The following article applies only to Iran.
In recent years, value added tax has been added to the other kinds of taxes that payers must pay.
Value added consists of: the difference between the value of the product and services sold and the product and services bought.
Value added tax is the amount which exceeds the original price of the product or services which the customers or demandants must pay the seller, who in turn pays this amount to the government in specific times.
Difference between value added and profit
Profit consists of: net sale minus expenses (including costs of staff or utility bills, etc.) which is the income of the management.
Value added consists of: net sale minus value of materials and products bought from the outside, allocated to managers and employees. This is because the value added is shared between the managers and employees and therefore bring these two groups closer together.
How to calculate the value added tax and its rate:
The rate of the value added tax is yearly specified by the government. This rate is a percentage of the net amount of the product or services’ sales invoice.
As mentioned previously, as a seller of products and services, when selling your product or service, must receive the value added tax as well as the actual price of your product or service. Similarly, if you are the buyer trying to purchase a product or service, you must pay the value added tax as well as the original price.
According to law, business owners are required to calculate their value added taxes in quarterly periods. This means that they must deduct their VAT payments from the received VAT and pay the remaining amount to the state treasury within maximum 15 days after the end of each quarter.
VAT Payment Method
Presently, VAT payments are based on self-declarations.
Payers must fill in their declarations on the integrated VAT system at www.evat.ir quarterly.
Tax payment bills are issued by the mentioned website and the amounts are paid electronically. After the payment is done, the declaration is automatically confirmed.
For more information, please contact our specialized advisors.