Iran imposes 1% annual tax on luxury cars

By bne IntelliNews January 24, 2024

The Iranian Parliament, also known as Majlis, has set a 1% annual luxury tax on cars valued over IRR35bn ($63,632). This increases the price cap of cars subject to tax by IRR5bn in comparison to the amount stated in the initial budget bill for the upcoming Persian calendar year (March 2024-25), Persian Daily Donyaye-Eqtesad reported on January 23.

Members of Parliament also announced that those who are required to pay luxury taxes must do so by February 19. This includes taxes on any cars owned by them, their children under the age of 18, and any other individuals who are legally dependent on them.

Individuals who are required to pay taxes but fail to do so will be subject to a penalty of 2.5% for each month of delay in paying the direct tax.

Starting from March 2021-22, luxury car owners have been required to pay taxes. In the first two years, March 2021-22 and March 2022-23, owners of cars worth more than IRR10bn were required to pay luxury taxes. In the current Persian calendar year, it was initially announced that those who owned cars worth more than IRR15bn would have to pay tax. However, according to the parliament members' opinions, the tax was raised to IRR30bn.

The head of auditing at the Iranian National Tax Administration, Shahin Mostofi, announced on January 7 that a total of IRR13 trillion in taxes had been collected from luxury and expensive cars and deposited into the treasury account from March 2021-2022. However, the total tax calculated for luxury cars during this period was IRR70 trillion, suggesting that only a small portion of taxes were paid by luxury car owners.

In many countries, taxes on cars are determined based on several factors including environmental impact, brand, technical specifications, and options. However, in Iran, the luxury status of a car is solely determined by its price. All such cars are imports purchased until 2018, as domestic and assembled cars do not exceed a price tag of IRR20bn. Iran imported a total of 4,384 passenger cars worth $86.47mn during the initial nine months of the current Persian calendar year, but all these cars were priced under $20,000 due to the price cap on car imports.

Iran recently lifted the price cap only for electric vehicle imports, allowing companies to import any EV model from any brand, including luxury vehicles, except American models.

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