam'Ali Haddad Aadel

* * *

MATERNITY LEAVE EXTENDED TO SIX (6) MONTHS

According to Article 3 of the Law on Promotion of Infants' Breast Feeding

and Protection of Mothers During Maternity, approved 1378, mothers who

feed their infants by their own milk, instead of the overall 90 days of

maternity leave provided in Article 76 of the Labour Law, shall be granted a

maternity leave of four (4) months. The said period has now been increased

to six (6) months. Also, the period of entitlement to one hour of leave per day

during the first 20 months of the life of their babies provided in Note 1 of the

said Article 3 has now been increased to 24 months. The following is a

translation of the said law:

Official Gazette No.18186 published on August 6, 2007 (Mordad 15, 1386)

Sole Article- In Article 3 of the Law on Promotion of Breast Feeding and

Protection of Mothers During Maternity, approved 1374, the phrase "four (4)

months" shall increase to "six (6) months" and the words "up to a maximum

of 20 months" shall increase to "a maximum of up to 24 months" in Note 1 of

the said Article.

The above Law was approved by the Islamic Consultative Assembly on June

27, 2007 and confirmed by the Guardians Council on July 4, 2007.

ICA Speaker- Gholam'Ali Haddad Aadel

The following is a translation of the revised text of Article 3 of the above

Law, and two of its notes:

Article 3- Maternity leave, for up to three children, in the case of mothers

who feed their infants with their own milk, in government and nongovernment

sectors, shall be six (6) months.

Note 1- Mothers who feed their infants with their own milk, after returning to

work and completion of the six-month maternity leave period, shall be

entitled to one hour leave per day (without being deducted from their annual

leave) for up to a maximum of twenty-four (24) months, provided that they

continue to milk their infants, by breast feeding.

Note 2- Job security of mothers, after the period of maternity leave and

during the period of breast feeing must be secured.

* * *

BAN ON IMPORT OF COUNTERFEIT PRODUCTS AND GOODS

THAT MAY MISLEAD CONSUMERS

The Customs Organization issued a Circular No.73/385/525/316712 on

Feb.13, 2007 on the above subject. Some of the main phrases of the above

Circular have been reproduced below:

"As you are aware, some internationally recognized manufacturers, during

the recent years, granted license to producers in China, Taiwan and Vietnam,

etc. to produce under their trademarks. Also, some importers of commodities

have been importing goods with above trademarks with certain misleading

expressions on them such as "Model China", "Designed in China", or "Mod

China", etc.

Considering that according to Sub-clause 12 of Article 40 of the Customs

Law "import of the commodities on whose wrappers or on whose main

bodies the trademarks of other manufacturer have been indicated that may

cause deceit and shall mislead buyers and consumers, as regards the country

of manufacture, the manufacturer itself, or the main features of the product,

shall be prohibited", therefore, the customs officers shall refrain from

allowing clearance of any such imported goods from the customs under any

pretext, especially if the goods shall bear internationally recognized and

famous trademarks without the country of manufacture being explicitly

mentioned on them.

Customs officers, in cases where the goods shall bear the trademarks of

famous brands but have been produced in countries other than the actual

country of the original manufacturers, shall be under the obligation to require

the relevant license to manufacture in that country that must be endorsed and

confirmed by the embassy of Islamic Republic of Iran in those countries of

manufacture and must also require that the country of manufacture shall be

legibly indicated on the product. Considering that 2007 has been termed by

the World Organization of Customs as the year of combat against counterfeit

products and crimes relating to intellectual property, therefore, customs

officers are required to refrain form allowing customs clearance of the goods,

as provided in Sub-clause 12 of Article 40 of the Customs Affairs Law, in

case of any doubt in respect of the country of manufacture."

Subsequently, a further Circular was released by the Ministry of Economy

and Finance, as the controlling Ministry of the Customs Organization

regarding the above Circular of Mr. Mohammad Reza Naderi, the Customs

Affairs Deputy of the Customs Organization, expressing doubt on the

deceitful nature of the above imported commodities. Some main parts of the

above circular have been reproduced below:

"It is evident that the products imported into Iran on whose main body or

wrapper the trademark, name, or descriptions of a manufacturer, other than

the original manufacturer have been indicated, must be precluded from

clearance through the customs. However, only in case such particulars have

been written in such way as to cause the deceit of buyers and consumers, the

products must be stopped from entering Iran and customs clearance.

Naturally, anyone who may claim that the particulars given for a product

shall not deceive consumers may refer to the First Instance as well as the

Appellate Boards of Investigation of Customs Claims as provided in Article

305 of Customs Law and By-Laws. Opinions given by the appellate board

shall be final and binding. Therefore, the customs chief or his deputy can not

finally preclude import of certain commodities by issuing circular letters.

Further, it has been the regular procedure at the Customs, to erase counterfeit

trademarks from the faces of products in cases where final verdicts have been

issued by the above panel and/or the country of manufacture have been

legibly indicated on the faces of the products with due regard to the right

granted to those who may object, according to Articles 51 and 52 of the

Customs Law.

* * *

ON TAX AND DUTIES PAYABLE ON EXPATRIATES' SALARIES

Official Gazette No.18116 Published on May 12, 2007

Council of Ministers' Decree No.H36023T/22231 Dated May 7, 2007

The Council of Ministers, in the course of a session held on May 2, 2007

amended Clause 1 of Decree No.H20790T/44327 dated December 25, 2000

concerning the mode of calculation of taxes and duties payable on the salaries

of expatriates.

The following is the full amended text of the said Decree

"2. In cases where the salaries and benefits of expatiates have not been fixed

separately in the relevant contracts, the basis of calculation, except in the

following cases, shall be a table that will be drawn by the Ministry of

Economy and Finance, and the Ministry of Foreign Affairs. The said Table

shall be used by the relevant government organizations in their calculations.

Note 1- In the case of those foreign nationals who have been living in Iran

for a long period and (or) live in Iran as a result of their marriage to Iranian

spouse and are, therefore, subject to the provisions of Article 122 of the

Labour Law, approved 19901, and have been employed by private companies

and firms, calculation shall be made on the basis of accepted statutory legal

books and vouchers.

In the case of other foreign nationals engaged in work in public and

government organizations and entities, the salaries declared by employer

organizations and entities shall be the basis of calculation. Otherwise,

calculations shall be made, with due regard to the existing records, at the

level of the pertinent job and by making comparison with the level of salaries

of Iranian nationals. In any case, the amount of the salary to be determined

shall not be less than that declared as minimum wage by the Ministry of

Labour and Social Affairs.

Note 2- If a foreign national shall file tax return with the tax authorities in

his/her own country and shall have a copy thereof legalized and certified by

the Iranian embassy in that country, the figures in the said returns shall be

used as the basis of calculation of tax and duties by the Ministry of Labour

and Social Affairs as well as the pertinent tax department.

1 Article 122- The Ministry of Labour and Social Affairs may issue, extend any renew the work permits of

the following individuals:

a. A foreign national with at least ten years of continuous residence in Iran.

b. A foreign national having Iranian spouse.

c. Immigrants from foreign countries in particular Islamic states and those seeking political asylum

subject to holding valid immigration or refugee cards, and after the written approval of the Ministries

of Interior and Foreign Affairs.

Note 3- The basis of calculation of duties and salary tax of the foreign

nationals who have been employed at the government sector by virtue of

Article 82 of the Constitution of Islamic Republic of Iran1 and in compliance

with Article 127 of the Labour Law2, approved 1990, shall be the salaries and

benefits paid by the government entity concerned.

Note 4- The provisions of the treaties, approved by the Islamic consultative

Assembly, to avoid double taxation, shall only apply to the nationals of those

countries that have concluded the said treaties with the Islamic Republic of

Iran.

Note 5- Missionaries of the religious minorities who receive work permits

with the confirmation of the Ministry of Culture and Islamic Guidance shall

not be subject to payment of work permit duties if they receive a certificate of

tax exemption (due to non-existence of income) from the relevant tax

department of the Taxation Affairs Organization.

Parviz Davoodi- First Vice President

* * *

DEEMED SALARIES OF EXPATRIATES WORKING FOR ARMED

FORCES

Official Gazette No.18200 Published on August 23, 2007

Decree No.H35842T/84681 dated August 19, 2007

The Council of Ministers, in the course of a session held on August 8, 2007,

pursuant to a proposal made by the Ministry of Defence and Logistics of the

Armed Forces and by invoking the provisions of Article 6 of the Law of

1 Article 82- The employment of foreign experts by the Government is prohibited unless it is essential and

approved by the National Assembly.

2 Article 127- Employment of foreign specialists and technical experts required by the Government shall

take place, in consideration of the nationality, period of service and the amount of their wages, and with due

regard to the domestic specialized work force, after examination by and comments of the Ministry of Labour

and Social Affairs, and the Organization for Administrative and Employment (OAE) and with the approval

of the ICA. Work permits for employment of foreign experts, in such cases, shall be issued by the Ministry

of Labour and Social Affairs after approval by the ICA.

Government Punishments, approved 1374 ratified that the following text

shall be added, as Note 6, to Sub-clause 2 of Decree No.H36023T/22231

dated May 7, 2007:

"Note 6- The basis for calculation of duties, unemployment insurance

premium and salary tax payable by foreign aids engaged or to be engaged in

work at the Armed Forces, the Ministry of Defence and Logistics of the

Armed Forces, as well as the organizations affiliated to them shall be

determined through agreement by the Ministry of Labour and Social Affairs,

Ministry of Economy and Finance and the Ministry of Defence and Logistics

of the Armed Forces and on the basis of the number of expatriates and salary

levels declared by the Ministry of Defence and Logistics of the Armed

Forces."

Parviz Davoodi- First Vice President

* * *

EXPERIMENTAL ENFORCEMENT OF ISLAMIC LAW OF

PUNISHMENTS EXTENDED UNTIL AUGUST 8, 2008

Official Gazette No.18204 Published on August 15, 2007

To Dr. Mahmoud Ahmadinejad, the Honourable President of Islamic

Republic of Iran

Please find attached hereto the Law on Extension of the Period of

Experimental Execution and Enforcement of Islamic Penal Code, approved

1370, the draft of which had been presented to the Islamic Consultative

Assembly, in the form of a double asterisk bill pursuant to your letter

No.310/76453 dated August 6, 2007, in compliance with Article 123 of the

Constitution of Islamic Republic of Iran.

The above Law was approved by ICA on August 8, 2007 and has been

confirmed by the honourable Guardians Council.

Gholam'Ali Haddad Aadel- Speaker, Islamic Consultative Assembly

Sole Article- The experimental period of execution and enforcement of

Islamic Penal Code, approved 1370, and its subsequent amendments, is

hereby extended for a further one year period. This Law comes into force as

of the date of approval.

Note. The Judiciary shall be under the obligation to present the draft bill of

the Islamic Penal Code, to the Islamic consultative Assembly, through the

Government, within a maximum period of three months.

The above Law, comprising a Sole Article and one Note was approved, at the

open session, by the ICA, on August 8, 2007 and was confirmed by the

Guardians Council on the same date.

Gholam'Ali Haddad Aadel- Speaker ICA

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LEGAL NEWS

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EXEMPTION FROM PAYMENT OF SSO PENALTIES SEEMS TO

BE IN THE PIPELINE

According to Article 101 of the Social Security Act, the Social Security

Organization shall charge employers one twelfth of the amount of social

security insurance premium that, according to the opinion of SSO Boards of

Settlement of Disputes, has not been paid on time by employers.

Considering that SSO insurance premium payable by contractors is a

percentage of the works carried out under a contract (16.68% of contracts

without materials and 7.78% of contracts where a contractor will be in charge

of procurement of materials and equipment) and also considering that some

contractors do not apply for SSO clearance certificate after payment of each

progress statement but apply for clearance certificate only after completion of

the project, therefore, the said penalty is not always directly related to a

failure, on the part of employers, to pay the insurance premium on the

salaries of their workers, on time.

The above penalties as well as those charged by the SSO for delayed

payment, according to information revealed by the Minister of Welfare and

Social Security, Mr. Abdul' Reza Mesri is being now exempted according to

a new law that will be soon approved by the Islamic Consultative Assembly.

The Majlis Deputies have just completed the first round of debates regarding

the draft law.

According to Mr. Mesri, the Principal debt of employers to the SSO will

become payable by installments during 12 to 36 months. Penalties will be

subject to exemption and reduction from 60% to 85% depending on the

duration of installment payment chosen by an employer.

* * *

NEW ACTIVITIES BECOMING SUBJECT TO WITHHOLDING

TAXES

According to Article 104 of the Direct Taxation Act, amended on January 16,

2002, "the ministries, government entities and individuals who are required

to maintain statutory accounts books and file tax returns, are under the

obligation to deduct 5% of all amounts they pay as fees, hospitals, laboratory

or X-ray expenses, arbitration fee, consultation, expert advice, administrative

and fiscal services, auditing, writing, editing, composing musical

compositions and/or performances, theatrical performances, singing,

painting, brokerage fee or commission, any type of fees, commissions or

charges for the services excluding charges paid to the banks, cooperatives

funds and the authorized non-bank credit institutes, cleaning of buildings,

rental of offices and calculating machines, computer services, digital

telecommunication, rental paid for any kind of ground, air and marine motor

vehicles and means of transportation, machinery, plants, cold stores,

warehouse charges, repair and maintenance of lifts, central heating and air

conditioning equipment, any kind of construction works, technical

installations, various establishments, designing and planning of buildings and

installations, topography and cartography services, supervision and technical

calculations of various kinds, transportation, as well as any fees paid on

account of royalties for movie films. The 5% withholding taxes shall be paid,

within 30 days, to the account designated by the Taxation Affairs

Organization and the receipt for payment of the above tax must be submitted

to the original taxpayer.

According to Note 5 of the above Article 104 of the Direct Taxation Act, the

Taxation Affairs Organization shall declare the new activates subject of

deduction of 5% withholding taxes. The last of such declarations, is circular

No.211-3808/65200 of the Taxation Affairs Organization dated 18.02.2007.

According to the said Circular, the following activities are subject to

withholding taxes under Article 104 of the Direct Taxation Act:

1. Repair and maintenance of all types of land, air, sea and rail transport

vehicles, as well as office equipment and machines that shall be carried

out under a contract.

2. Lodging and accommodation provided to government and private sector

entities' personnel in hotels and other places together with pertinent

services to be carried out under a contract.

3. Training and educational services of all kinds.

4. Exhibits and fairs services.

5. Insurance services (whether medical or hygiene services).

6. All types of managerial services.

7. Landscapes maintenance.

8. Packaging of any product, in any manner, with any material.

9. Fee paid for logistics services and operation of cargo and passenger

terminals and facilities for rail, airport, aviation, ports and road

transportation and services.

10. Fee for refining and conversion of sugar lump and sugar.

11. Fee for the use of telecommunication equipment and facilities.

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BUSINESS AND ECONOMY

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EVALUATION OF GOVERNMENT'S ECONOMIC MANAGEMENT

The Government of Dr. Ahmadinejad can surely boast of being one of the

most active and hard working governments, in charge, after the victory of

1979 Islamic Revolution in Iran. Visits to every corner of all provinces

demonstrate the government's determination to solve people's difficulties

and hardships, throughout the country, in a move towards development and

progress of Islamic Iran. The said efforts, at the same time, seem to be of a

more intention to do good, rather than implementation of wise programs.

Thoughtless executive works will not surely bring favourable results.

It should be admitted, however, that visits by the government, to 336 cities in

30 provinces during the past two years resulted in the ratification of 6,119

decrees on development and removing various bottlenecks.

These visits provided a general consensus that funds should be directed

towards setting up infra-structures in deprived regions. As a result of this

trend, the bulk of credits by banks have been allocated to deprived regions.

Special attention was given, during the said trips, to the construction of large

refinery, petrochemical and manufacturing projects and establishment of

industrial zones.

Government plans in devising fuel rationing cards and implementation of the

rationing plan are among the very brave steps taken by the 9th government,

after the Islamic Revolution, towards providing an objective system of

subsidies, supplementing social security system, enhancement of public

transportation network and boosting the output of refineries and power

plants.

The 9th government can also be pound in having reduced the interest rate

charged on banking facilities with the aim of expanding investment coupled

with the distribution of over 5,000,000 stocks known as stocks of Justice.

During the 16 years prior to the term of the 9th government, a total of 35,000

billion rials of stocks of government owned companies had been privatized.

This figure can be compared with 26,500 billion rials of justice shares that

went public only during the first years of office of the 9th government.

In spite of the above, there are some signs that the end result of the above

policies may not be very favourable. The following are only some of the said

signs:

- During the past years, the grip and control of all markets by the

government increased, so much so that the economy has lost its

efficiency to great extent and is no longer quite dynamic. The

government greatly intervened in the job market by unprecedented

increase of minimum wages, and had an adverse effect on the

commodity market through enforcement of a fixed prices system in a

move to stop prices hike. Government's change of interest rates charged

by banks and directing the trend of allocation of banks' credits towards

specific economic activities was also regarded as unfavourable

manipulation of fiscal and financing market that caused the

implementation of the policies introduced by the Honourable Leader in

respect of Article 44 of the Constitution, difficult.

Although the above restricting acts also existed during the reign of the

previous governments, the decrees and programs of executive

organizations and certain laws and regulations (such as the Annual

Budget Bill and its addenda) during the period of office of the 9th

government are explicitly in contradiction with the IRI's 20 Year

Outlook and the policies of Article 44 of the Constitution1.

- Government's disregard and neglect of free market system and fixing

the prices continues to be a main obstacle in the path of expansion of the

private sector.

It is obvious that the government may insist that pricing must be

transparent in order to protect the legitimate rights of consumers. But,

actions such as rationing the fuel are obviously curtailing market

mechanisms, even if such acts can bring good results in the short term.

Rationing can not bring about discipline in consumption but pricing

(free market pricing) can efficiently and speedily prevent wastage and

extravagance.

- Price control, at a time when the liquidity has a growth of 40% per year,

has provided tremendous difficulties for manufacturers that will surely

have adverse effects on production, investment and employment levels.

Inflation has its roots in economic and social structures. Fixing prices

and reducing interest rates of banks' credit facilities surely can not

eliminate or even reduce the effects of erroneous monetary policies,

budget deficit, unprecedented growth of cash in hard, state run

1 Please see LIS Bulletin of August 30, 2006.

economy, the heavy burden of government and public companies, lack

of discipline, extravagance, disregard of the Law, etc.

To make good the losses the government is being urged to:

- Bring about discipline and transparency in drawing up annual budgets

and activities beyond the budget.

- Total avoidance of budgetary deficit.

- Promoting management of affairs by the knowledgeable elites in all

levels.

- Expanding justice and respect of private ownership by natural persons

and legal entities.

- Unconditional release of grips by the government over the economy.

- Protection of small industries and businesses.

- Enhancing competitiveness of Iranian economic enterprises at the

international markets through promotion of free market mechanisms.

- Expeditious revision of labour law, bankruptcy law and other laws

affecting the economic trends.

- Organization of capital market and avoiding concentrated planning.

- Globalization of national economy for the purpose of protection of

national interests.

Iran Economics – September 2007

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