As per the new tax rules, value added tax on gold trade will be levied only on services, profit and fees, the vice president of Tehran Gold and Jewelry Union said.
According to Mohammad Kashti-Aray, the original value of gold will no longer be taxable. The guild official hailed the decision that was long demanded by the jewelers, IRNA reported.
Jewelers for long had said that VAT should be levied only on fees they charge for “making the jewelry”. Observers say the competitive edge of domestic gold and jewelry producers was undermined under the previous VAT system.
As per law, jewelers charge 9% VAT on sales. One gram of 18-karat gold in the local market Saturday was worth 10.62 million rials, according to the TGJU website.
“Since the [original] value of gold constitutes a big part of the price, 9% VAT is too high,” Kashti-Aray, was quoted as saying. “This pushed many to buy scrap gold and used jewelry, which is a bane for the jewelry industry”.
VAT on gold further undermines demand because of higher prices people prefer to buy trinket and costume jewelry.
The official noted the new tax decision is the outcome of two years of bargaining with the Economy Ministry, the Majlis Research Center and the Majlis Economic Commission.
“We managed to convince them that taxing the original value of gold is not reasonable because gold per se is a type of asset.”
Kashti-Aray expressed the hope that the new law will help boost the domestic gold industry and stimulate sagging demand for the precious metal.
Up until the recent past Iranians were predisposed to buying gold coins as a safe haven and protect their hard-earned savings despite skyrocketing prices, especially due to the de facto devaluation of the national currency and high inflation.
The new measure is part of a broader VAT rules debated over the past two years in the parliament and approved recently. The rules were announced by the government but it is unlikely to be enforced in no time flat.
In a talk with ISNA, Nader Bazrafshan, a member of the TGJU, pointed to the process whereby enforcement of new tax laws start at least six months after it is announced by the government.
The new tax rules also exempt producing and importing gold ingot from VAT.
While the decision may help revive gold trade over time, the industry is expected to face another headwind in light of a bill currently being debated in the parliament.
Lawmakers are discussing new rules on capital gains tax (CGT) that calls for imposing high tax on trade of various assets, namely gold, foreign currency, homes and cars.
Highlight: Up until the recent past Iranians were predisposed to buying gold coins as a safe haven and to protect their hard-earned savings despite skyrocketing prices, especially due to the de facto devaluation of the national currency and high inflation
