Ministry of Economic Affairs and Finance
Organization for Investment, Economic and Technical Assistance of Iran
Guidance And FAQs
On Foreign Investment in the Islamic Republic of Iran
Foreign Investment Promotion and Protection Act (FIPP)
Foreign Exchange Transfers Tax & Customs Issue
Tax & Customs Issues
Tax and Customs Facilities and Exemptions
Other Facilities and Exemption
This is a compilation of the
enquiries frequently asked by potential investors willing to invest in
the Islamic Republic of Iran. We hope the answers provided herein, in
addition to the policy issues, would assist parties, and provide them to
have access to a package of comprehensive information in respect of the
legal framework for admission of investments and the manner to obtain
the relevant Investment License. You may find certain questions which do
not necessarily have any direct relevance with Foreign Investment as a
whole ,but in light of the need for preparing a multipurpose source of
information, we have tried to compile a variety of likely inquiries to
respond to any question relating to doing business in Iran.
Obviously , those investors who may need more detailed information on
any subject , are recommended to refer to other OIETAI publications and
guides;or if they wishthey may communicate directly or have meetings
with the OIETAI staff who are in a position to welcome them by providing
answers to any other question which is not addressed in this guide as
Readers are kindly recommended to refer to the table of content before searching the answers to their questions in each chapter
provisions of Iran's Foreign Investment Promotion & Protection Act
(FIPPA),foreign investors investing within the framework of contractual
arrangements such as buy-back shall also have the right to make
transfers abroad by using the mechanism of purchasing foreign exchange
from the banking system of Iran. In consideration of their specific
nature of investment and as stipulated in the Note of Article (23) of
the Implementing Regulations of FIPPA, these investors also have the
privilege to make the transfers through export of goods, without giving
up the right to purchase foreign exchange from the banking system.
1.Is Foreign Investment permitted in Iran?
Foreign investment is permitted in accordance with the prevailing laws
and regulations of the Country. All foreign investors are permitted to
invest, for the purpose of development and producing activities, in all
areas of industry, mining, agriculture and services. However, from the
standpoint of the Iranian government, only those investments shall be
eligible to enjoy the privileges and protections under the Foreign
Investment Promotion and Protection Act (FIPPA) that have obtained the
required license under the FIPPA.
2.What objectives are to be achieved by foreign investment?
The main objectives are:
· Enhancing economic growth;
· Increasing employment opportunities;
· Access to and development of new technologies and managerial skills;
· Upgrading quality of products and boosting export capabilities.
3.Under what legal or contractual framework, foreign investment may be admitted in Iran?
Foreign investment in Iran is admitted under all forms of legal
participation (Foreign Direct Investment) and/or contractual
arrangements. By contractual arrangements we mean all forms of project
financing methods within the framework of civil participation, buy back
arrangements, and different types of Build, Operate and Transfer (BOT)
4.How do you define foreign investment?
investment is defined as employment of capital in an activity in which a
level of risk involved.FIPPA classified foreign investment under two
broad categories :
Legal participation (direct investment): is defined as a direct
involvement of a foreign investor in the equity capital of a new or
existing Iranian company. There is no restriction on the level of
shareholding as well as percentage of shares belonging to foreign
investors in Iranian companies. The right of foreign investor to run and
control a company emanates from and is dependent upon his direct
contribution in the equity capital of the concerned company.
Contractual arrangements: is defined as a set of mechanisms under which
the utilization of foreign capital is solely based on agreements
reached by the parties to a contract. In other words, the rights of the
foreign investor is not yielded with his direct participation in the
capital of the recipient Iranian firm, but through the arrangements
agreed upon under a contract. This type of investment may be carried out
in all sectors of economy. Under contractual arrangements, the return
of capital and accrued profits have to be sourced only out of the
economic performance of the project in which the investment is made
without being dependent upon a repayment guarantee by the government, by
the banking system as well as state owned companies.
5.In what sectors foreign direct investment is permissible?
Foreign direct investment is permissible in all areas open to Iranian private sector.
6.In what sectors foreign investment under contractual arrangement is permissible?
investment under contractual arrangement is permissible in all sectors
of economy. However, foreign investment in sectors reserved for the
Government may only be carried out under contractual arrangements.
7.What legal structure do you recommend for foreign investment?
are seven types of juridical entity or company which can be established
under the Iranian Commercial Code. From among all these different
types, Joint Stock Company, in which the capital is divided by shares,
is the most common and acceptable type of company which can be
recommended to foreign investors (For further information please refer
to "Establishing a Joint Stock Company in Iran" published by OEITAI).
8.Is it obligatory to have local partner(s)?
course not. It is by no means obligatory to have local partner, but in
most cases foreign investors themselves are willing to take advantage
from their local partners for the reason that they are more familiar
with the business environment, regulatory and administrative
requirements and opportunities locally available.
9.Is there a ceiling for foreign investment in Iran?
is no minimum and maximum for foreign investment in respect of
percentage of shareholding, nor is any restriction on the amount of
investment for foreign investment in Iran.
there is no restriction imposed in Iran, then what message a
prospective foreign investor should get from the ratios of 25% and 35%
referred to in Para (d) of Article (2) of FIPPA?
ratios referred to in the said Para have nothing to do with the
shareholding percentage of foreign investors in a single investment
case. As formerly explained, no restriction with respect to the ceiling
of foreign participation is imposed in Iranian companies. In fact, these
ratios illustrate the proportion given to the value of goods and
services produced by foreign investment in the global economy in each
sector and subsector respectively, verified at the time of issuance of
the foreign investment license (i.e., value of foreign products in GDP).
11.Is foreign investment permissible in oil and gas upstream activities?
investment in oil and gas upstream activities within the framework of
contractual arrangements is permissible, but Foreign Direct Investment
(FDI) in such areas is not permitted.
12.Is it permissible to use foreign trade marks and names in foreign investments?
Application of trade marks and names is permissible in all areas of economic activity.
13.Is foreign investment allowed in companies quoted in the Stock Exchange Market?
is no restriction for investment in companies quoted in the Stock
Market. Foreign investment in these companies are eligible to enjoy the
protections available under FIPPA, in the same manner as is available to
foreign investment outside the Stock Market .
do you define Special Economic Zones in Iran and in which areas of the
Country these so-called zones have so far been established?
Economic Zones are restricted customs areas in which import of goods,
machinery and equipments is not subject to the general import/export
regulations. The zones may have been established for different reasons
and objectives. Some of them are established for the purpose of
warehousing whereas some, in addition to warehousing of goods, are
designed for setting up processing and production line. At present the
number of Special Economic Zones reaches to 17 (For more information
please refer to website www.freezones.ir) .
15.Is there any difference between investments made in Free Trade Industrial Zones, Special Economic Zone and the mainland?
in Free Zones is subject to especial regulations governing such
investments. Iranian Free Zones at present comprise six areas by the
name of Gheshm, Kish, Chahbahar, Arwand, Aras and Bandar Anzali. Areas
known as Special Economic Zones are part of the mainland in which all
investments are considered to be investments in the mainland. Taking
into consideration the applicability of Foreign Investment Law to the
territory of the Islamic Republic of Iran, all foreign investments
realized in Free Trade and Industrial Zones may also enjoy the
privileges of FIPPA, provided that the relevant formalities for
obtaining the investment license have been followed .
16.What is meant by the terms Iranian Company and Foreign Company, from the standpoint of Iranian laws and regulations?
term Iranian Company refers to a company incorporated and registered in
Iran according to Iranian Commercial Code, even if a hundred percent of
its shares or stocks belong to foreign natural or juridical persons.
The term Foreign Company refers to a company incorporated and registered
17.Is it possible for foreign companies to establish legal bases in the form of branches or representative offices in Iran?
Of course yes. Any foreign company, for the purpose of expanding its commercial activities, performing its contractual
obligations, carrying out marketing activities, etc. may establish a
legal permanent base in the form of branch or representative office in
Iran. For establishing a branch or representative office certain
procedure should be followed under the Law for Establishing Branches and
Representative Offices. For this purpose the applicants are advised to
refer to the General Directorate for Registration of Companies and
18.Is the establishment of branch or representative offices considered as foreign investment?
Establishing a branch or representative office is not considered as foreign
investment. In fact, foreign investment can be realized by way of
establishing a new Iranian company, participation in an existing Iranian
company and/or entering into contractual arrangements with Iranian
19.What are the features of Industrial Estates and what facilities are available in those areas?
Estates are prefabricated Estates designed and constructed by the
Industrial Estates Company of Iran, affiliated to the Ministry of
Industry and Mines, readily available for investors in all industrial
poles throughout the Country. Even in certain Estates, factories and
industrial workshops are offered for purchase. The important feature of
these estates is availability of infrastructural utilities such as
water, power, gas, telephone and quick access to the main transportation
network of the Country.
Foreign Investment Promotion And Protection Act
20.What law protects foreign investment in the Islamic Republic of Iran?
The law protecting foreign investment in Iran is the Foreign
Investment Promotion and Protection Act ratified in 2002 which is
hereinafter referred to as FIPPA. The scope of applicability of the
FIPPA extends to the territory of the Islamic Republic of Iran under
which all foreign investors may invest in the Country and enjoy the
privileges available there under.
21.What is the role of the regulations governing investment in Free Zones?
foreign investment in Free Zones is governed by especial regulations,
foreign investors may also invest in such zones under Foreign Investment
Law and take advantage of its protections.
22.What is meant by the term protection under FIPPA?
term protection refers to a series of certain rights and privileges
which are extended to investors under FIPPA. In other words, investments
carried out under any law other than FIPPA shall not be eligible to
enjoy such rights.
23.What are those rights and privileges?
Fundamental rights recognized under FIPPA in favour of foreign investors are as follows:
- The right to transfer profits (dividends) as well as capital and gains on capital in foreign exchange;
- The right to receive compensation resulting from expropriation (deprivation of ownership) and nationalization of foreign capital;
- The right to receive compensation resulting from the passing of laws or Cabinet Decrees causing prohibition or interruption in the implementation of financial contracts of foreign investors;
- The right to enjoy equitable treatment accorded to domestic investors.
24.Are there any other facilities and privileges available to foreign investors?
Other facilities and privileges contemplated under FIPPA and its Implementing Regulations are as follows:
- Convertibility and transferability of the funds resulting from various investment and transfer of technology agreements;
- Possibility of submission of investment disputes to international tribunals;
- Recruitment of foreign technicians in affairs related to investment projects;
Export of goods and services without any commitment to reintroduce
export proceeds to the Country (i.e., no surrender commitment
Direct access to and possibility of withdrawal of export proceeds out
of Escrow accounts established in banks outside the Country;
- Inapplicability of price control, distribution as well as local content and manufacturing requirements.
25.What issues are specified in the investment license?
issues such as area of investment, Iranian and foreign shareholders,
type and method of investment, volume and percentage of foreign
investment, the manner for transfer of dividend and profit gained as
well as other terms and conditions pertinent to a foreign investment
project are to be specified in the investment license.
26.Who is qualified to invest in Iran?
foreign natural and juridical persons, international organizations,
institutions and companies as well as Iranian natural and juridical
persons are qualified to invest in the Country in accordance with the
provisions of FIPPA .
27.How investments by Iranian nationals can be covered under FIPPA?
by Iranian nationals can enjoy privileges of FIPPA on the condition
that their capital has been sourced from foreign origin and, further to
that, the investor has submitted documentary evidence proving their
economic and commercial activities outside the Country.
28. Is the validity of the investment license limited time wise?
Upon the notification of investment license, the foreign investor is
required to bring an appropriate portion of his capital into the
Country, within a period determined by the investment board on the basis
of the peculiarities of the investment project; otherwise the
investment license shall be null and void.
29.Is it possible to extend the validity, and how?
foreign investor may apply for the extension of the validity of the
investment license, prior to expiration, by way of submission of
justifiable reasons. The investment board will review the application
and determine a new period for importation of capital, upon the approval
of the application for extension.
30.Are foreign state-owned companies authorized to invest in Iran in accordance with FIPPA?
Foreign state-owned companies may invest in Iran in accordance with FIPPA, and enjoy privileges available under the law.
31.What are the sectors open to foreign investment in Iran under FIPPA?
Sectors open to foreign
investment in Iran are vastly diversified and include all producing
activities for the purpose of development in all areas of industry,
mining, agriculture and services including tourism sector.
32.Does FIPPA consider pure commercial activities as foreign investment?
pure commercial activities are not considered as foreign investment.
However, should they be complementary to the producing activities in
connection with an approved project, they can be taken into account as
33.What type of service activities are eligible to be covered under FIPPA?
Foreign investment in service sector including tourism is eligible to be covered under FIPPA.
34.Is the legal protection under FIPPA extended to foreign investments automatically?
Extension of legal protection to foreign investments is not an automatic phenomenon, but subject to obtaining the required investment license.
35.How and under what condition an investment already carried out but not covered under FIPPA can enjoy FIPPA’s coverage?
already carried out but not covered under FIIPA may, upon application
for obtaining an investment license and subject to creating added value,
enjoy the protections available under FIPPA.
36. Is foreign investment permissible in existing firms? If yes how?
the standpoint of FIPPA, there is no difference between investment in a
greenfield project - a new company - and investment in an existing
economic entity. All prospective foreign investors may at any time
proceed for investment in a new (greenfield) project and/or an existing
economic entity. However, admission of foreign investment in existing
firms is subject to creation of new added value which may result from
increase in investment, upgrading managerial skills, development of
exports, and improvement of technology level in the same entity.
37.How foreign investment can take place in an existing Iranian company?
the standpoint of admission regulations, such investments can be
covered under FIPPA and enjoy its privileges upon completion of
admission procedure and obtaining the investment license, on the
condition that they bring about value addition .
38.In what manners a foreign investor can invest in an existing Iranian company and become a shareholder?
There are two ways:
1. Acquiring shares of a company based on agreed terms and conditions.
of the shares resulting from the capital increase of the company by way
of assigning the first refusal rights of the existing shareholders to
the foreign investor.
39.Under what legal framework BOT contracts are implemented?
the purpose of conducting BOT contracts including BOOT, BOO, etc., the
foreign investor may proceed either by establishing a branch office in
Iran or by way of incorporating an Iranian company (i.e., Project
40.What is meant by proprietary rights?
Proprietary rights are certain rights arising from
having ownership over property and assets and/or rights assigned to the
recipient under a contract. This right has been recognized in FIPPA and
is applicable to a series of rights including right of ownership, right
of operation and profitability, as the case maybe.
41.What is meant by assignment of proprietary rights in BOT contracts?
contracts assignment would cover the ownership right as well as the
rights acquired under the contract which can be assigned to Iranian
party of the contract.
42.Are foreign investment companies authorized to open bank accounts outside Iran?
investment companies are authorized to have bank accounts for the
purpose of depositing their export earning. This would facilitate any
and all payments due to the foreign investors by way of having a quick
and direct access to export earnings from the export of products and
43.Is there any requirement for reintroducing export earnings to the Country for joint venture companies and investee firms?
no commitment for the return of export earnings is required. Export
earnings are at free disposal of the exporter, to be used at his own
44.Can foreign investor insure his investment? What kind of insurance?
Foreign investor may insure his investment against
non-commercial (political) risks with an insurance agency of his
respective country. In the event a payment is made to the investor under
the insurance contract, the insurer in the capacity of the investor’s
subrogee may apply for compensation resulting from the rights the
investor is originally entitle to claim.
authority is competent to settle investment disputes between Iranian
and foreign investors or between a foreign investor and the Government?
general, an investment dispute between Iranian and foreign investors
can be referred to domestic or foreign courts or to an international
arbitration based on the (prior) agreement of the two parties. However,
should the Iranian party to the dispute be a government sector or
company, referral of the dispute to foreign courts or international
arbitration can be done only upon observance of relevant legal
formalities by the Iranian (government) party. To this effect, referral
of disputes to international courts and arbitration based on prior
agreement between the Iranian Government and the investor's respective
government has been accepted in bilateral treaties.
46.How investment disputes may be settled?
Investment disputes may be classified in 3 categories, each of which may be settled in a different manner:
· Disputes between local and foreign investors: This type of dispute may be settled, in the first place, through friendly
negotiations. In the event a settlement is not reached, the dispute may
be referred to domestic courts, foreign courts and/or international or
ad hoc arbitral tribunals. There is no legal impediment for accepting
any of the aforementioned methods as is mutually agreed between the
parties to the disputes.
· Settlement of disputes between an investor and the host government:
As contemplated in Article19 of FIPPA, in the event a dispute between
an investor and the Iranian Government is not settled through
negotiations, the investor may approach through either of the following
a) Referring to domestic courts;
the dispute to the competent arbitration tribunal stipulated in the
Agreement on Reciprocal Promotion and Protection of Investment with the
investors` respective government (i.e. Bilateral Investment Treaties:
· Settlement of disputes between host and home governments: This type of disputes are not usually of the same nature as disputes raised between
investors. Moreover, they are attributed to the commitments and
obligations of the respective governments vis-à-vis in respect of the
implementation and interpretation of the contracts. Settlement of such
disputes is also included in the bilateral and multilateral investment
47.Is ownership of land by foreign nationals permitted in Iran?
Ownership of land to the extent typically required for personal use by
foreign nationals is permissible. Recognition of such ownership is
dependent upon a specific permission from the Ministry of Foreign Affairs.
it permissible to own land by foreign nationals for the purposes other
than personal use (i.e. industrial, agricultural, services, etc.)?
answer is no. On the overall, the ownership of land for the
aforementioned purposes which are considered to be beyond personal use,
is not permitted.
49.Then how the “ownership of land” in foreign investment projects is resolved?
explained in previous answer, ownership of land in the name of foreign
nationals is not permitted. However, in the event the implementation of
foreign investment project results in establishment of an “Iranian
Company”, ownership of land in the name of that company which bears an
Iranian identity, would be permissible.
50.What is meant by the term “ Iranian Company”?
Iranian company is a company established and registered in Iran in accordance with Iranian Commercial Code, regardless of the identity and nationality of its shareholders or partners.
51.Which authority is responsible for admission and protection of foreign investments in the Islamic Republic of Iran?
Organization for Investment Economic and Technical Assistance of Iran
(OIETAI) is the sole government authority which in accordance with FIPPA
is legally empowered to admit and extend legal protections to foreign
capital. The license for foreign investment under FIPPA is also released
52.Is it obligatory to obtain a license for foreign investment?
For those investment to be covered under FIPPA, it is required. Such a license is released when signed by the Minister of Economic Affairs and Finance.
53.Does it mean that each single investment under FIPPA requires a specific license?
Yes. Foreign investment in any single project covered by FIPPA, requires a separate license.
54.What is the procedure for issuance of a foreign investment license? What documents are required for the issuance of such a license?
procedure for issuance of an investment license is short and simple.
Upon submission of the official application for foreign investment
addressed to OIETAI, the application will be put in the agenda of the
Foreign Investment Board for review within 15 working days, and
subsequently a draft license will be communicated to the foreign
investor for confirmation. Should the foreign investor be satisfied with
the draft, upon his confirmation, the final investment license will be
issued and released. The documentation required include the filled-in
application form along with all supplements/annexes, as the case may be,
and other documents indicated in the last page of the application form.
55.Which services could be provided to foreign investors by OIETAI?
The organization can be addressed and consulted for any and all issues
foreign investors come across. To this end, the investor is in touch
with only one single organization through the Center for Foreign
Investment Service, which will result in time and cost saving for them.
56.What is the objective behind establishment of the Center for Foreign Investment Services ?
the purpose of facilitating and accelerating the attraction of foreign
investments into the Country, the Center for Foreign Investment Services
was established at the premises of O.I.E.T.A.I., comprising the
representatives of relevant authorities. This center acts as a focal
point for the referrals by foreign investment applicants to the relevant
57.Does the Organization provide any specific services to foreign investors other than consultancy services?
course yes. The Organization, besides offering the consultancy services
to foreign investors, provides the following services:
1. Provision of information related to all laws and regulations pertaining to foreign investment;
2. Introducing investment opportunities in the Country;
3. Coordinating with different authorities with respect to applications for foreign investment;
4. Finding appropriate partners/parties, being local or foreign;
5. Contributing towards settlement of disputes between investors;
6. Organizing and arranging meetings and/or appointments with relevant authorities.
58.What are the types of foreign capital?
to FIPPA, there are various types of foreign capital which, in addition
to cash capital, includes all types of non-cash capital comprising of
machinery, equipments, parts, raw material, know-how and expertise
services. (For more information please see Article(2) of the
Implementing Regulation of FIPPA).
59.Are all kinds of foreign exchange acceptable as cash capital?
fact, those kinds of foreign exchange which are acceptable to the
Central Bank of the Islamic Republic of Iran, could be registered as
60.How foreign cash capital is imported into the Country?
cash capital shall have to be imported into the Country through banking
system and/or the official channels acceptable to the Central Bank of
the Islamic Republic of Iran. Evidently, the imported foreign exchange
shall be among those currencies acceptable to the said Bank.
61.Is it obligatory to convert the imported foreign exchange into Rials?
portion of imported foreign exchange required to be converted into
Rials at the discretion of the investor, shall be purchased by the
recipient bank at the current rate, and its equivalent in Rials shall be
deposited in the account of the J.V.C. or the investee firm.
it possible for the foreign investor not to convert the imported
foreign exchange into Rials but use it for foreign purchases and orders
related to the investment project?
as the foreign exchange may be converted into Rials, it is also
possible to deposit the same in the foreign exchange account of the
J.V.C. or the investee firm to be used, under the supervision of the
Organization, for payments related to foreign orders and/or other
necessary expenses of the investment project. Depositing foreign
exchange without conversion into Rials protects the foreign investor
against foreign exchange fluctuations, and provides the opportunity to
use it at his own discretion, whenever required.
63.What is the applicable rate for the conversion of the foreign exchange imported into the Country?
rate applicable for the conversion of cash funds imported by the
foreign investors is the prevailing rate of the Country's official
monetary network or the free (market) rate as acknowledged by the
Central Bank of Iran.
64.Is it necessary to valuate the foreign imported capital before its registration?
Valuation of capital, whether in cash or kind, is necessary. In both
cases, the bank's conversion rate on the date of importation shall be
the basis for valuation.
65.What formalities are required for importation of machinery, equipments, parts and raw materials (i.e., non-cash capital)?
principal, importation of non-cash capital items related to foreign
investment projects are not subject to the formalities of importation of
commercial commodities. Non cash items of any type can be imported into
the Country upon recommendation by OIETAI based on the approved list,
and the statistical (order) registration with the Ministry of Commerce.
it mean that importation of non-cash capital is free from local content
requirements, allocation of foreign exchange and opening letter of
is true. It is not necessary to comply with the local content
requirement, allocation of foreign exchange and opening letter of
67.Is there any charge applicable to importation of foreign non-cash (in-kind) capital?
for machinery applicable in manufacturing and mining projects, foreign
non-cash capital, the same as other goods, is subject to payment of
68.What criteria are to be considered for importation of know-how?
know-how and specialized services are considered as acceptable types of
foreign capital, so should be valuated and registered then as foreign
capital. However, the opinion of the relevant Ministry shall be sought
before the importation of technical know-how.
69.Is it permissible to pay license fee or royalty?
In cases where technical know-how is not considered as part of foreign
capital, the relevant sums and/or approved royalty are payable to
70.What criterion is set for payment of license fee or royalty to foreign parties?
any and all manners of payment, the value of imported raw material
shall be the basis for calculation of royalty and or license fee. This
net amount, after deduction of imported materials value, shall be paid
to whom granted the license. In other words, according to prevailing
policy, payment of royalty and license fee is calculated on the basis of
domestic added value.
71.Is it possible to register patent right and trade mark in Iran?
to Patent and Trade Marks Registration Law, industrial and intellectual
property rights such as patent rights, trade marks and names, etc. can
be registered and protected in Iran.
72.Is it necessary to provide the list of non-cash capital before importation of the same?
Prior to importation of non cash capital, the foreign investor is
required to submit to the OIETAI the detailed list of the same
comprising technical specifications, manufacturer(s)’ name, year of
manufacture and price, along with relevant catalogues. Upon confirmation
of the list, the said non-cash capital can be imported into the Country
in one or more shipments at the discretion of the investor without any
other specific formalities.
73.Is a prior review of technical know-how necessary?
Agreements related to specialized services, to be imported in the from
of capital or to be paid for in other ways, shall be submitted to OIETAI
along with the foreign investment application. The Organization will
then coordinate and consult with the relevant Ministry on the necessity
of the know-how as well as its value.
Foreign Exchange Transfers
74.What is meant by the term "foreign exchange transfers"?
term “foreign exchange transfers” refers to transfer of all sums
resulting from the performance of a foreign investment and/or other sums
to be transferred in the from of foreign exchange. Such transfers are
categorized in two:
Capital transferssuch as dividends, principal capital, capital gain,
sums pertaining to compensation for confiscation or expropriation of
Other foreign exchange transfers including those resulted from patent,
technical know-how as well as engineering and technical assistance
agreements, trade marks and name, and similar agreements.
75.Is there any restriction with regard to the volume of transferable funds?
No, there is no legal restriction with respect to the volume of transferable funds, neither annually nor totally.
76.How the foreign exchange required for such transfers is procured?
exchange required for transfers related to foreign investments shall be
procured and made available by way of purchasing foreign exchange from
the banking system or out of foreign exchange earnings resulted from the
export of products and/or services of the foreign investment project,
as the case may be. However, the mechanism for provision of foreign
exchange transfers is specified in the investment license.
77.Which formalities are required for transfers related to a foreign investment?
any and all foreign exchange transfers shall be made upon formal
application of the foreign investor or the joint venture company or
investee firm on behalf of the foreign investor. All transfers, after
deduction of legal dues, are payable to the foreign investor's account.
case specific regulations or a government decision prohibits the export
of products of the investment project, how the foreign exchange related
to transfer of capital and profit is procured?
exceptional cases where export is not so permitted, the foreign
investor is authorized to sell his products in domestic market and to
purchase, from the banking system, the required foreign exchange for
such transfer(s). Obviously, the foreign investor may export other
authorized goods instead, should he wish to do so.
Tax & Customs Issues
79.What is the rate of income tax for juridical persons in Iran?
The rate of income tax for juridical persons in Iran is 25% of the taxable income (Article 105, Iranian Tax Code).
80.Is an equal rate of tax applicable to all types of company including Iranian as well as foreign companies?
rate of tax for all types of company, whether Iranian or foreign
(branches and representative offices), is 25% that is equally applied
(Article 105, Iranian Tax Code).
branches and representative offices of foreign companies which are
engaged only in marketing and information collection for their parent
companies abroad, subject to payment of income tax too?
branches and representative offices of foreign companies and banks
which are engaged in gathering information or marketing in Iran for
their parent companies, without any transaction right, and receive
remuneration from them against their expenditures, shall not be subject
to taxation in respect of such remuneration ( Note 2, Article 107,
Iranian Tax Code).
82.How is the income tax of foreign airlines and shipping companies calculated in Iran?
tax of foreign airlines and shipping companies for passenger freight
cost and the like earned in Iran, is a fixed rate of 5% of such earnings
whether collected in Iran, at the destination, or on the way.
the income derived from transfer of technology agreements such as
technical know-how, engineering and technical services and also payments
of license fee and royalty be subject to taxation?
case of granting of licenses and other rights in such agreements, which
is considered as the income of foreign juridical persons, taxable
income consist of 20% to 40% of all payments received by them during a
tax year and shall be taxed at a rate of 25% (Note 2, Article 105;
Para“b”, Article 107, Iranian Tax Code).
84.How the contracting business agreements are taxed?
case of contracting businesses of foreign entities in Iran with regard
to all types of work in fields of construction, installations, and
technical installation including procurement and setting up of the same
or transportation, preparation of design for buildings and installation,
topography, supervision and technical calculations, provision of
training and technical assistance, transfer of technology and other
services, the taxable income will be 12% of total annual receipts.
(Para“a”, Article 107, Iranian Tax Code). In the event the relevant
employer of the contract is a ministry, a government institution, a
state company or a municipality, then that part of the contract price
which is used for purchase of supplies and equipments from domestic or
foreign sources shall be exempt from taxation, provided that the amounts
relevant to those supplies and equipments are included, apart from
other items, in the contract or in its further amendments or
supplements. (Note 2, Article 107, Iranian Tax Code). However, in
accordance with Note 5 of Article 107 of Iranian Tax Code, the taxable
income of the activities subject matter of Para“a” of Article 107
thereof, the contracts which will be concluded from the beginning of the
year 2003 onwards, shall be audited according to the provisions of
Article 106, by way examination of statutory books.
85.How to compute the taxable income in Build, Operate and Transfer (B.O.T) projects, and what is the rate?
taxable income of foreign investors in Build, Operate and Transfer
(B.O.T) contracts in Iran, shall be calculated at a fixed rate of 25%
after deduction of acceptable expenditures, by way of examination of the
statutory books (Article 105 and 106, Iranian Tax Code).
86.What is the manner of computation of salary income tax of foreignemployees?
tax rate of salary income of employees whether Iranian or foreigner,
after deduction of annual exemptions provided in Article 84of Iranian
Tax Code and up to IRR42,000,000 of the annual salary income,
shall be subject to a rate of 10%. The rest shall be subject to a rate
ranging from 20% to 35%, in accordance with Article 131of the said Code.
87.What is the rate of tax applicable to transfer of shares of companies listed in the Stock Exchange?
transfer of companies’ shares and priority right of shares, shall be
taxed at a flat rate of 0.5% of the sale value of such shares and
priority rights of shares (Note 1, Article 143, Iranian Tax Code).
88.What is the rate of tax applicable to transfer of shares of other companies?
transfer of stocks, partnership shares, priority right of stocks and
partnership shares shall be taxed at a flat rate of 4% of face value of
the shares and/or partnership shares (Note 2, Article 143, Iranian Tax
89.What customs duties are there?
aggregate of custom tax and duties, order registration fee and other
levies on imported goods is called as customs duties which is charged at
a rate of 4% of the customs value of the goods. This sum plus the
commercial benefit to be determined by the Council of Ministers are
referred to as import duties.
Tax and Customs Facilities and Exemptions
A. Tax facilities / exemptions
90.What is meant by tax exemption, and how they are realized?
exemption means exemption from payment of tax on income derived from
industrial, mining and producing activities. Companies in Iran are
required to withhold the tax on dividend, which is considered as natural
entities’ tax, and pay it to the relevant tax office (Article 132,
Iranian Tax Code).
91.What are the tax exemptions, and in what manner they can be applied?
· Tax exemption in industry, mining and producing sectors:
of the income derived from producing and mining activities of
cooperative and private sectors are tax exempted for a term of 4 years
as from the date of exploitation or extraction (operation) (Article 132,
Iranian Tax Code).
Any part of the declared profit of private and cooperative companies
that is used in the same year for development, reconstruction,
renovation or completion of existing industrial or mining units and/or
for setting up of new industrial or mining units, is exempted from 50%
of the applicable tax (Article 138, Iranian Tax Code).
· Tax exemption in agricultural sector:
income derived from all activities in the field of agricultural, animal
rearing, stock breeding, fish farming, bee-keeping, poultry, husbandry,
hunting and fishing, seri-culture, revival of pastures and forests,
horticulture of palm trees, is tax exempted without time limitation
(Article 81, Iranian Tax Code).
· Tax exemption in tourism sector:
enterprises for internal and international tourism obtained
exploitation permit from the Ministry of Culture and Islamic Guidance
shall enjoy an annual exemption with regard to 50% of their applicable
taxes (Note 3, Article 132, Iranian Tax Code).
92. Is there any requirement for enjoying tax exemptions?
industrial and mining enterprises shall enjoy tax exemptions if located
out of a 120-kilometer radius from the center of Tehran or out of a
50-kilometer radius from the center of Isfahan, and also out of a
30-kilometers radius from the administrative centers of provinces and
cities with a population of more than 300,000. Industrial Estates
established within the same 30-kilometers radius from the later
province centers and cities are exception to this rule (Note 2, Article
132, Iranian Tax Code).
93.Shall the establishment of manufacturing units in less developed areas result in increase of the rate and period of tax exemption?
Yes, 100% of taxable income of all units located in less developed areas shall be tax exempted for a period of 10 years.
94.In respect of tax exemptions, is there any distinction between the units located in Special Economic Zones and those of the mainland?
In respect of tax exemptions, there is no differences between the
Special Economic Zones and the mainland. In fact, tax treatment is the
same in all parts of the Country.
95.Shall export income enjoy tax exemption?
100% of the income derived from exportation of agricultural and
industrial finished goods as well as their conversional and
complementary industries, also 50% of the income earned from exportation
of other non-oil goods, are tax exempted (Article 141, Iranian Tax
96.What is the tax exemption applicable to transit goods?
of the income derived from exportation of different goods that have
been, or will be, imported to Iran on transit, and are exported without
making any changes in the substance thereof, or doing any works on them,
are tax exempted (Article 141, Iranian Tax Code).
97.Do the companies quoted in the Stock Exchange enjoy tax exemptions other than those applicable to industrial, mining, agricultural and tourism units?
the companies listed in the Stock Exchange whose transition of shares
is done by stock brokers are tax exempted equivalent to 10% of their
payable tax (Article 143, Iranian Tax Code).
B. Customs facilities and exemptions:
98.Is customs exemption applicable to the raw materials imported on transit to be exported then in the form of manufactured goods?
the raw materials imported on transit for producing purposes are
exempted from customs duties. Any sum paid at the time of importation
for any reason, shall be refunded once the said goods are exported.
99.At which price are the imported second hand machinery and equipments evaluated in customs house?
the imported goods are evaluated at new price in customs; only the
second hand machinery and equipments which are imported to the Country
for production line under FIPPA, are to be evaluated at second hand
Other Facilities and Exemptions
100.Which facilities are offered by OIETAI for entry visa of foreign investors and experts?
facilitates visa formalities of foreign investors, including short and
long term as well as single and multi entry visas (i.e., 3 year multi
entry visa with a 3 months residence permit that is renewable for 1
year), by introducing foreign investors, directors, foreign experts and
their immediate family members to the Ministry of Foreign Affairs.
Foreign investors or joint venture companies can apply for visa by
sending the relevant specification form of applicants along with the
reasons for their presence to OIETAI. It is worth mentioning that OIETAI
is not the only reference for foreign investors to obtain visa, but all
foreigners, according to the prevailing regulations, can refer to the
Missions of the Islamic republic of Iran abroad, and apply for visa.
101.Are there any facilities available for the issuance of residence and work permits?
If necessary, OIETAI will provide certain facilities and assistance to foreign investors in this regard.
102.With which countries has Iran signed the Agreement on the Avoidance of Double Taxation? And are they enforceable at present?
the Revolution, Iran had signed the Agreement on the Avoidance of
Double Taxation with two countries, France and Germany, in 1964. After
the Revolution, 19 agreements has been signed worldwide.
103.With which countries has Iran signed the Agreement on Reciprocal Promotion and Protection of Investment?
Agreement on Reciprocal Promotion and Protection of Investment has been
signed with 40 countries, the final ratification procedure for a number
of them is still on the way.
104.Has Iran concluded any multilateral investment agreement?
the Government of the Islamic Republic of Iran has joined the Agreement
on Promotion, Guarantee and Protection of Investment among OIC member
countries as well as the agreement among ECO member countries.
105.Has Iran joined the Multilateral Investment Guarantee Agency (MIGA)?
the Islamic Republic of Iran is a member of MIGA at present, to this
end foreign investors can enjoy the guarantee mechanisms of this agency
as well. Although FIPPA along with bilateral and multilateral investment
agreements signed by Iran, provides sufficient protections against
non-commercial risks, membership to MIGA gives a double guarantee.
106.Which laws and regulations are necessary for potential foreign investors?
addition to FIPPA and its Implementing Regulations which protect rights
of foreign investors, OIETAI recommends the investors to acquire
knowledge of the following regulations:
· Commercial Code (sections related to joint stock companies);
· Export and Import Regulations;
· Iranian Tax Code;
· Customs Law;
· Labour Law (to find out how to employ foreign services);
· Law for Registration of Patent and Trade Marks (to know about industrial and intellectual property rights).