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VAT

Value-Added Tax (VAT)

General


The VAT Act was approved by the Islamic Consultative Assembly (Majlis) on January 29, 2008 and was put into force since September 22, 2008.


Supply of goods and services in Iran, as well as their import and export are subject to VAT (see Art. 1 of VAT Act). The suppliers of the goods or services stipulated in the VAT Act shall register themselves in accordance with the procedures determined by the Iranian National Tax Administration (INTA).


      Against the supplied goods or services, the taxpayers are required to issue an invoice containing the particulars of the parties to the transaction, in the form determined by INTA, stating the tax amount in a separate column and collecting the same (see Art. 19 of VAT Act). In cases where sale machines are used, the invoice issued by the machine replaces the hand-written invoice (see the same Art.)


The taxpayers liable to the taxes provided for in VAT Act shall have to use the books, invoices, and other forms, cashier machines, and other tools and accounting procedures; such documents shall be kept for ten years after the tax year thereof and produced to the tax officers upon their request (see Art. 34 of VAT Act).


Any solar year is divided into six 2-month periods starting from the first day of Farvardin (March 21st) and ending on the last days of the months of Ordibehesht (May 20th), Tir (July 21st), Shahrivar (September 21st), Aban (November 20th), Day (January 19th), and Esfand (March 19th or 20th), every year. In case the activity of a taxpayer starts during a tax period, the duration of activity of such taxpayer shall be regarded a tax period.


The tax shall accrue on the following times (see Art. 11 of VAT Act):


A: In case of supply of goods:

1) Date of invoice, delivery time, or when the transaction is finalized, whichever earlier, as the case may be;

2) The date the asset is entered into the books or when it starts to be used, whichever earlier, or the date it is allocated, as the case may be (Note: The goods subject of the VAT Act, which are purchased, acquired, or produced, and are entered in the books as assets for business purposes, or are allocated for personal use shall be considered as supply of goods for the self, and shall be subject to taxation.);

3) In case of exchange of goods, the date of exchange.


B: In case of services:

1)    Date of invoice, or the time the service is rendered, whichever earlier, as the case may be;

2)    In case of exchange of services, the date of exchange.


C: In case of exports and imports:

1) Date of export (as for tax refunds);

2) Date of being released from customs; and

3) As for services, when the consideration is paid.


In case of use of cashier machines, the tax accrues upon the entry of the transaction into the machine.


Taxable persons


Any person engaged in supply of goods and services or their import or export is subject to the provisions of VAT Act as a taxpayer (see Art. 8 of VAT Act).


In case of exchange of goods and services subject of this Act, supply of goods and services by any of the parties shall be taxable separately (see Art. 8 of VAT Act).


The taxpayers shall submit the declaration form within 15 days after the end of any tax period and pay the related taxes after deduction of the previous tax payments, to the account of INTA in the due time (see Art. 21 of VAT Act).


Taxable transactions


As for the supply of goods, the exchange of goods in any kinds of transaction except for those which are tax exempt (see Section II.3.1.5 below) will be subject to VAT. The goods subject of the VAT Act, which are purchased, acquired, or produced, are entered in the books as assets for business purposes, or allocated for personal use shall be considered as supply of goods for the self, and shall be subject to taxation (see Note under Art. 4 of VAT Act).


As for services, the exchange of services in any kinds of transaction except for those which are tax exempt (see Section II.3.1.5) shall be subject to taxation.




Taxable amount


The price of goods or services mentioned in the invoice shall form the basis for tax calculation; in cases where there is no invoice available, or it is not presented, or it is established through proving documents that the price stated therein is not true, the market value of the goods or services on the date of accrual of the tax shall be taken as tax calculation basis (see Art. 14 of VAT Act).


The following cases shall be excluded from tax calculation basis (see Note under Art. 14 of VAT Act):


1) Discounts,

2) The tax amounts already paid by the supplier of goods or services in accordance with the VAT Act,

3) Other indirect taxes and duties accrued to the goods or services when they were supplied.


The basis for calculation of import goods is the CIF value of the goods together with the tax duties and charges, commercial duties and other charges mentioned in the customs documents (see Art. 15 of VAT Act).


Exemptions


The exportation of goods and services abroad via formal departure gates is not subject to taxation, and any tax paid shall be refunded against proving documents (see Art. 13 of VAT Act). That is to say that the export of goods and services is subject to a zero tax rate.


Supply and import of the following goods and services are exempted from taxation:


1) Unprocessed agricultural goods,

2) Live birds and pet animals, aquatics, honey bees, and silk worms,

3) Fertilizers, poisons, and seeds,

4) Flour, all types of bread, meat, sugar, rice, grains, soya, milk, cheese, vegetable oil, and formula as babies food,

5) Books, press goods and newspaper, notebooks, and paper for printing, writing, and newspapers,

6) Goods gratuitously donated to ministries and government agencies, and non-governmental public institutions,

7) The goods imported by passengers as accompanied luggage for personal use, up to the quantities authorized by export & import regulations, beyond which shall be taxable,

8) Immovable properties,

9) Pharmaceutics, medical treatment services (man – animal), as well as rehabilitation services,

10) The services that are subject to salary income tax in accordance with Direct Taxes Act,

11) Services of banks and authorized non bank credit institutions,

12) Public inter-city and intra-city passenger transportation services,

13) Handmade carpets,

14) Research and educational services,

15) Nourishment of birds and pet animals,

16) Radars and aerial navigation equipments used at airports, and

17) Items exclusively used for defensive and security purposes.


Rates


The standard rate of the Value Added Tax is 9 percent (including 6% VAT and 3% municipal excise duties collected under the VAT Act) since March 21, 2015 (on the strength of annexes to the Public Budget Law of 1394).


There are special VAT rates for the following goods (see Note under Art. 16 of VAT Act):


1) Different kinds of cigarette and tobacco products (12%);

2) Different kinds of gas and fuels of aero planes (20%).


In addition to the standard rate, other rates will also be applied as municipal taxation as follows (see Art. 38 of VAT Act):


1) Different kinds of cigarette and tobacco products (10%),

2) Different kinds of gas and fuels of aero planes (10%),

3) Kerosene and gas oil (10%) and mazut (5%)


Transfer of domestically-produced and imported automotive vehicles except for those used in road construction, workshops, mines, and agriculture and except for ships and boats, motorcycles and motor tricycles shall be subject to a tax at the rate of 1% (1% of factory sales price of domestically-produced vehicles or 1% of the sum of the CIF value of the goods together with the tax duties and charges, commercial duties and other charges mentioned in the customs documents) (see Art. 42 of VAT Act).


Other taxes and duties in respect of special services are also applicable as follows (see Art. 43 of VAT Act):


1) Domestic intra-city passenger transportation except for railway transportation (5% of the ticket),

2) Annual charges of cars and pickups with an extended cab will be one per thousand of the factory sales price of domestically-produced or one per thousand of the sum of the CIF value of them together with the tax duties and charges, commercial duties and other charges mentioned in the customs documents,

3) Charges of registration of cars and pickups with an extended cab, whether they are domestically-produced or imported, excluding intra-city and inter-city public cars will be 3% of their factory sales price or 3% of the sum of the CIF value of them together with the tax duties and charges, commercial duties and other charges mentioned in the customs documents, as the case may be.


Non-residents


The goods accompanied by foreign passengers at their departure shall be subject to refund up to prescribed limits, in accordance with related laws, against proving documents (see Note under Art. 13 of VAT Act).


Related Pages
A Review of the Iranian Tax System
Corporate Income Tax
Employment Income Tax
Full-Text of VAT Act
Individual Business Income Tax
Letters of Circular
Property Taxes
Real Estate Income Tax
Tax on Incidental Income
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