Lawmakers Approve Outlines of Capital Gains Tax Bill

A capital gains tax is levied on the profit derived from the sale of precious metals, namely gold, gold ingot and platinum, foreign currency, real estate and cars. Notably, it is not the amount of money you receive for the asset but the gain you make that is taxed, Tasnim News Agency reported.

To calculate the gain, you compare the sale proceeds (or value of the asset at the time it was disposed of) with the original cost of the asset (or value when it was acquired), ISNA reported.  

According to the parliament’s proposal, homes and vehicles that have been at the disposal of a person for more than a year won’t be subject to capital gains tax. 

Capital gains tax at the rate of 40% apply to profits from the sale of a house held for less than a year. An annual three percentage point will be deducted from profit gained from the sale of a property held for more than a year. A fixed 4% tax rate will be applied to properties held for more than 12 years. Wastelands will also be subject to 40% capital gains tax. 

Cars owned for less than a year will be subject to 30% capital gains tax. An annual 10 percentage point will be deducted from the profit gained from the sale of a car held for more than a year. Zero percent tax rate will be applied to cars held for more than four years. 

Gold and foreign currency kept for less than a year will be subject to 30% capital gains tax, a 20% tax if held between 1-2 years and a 10% tax applies to gold and foreign currency held for more than two years. 

An important economic function of the capital gains tax is to curb speculation, especially in real estate, the values of which have been rising owing to inflation, population growth, urbanization and development programs, and to encourage investments that are economically productive. 

Detractors believe the capital gains tax discourages a shift in capital from unproductive investments in real estate to more venturesome undertakings in commerce and industry.