Revised VAT for Gold, Jewelry
EghtesaOnline: New regulations governing value added tax on gold trade will come into effect in January, the vice president of the Tehran Gold and Jewelry Union said.
Mohammad Kashti-Aray told the state broadcaster IRIB that the new rules are expected to improve gold trade because “prices would be more attractive.”
As per the new regulations, VAT on gold trade will be levied on service, profit and fees charged by jewelers. In short, the original value of gold will no longer be taxable.
“The rules are to the benefit of buyers. It is not yet clear whether or not the jewelers would also benefit,” Kashti-Aray said.
Citing jewelers, the IRIB said the planned VAT rules would be in the interest of gold merchants as prices will “become more attractive and they will be able increase sales.”
He said the new VAT mechanism has long been demanded by the TGJU union and other guild unions.
“After extended appeals by the TGJU and other unions across the country, the Majlis and the Iranian National Tax Administration concurred that tax rules for gold business need to be revised.”
The VAT decision is the outcome of two years of bargaining with the Economy Ministry, the Majlis Research Center and the Majlis Economic Commission.
Jewelers for long had said that VAT should be levied only on fees for “making the jewelry”. Observers say the competitive edge of domestic gold and jewelry producers has been undermined under the existing VAT regime.
As per law, jewelers charge 9% VAT on sales. A gram of 18-karat gold cost about 13 million rials on Tuesday. According to the guild official, as the original value of gold constitutes the biggest part of the price, 9% VAT is way too high.
It has been reported that under the present rules, most people wanting to protect their savings prefer to buy scrap gold, which is a bane for the jewelry industry.
VAT on gold has further undermined demand because of higher prices people are unable to buy the precious metal and make do with trinkets and costume jewelry.
The guild official expressed the hope that the new law will help boost the once robust domestic gold industry and stimulate sagging demand for the yellow metal.
Not long ago Iranians were predisposed to buying gold coins as a safe haven and protect their hard-earned savings despite skyrocketing prices, especially due to devaluation of the national currency and high inflation.
The new measure is part of broader VAT rules debated over two years in the parliament. It exempts producing and importing gold ingots 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.
New legislation is in the pipeline for levying capital gains tax (CGT) that calls for imposing high taxes on trade in assets like gold, forex, homes and cars.