Members of the Iranian Parliament have voted for levying taxes on homes priced above a ceiling in the upcoming fiscal year (starting March 21).
The set rates are as follows:
- Homes valued at 100-150 billion rials ($400,000-$600,000) will have to pay 0.1% in tax
- Homes valued at 150-250 billion rials ($600,000-$1 million) will have to pay 0.2% in tax
- Homes valued at 250-400 billion rials ($1 million-$1.6 million) will have to pay 0.3% in tax
- Homes valued at 400-600 billion rials ($1.6 million-$2.4 million) will have to pay 0.4% in tax
- Homes valued above 600 billion rials ($2.4 million) will have to pay 0.5% in tax.
The MPs tasked the Iranian National Tax Administration with assessing the value of homes by the end of the third month of the next Iranian year (June 21, 2021) and communicating the corresponding taxes to their owners, who in turn will have to pay their dues by the 11th month of the year (Feb. 19, 2022).
Under-construction homes will be exempt from the tax on “luxury homes”.
Amid financial constraints, mainly due to sanctions, taxes have emerged as a key source of government revenues to balance its budget next year.
Earlier in December 2020, the Guardians Council — a watchdog that ensures laws are in line with the Iranian Constitution and Islamic law — approved the parliament’s bill on revisions to Article 54 of Direct Tax Code, i.e. vacancy tax.
The Iranian Parliament approved the proposal on Aug. 5, based on which empty homes in cities with a population of over 100,000 will be taxed after four months based on their assessed rental income tax on a monthly basis.
The owners of these properties will have to pay six times more than the rental income tax in the first year, 12 times more than the rental income tax in the second year and 18 times more than the rental income tax in the third year and the following years.
The final approval came after the council returned the vacancy tax bill to the parliament on Aug. 12, citing "ambiguities" and called for amendments to the document.
Abbasali Kadkhodaei, the council spokesman, tweeted that the parliament’s revised proposal on taxing empty homes was not against the Iranian Constitution and Islamic law.
Budget in Parliament
The vote for tax on luxury homes came as part of the parliament’s evaluation of the upcoming year’s budget details.
Lawmakers finally approved the outlines of the fiscal 2021-22 budget revised by the government on Tuesday with 211 votes in favor, 28 against while six MPs abstained from voting.
The approval came after the parliamentarians had rejected the outlines of the bill on Feb. 1 and returned it to the government for revision.
The parliament’s work on the fiscal 2021-22 budget bill began amid increasing tensions between lawmakers and the government, such that each fundamental change in the bill by the Majlis Joint Commission met with the criticisms of the government and President Hassan Rouhani.
The parliamentary move to initially reject the bill’s outlines was the beginning of a serious legal challenge: It was not clear whether the lawmakers cast their vote against the government’s version of the bill or against the draft prepared by the joint commission.
Parliament Speaker Mohammad Baqer Qalibaf said the former proposition is true, but according to the precedent rule and standards as well as the parliament’s internal bylaw, the latter proposition is deemed to be true so the government, as it had announced, is not obliged to submit a revised budget.
The operating budget (including revenues derived mainly from taxation and exports at the disposal of the government) had been projected to stand at 8,410 trillion rials ($33 billion) in the original bill, registering a 47% increase compared with the current year’s budget (2020-21). The government has increased the next year’s operating budget to 8,546 trillion rials ($34 billion) in the amendment, Tasnim News Agency reported.
Revenues earmarked for ministries and governmental institutions have been projected to stand at 894 trillion rials ($3.5 billion) from 884 trillion rials ($3.5 billion) in the first draft, which takes the total sum of the general budget to 9,440 trillion rials ($37. 7billion) from 9,298 trillion rials ($37 billion) of the first draft.
The ceiling set for the government’s total budget has increased from 24,357 trillion rials ($97 billion) to 24,499 trillion rials ($97.9 billion).
The budget of state companies, banks and for-profit organizations had been put at 15,619 trillion rials ($62 billion) in the original proposal. The government kept the figure unchanged in the budget amendment.
Total tax earnings had been set at 2,515 trillion rials ($10 billion) in the first draft of the government’s budget bill.
According to Mohammad Khodabakhshi, the deputy head of Majlis Plan and Budget Commission, the government has added 250 trillion rials ($1 billion) to tax revenues in the amendment.
“The government has projected that its oil and oil products revenues will stand at 1,990 trillion rials [$7.9 billion] in the budget amendment; the projected earnings were the same in the original draft,” he was quoted as saying by Fars News Agency.
On the side of expenditure, operating expenses increased from 6,370 trillion rials ($25.4 billion) in the budget bill to 6,524 trillion rials ($26 billion) in the budget amendment.
$5.2b in Tax Revenues in 8 Months
Latest data show the government earned upwards of 1,314 trillion rials ($5.2 billion) in tax revenues in the eight months to Nov. 20, which account for 64% of the sum predicted in the budget for the period.
The government’s tax revenues consist of its returns from tax on legal entities, income tax, wealth tax, tax on imports and tax on goods and services.
Earnings from taxing companies and legal entities stood at 347.53 trillion rials ($1.3 billion), which account for 78% of the sum projected in the budget for the period under review.
INTA earned 257.75 trillion rials ($1 billion) from taxing civil servants and workers (income tax), which constitute 74% of the budget’s projected figure.
Wealth tax revenues stood at 157.68 trillion rials ($630 million) over the period, indicating a 186% realization rate. The tax recorded the highest growth over the period, thanks to tax on stock trades.
Tax on imports earned the government 95 trillion rials ($380 million). The earnings from tax on imports meet 39% of the projected budgetary requirements. The small realization rate is due to the decline in imports over the period.
And finally, tax on goods and services, which also includes value added tax earnings, hovered around 455.96 trillion rials ($1.8 billion), indicating 49% of the projected figure in the eight-month budget.
Latest data published by the Central Bank of Iran show the average price of each square meter of a residential property in Tehran stood at 273.86 million rials ($1,095) during the month under review, showing an increase of 98.3% over last year’s same month, as average prices were registered at 138.09 million rials ($552) then.
The average price of per square meter home in the capital city increased by 1.8% compared to 269.05 million rials ($1,076) in the ninth month of the current year.
Among Tehran's 22 districts, District 1 registered the highest average price of 600.3 million rials ($2,400) per square meter. District 18 offered the capital city's cheapest homes with an average per square meter price of 121.5 million rials ($486). The aforesaid numbers show a respective increase of 99% and 86.1% YOY respectively.
Residential units, with an average price range of 140 million rials ($560) to 160 million rials ($640) per square meter, were the most popular in Tehran during the Iranian month under review, as they grabbed a 7.7% share of all deals. They were followed by units priced at 160 million rials to 180 million rials ($720) per square meter with a share of 7.2% and homes priced at 120 million rials ($480) to 140 million rials per square meter with a share of 7.1%.
From the total number of deals, 61.3% belonged to homes cheaper than the average per square meter price of the city (273.86 million rials or $1,157).
Residential units with a floor area of 50-60 square meters registered the highest number of sales with a 14.9% share of total deals.
Units with an area of 60-70 square meters came second with a share of 14.2%. All-in-all, residential properties with an area of less than 80 square meters had a 56.4% share of total deals.
CBI data further show that Tehran’s homes worth between 6 billion rials ($24,000) and 8.5 billion rials ($34,000) were the most popular with a 14.4% share of total deals. These were followed by homes with a price tag of between 8.5 billion rials and 11 billion rials ($44,000) and those priced between 11 billion rials and 13.5 billion rials ($54,000) with a share of 10.4% and 8.7% of total deals respectively.
Collectively, homes valued under 18.5 billion rials ($74,000) had a 55.5% share of total home deals in Tehran during the ninth month of the current year.
All the above values have been converted based on the exchange rate of 250,000 rials per dollar.
