Invest In Iran

Why Iran

Trade-Industrial Free Zones

Incentives and advantages for investment in Trade-Industrial Free Zones
1-Tax exemption for 20 years from the date of operation for all economic activities
2-Foreign investment and nearly a hundred percent of the amount invested.
3- Freedom of entry and exit of capital and profits
4- Protection and guarantees for foreign investments.
5- Abolition of entry visas and easily issue of residence permits for foreigners.
6-Facilitated regulation on labor relations, employment and social security.
7- Transfer of part manufactured goods to the mainland without paying customs duties.
8- Elimination of pay customs duties on imports from outside to the region and vice versa.
9- Employing trained and skilled manpower in all different skill levels and professions.
10- Utilization of raw materials, oil and gas as feedstock and fuel for all industrial activities.

The list of the Trade-Industrial Free Zones of the Islamic Republic of Iran are as follows:
1-Qeshm Trade-Industrial Free Zone
2-Chabahar Trade-Industrial Free Zone
3-Aras Trade-Industrial Free Zone
4-Anzali Trade-Industrial Free Zone
5-Arvand Trade-Industrial Free Zone
6-Kish Trade-Industrial Free Zone
7-Maku Trade-Industrial Free Zone

For more information the visitors may go to the website:  http://www.freezones.ir

Incentives for investment in Special Economic Zones

• Import of goods from the above mentioned zones for domestic consumption would be subordinate to export and import regulations, and export of goods from these areas will be carried out without  any formalities.
• Import of goods from abroad or free trade zones or industrial area-would be carried out with minimal customs formalities and good internal transit cases would be performed in accordance with the relevant regulations.
• Log entry of merchandise subject to this article will be done without any customs formalities.
• Goods imported from outside or industrial areas or other commercial zones can be exported without any formalities of the country.
• Management of the region is allowed to assign the region to qualified natural or legal persons after classification and valuation.
• Owners of goods imported to the region can send all or part of their goods for temporary entry in to the country after doing customs clearance regulations.
• If the processing of imported goods is to some extent that changes the tariff of goods, the rate commercial benefit of the goods would be calculated equal the commercial benefit of raw materials and spare parts of the country.
• Importers of goods are allowed to hand over to others part or all of their products against warehouse receipt to be issued by the district administration, in this case the breakdown warehouse receipt holder would be the owner of the goods.
• The management of each district is authorized to issue certificated of origin for goods per applicant out of the area with the approval of the customs.
• All the goods imported to the region for the required production or services are exempted from the general import-export laws. Imports of goods to other parts of the country will be subordinated to export and import regulations.
• Percentage of goods produced in the zone, based on paragraph (d) of clause (25) of the law of the second economic, social and cultural development plan of the Islamic republic of Iran imported to the country, the proportion of total value added and domestic parts and materials used in the total price of the commodity production is allowed without any limitation and in addition to not having to order and open letter of credit.
• Goods manufactured in special economic zones, as well as raw materials and imported CKD parts into the country is not subject to price regulation due to unutilized resources and allocated currency

The list of the special economic zones of the Islamic Republic of Iran are as follows:
1-Salafchegan special economic zone
2-Shiraz special economic zone
3-Assaluye special economic zone
4-Arge Jadid special economic zone
5-Payam Airport  special economic zone
6-Persian Gulf special economic zone
7-Lorestan special economic zone
8-Amirabad port special economic zone
9-Bushehr Port special economic zone
10-Shahid Rajaee Port special economic zone
11-Sarakhs special economic zone
12-Sirjan special economic zone
13-Yazd special economic zone
14-Bushehr special economic zone

For more information the visitors may go to the website:  www.freezones.ir

Supportive Goverment Policies

 The Law on foreign investment in Iran under the name of “Foreign Investment Promotion and Protection Act” (FIPPA) was ratified by the parliament in 2002.Some specific enhancements introduced by FIPPA for foreign investment in Iran can be outlined as follows:

1-Broader fields for involvement by foreign investors including in major infrastructure,
2-Broader definition given to foreign investment, covering all types of investments from FDI to different types of project financing methods including :Civil Participation, Buy –Back arrangements, Counter trade and various BOT schemes;
3-Streamlined and fast track investment licensing application and approval process;
4-Creation of a one stop shop called the “Center for foreign investment Services” at the organization for investment for focused and efficient support for foreign investment undertaking in Iran,
5-More flexibility and facilitated regulatory practices for the access of foreign investors to foreign exchange for capital transfer purpose

 Donwnload FIPPA Book

Economic Advantages

• The 18h largest economy in the world by purchasing power parity (ppp)

• Consumption and the government plans billions of dollars worth of further investment to increase this share.
• The diversified economy and broad industrial base with over 40 industries directly involved in the Tehran stock Exchange is the industrial base in the MENA region.
• Resource-rich economy
• Labor-rich economy
• Young and educated population
• Large domestic market
• The Middle East market is a prime market opportunity for Iran’s non-oil exports
• An increasingly sophisticated infrastructure and human capital base providing the foundation for an emerging knowledge –based economy.

A Review of the Iranian Tax System
1. Tax Bases and Rates

The Iranian tax system is divided into two general categories of direct and indirect taxes. The share of direct taxes from the total tax revenues is almost 68% currently. There are two major types of direct taxes including income taxes and property taxes.  Each category of direct taxes, in turn, is divided into sub-parts. Indirect taxes include taxes on imports and Value Added Tax (VAT). Taxes on imports are currently collected by the Iranian Customs and are not within the jurisdiction of INTA. Table 1 briefly shows various types of taxes in the Iranian taxation system

                                                                             Table (1):  The Iranian Tax System

 

Tax Category

Tax Type 

Tax Base

Act/

Chapter/Article

Taxable Income

Taxable Persons

Tax Rates

Direct Taxes

Income Taxes

Real Estate Income Tax

DTA – C/I/52-58

Income of persons derived from transfer of rights in immovable properties situated in Iran, less the exemptions: total rent, less a deduction of 25% for expenses, depreciations, and commitments of the owner in regard to the property.

Owners who have rented their immoveable properties to others

15%-35%

Employment Income Tax

DTA -C/III/82-92

Salaries, wages or any other remuneration received by individuals in respect of their employment services. Payments for works conducted out of Iran, shall be subject to the tax, provided that the payer is an Iranian resident.  

Individuals

10%  for public sector employees and the others 10-35%

Individual Business Income Tax

DTA -C/IV/ 93-104

Unincorporated business activities (aggregate sale of goods and services) less the exemptions provided in the DTA

Individuals

15-35%

Corporate Income Tax

DTA -C/V/105-118

Aggregate profits of companies, and the profits from the profit-making activities of other legal persons, derived from sources in Iran or abroad, less the losses from nonexempt sources and minus the provisioned exemptions

Legal Persons

25%

Tax on Incidental Income

DTA -C/VI/11119-131

Income earned ex gratia or through favoritism or as an award.

Real or legal person

15-35%

Property Taxes

Tax on Transfer of Real Properties

DTA -C/I/59-80

Final transfer of real estates & goodwill shall be subject to taxation at the date of transfer.   

Real or legal person

5% & 2%

Tax on Transfer of Shares

DTA -D/I/143

Nominal value of transfer of shares

Joint Stock Companies and other Companies

0.5% & 4%

Inheritance Tax

DTA -B/IV/17-43

Any estate left from the deceased individual. 

Real person

5-65%

Stamp Duties

DTA -B/5/44-51

Each sheet of check printed by banks (Rls. 200), bill of exchange, promissory notes (0.3%), and other documents and negotiable papers with specified amounts.  

 

As provisioned in Articles 44-51

Indirect Taxes

VAT

Value Added

VATA

Value added resulting from the sale of all goods and services and their imports, except 17 items listed in Article 12 of the VAT Act (VATA) as the exempted ones

Real and Legal Persons

6% currently, to be annually increased for 1% up to 8% by the end of the 5thDevelopment Plan

   

Taxes on Imports

Currently collectible by the Iranian Customs Organization.  

 

Some of the most important tax rates are as follows:

                                                                     Table (2):  Most Important Tax  Rates

Tax bases

 

Tax rates

Company Income Tax

 

25%

Real Persons Income Tax

Rates of the Article 131

Up to IRR 30,000,000

15%

30,000,000 to 100,000,000

20%

100,000,000 to 250,000,000

25%

250,000,000 to 1,000,000,000

30%

Over 1,000,000,000

35%

Public Sector Salaries Income Tax

 

10% on annual income

Private Sector Salaries Income Tax

Up to IRR 42,000,000

10% on annual income

Over IRR 42,000,000

Rates of Article 131

Rental Income Tax

 

Rates of Article 131

Transfer Tax

Goodwill

2%

Real properties

5%

Shares

0.5% (listed companies’ shares)

4% (other companies)

Value Added Tax

 

6%

 

2. Taxation from foreign investors in Iran
Direct Taxes
All non-Iranian real or legal entities for the income earned in Iran and also for the income gained through granting of license or other rights, technical and educational assistance or movie contracts in the territory of Iran are subject to taxation. Depending on the type of activity of the foreign investor, various taxes and exemptions are applicable, including profit tax, income tax, property tax, etc.
Foreign investors in Iran enjoy the same supports and privileges that are offered to the Iranian investors. This means both Iranian and foreign investors pay the same amount of taxes. Tax exemptions and discounts are also equally granted to domestic and foreign investors.
Since foreign investments are usually active as legal entities, we will hereunder focus on rules and regulations for Corporate Income Tax.

Corporate Income Tax
a) General Issues
Foreign legal entities residing abroad shall be taxed at the flat rate of 25% in respect of the aggregate taxable income derived from the operation of their investment in Iran or from the activities performed by them, directly or through the agencies in Iran.
The legal entities shall not be subject to any other taxes on the dividends or partnership profits they may receive from the capital recipient companies.
Legal entities are obligated to, even within the exemption period, submit declaration and profit and loss balance sheets, provided from their official statutory books, maximum four months after the tax year (March 21 each year until March 20 next year)  along with the list of partners and shareholders, their shares and addresses to the tax department within the area of the activity of the legal entity. If these legal entities do not submit the documents within the stipulated time span, the tax exemption will be null and void

 

b) Exemptions

The Direct Taxation Law and other pertinent legislations have considered certain exemptions for the legal entities as table (3):

 

                                                                                                 Table (3):  Highlights of Tax Exemptions

Activity

Level  of  Tax Exemption

Duration of    Exemption

Legal Basis

(Act- Article)

Incentive Type

Agriculture

100%

Perpetual

IDTA- Article 81

Permanent Exemption

Industry and Mining

80%

4 Years

IDTA- Article 132

Tax Holiday

Industry and  Mining  in Less-Developed  Areas

100%

20 Years

IDTA- Article 132; Paragraph B of Article 159 of the 5thYear Development Plan

Tax Holiday

Tourism

50%

Perpetual

IDTA- Article 132- Note 3

Tax Credit

Export of Services & Non-oil Goods

100%

During 5th Development Plan

IDTA- Article 141

Tax Holiday

Handicrafts

100%

Perpetual

IDTA- Article 142

Permanent Exemption

Educational & Sport Services

100%

Perpetual

IDTA- Article 134

Permanent Exemption

Cultural Activities

100%

Perpetual

IDTA- Article 139- Paragraph L

Permanent Exemption

Salary in Less-Developed  Areas

50%

Perpetual

IDTA- Article 92

Tax Credit

All Economic Activities in Free Zones

100%

20 Years

Article 13- the Free Zones Act

Tax Holiday

Profits of Private and Cooperative Companies used for development, reconstruction and renovation of  existing industrial and mining units

50%

Perpetual

Paragraph A of Article 159 of the 5th Development Plan, 15% was added to the exemption as of 2010

Tax Credit

 

 

c) Deductions
Expenses which are deductible in the assessment of taxable income are listed in the Direct Taxes Act. These expenditures must be supported to a reasonable degree by documentary evidence and are exclusively connected with the earning of income during the year in question.
The categories of deductible expenditure are as follows:
 Table (4):  Deductible Expenses

The cost of goods and raw materials Expenses incurred in the maintenance and upkeep of the premises owned by the enterprise
Personnel costs Transportation expenses
Rental of enterprise’s premises in case of being rented Expenses related to transportation and entertainment for employees, and warehousing costs
Rent of machinery and equipment Fees paid in proportion to the services rendered
Costs of fuel, electricity, lighting, water and communication Interest and fees paid for the carrying out of the enterprise operation
Business insurance Cost of repair and maintenance of machineries and business equipments
Royalties, duties, rights and taxes paid Abortive exploration expenditures for deemed mines
Research, development and training expenditure Membership and subscription fees connected with the business operations
Compensation paid for damages resulted from the business operations Bad debts, if proved
Cultural, sports and welfare expenditures paid to the Ministry of Labour and Social Affairs in respect of workers Currency exchange losses computed in accordance with accepted accountancy practice
Reserves against doubtful claims Normal wastage of production
Losses of legal persons The reserve related to acceptable expenses of the assessment period
Minor expenses incurred in connection with the rented premises of the enterprise Expenses for purchasing of books and other cultural and art goods for employees and their dependents

 

Other expenses that are not referred to in the above Table, but are related to the earning of the enterprise’s income, shall be accepted as deductible expenses on basis of the proposal of the INTA and approval of Ministry of Economic Affairs and Finance.

d) Losses
Losses sustained by all taxpayers engaged in trading and other activities are accepted by the tax authorities; will be carried forward and written off against future profits for a period of three years.

e) Withholding taxes
● Five percent of every contract payment may be withheld by the payer and accounted for to tax authorities. Such a withheld tax constitutes an advance payment of the final tax due.
● The payers of salaries are obliged, when paying or allocating the same, to compete and withhold therefrom the applicable taxes and to remit, within thirty days, the deducted amounts together with a list containing the names and addresses of recipients and the amount of the payments, to the local tax assessment office.

f) Depreciation
Depreciation of assets is deductible in the assessment of taxable income. Depreciation rates range from 5% to 100% and the period over which assets may be depreciated ranges from 2 to 15 years.

3Value Added Tax (VAT) in Iran
The VAT in Iran is levied on the sale of all goods and services and their imports, except 17 items listed in Article 12 of the VAT Act (VATA) as the exempted ones. The VATA, however, does not include the export of goods and services through official Customs gates. Therefore, the taxes paid for the export of goods and services will be refundable by submitting the Customs clearance sheets and valid documents.
Currently, the VAT rate stands at 6% (VAT rate for two special goods of cigarettes and jet fuel is relatively higher). To reduce the country’s dependency on oil revenue, the Law on the Fifth Five-Year Development Plan provisioned an annual one-percent increase in the VAT rate to put it at 8% at the end of the Plan, i.e. 2016.
Economic activities in free trade and industrial zones are exempted from the VAT.

4. Agreements for the Avoidance of Double Taxation
To facilitate cooperation between Iranian and foreign residents and to promote trade and economic exchanges with foreign countries, the Government of the Islamic Republic of Iran has applicable mutual Agreements for the Avoidance of Double Taxation:

 Table (5):  List of Iran’s Applicable Agreements for the Avoidance of Double Taxation  

France

Turkmenistan

Algeria  

Azerbaijan Republic

Kyrgyzstan

Turkey

Indonesia

South Africa

Kazakhstan

Tunisia

Ukraine

Germany

Qatar

China

Bahrain

Austria

Georgia

Russia

Belorussia

Jordan

Lebanon

Sri Lanka

Bulgaria

Armenia

Poland

Switzerland

Venezuela

Uzbekistan

Kuwait

Syria

Pakistan

Spain

Serbia

Sudan

Romania

Tajikistan

Malaysia

Croatia

South Korea

Oman

 Strategic Position

 Islamic Republic of Iran with an area of 1،648،196 sq.km and nearly 76.03 million populations has been located in South- West Asia. The country neighbors with Turkey and Iraq in west, Afghanistan and Pakistan in East, Armenia, Azerbaijan, Russia, Kazakhstan and Turkmenistan in North and Kuwait, Saudi Arabia, Qatar, Bahrain, United Arab Emirates and Oman in South through Persian Gulf and Oman Sea. Therefore, Islamic Republic of Iran, as a strategic country, has got common borders with states of ESCWA in South and West, SAARC in East and CIS and Caucasus as well as UNECE in North. The country is regarded as one of the richest countries in hydrocarbure reserves, so that it ranks the second for gas reserve and its export as well as the second for exporting crude oil in the world. According to the reports of the international institutions like the World Bank, Islamic Republic of Iran, with having more than 700 billion dollars GDP, scores the eighteenth out of twentieth outstanding economies, eighteenth and sixteenth for population and area respectively.

Source: http://www.investiniran.ir

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