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The VAT act is finally approved by the parliament and the Guardian Council - 22 May 2008
 

29th January 2008
The Parliament Approved to Implement the VAT for 5 Years


Members of the Parliament approved on Tuesday, to implement VAT on pilot for 5 years.According to IRNA, members of the Parliament had already decided to ratify VAT bill under Article 85 of the Constitute and hence referred it to the Economic Commission for approval.
In Accordance with Article 85, the bill was referred to Economic Commission for review and approval. The commission approved the bill after many sessions (with presence of tax authorities and experts) of reviewing reforming and annexation of many articles and clauses.
Today the Plenary Meeting of the Parliament discussed the Pilot Implementation period and decided on 5 years. The Economic Commission had proposed 10 years for pilot implementation.
The VAT bill has 10 sections and 56 articles.
Section one includes generalities and definitions and section two exemptions, section three considers the tax base, section four taxpayers’ duties and obligations and section five VAT Organization, duties and powers.
The other five sections consider matters as follows: section six other regulations, section seven goods and services excises, and section eight custom duties, section nine other taxes and special goods excises, and finally section 10 other related taxes and introduction date.
An articles of the bill exempts supplies an imports of following goods and services and from VAT: unprocessed Agricultural products, live stock and live birds, aquatics, honeybees and silkworm, fertilizer, pesticide, seeds, flour, all varieties of bread, meat, cube sugar, sugar, rice, grains, soy, milk, cheese, vegetable oil and formula used as baby food.
The bill also exempts papers used for printing, writing and newspapers, goods donated free of charge to the ministries, goods imported by passengers into the country as for personal use (up to the amount of exemption provisioned under export and import regulations), Immoveable properties, all kind of medicine, medicinal effects, medical services (for human, animals and plants), rehabilitation and supportive services, financial and credit services of banks, credit institutes and cooperatives, interest free lending funds, and cooperation funds.
Other services exempted from VAT include Services subject to wage and salary income tax, handmade carpets, inter-city and intra-city public passenger transportation and aerial, marine, and railroad trucking services, all kind of research and training services, livestock, cattle and poultry food, radar and auxiliary airway controls for airports, goods used exclusively for defense (martial and disciplinary) and security purposes.
According to the bill the standard VAT rate is to be 1.5 percents but some specific goods are subject to higher rates (all cigarettes and tobacco products are subject to 12 percents rate and all kinds of gasoline and aircraft fuel subject to 20 percents rate).
The bill requires taxpayers to use invoices in transactions and enter related tax amounts in specified columns. If taxpayers fail to comply with these requirements or violate related regulations they will have to pay penalties in addition to the tax amount due.
The bill defines import duties to be 4% of customs value of the imported goods.
It also defines Car Transfer Tax to be 1% of car factory selling price (for cars produced in Iran) or sum of their custom value, custom duties and charges (for imported ones).

Source: Islamic Republic News Agency