What is Value Added Tax (VAT)?

Value-added tax is applied as a percentage of the total sales price of goods and services, which is ultimately paid and collected by the final consumer.

Currently, individuals are required to submit VAT returns quarterly. However, due to the Sales Terminal and Taxpayer System law, VAT returns have become invalid and of no value. Nevertheless, under current regulations, individuals and businesses must still submit VAT returns based on VAT laws, specifying exempt and non-exempt activities as well as exports and imports.

If you make a mistake in submitting the VAT return to the relevant authorities, you may be subject to penalties according to VAT law.

What is Added Value?

In response to the question "What is added value?" it refers to the increase in the monetary value of goods during the production process. In other words, it represents the value added at each stage of production of a product.

Let’s consider a practical example to understand the concept of added value. Suppose, to make one kilogram of pastries, you used 200 tomans of sugar, 300 tomans of flour, 300 tomans of butter, 350 tomans of eggs, and 450 tomans of other materials. Now, if you sell the one kilogram of pastries for 5000 tomans, the added value of this product will be 3700 tomans. In other words, added value shows the value you add at each stage of making a product.

Which goods are exempt or subject to the new VAT law?

According to VAT law, some goods and services are subject to VAT, while others are exempt. Basic goods like bread, meat, milk, medicine, and books are usually exempt to reduce the tax burden on low-income groups. On the other hand, luxury goods and non-essential services like expensive cars, luxury hotels, and some recreational services are subject to VAT. Additionally, exports of goods and services are generally exempt from VAT to enhance the competitiveness of domestic products in global markets. Awareness of these distinctions helps businesses correctly file their tax returns and avoid potential penalties.

What is VAT?

Why are VAT services important?

VAT services play a crucial role in improving the financial and economic system. By creating transparency in the supply chain of goods and services, these services help ensure more accurate financial oversight and prevent tax evasion. For businesses, these services are a practical tool that simplifies and refines tax calculation and payment processes, thus reducing the risk of errors or tax penalties. On the other hand, VAT services also serve as an important revenue source for governments, funding public expenses, infrastructure development, and social services.

Deadline for submitting and filing VAT returns

According to VAT law, taxpayers are required to submit their tax returns periodically and within specific timeframes to the tax authority. The deadline for submitting a VAT return is typically 15 days after the end of each quarter. For example, for the spring season (Farvardin, Ordibehesht, Khordad), the submission deadline is July 5th. This schedule applies uniformly to all businesses, whether they are involved in production, services, or trade.

Delays in submitting the return or failure to submit it result in tax penalties. These penalties include a percentage of the owed tax and a late fee, which can significantly increase costs for businesses. Therefore, adhering to deadlines not only prevents penalties but also contributes to financial transparency and improves relations with tax authorities.

To facilitate this process, using accounting software and tax consulting services can help businesses submit their returns on time and without errors.

What is the VAT system?

The VAT system is an electronic platform established by the Iranian Tax Administration to simplify and enhance transparency in VAT-related processes. This system allows taxpayers (both individuals and businesses) to submit their VAT returns online, make tax payments, and stay updated on new notifications and laws.

Through this system, businesses can record their activities separately for exempt and non-exempt items, submit periodic reports, and track their tax status. The VAT system also allows precise tracking of transactions, automatic tax calculations, and the receipt of necessary confirmations.

Using this system not only increases the accuracy and speed of tax processes but also prevents errors and penalties due to delays or incomplete returns. To access this system, taxpayers must first register, then log in with their username and password.

How to calculate added value

To calculate VAT in Iran, the final value of the product must first be determined. Then, the total value of the raw materials used to produce the product is subtracted to calculate the added value. This calculation method applies to every good or service and is an important indicator of profitability and production efficiency..

Types of VAT

There are three main types of VAT:

• Production VAT: This is applied to the sale of consumer and capital goods. It is known as a production tax and is generally applied at every stage of the production and distribution process of goods.

• Consumption VAT: This tax is applied to gross investment expenditures. It is charged based on consumer goods and services, meaning it impacts consumers and affects their consumption patterns.

• Income VAT: This type of VAT is applied to the sale of net produced goods, after deducting depreciation from gross investment. It is considered an income tax on business profits.

The objectives of VAT

Now that we understand what VAT is, let's review its main objectives:

1. Increase government revenue: VAT serves as a primary revenue source for governments, which is used for public expenses and fulfilling government duties.

2. Regulate consumption: By increasing the prices of goods and services due to VAT, individuals are forced to consume less, maintaining a balance between supply and demand.

3. Adjust demand: By imposing VAT on luxury goods and services, people's tendency to consume them decreases, creating demand for more essential and necessary goods.

Types of VAT services we provide

Zarrin Taraz Golestan, with years of experience and expertise in providing tax services, offers a comprehensive set of solutions related to VAT for businesses:

Registration: Registering in the VAT system is the first step in complying with tax laws. Zarrin Taraz Golestan completes this process quickly and accurately so businesses can start operations without legal issues.

Calculation: VAT calculation requires precise knowledge of tax laws and careful review of financial documents. Zarrin Taraz Golestan calculates the payable or refundable VAT with accuracy, preventing mistakes and potential penalties.

Reporting: Submitting periodic reports to the tax authority is a critical responsibility of businesses. Zarrin Taraz Golestan simplifies this process by preparing and submitting accurate tax reports, preventing delays or omissions.

Professional consultation: Navigating the complexities of VAT requires specialized advice. Zarrin Taraz Golestan offers practical, expert solutions to help businesses make informed tax decisions and manage their costs.

Steps in VAT processing with our team

With the assistance of our professional tax services team, all VAT processes are completed accurately and comprehensively. From initial registration in the tax system to precise tax calculations, our team at Zarrin Taraz Golestan reviews every detail with great care. Then, necessary tax reports are submitted on time and in compliance with legal schedules. Finally, our specialized consulting ensures that you make optimal tax decisions and manage your business’s financial processes professionally.

How VAT services reduce your costs and penalties

Using professional VAT services significantly reduces your tax-related costs and penalties. Our expert team performs accurate calculations and submits reports on time, preventing errors and legal issues. Adhering to tax regulations and deadlines helps protect your business from heavy tax penalties and allows you to fully benefit from tax advantages. Professional services ensure that your costs are optimized and prevent financial losses.