Currency Tax Excludes Personal Needs: INTA

On Wednesday INTA said 10% tax will be levied on each forex transaction.

“Those who purchase foreign currency for personal need are excluded from the new tax rules,” Mohammad Masihi told state TV.

“The new tax will cover all legal and natural entities who trade in currency, including exchange bureaus,” he said, adding that they are obliged to file tax returns.  

INTA says it is implementing the new tax in line with provisions of the Direct Taxes Act. The tax would be a form of Financial Transaction Tax (FTT), i.e. tax on transactions such as sale and purchase of financial elements like currency, stocks and shares.

Taxing currency trade comes amid steep volatility in the forex market and is seen as a new government move to restore a semblance of calm to the near permanent chaotic market in which demand has always outstripped supply.

On how the INTA is supposed to identify the potential taxpayers, Masihi referred to voluntary declaration via INTA’s electronic platform as one method.

However, the majority of those liable will be identified through data shared between INTA and the Central Bank of Iran. “The infrastructure for enforcing the rules and cooperation mechanism with the CBI are in place.”

Iran’s currency market faced unseen demand in the past several weeks. The CBI says it is “artificial demand” driven by political factors and speculative activity – a claim heard time and again in the past several years. The regulator said it plans to set up an electronic trade platform to register retail demand for currency.

The dollar gained more than 3% against the national currency this week and there is no clue as to where forex rates are heeded ultimately amid widespread economic uncertainty,  galloping inflation, ballooning money supply and the systemic  decline in the purchasing power of the rial.