INTA: New Taxes Not to Raise Home Prices

The new property taxes are in line with constructors' incomes and the state of housing market, therefore it will not impact home prices, the chief of Iranian National Tax Administration said.

"Builders like other businesspeople need to pay income taxes and policymakers have made the regulations in the new directive more fair," Seyyed Kamel Taqavinejad was also quoted as saying by Mehr News Agency.

According to the new measures, home builders have to pay 15-25% of their profit in tax like the rest of businesses in line with articles 131 and 105 of direct tax laws.

This is while builders were earlier obliged to pay 10% of the value of property in taxes, which were hard to pinpoint but now since the costs of construction and land prices are known, it is easy to calculate the profit and set the proportionate tax.

In addition to this, 5% of the value of residential real-estate deals still need to be paid in tax.

He noted that the new measures approved by the Cabinet to prevent tax evasion only apply to buildings for which construction permits were issued after May 20, 2016, with the rest following the previous regulations.

"House builders who do not intend to sell their house, but to use it themselves and cities with a population of under 100,000 are exempted from paying taxes," he added.

Taqavinejad said that in order to support the renovation of old buildings, their taxes have been set at 40% lower than the normal property taxes, which will significantly help renovate older neighborhoods.

Builders Disgruntled

Farshid Pourhajat, the secretary of Builders Association–a guild establishment that works in coordination with policymakers in the housing sector–told Fars News Agency that the new regulations will lead to speculative activities by mass builders and urged the parliament to revise them.

"The new direct tax regulations will only worsen the housing recession and no country in the world would approve harsher tax regulations for a sector that is already in turmoil," he added.

After a lackluster start to the new Iranian year (started March 21), real-estate residential deals in Tehran rebounded during the second month (started April 21) to herald an imminent relief for the beleaguered housing sector now in a six-year slowdown.

President Hassan Rouhani recently weighed in on the housing market and said, "We are facing no recession in our economy, other than in the housing sector."