Tax Incentives for New Listed Companies

EghtesadOnline: Tax incentives are being considered for new companies that want to list on the stock market in the current fiscal year (March 2020-21).

News ID: ۷۵۰۳۲۸

28 June 2020

The proposal was floated by the Ministry of Economy at the High Council of Economic Coordination- an ad hoc economic decision-making body comprising heads of three branches of power- and approved therein, according to Securities and Exchange News Agency.

Citing ministry officials, SENA reported that as per the decision the Iranian National Tax Administration will grant tax waivers to companies wanting to go public.

Potential listed companies will be accountable only for tax liabilities in the previous fiscal year (March 2019-20) and INTA will not delve into prior tax records.

This is in line with efforts to ease rules and procedures that govern listing companies at the stock market and encourage more companies to offer shares and by extension expand the bourse.

SENA said the move addresses concerns of companies that are poised to enter the flourishing market but hesitate their (unpaid) tax background would be exposed.

The Economy Ministry, however, obliged companies that want to benefit from such tax incentives to offer 25% of their stakes as “floating stocks”.

Floating stocks represent the total number of shares that are open to public for investment. It is a measure that excludes closely-held shares. Closely-held shares are stock shares that are held by company insiders or controlling investors.  In short, floating shares indicate the number of shares available for trading.

The decision will partly address stock market officials’ concerns about the supply crunch, given the significance of floating stocks in strengthening the supply side.

With stock market indicators pulling upwards in recent months and fresh money pouring in the bourse from an ever-increasing number of investors, the influential parliamentary think tank the Majlis Research Center recently stressed the need to take appropriate measures to balance the market by boosting the supply of shares.

To balance the market, the MRC said listed companies and capital market authorities need to take steps to address the supply crunch and restrain the unreasonable surge in share prices due to rising demand.

President Hassan Rouhani on Wednesday called on relevant bodies to expedite offering shares in their subsidiaries in the stock market.

“Boosting and protecting the bourse is one of the foremost duties of the Economy Ministry. Organizations should offer their shares at this market,” he was quoted as saying by SENA.

Rouhani said “good conditions in the stock market” benefit investors and the government alike and also will help the latter reduce its economic footprint by divesting shares in several companies.

The government recently started selling its shares in major companies and banks via exchange-traded funds with the declared aim to reduce its role in the economy and secure financial resources to plug its budget deficit.

Divestiture schemes started on May 3 when the government called on the public to subscribe for ETFs that hold government stakes in three banks and two insurance companies.

Observers concur that the government needs a robust share market to offload its shares in bloated state-run companies and focus on the macroeconomic side.