The EU will announce Sunday the formal end to damaging economic sanctions imposed on Iran over its nuclear programme which the West feared would give Tehran the atomic bomb, Western diplomatic sources said.

They said the decision will take effect around the end of the year after the International Atomic Energy Agency (IAEA) certifies that Iran has met its commitments under a landmark July accord with the major powers to curb its nuclear programme in return for lifting sanctions.

"The EU will adopt the legislative framework for lifting all nuclear-related economic and financial sanctions but this will of course only apply ... once the IAEA would have ticked all the boxes," one of the sources said.

"My own assessment is that implementation can be expected to take place at the end of the year, (or) the beginning of next year, but of course only once the IAEA has given the green light," said the source who asked not to be named.

Crucially, Iran will have to satisfy the IAEA, the UN nuclear watchdog, that it has taken the steps required to ensure its Arak reactor and other installations cannot be used for military purposes.

Sunday's announcement will complete the 90-day adoption stage of the July agreement reached between Iran and the five permanent UN Security Council members -- Britain, China, France, Russia and the United States -- plus Germany.

The United States and the European Union have hit a long list of Iranian individuals and companies, especially its banks and key oil and gas groups, with asset freezes and visa bans to pressure Tehran to open up its nuclear programme to international inspection.

The sanctions have proved very damaging, locking up billions in Iranian assets overseas and starving the oil-dependent economy of crucially needed technology and investment.

Washington is expected to make a similar announcement Sunday on lifting its Iran sanctions.

In Tehran, the official Iranian News Agency (IRNA) said EU foreign affairs head Federica Mogherini and her Iranian counterpart Foreign Minister Mohammad Javad Zarif would issue a statement on Sunday.

"The ending of the sanctions will follow once we have done our part. We hope that will happen within one or two months," Iran's chief nuclear negotiator, Abbas Araghchi, was quoted as saying in the IRNA report.

The July agreement won final approval in Iran on Wednesday following US and United Nations clearance despite fierce opposition from US and Israeli critics who believe it lets Tehran off the hook too easily and from Iranian hardliners who believe it concedes too much to the West.

Iran has always denied seeking nuclear weapons and the accord is meant to ensure it never does through an inspection regime over 15 years.

The two sides are due to hold a first meeting Monday in Vienna of the Joint Commission which will oversee the next phase, implementation of the accord.