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Maliyat Journal, No. 16, Summer 1997








As our readership will notice, this periodical has commenced a new stage of its journalistic life. Not only theform and appearance of the journal is reshaped, but noticeable steps are also being taken toward thediversification of the subjects and more effective participation of newcomers in preparation of articlescontained therein.

Those alterations, nevertheless, would not signify any deviation from the main goals and principal policies ofthis magazine. We have always been endevouring to create an appropriate ground for tax researches andstudies, and to provide a suitable forum for promulgation of tax knowledge among taxpayers and other groups interested in tax studies.

The resources and means within our reach have always been limited, in comparison with other papers, but itnever discouraged us, and we could manage to overcome difficulties, so that this journal could gainpopularity among the vast categories of taxpayers, tax officials and academic centers.

We would like to address the tax experts and others who are interested in tax debates, and ask them oncemore to take part in this productive undertaking. They may focus on specified subjects, especially issue ofcertain ambiguity, in respect of which no single and clear solutions are being adopted. The shortcoming ofregulations is usually the most important and common cause of presence of such vaguenesses. Deliberationon these fields of research and investigation can be of great help for solution of cases of ambiguity.

Wider and more common themes may also be dealt with. Among them one can refer to the subject ofcomputerization of tax information system. Not only the tax experts with experience in this field, but also thespecialists in the field of computer science and programming might be of great assistance. All other topics inthe area of tax and taxation can be addressed and presented in this journal.


Dr. Aliakbar Arabmazar






Tax News




The BSTDs (Boards of Settlement of Tax Disputes) are vested with the power to receive andreview all tax disputes and claims. The parties to disputes are taxpayers and tax officials. Whenthe parties are summoned by a BSTD, they have to attend the sessions of the BSTD to defendtheir cases. It sometimes happens that the tax officials ignore this duty and refrain fromattending the meetings of BSTDs. The Ministry of Economic Affairs and Finance issued a circularin this respect and condemned such behavior. It has been emphasized in the circular that therelevant tax assessors are obliged to attend the meetings of BSTDs, and to defend their casesseriously by presenting all kinds of available evidence and documents. Those neglecting this dutyare warned and told that they will be prosecuted by the Office of the Disciplinary Prosecutor ofTaxation Affairs.

The chief assessors are also directed to follow up the execution of this order. They have to beafter the tax assessors and see to it that they would observe the duty of attending the sessionsof BSTDs. In case of discovering failure on behalf of the assessors, the chief assessors have toreport the issue to the Office of the Tax Prosecutor for prosecution of the failing officials.





Section 3 of the third Chapter of the Direct Taxation Act (Articles 82-92) contains theregulations of the salary tax. Article 91 of this section provides for the kinds of salary incomethat are exempted from taxation. A law was adopted by the Parliament during the last year, thatcomprises payments to the civil servants. The law covers, in particular, some special kinds offringe benefits which are not specifically named by the articles of the aforesaid section of theDirect Taxation Act. Therefore ambiguity raised as to the applicability of the exemptions to theseparticular fringe benefits. A new circular letter of the Ministry of Economic Affairs and Financeexamines these cases and provides that:

1. The money paid to employees as the "service bonus" is to be considered subject to paragraph5 of the aforementioned Article 91, and thus is tax exempted.

2. The payments to the civil servants under the title of "marriage expenditures" (in respect ofpermanent marriages), as well as the money paid to employees when their first child is born, bothare examples of paragraph 13 of the Article 91, and therefore are exempted from salary tax.

3. The payments made as a part of "death expenditures" is also subject to paragraph 5 of thesame Article 91, and should be regarded as tax exempted.

4. The money paid as an assistance in respect of the expenditures of death of a member of theemployee's family, is not tax exempted and should be taxed as an item of salary income.




Article 2 of the iranian Direct Taxation Act enumerates specific institutes and other juridicalpersons whose income is - under certain conditions - exempted from taxation. The paragraph 2of this article pertains to the Society of the Red Crescent of the Islamic Republic of Iran,Organization of Social Security, saving funds of pension schemes, schools of Islamic sciences,foundations of Islamic revolution, and the Fund for Improvement of Endowments.

Note 1 of the Article 2, on the other hand, provides for cases where the income of the saidinstitutes is earned through the economic activities, like the activities performed in the field ofproduction, industries, mining, trade, as well as the income derived from real estates. Thesecategories of income are excluded from the general rule of the Article 2, ane are subject totaxation.

Based on these considerations, a question was raised as to whether the income of theseinstitutes from their banking deposits, namely the interest accrued to such deposits, could beconsidered as an example of "economic" and "commercial" activities, and thus being subject totaxation.

The aquestion was referred to the Supreme Council of Taxation (SCT) for consideration. TheSCT reviewed the subject in its Plenary Board and decided that the interest earned from bankingdeposits is beyond the categories of "economic activities" mentioned in Note 1 to Article 2.Therefore, the income so derived, is - according to the SCT - exempted from taxation, by virtueof the paragraph 2 of the same article.




Under the Article 133 of the Direct Taxation Act, the income of certain cooperative companies istax exempted. The Cooperative Ministry sent a letter to the Finance Ministry and stated thatthere  are special kinds of cooperative companies which perform several activities. In otherwords, they are multipurpose cooperatives that undertake the businesses of severalcooperatives enumerated in the Article 133. Thus, they can - according to the Ministry ofCooperatives - enjoy the tax exemption status provided under the said article with regard to eachof those separate cooperatives.

The Ministry of Economic Affairs and Finance referred the case to the Plenary Board of theSupreme Council of Taxation for reviewing. The Board considered the matter and delivered itsopinion unanimously. It was of the opinion that the Article 133 refers to certain types ofcooperatives, and any other cooperative not mentioned therein, could not enjoy the taxexemption. So, the multipurpose cooperatives which are not enumerated among such particularentities, are not entitled to tax  exemption provided in the said Article of the tax law.




Certain changes are recently being made in respect of the minimum amount of salary income ofemployees which is exempted from taxation. Before this amendment, the amount of the saidexempted salary was different for employees of the public and private sectors. The employeeswhose salaries are paid by the ministries, governmental institutes and companies, as well asthose receiving their salaries from "municipalities", used to enjoy a higher level of tax exemption.

so, the employees of municipalities could take benefit from their higher tax exemption. But, themunicipalities have some companies under their control and ownership. The ambiguity had beenraised with regard to the employees of these particular companies. Could they enjoy the samehigh level of exemption, as the "direct" employees of municipalities, or not?

The question had been referred to the Plenary Board of the Supreme Council of Taxation, and ithad delivered a negative opinion in this regard. The Article 133 of the tax law does not -according to the Plenary Board of the SCT - cover the affiliates of municipalities, and thus theyare not entitled to enjoy the higher level of exemption.

The Municipality of the city Ahwas (a southern town of the country) filed a protest against theopinion of the Plenary Board of the SCT with the Administrative Court of Justice.

The Court - which is a branch of the judiciary - confirmed the opinion of the SCT, and decidedthat the employees of the affiliates of municipalities may not enjoy the higher level of exemptionprovided for employees of municipalities themselves, since the relevant articles of the DirectTaxation Act pertains to municipalities exclusively.




The Martyrs Foundation of the Islamic Republic of Iran has been established for giving assistanceto the families of those who were martyred for the sake of the revolution, or during the war withIraq. The Foundation owns and manages wide range of properties. It provides houses to thefamilies of martyrs for dwelling, while keeping the ownership of properties for itself. The relevanttax authorities considered the relationship between the Foundation and the occupants of thehouses as the relation between the landlord and tenants. Therefore they demanded theFoundation to pay taxes on rental income.

The Foundation protested and declared that the opinion of the tax officials is not correct, sincethe dwellings in question are provided free of charge, and no rental is earned from the familiesreceiving this special kind of assistance.

The Ministry of Economic Affairs and Finance reviewed the matter and rendered an opinion,which is contained in a special circular. It has been stated in the circular that the houses used bythe families of martyrs, are given to them as a kind of assistance and charity, and nolandlord-tenant relationship does exist in this case. The charitable help of this kind is - under therelevant regulations of the Direct Taxation Act - exempted from taxation whatsoever. Therefore,the tax officials are ordered to stop demanding taxes in this respect.











The Editorial in this issue is devoted to the subject of commencement of a new stage in thelife of the Maliyat journal and changes that has taken place in the form and contents of thisperiodical. Diversification of subjects and effective participation of different groups inpreparation of articles of the journal is another aim of new changes. The same theme isdiscussed in the Editorial of English section as well.


Interview with the Director General of Finance and Economy ofthe Province of Tehran

We had an interview with Mr. Sadegh Kord-e-Zanganeh, Director General of the EconomicAffairs and Finance of the Province of Tehran. This Province includes several cities in thecentral area of Iran. The text of this interview is reflected in the Persian section. A briefpresentation of economic situation of the Province is introduced, then the intervieweeprovides information concerning the issues and problems of the Directorate General underhis supervision.


Consumption Tax, a Suitable Tax for Iran

The author introduces some general observation regarding the role of taxation in the societyand imperative needs that require governments to resort to taxation in all countries. Then thecharacteristics of consumtion tax are  analyzed and reasonings are presented in favor of thisparticular kind of taxation as an appropriate tax for a country like Iran. The article is dividedinto two parts. The first part is provided in the current issue, and the second and last part willbe presented in the next issue of the journal.


Economic and Taxation Issues in the Province of Fars (part two)

The first part of the interview with the Director General of Economic Affairs and Finance of theprovince of Fars had been printed in the last issue of Maliyat journal. The second and last partof the same interview is printed in the present issue. The interview contains a briefpresentation of economic perspective of the Province, then it reviews the taxation issues indetail.


A brief Report on Accountancy of the Foreign Exchange Transactions in Iran (part two)


The first part of this article was provided in the last issue of the journal, and the remaining ispresented in the issue at hand. The subjects commented on in this part are focused on thetaxation aspects of  foreign exchange transactions. The author presents several proposals forsolution of existing problems and discrepancies in the field of accountancy and taxation ofthis kind of transactions.


Tax Concepts and Theories at a Glance

Several Common Terms are defined and the history of evolution of theories in the field oftaxation is presented in brief.


Crticism on an article

An article had been printed in the issue No. 14 of Maliyat journal regarding the legalcompetence of the Administrative Court of Justice in the field of tax claims. The author ofthat article was of the opinion that the Court is not competent to receive and reviewcomplaints against the opinions rendered by the Plenary Board of the Supreme Council ofTaxation. This article triggered reactions, especially among the tax advisors, and criticalresponses were received by the office of the journal. Two cases of these criticisms are printedin the present issue of the journal without any judgement about their merits.


Cumulative Index

As was mentioned above, Maliyat journal has commenced a new stage of its publication.the new stage in beginning with the present (sixteenth) issue. To give our readershippossibility to have a general idea about the content of the previous issues of the journal, wehave inserted a cumulative index of all articles and subjects contained in the first 15 issues ofour publication.



The texts of latest laws, regulations, decrees, and opinions of the Supreme Council ofTaxation are reported in the Persian section of the Journal. A part of the same is presented inEnglish section under the heading "Tax News".



Several tax terms and expressions are presented and defined in each issue of Maliyat journal.Detailed explanations follow the definition of the terms.


Consumption Tax, a Suitable Tax for Iran

The author introduces some general observation regarding the role of taxation in societyand imperative needs that requires govenments to resort to taxation in all countries. Then thecharacteristics of consumption tax are anlyzed and reasoning are presented in favor of thisparticular kind of taxation as an appropriate tax for a country like Iran. The article is dividedinto two parts: the firest part is provided in the current issue, and the second and last part willbe presented in the next issue of the journal.0




The End