Regulations for separating personal and commercial bank accounts will be finalized this week, the Iran National Tax Administration (INTA) said.
Mohammad Hadi Sabahian, the INTA head said, “More than 178,000 personal accounts involved in commercial activities have been identified, though their owners had not listed them as such. They have been abusing the system to evade taxes,” IBENA quoted Sabahian as saying on Tuesday.
Per law all banks must join the new system by June 22. According to an announcement by the Central Bank of Iran, so far 24 banks have joined the account separation plan and the remaining six are set to join by the deadline.
Sarmayeh Bank, Sina Bank, Gharzolhasaneh Mehr Iran Qarz al-Hassanah Bank, Dey Bank, Iran Zamin Bank, and Iran and Venezuela Joint Bank have not joined the account separation initiative. INTA said 12.6 million commercial accounts have been identified.
Earlier Hassan Mirzapour, the director of software department at the CBI, said the CBI was able to identify personal and commercial accounts using algorithms. “Accounts with significant transactions are automatically marked as commercial.”
He added that the tax authority will create a tax file for each account after investigations and will notify the central bank. The CBI will inform the relevant bank of the accounts’ commercial status."
The regulator last year instructed banks to separate the accounts that business owners use for their work from regular accounts. The CBI last September set procedures for banks and the tax authority to compartmentalize the bank accounts of businesses and personal accounts.
As per the new plan, there are different methods for setting the record straight, but banks must make certain two conditions before tagging a customer’s account as business.
Firstly, the number of times deposits are made into an account, which should be over and above 100 a month. Second, the amount(s), which should be more than 3.5 billion rials per month. Both conditions must be met concurrently for any account to be tagged as being related to business or trade.
However, even if both these conditions are upheld, it doesn’t necessarily render a bank account as business. “The bank must also decide on the nature of the account after additional information,” the regulator has said.
Surveys show that a small percentage (less than 2%) of bank accounts may fall into the business category.
Given the new developments, an estimated 8.3 million POS terminals have been connected to the tax network. Bank accounts connected to the gateways are automatically recognized as business accounts and money passing through the terminals are automatically taxable.
If INTA erroneously rules any account as business account, owners have the right to demand a review by presenting verifiable documents.
In the Interest of Business Owners
The separation of bank accounts, the CBI says, also seeks to improve economic and financial transparency, which is “in the interest of business owners”.
“Higher online money transfer ceilings, easing procedures for issuing checkbooks and the possibility of transferring big amounts without the need to show documents to back such transfers are incentives”, Abouzar Soroush, the CBI deputy for supervisory affairs said earlier.
Over the years the CBI has announced rules to improve oversight of bank performance. It said the measures, among other things, are to ensure anti-money laundering rules are upheld, curb tax evasion and curtail speculation in financial markets, namely gold and forex.
The project to separate commercial and non-commercial accounts is an essential part of government efforts to strengthen its financial system, increase tax revenue and combat money laundering. The project has been underway for several years and has faced numerous challenges due to technical and administrative loopholes.
The government made close to 3,480 trillion rials ($8.7 billion) in tax income in the first three quarters of the last fiscal year (March 21-Dec. 21, 2022), according to the Economy Ministry.
Total tax earning during the Q1-3 period was estimated at 3,390 trillion rials ($8.5 billion), which means over 100% of the target was realized.
From the total direct taxes reached 2,190 trillion rials ($5.49 billion) and tax on goods and services reached 1,280 trillion rials ($3.21 billion).
From total direct taxes, 1,440 trillion rials ($3.61 billion) came from legal entities, 624 trillion rials ($1.56 billion) was income tax and 13 trillion rials (32.63 million) capital tax. Total tax income stood at 3,250 trillion rials in the fiscal 2021-22 and 2,070 trillion rials ($5.19 billion) in 2020-21.
