Revaluation of assets in Iranian companies

According to article 141 of the Iranian commercial code (1968) ” In the case of the loss of a minimum of half the company’s capital, the board of directors is bound to call an extraordinary general meeting immediately, to decide whether the company shall be wound up or shall continue its operations”. On this basis, lots of giant companies, as their financial statements show, are bankrupt. Since their cumulative losses have risen by more than half of their registered capital, Accordingly, Iran khodro and Saipa -two of the major automaker’s company in Iran- are legally considered bankrupt. However, new facilities are being offered to these companies and accordingly they may be withdrawn from article 141. According to the new bylaw recently approved by the government, automakers can update the value of their assets and thus increase their fixed capital. As capital increase through revaluation, the ratio of accumulated losses to fixed capital changes and automakers are therefore excluded from Art.141.

Iran Khodro and Saipa have already made some preparatory steps to get out of bankruptcy. In parallel, in the process of re-evaluating the assets, automakers can take advantage of their various assets, including real estate, machinery, and even long- term fixed investment. Authorized audits shall do a reevaluation of such assets. This process shall be done by a formal petition of each company to the Association of Judicial Experts and therefore, the companies do not interfere with the selection of financial experts.

In addition to the above mentioned, terms of executive bylaw approved by the government are as follow:

Pursuant to note 1 of Article 149 of the Direct Tax Act, the increase in the cost arising from the revaluation of the assets of legal entities shall not be subject to income tax due to accounting standards, and the depreciation expense resulting from the revaluation increase. Expenses are not considered taxable and are measured at the time of sale or exchange of revalued assets with the differences between the sale price and the book value without applying revaluation in calculating taxable income.

Article 10 of executive bylaw of Note 1 of Article 149 of Direct Tax Law:

Article 10: “Covering losses from the assets revaluation surplus and transferring the surplus to the profit or loss account, or distributing it in any form between the owner of the assets constitute compliance with accounting standards and is subject to income tax.

Note 1: legal entities subject to note 1 of article 149 of Direct Tax Act, within one year of asset’s revaluation shall begin legal procedure for transferring the revaluation of surplus to the capital account and record increase capital in Iran’s registration office. This surplus transferred amount shall not be subject to income tax.

It should be noted that the increase in capital from this location is only acceptable if this amount is added within one year of the revaluation and this is only possible once every five years. This limitation set force in this bylaw shall apply only to the revaluation of each category of assets separately from other categories. Therefore revaluation of different asset categories other than the aforementioned is allowed during those five years.

Facilitation of Repayments

Iran’s Central Bank has issued a circular to the banks’ network regarding the execution of a newly enacted law with the purpose of facilitation of repayment of the debts to the banks and credit institutions.

According to this law, to support domestic production and to facilitate the clearing of debts of producers, they have an option to apply to their banks for the repayments of their debts under new conditions, if they have not paid all or part of their debts by the due date with the condition that repay their debts in cash. Accordingly, the same contract shall be the basis for calculating the debt under this Act and the amount that the debtors must pay to the bank or credit institutions shall be the principal debt amount plus the simple and non- compounded interest rate. Also, all their fines and penalties shall be discarded.  We are expecting the issuance of the executive circular within the next two weeks. Ultimately those who want to use this law are required to submit their applications until March 2020.

7th Annual Conference on Electronic Banking and Payment Systems

7th Annual Conference on Electronic Banking and Payment Systems

The largest banking event of the year was held at Tehran’s iconic Milad Tower on Monday. This event centered on financial technology and innovative solutions to succor an economy which is in a dire need to reform. The entity in charge of organizing such major event is Ali Divandari, director of the Monetary and Banking Research Institute. A large number of high-level officials, industry players and local and foreign experts are attending the Seventh Conference on Electronic Banking and Payment Systems.
The ever-increasing importance of fintechs and the boons they bring for consumers are the main points of the meeting. This year’s conference is focused on promoting innovation and optimizing efficiency in financial businesses. In line with this subject, Governor of the Central Bank of Iran Valiollah Seif, called on bank executives and board members to develop a comprehensive understanding of financial technology and block chain innovation.
Communications Minister Mohammad Javad Azari Jahromi was one of the top-tier speakers of the event as well. He warned that the monopoly in payment systems effects market expansion in a detrimental way. He also called the administration’s commitment to combating digital and cyber fraud. He also announced that in a month with collaboration of ministries of economy and industries and central bank, the strategic blueprint of digital economy will be submitted to the parliament. Jahromi promised granting of a bigger role to a digital economy in the government’s plans for the fiscal 2018-19 that begins on March 21.

Digital Banking and Fintechs

Another keynote speaker of the event was the head of CBI’s Innovative Technologies Department. He determined the policies of the monetary regulator in financial innovation and technology. He outlined that the central bank has planned six documents in three phases to provide “regulatory frameworks”. He mentioned that they do not seek just some rigid regulations, but the want to take stance on fintechs and cryptocurrencies. Two of the mentioned documents dealing with payment initiators and facilitators have already been published. The rest of them will be disclosed publicly by the end of next year’s second quarter on Sept. 22. On this subject, the industry players’ feedback will absolutely be considered.
The annual conference had a number of other roundtables which discussed on Europay, Mastercard and Visa technology, open banking and conformity to international standards. In this event, some scientific research articles were also presented. The major subjects were about Banking supervision, confidentiality of information, automation systems, anti-money laundering and combating the financing of terrorism laws and global banking trends.

Finance Department

Banking Relations between Iran and Turkey

Banking Relations between Iran and Turkey

On Sunday, top officials from the Central Bank of Iran and Turkey had a meeting in Tehran. Along with senior bankers, they had a high level talks to discover a new way of developing banking relations. One of the measures of the central banks of both countries is the currency swap agreement, which recently signed between Iran and Turkey.
This agreement is a very appropriate way to continue and increase cooperation. It is expected after the infrastructures are set in place, the implement procedure will be commenced as soon as possible. After rounds of negotiation, the officials of two countries’ central banks finally agreed on conducting bilateral trade in local currencies. Regarding to the agreement, both parties allocated a credit of 5 billion Lira and its equivalent in Rial to their agent banks. Bank Melli Iran and Ziraat Bank are the respective agent banks which such credit allocated to them. Both countries’ traders can use this credit as letters of credit with a repayment period of one year.
Based on this agreement, the payment tools such as letters of credit and remittances will be issue in the local currency. The traders will no longer need to use intermediate currencies. By such method the costs for both countries’ traders will reduce.
The future goal between two countries is connecting their bank cards. This movement allows their citizens to benefit from mutual electronic banking services and facilitate tourism.

Development of Strategic Relations

Referring to the longstanding history of trade between two countries, the expansion of the ties is very important. The implementation of the currency swap agreement is a step toward such aim. The CEO and other top-level executives of Ziraat Bank and Halkbank participated in the meeting. In addition to stating their opinion about the currency swap agreement, they expressed their willingness to improve the correspondent banking relations with their counterparts.
Finance Department

Iran and Turkey to Expand Technical Relations

Iran and Turkey to Expand Technical Relations

TEHRAN , Oct.20 (FNA)- Iran’s Minister of Industry, Mine and Trade and Turkish Economy Minister in a meeting in Ankara voiced their countries’ preparedness to further expand bilateral relations, specially in the technical and engineering fields.
During their meeting, the two ministers, who also serve as special representatives of the presidents and chairmen of the economic commission in their own countries, discussed promotion of economic and trade collaboration in a bid to achieve the 30-billion-dollar goal set for the volume of trade exchanges between the two neighboring nations.
The documents and Memoranda of Understanding (MoUs) which were endorsed in the presence of Iranian President Hassan Rouhani and his Turkish counterpart Recep Tayyip Erdogan are related to the two countries’ customs and banking ties as well as cooperation between their national libraries and state TV and radio organizations.

Financial Ties between Malaysia and Iran

Financial Ties between Malaysia and Iran

Minister of Economic Affairs and Finance Masoud Karbasian met with top-ranking officials of the Islamic Development Bank as well as his counterpart from Malaysia.

In the present membership of the bank, which consists of 57 countries, Iran ranks third with a total share of 8.25% and stands behind Libya and Saudi Arabia that respectively hold 9.43% and 23.50% of shares. The basic condition for membership is that the prospective member country should be a member of the Organization of Islamic Cooperation.

In the meeting with IDB officials, Karbasian called on them to consider the rights of all member states and pointed to the multilateral development bank’s special standing in the region.

Karbasian talked about ways through which the Iranian private sector will be able to enjoy facilities offered by IDB and it was decreed that both sides would negotiate further when an IDB delegation travels to Iran in the foreseeable future.