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Tax-Related Provisions of 1395 (2016) Annual State Public Budget

Reg. No.: 200/95/18

Reg. Date: June 5, 2016-06-11

 

The tax-related provisions of 1395 (2016) Annual State Public Budget, approved on May 16, 2016, are hereby communicated to be appropriately implemented:

 

Note (1):

Paragraph D: Ministry of Petroleum is obligated, through its relevant subsidiary company, to take measures for renovating and developing the network of crude oil/condensate/oil product transfer pipelines and financing the share of the government in the development of refineries and the infrastructures of provision, storage and distribution of products and providing for the funds needed by increasing an amount of 5% to the price of any liter of oil products including gasoline, kerosene, gasoil, fuel oil and plane fuel, up to a ceiling of IRR 15,000,000,000,000 after the relevant amount is remitted to the account of the State Treasury General. Such funds are not taken as the company’s profit and shall be subject to zero-rate taxation.

 

Note (5):

Paragraph D: Municipalities and their subsidiary organizations are hereby authorized to issue individually or jointly partnership bonds and Islamic sukuk bonds up to a ceiling of IRR 70,000,000,000,000 upon the acquisition of the relevant license from the Central Bank of the Islamic Republic of Iran and the approval of the Ministry of Interior (Organization for Urban and Rural Municipalities); they are also authorized to guarantee the reimbursement of the original amounts and the interests thereof, observing the Law on How to Issue Partnership Bonds and its subsequent Administrative By-Law. At least 50% of the price of such bonds shall be allocated to subway projects.

The license for selling partnership bonds of previous years shall still be applicable for the year 1395 (March 20, 2016 – March 20, 2017) up to the ceilings determined for any relevant years. The guarantee for the reimbursement of the original amounts and the interests on the partnership bonds issued for the execution of subway projects shall be made by the government (for 50%) and the relevant municipalities (for 50%) with a tax rate of 0%, where the share of the government guarantee shall be made by the State Organization for Management and Planning.

 

Paragraph E: The government is hereby authorized to issue nameless/named Islamic Treasury Notes holding purchase powers and maturity deadlines of 1-3 years and to submit them to non-government creditors up to a ceiling of IRR 75,000,000,000,000 in order to settle its confirmed debts for development projects and to settle the differences between the fixed prices of electricity and water and their prescribed selling prices of previous years with Electricity [Supply] Company and Water [Supply] Company as per the provisions of Article (20) of the State Public Accountancy Law approved on August 8, 1987.

Such notes are exempt from any taxes and are classified as financial instruments pursuant to the Law for the Market of Securities in the Islamic Republic of Iran approved on November 22, 2005 and shall be issued bearing the signature of the Minister of Economic Affairs and Finance. Islamic Treasury Notes shall be capable of being traded through secondary markets and the Security and Exchange Organization shall be obliged to make the preliminaries required for such secondary transactions through [Tehran] Stock Exchange or OTC markets. The Central Bank of the Islamic Republic of Iran shall not be allowed to trade such notes.

 

Paragraph G: In order to maintain the flow of payments by the State Treasury General, the government is hereby authorized to issue Islamic Treasury Notes up to IRR 100,000,000,000,000 to be allocated to prioritized projects announced by the State Organization for Management and Planning pursuant to the State Annual Public Budget Law of 1995 (March 20, 2016 – March 20, 2017); the government is also authorized to settle such Notes from the credits available to relevant organizations before the end of the year. The Notes shall be tax-exempted and are capable of being traded at [Tehran] Stock Exchange.

        

 

Note (6):

Paragraph A: The ceiling for the basic annual allowance referred to in Article (84) of the Direct Taxes Act approved on February 22, 1988 and its subsequent amendments shall be IRR 156,000,000 for the year 1395 (March 20, 2016 – March 20, 2017).

 

Paragraph B: The period for the trial implementation of the VAT Act approved on May 6, 2008 and its subsequent amendments is hereby extended to the end of the year 1395 (i.e. March 20, 2017).

 

Paragraph C: Ministry of Energy shall be obliged, through urban water and wastewater engineering companies all through the country, to receive an amount of IRR 150 for any cubic meter of drinking water sold to the subscribers in addition to the [normal] urban water price and remit the same to the account of the State Treasury General. One hundred percent of the amounts so collected shall be allocated merely to rural/nomadic drinking water pipelining projects up to a ceiling of IRR 700,000,000,000. The aforementioned fund shall be distributed, on a quarterly basis, among different provinces by the National Water and Wastewater Engineering Company based on the indicator of shortage of healthy drinking water so that it can be spent upon the exchange of a mutual agreement between the provincial branches of the State Organization for Management and Planning and rural water and wastewater engineering companies. Such funds shall not be subject to taxation.

 

Paragraph D: The government may require the relevant administrative bodies to record the tax and customs exemptions and discounts as Collected and Refunded amounts in the relevant accounts.

 

Paragraph G: With the purpose of realization of tax revenues and observation of financial discipline, in the year 1395 (i.e. March 20, 2016 – March 20, 2017), the final transfer of real estates, as well as the transfer of goodwill, shall be subject to taxation at the time when such transfers take place by the owner of the substance of the property or by the possessor of the right of goodwill. The basis of taxation shall be the taxable value in case of transfer of real estates and 10 times the taxable value in case of goodwill and the tax rates will be 5% and 30%, respectively.

For the purposes of this Law, goodwill refers to the business or vocation right or the right for occupation of a place or the rights resulting from the situationality of an active business in operation.

All cases of transfer tax which have not been finalized prior to the date of approval of the present Law shall be subject to the rule of this provision.

 

Paragraph H: The amendments to the Direct Taxes Act approved on July 22, 2015 as well as the tax-related provisions of the Law for Removing Obstacles to Competitive Production and Promoting the Country’s Financial System approved on April 21, 2015 and those of the Law Annexing Certain Articles to the Law for Regulating Part of the Government Financial Regulations shall still be applicable.

 

Note (7):

Paragraph A: All real and legal persons engaged in extracting iron ore, whose exploitation licenses have been issued in the name of the Iranian Mines and Mining Industries Development and Renovation Organization (IMIDRO) or its subsidiary companies but lack a contract with the aforementioned organization of its subsidiary companies shall be obliged to pay 20% of their product sale amounts to the public revenue account with the State Treasury General bearing the Row No. 130419 under the Schedule No. (5) of the present Law in return for the entitlement to take benefit from the exploitation licenses of relevant mines. In the event of investment for completing the production chain, the Council of Economy shall approve the amounts of exploitation right to be collected in the form of descending gradual payments as of the beginning of the year 1395 (i.e. March 20, 2016).    

The abovementioned provision shall apply to those companies that complete the chain of production within their own company. If companies subject to this Section use their profits in investing on subordinate mines and industries observing the provisions of the Commerce Code, then 10% of the investment made out of the companies’ profits will be considered as “the right for taking benefit from exploitation”.

50% of the income referred to in Row 130423 out of the credits mentioned in Row 530000-157 shall become available to Steel Retirement Fund through Ministry of Cooperatives, Labor and Social Welfare and an amount of IRR 4,300,000,000,000 out of the amounts collected pursuant to the provisions of the Row 130419 under the present Note along with the amounts received as allocated by the State Treasury General through the Rows 530000-82 and 530000-120 (80% of which belonging to Iranian Mines and Mining Industries Development and Renovation Organization and the remaining 20% belonging to Geological Survey of Iran) shall be made available to the Ministry of Industry, Mine and Trade in order to be spent on exploration, applied and environmental projects or on creation of mineral and safety infrastructures. An amount of IRR 300,000,000,000 out of the revenues deriving from this Section shall be spent on mineral infrastructures through the Project 1304011006.

The income tax of each mine subject to this Section for the year 1395 (i.e. March 20, 2016 – March 20, 2017) shall be remitted to the account of the Auxiliary Treasury of the province where the mine is located.

 

Paragraph D: As of the beginning of the year 1395 (i.e. March 20, 2016), an amount of IRR 500 shall be added as excise tax to the retail price of each single imported cigarette whereas the additional amount for cigarettes jointly produced and cigarettes domestically produced shall be IRR 350 and IRR 100, respectively. Ministry of Economic Affairs and Finance shall be obliged to collect the amounts so received from the importers and manufactures, whoever that case, and to remit the same to the account of public revenues pursuant to the Row 160155 under the Schedule (5) of the present Law.

 

Note (10)

Paragraph A: Insurance companies shall be obliged to remit, on a weekly basis, an amount of IRR 2,500,000,000,000 out of the received principal third party insurance premiums to the account of public revenues with the State Treasury General bearing the Row No. 160111 under the Schedule (5) of the present Law within the framework of a schedule determined based on the insurance sales (portfolio) of each company to be confirmed by the Supreme Insurance Council. The amounts so remitted shall be made available to the Police of the Islamic Republic of Iran to be spent on affairs leading to a decrease in the number of deriving accidents as mentioned in the Row 530000-20 under the Schedule (9) of the present Law. Central Insurance of the Islamic Republic of Iran shall be obliged to supervise the implementation of this Section. Remitted amounts by insurance companies subject to this Paragraph shall be deemed tax-deductible expenses.

 

Note (15)

Paragraph A: Companies producing thermal power as well as regional power companies shall be obliged to pay the resources approved for them in the State Annual Public Budget to Thermal Power Plants Holding and Tavanir Company, respectively, in return for the settlement of their liabilities or for the purpose of investing on the development of thermal power plants and development of the country’s electricity transfer network. Companies selling the power produced in hydropower plants shall be obliged to spend all the funds deriving from selling their power energies on investing on the development of hydropower plants after paying for the production costs thereof. The amounts paid by aforementioned companies for investments pursuant to the present Paragraph shall be tax-deductible expenses. The accounting instructions relevant to this Paragraph shall be approved by the ministers of “Economic and Finance” and “Energy” with due regards to relevant legal regulations.

 

Paragraph B: Transfer of properties, real estate and assets as well as contracts concluded between Tavanir Holding and power distribution companies shall be exempt from taxation.

 

Note (18):

Administrative organizations referred to in Article (5) of the Act for State Services Management as well as parties to contracts shall be obliged, up to the end of the next month following the date of receiving the financial statement or the invoice, whichever the case, to pay the taxes imposed on the contractor for the contract work. Otherwise, upon the request to be made by the taxpayer (i.e. the contractor), the original tax and the fines thereof shall be collected through appropriate enforcement operation from the work master to be remitted to the accounts of the Iranian National Tax Administration. In this case, the original collected tax shall be taken as paid by the taxpayer and shall be refunded to him as per relevant regulations.

The work master, if he refrains from the above obligation, shall be subject to a fine amounting to 10% of the unpaid tax. Moreover, a delay in the payment of the taxes due, as mentioned in the present Note, shall be subject to a monthly fine amounting to 2% of the unpaid tax as of the deadline for filing the tax return or the deadline for the payment of the tax, whichever comes sooner. In such a case, the contractors and consulting engineers shall bear any responsibilities in respect of the payment of the due tax and the fines thereof.

 

Note (23):

The government shall be obliged to barter the audited liabilities of the State Air Services Company to the government or state-owned enterprises for the liabilities to the aforementioned company, excluding tax liabilities, up to a ceiling of IRR 10,000,000,000,000.

 

Note (34):

All provisions stipulated in this Law shall only apply to the year 1395 (i.e.  (March 20, 2016 – March 20, 2017).

 

Singed for Seyed Kamel Taghavi Nejad

President of the Iranian National Tax Administration

Related Pages
A Summary of the Address Instruction on the Issuance of Invoices Pursuant to Article 19 of the VAT Act
Administrative By-Law of Article (107) of the Amended Direct Taxes Act
Administrative By-Law of Note (3) under Article (169) of Amended Direct Taxes Act approved on July 22, 2015
Allow ability of the Interests Paid for the Issuance and Sale of Cooperation Bonds
Bylaw of Paragraph (14) under Article (12) of the VAT Act
Currency Exchange for the Taxpayers with Foreign-Currency Transactions and Foreign-Currency Debts
Extension of the Rule of Note (2) under Article (119) of the Fifth Five-Year Development Plan of I.R.I to Those Entitled to the Tax Exemption Provided in Art. (13) of Law for the Management of Free Trade/Industrial Zones
Letter of Circular on Salary Income Annual Allowance for 1395 (2016)
Letter of Circular regarding the Tax Exemption in Free Trade/Industrial Zones
New Directive Regarding the Prevention from the Exit from the Country
Procedure for the VAT Treatment of Chain Store Companies
Procedure on How to Apply the VAT and Excise Duties in Free Industrial/Trade and Special Economic Zones
Resolutions Made by the Tax Supreme Council regarding Tax Exemption in Free Zones
Resolving Obscurities regarding the Procedure on How to Apply the VAT and Excise Duties in Free Industrial/Trade and Special Economic Zones
Some Provisions Related to Article (197) of the Direct Taxes Act
Starting Point of Calculating the Fines Pursuant to Article (190) of Direct Taxes Act on Understated Incomes (Adjusted Tax)
Tax-related provisions of the Law for Removing Obstacles to Competitive Production and Promoting the Country's Financial System
The Exemption of the Profits Derived from Currency Exchange in the Economic Activities Carried Out in Trade/Industrial Free Zones
The Resolution No.: 30/4-5586 Date: June 12, 1995 (issued by the Plenary Board of the Supreme Tax Council on the Tax Exemption of Free Zones)
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