The Iranian National Tax Administration (INTA) said foreign currency dealers must also pay tax if they trade outside the purview of official exchange bureaus and banks.
In a notice posted on its website on Wednesday, INTA said it will levy tax on “trade by currency speculators” whose names are sent to the tax authority by the Central Bank of Iran and other supervisory bodies.
The new measures will be levied in line with Article 163 of the Direct Tax Act, the notice said.
INTA in the notice did not say how much the currency dealers would be taxed. However, based on an announcement last December, the tax would be 10% of the currency transactions.
As outlined in Article 163 of Direct Tax Law, the tax appears to be a Financial Transaction Tax (FTT), which was earlier levied on share trades, albeit at much lower rates.
FTT is a generic name for taxes that are levied on transactions such as sale and purchase that involve some sort of financial element such as currency, stocks and shares.
The CBI insists that all forex trade must involve official exchange bureaus operated by the central bank otherwise the trade is illegal.
Last month the government announced tighter anti-currency smuggling rules based on which currency trade is prohibited unless one of the parties is a bank, credit institution or an authorized exchange bureau.
This is while buying foreign currency from authorized dealers has its own limitations. The dealers must register all currency deals with special trade platforms for transparency purposes. Besides, the CBI has told exchangers that the currency market regulator will continue allotting foreign currencies for 25 services, asking them to sell currency merely based on the buyers’ needs as specified by the regulator.
INTA said it is reviewing the tax files of 1,005 currency dealers identified by the CBI in the past two years. These people reportedly used more than 5,000 bank account to handle their “illegal forex transactions”.
INTA said their estimated financial turnover was 1,000 trillion rials ($3.3 billion) and 730 dealers simply had no record of tax payment.
Taxation on currency trade comes in the wake of steep volatility in the already chaotic forex market in Iran and is seen as a renewed government effort to tame volatility and discourage speculative trade.
The US dollar surged more than 8% to 307,000 rials in one week, spurred by higher inflation expectations arising from the government decision to end forex subsidies for importing food and other basic goods.
It appears that the volatility has been controlled to a small degree and the dollar has been hovering around 300,000 rials in the past three sessions.
Inflation expectations are seen as the side-effects of the latest government decision to overhaul the decades-old opaque subsidy policy that has caused violence and social unrest in several cities as prices of basic necessities have sky rocketed.
