The Iranian National Tax Administration (INTA) said income from investment in bonds and certificates of deposit (CDs) is taxable only for legal entity investors.
In a bylaw INTA said the decision is based on provisions of the Direct Act Tax, as per which investment funds are exempt from income tax on securities, IRIB news website reported.
The bylaw sheds light on the ambiguity surrounding a budgetary decision, which requires institutional investors to pay tax on interest they receive on bank deposits.
It is implied in the bylaw that INTA still imposes tax on deposits interest for legal entities and what is not taxable is CDs, which can be traded in the equities market like bonds.
CDs are offered by banks providing a fixed interest rate in exchange for the customer agreeing to leave a lump sum untouched for a predetermined fixed period of time.
Earlier, the High Council of Securities and Exchange had given the go-ahead to banks to issue CDs that can be publicly traded in the equities market.
The move is seen as the regulator’s renewed bid to attract deposits to banks, giving them the option to sell CDs in the equities market before maturity.
Planned to be a newcomer to the bourse, CDs are not new to Iran’s banking sector. They have existed for years and offered a comparatively better substitute for ordinary banking deposits.
CDs are reportedly more advantageous to banks than ordinary deposits. As per rules, lenders are allowed to issue CDs up to a ceiling subject to their need for funds.
Banks can issue CDs when they see the need and usually do so to a level that they are confident their long-term deposits are adequate. For ordinary deposits lenders have to pay interest on unlimited amounts of deposits.
