Foreign Investment in Iran

Foreign Investment in Iran

The potential in Iran's economy and opportunities created by the legal framework with incentive laws, have made Iran an attractive option to invest in. In the following, you will find the main practical and informative points on the economic scope of Iran, governing laws, taxation system and, intellectual property protection.

For an ultimate and more detailed guide, you can look into the comprehensive pdf file here as it contains all necessary information regarding foreign investment in Iran.

  1. Why Iran?

Iran’s economy has incredible potential for progress due to its young and highly educated population, geopolitical location, and numerous vast natural resources. Major sectors for foreign investments in Iran include the oil and gas industries, vehicle manufacture, copper mining, petrochemicals, foods, and pharmaceuticals.

  1. Regulatory Framework and Governing Laws

Foreign investment in Iran is governed by Foreign Investment Promotion and Protection Act (“FIPPA”) 2002.

The main protections and advantages offered to foreign investors under FIPPA are:

  • 100% ownership of shares by foreign investors
  • Equal treatment of foreign investors as accorded to domestic investors
  • Guarantee against losses resulting from prohibition or interruption of the financial agreements
  • Repatriation of capital
  • Guaranteed purchase of goods and services supplied at subsidized
  • Issuance of three-year residence permit for all investors, directors, experts, and their immediate family members

Moreover, based on the numerous ilateral investment treaties which Iran has ratified, typical substantive and procedural protections have been offered, such as:

  • Fair and Equitable Treatment (FET)
  • Most Favored Nation Treatment (MFN)

Investment through the FIPPA mechanism grants foreign investors some considerable protections and under FIPPA investments there is no need for a contractual agreement for investing in private sectors. A FIPPA license could be acquired in no more than 45 days by providing the relevant information to the Organization for Investment and Economic and Technical Assistance of Iran (“OIETAI”) as the organization that is in charge of the issuance of the FIPPA license.

To carry out their business in Iran, foreign investors may choose to either buy shares or stocks in an existing company or set up a new company in the form of a branch or a subsidiary. Notably, a company in Iran can be fully owned by foreign shareholders. Investment is allowed in all areas open to the Iranian private sector without any limitation on the percentage of shareholding by foreign investors.

According to the Commercial Code of Iran, there exist 8 different types of companies that two of which are the most commonly used forms among foreign investors.  Joint Stock Company (“JSC”) and Limited Liability Company (“LLC”) due to the limited liability of shareholders of both company types, and more comprehensive and straightforward rules.

Additionally, regarding the dispute resolution system, it is noteworthy that there is access to international arbitration, typically under UNCITRAL arbitration rules, and since Iran is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, arbitral awards issued outside of Iran territory are enforceable in Iran.  Arbitration Center of Iran Chamber of Commerce, Mining and Industry, and Tehran Regional Arbitration Center are two major Arbitration Centers located in Iran.

  1. Taxation System

In Iran, there is a straightforward tax system with a flat rate of 25% on taxable incomes. For the non-resident companies and registered branches, the taxable income is their income derived from Iran. Furthermore, there is a remarkable point in Iran's taxation system is that there is no discrimination between the taxation of domestic and foreign investors or the granting of tax exemptions and discounts under the Direct Taxation Law (1987).

In addition, by making the right choice in terms of the location and the type of business, foreign investors may benefit from a variety of tax incentives and exemptions, some capable of lasting for even decades. For instance, investing in free trade zones consists of some notable advantages including but not limited to:

  • 20-year tax exemption for all economic activities
  • Custom exemptions for raw materials and industrial machinery
  • Simplified procedure for re-export and transit of goods

You can find out about all advantages in the pdf file below.  

  1. Intellectual Property Protection

Since 2001, Iran has been a member of the World Intellectual Property Organization (“WIPO”) and has ratified multiple WIPO intellectual property treaties such as the Convention for the Protection of Industrial Property (“Paris Convention”) and the Patent Cooperation Treaty as well. Regarding Copyright and related rights, there exist some national relevant laws including The Law for Protection of Authors, Composers and Artists Rights (1970).

  1. Conclusion

Although foreign investment is potentially beneficial in Iran due to the matters stated above, and while there is no obligation in Iran to have a lawyer for investment purposes, having a commercial expertise lawyer with a deep knowledge of Iran's legal framework and relative experience in representing foreign investors could help you to easily overcome subtle complexities and to maximize the benefits of your investments and minimize the liabilities. The legal team of Karimi & Associates law firm could assist you in designing strategies to have a safe and legitimate business in Iran.

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