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EghtesadOnline: The Guardians Council—a watchdog that ensures laws are in line with the Iranian Constitution and Islamic law—has drawn attention to the flaws in various provisions of new vacancy tax bill drafted by parliamentarians.

On Aug. 12, the council returned the vacancy tax bill to Majlis citing "ambiguities" and called for amendments to the document.  

The Iranian Parliament approved on August 5 revisions to Article 54 of Direct Tax Code (pertaining to vacancy tax), 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 Guardians Council has underscored the lack of a definition for “empty home” stated in the bill as the first flaw in the bill. 

“The date from which the empty home will be taxed has not been specified in this bill,” Mehr News Agency reported, citing the council’s letter to the parliament.    

As per the legislation, “New homes will be subject to vacancy tax 12 months after the end of the construction project [as per the date printed in their construction permit]. The proposal also pushes the deadline for vacancy tax of new homes that are built as part of mass construction projects; they will be taxed 18 months after the end of their construction project.”

On the one-year exemption of new homes, the council asks whether the vacancy tax will apply to a builder who has failed, because of a legitimate reason, to complete the construction of their residential property after one year of the issuance of construction permit.

The watchdog also finds it to be against Clause 9 of Article 3 of the Iranian Constitution that the proposed vacancy tax rates are doubled for legal entities compared with real entities. 

Clause 9 of Article 3 of Iran’s Constitution states that the country is obliged to direct all its resources to the abolition of all forms of undesirable discrimination and the provision of equitable opportunities for all, in both the material and intellectual spheres. 

The council also found the inclusion of “universality of tax on all empty homes” phrase in the bill to be against the Islamic law, as the owners of some properties might not be able to sell or rent their residential units for legitimate reasons. 

The imposition of vacancy tax on the market is against the Islamic law of private ownership of property. The new bill has been drafted to address the current unprecedented situation (shortage of supply), therefore the parliament is required to include within the bill that the “emergency” legislation is “temporary”. 

The council has also questioned the risk of intelligence gathering by requiring all members of the public to upload their information on the so-called National Property and Housing Database.

Under the parliament’s bill, householders are required to register the principal residence of the family in the nationwide online database of all residential properties within two months of the publication of the guidelines of this legislation. 

Unregistered homes, owners of which have failed to log on their postal code and ID number at the database, will be accounted as empty homes. In addition, all persons subject to the code are required to update their new information in the National Property and Housing Database within one month in the event of any change in their place of residence, including a home sale. 

The council also recognized flaws in the bill, including lack of provision regarding premises used both for residence and business purposes, or whether the word “household” includes a one-member household. 

It has also called on the parliament to determine the tax status of residential properties rented to pilgrims and tourists for a short period and can’t be rented or sold to one person.



More on Parliament’s Legislation

Clause II of the new tax draft says each household is allowed to name one more of their properties as the second home, provided it is located in a city other than their primary residence. Second homes will enjoy exemption from vacancy tax. 

University students studying in cities other than their own hometowns are allowed to register another property besides their principal residence and second homes, and enjoy vacancy tax exemption. 

Residential properties used lawfully by businesses, institutes and companies would be exempt from vacancy tax, provided they have been registered in the National Property and Housing Database.

Executive bodies are only required to provide services, such as opening bank accounts, welfare programs, selling electricity, water, landline and natural gas subscriptions and school registration, to residents based on their postal code and address uploaded on the database.  

According to Mehdi Toghyani, the spokesman of Majlis Economic Commission, the government and parliament are of the same opinion regarding the taxation of empty homes and that the new reforms to the legislation have been sent to the Guardians Council for verification.  

A motion to consider the adoption of a vacancy tax was originally passed in the Iranian year ending March 2016. It stipulated that if a home remained vacant for more than one year, it would have been subject to Vacancy Tax. Homes with a floor area of 150-odd square meters would have been subject to tax at the rate of 20% of the property’s rent value.

The Ministry of Roads and Urban Development was then tasked with designing, in cooperation with a number of other affiliated organizations and entities inside and outside of the administration, a database containing information on all residential units and homeowners across the country and handed it to the tax administration. 

Three months ago, Minister of Roads and Urban Development Mohammad Eslami said the nationwide online database of all residential properties across the country had finally been completed and submitted to the Iranian National Tax Administration that would issue tax statements as of the beginning of summer, June 21. 



Demographic Projections

According to the Housing Comprehensive Plan (March 2017-27) drafted by the Ministry of Roads and Urban Development, the Iranian population will reach 88.2 million in the year ending March 2027. 

Projections show that 68.2 million would be living in urban areas and 20 million in rural areas by then. The number of households will hit 28.7 million, of whom 22.1 million will inhabit cities and 6.15 million villages. 

Newly-formed families will need 4,076,000 homes over 10 years to March 2027 (including 3,997,000 urban households and 79,000 rural households). The country will be short of 1,370,000 homes, including 673,000 units in cities and 697,000 in villages. A total of 5,313,000 homes, including 3,003,000 in cities and 2,310,000 in villages, have to be repaired or rebuilt by then.    

From the Iranian year ending March 2007 to the year ending March 2017, close to 590,000 residential units were produced and supplied to the market. The highest and lowest number of homes constructed over these years were registered for the year ending March 2013 with 820,000 and the year ending March 2017 with 390,000, respectively. 

About 2.5 million homes in the country are empty. The optimal ratio of vacant house is 5% in urban areas and 2.5% in rural areas whereas it is 10.3% in Iran’s urban areas and 8.5% in rural areas. 

The Housing Comprehensive Plan says the number of vacant homes must decline to 1.4 million (1.1 million in urban areas and 300,000 in rural areas.) 


Iran Vacancy Tax Bill