Iran’s currency fell below the psychologically important level of 1 million rials per US dollar on Tuesday and continues to trade lower, as Donald Trump's administration presses on with its “maximum pressure” campaign against Tehran with a new round of sanctions to curtail its revenue.
After dropping to a record low of 1,039,000 rials to the dollar on Tuesday, the rial continued to trade lower on Wednesday, with the exchange rate on the parallel market remaining above the 1 million mark at around 11am UAE time.
Tuesday’s drop resulted in more than halving of its value since President Masoud Pezeshkian took office last year, Reuters reported, citing Bonbast.com, which gathers live data from Iranian exchanges.
“The vast majority of the markets, probably 95 per cent plus, participate in the unofficial or parallel market for the Iranian rial that has now passed a million,” said Thomas Roden, senior foreign exchange dealer and head of business for emerging markets at foreign exchange platform Hubpay.
“It’s just due to all the uncertainty around [Mr] Trump over the past few weeks; he’s focused himself on the nuclear deal over there,” Mr Roden told The National.
Last week, the US Treasury Department announced new sanctions against a network of individuals and entities supporting Iran's oil exports. These include sanctions on 19 entities and vessels responsible for shipping millions of barrels of Iranian oil to Chinese refineries.
The move marks the fourth round of sanctions against Iranian oil sales since US President Trump issued the National Security Presidential Memorandum 2 on February 4, ordering a campaign of "maximum pressure" on Iran to curtail its oil revenue.
Mr Trump also expressed his willingness to engage with Iran and sent a letter inviting supreme leader Ayatollah Ali Khamenei and Mr Pezeshkian to talks over its nuclear programme. However, the offer was rejected by Tehran earlier this month, describing it as "deceptive" and "bullying".
The Iranian currency is expected to be under pressure unless there is some kind of a deal with the US in the coming days, which looks unlikely, according to Mr Roden.
"Iran's economy has been pretty severely impacted during the first term with [Mr] Trump and it looks like down that route again," he said.
"Oil is pretty much their only export. So generally, if oil prices fall, which they have over the past 12 to 18 months, it's going to have bad effects on the Iranian economy as well, and with the US promising to pump as much oil as they possibly can, that's not going to help."
Iran's economy has suffered under extraneous sanctions reimposed by Washington in 2018 after Mr Trump, in his previous term as president, removed the US from the Joint Comprehensive Plan of Action nuclear deal that could have provided relief to Tehran in exchange for limiting its nuclear enrichment programme.
The sanctions are yet to be lifted. The country is also on the Financial Action Task Force's blacklist.
Iran’s economy is projected to grow 3.1 per cent in 2025, from 3.7 per cent in 2024, the International Monetary Fund said in a report in January. It is forecast to further slow to 2.8 per cent next year.
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Tailors and retailers miss out on back-to-school rush
Tailors and retailers across the city said it was an ominous start to what is usually a busy season for sales.
With many parents opting to continue home learning for their children, the usual rush to buy school uniforms was muted this year.
“So far we have taken about 70 to 80 orders for items like shirts and trousers,” said Vikram Attrai, manager at Stallion Bespoke Tailors in Dubai.
“Last year in the same period we had about 200 orders and lots of demand.
“We custom fit uniform pieces and use materials such as cotton, wool and cashmere.
“Depending on size, a white shirt with logo is priced at about Dh100 to Dh150 and shorts, trousers, skirts and dresses cost between Dh150 to Dh250 a piece.”
A spokesman for Threads, a uniform shop based in Times Square Centre Dubai, said customer footfall had slowed down dramatically over the past few months.
“Now parents have the option to keep children doing online learning they don’t need uniforms so it has quietened down.”
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1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
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Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
