A Critical Analysis of the Judicial Decision by the General Board of the Administrative Justice Court on the Tax Exemption on the Cost of Welfare Services

The Administrative Justice Court annulled the directive that was issued by the Iranian National Tax Administration. According to the directive, kindergarten, food, commuting, … subsidies are not exempt from the payroll tax. In this research, which is conducted with the descriptive-analytical approach, the exemption or the lack of exemption of the subsidies is studied with regard to the tax law. The Administrative Justice Court stated that the aforesaid subsidies are not considered “job-related benefits”. Rather, they are considered employee-related benefits. This definition is not only vague but also questionable because any payment made to the employees is for doing their job; otherwise, the aforementioned payments are baseless. However, assuming the aforesaid payments do not originate from the job and are ex gratia payments, they are subject to the incidental income tax due to the article 119 of the Tax Law, by virtue of indent 2 of article 1 of the Tax Law, whereby the incomes of natural persons are considered to be entirely subject to taxation, but if these payments are not assumed to be ex gratia payments, they are subject to the payroll tax, i.e. article 93.