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New Tax Exemptions Will Help Lift Capital Markets

New Tax Exemptions Will Help Lift Capital MarketsNew Tax Exemptions Will Help Lift Capital Markets

M utual funds will be exempt from all taxes and duties from March 21, the parliament decided, as a means to boost the investment industry.

The bill which was ratified by the parliament is part of the new administration’s bid to bolster capital markets.

According to the new law, mutual funds that invest in any of Iran’s capital markets will be exempt from paying taxes or duties of any kind, from the start of the new Iranian year on March 21, 2015.

The exemption will draw more investments into the sector, by both boosting mutual fund profits and also making indirect investment in capital markets more attractive to investors.

Equity investors must pay half a percent tax on every stock purchase, which mutual funds are now exempt from paying.

News of the exemption which came out 30 minutes before Tehran Stock Exchange’s closing bell did not have any immediate effect on the market or mutual fund share prices. Equities had a flat session on Sunday, edging up 0.12 percent for the day. The TSE has lost 7.3 percent in the past month.

Iran’s fledgling investment industry is in dire straits. Except a handful of funds, most mutual funds are in the red, with losses ranging from 3.5 percent to 56 percent for the past year, according to Financial Information Processing of Iran.

The bearish market means that “many newly established funds have nursed hefty losses in their first year of operations,” an investment analyst at Shahr Bank told the Financial Tribune. “Many are laying off employees and winding down their operations.”

TSE’s benchmark index has lost 20.7 percent in the past year, set for the first yearly decline since 2008, as petrochemical companies and lenders plunged, TSE data shows. Over the previous five years, shares soared 910 percent, or about 300 percent in dollar terms after factoring in the rial’s declines.

Trading also slid this year, with $102 million shares changing hands on average by December, compared with $203 million a year earlier. By comparison, stock trading in Saudi Arabia, the region’s biggest market, averaged $2.3 billion, data compiled by Bloomberg shows.

The government is trying every avenue to revive the equities and expand capital markets as part of a plan to revive the economy.

Parliamentarians voted in favor of the exemption of mutual funds from paying taxes in an open session on Sunday. The bill passed the parliament with 140 votes for, and 22 against. Six abstained.

Financialtribune.com