Iran: What is Waiting for the Foreign Traders/Investors in Iran?*

Last Updated: 1 April 2016

By Serap Zuvin Law Offices

The commercial relationship among the western countries and Iran declined especially following the USA and the United Nations ("UN") imposing the embargo in 2012 because of Iran's nuclear program. Iran had remained introvert and quite radical in its international politics for a long time. As result of intensive efforts of Rouhani regime, who replaced Mahmoud Ahmedinejad as President on August 3, 2013, the Joint Comprehensive Plan of Action ("JCPOA") has emerged, and finally became effective on January 16, 2016. With this significant progress, Iran is in the phase of taking her place in the global economy once again and becoming the world's most exciting emerging market. In order to catch up with such development in the region, the Founding Partner of SZLO visited Iran at the end of February and met a number of legal/business people. This article aims to provide you with brief information about investing in Iran.

Eyes are on the Upcoming Elections!

At the last elections on February 26, 2016, President Rouhani and the reformists swept all 30 parliamentary seats in the capital Tehran, and increased their number of seats at the parliament and in the Assembly of Experts, which is a clerical body that is constitutionally charged to pick Iran's next supreme leader. While the reformists won 83 seats in the first round versus the conservatives' 64; it is the second round, which will be held on 29 April 2016, which will determine on the final balance of power.[1] The outcome of the general elections in the USA, in November this year, is likely to have an essential effect on the future of Iran too. Therefore the investment climate of Iran is quite dependent on the political decisions taken about this country.

Certain Iranian Law Tips for the Foreign Traders/Investors...

  • Iran is a party to New York Convention[2] ("Convention"). Therefore for dispute resolutions, in addition to the Convention, it is recommended to use Iranian arbitration such as Tehran Regional Arbitration Centre (TRAC) and Arbitration Center of Iran Chamber (ACIC), which are applying UNCITRAL Rules. There has not been any history of encountered special difficulties in enforcing the enforcement of Convention awards under the Iranian Code of Civil Practice.
  • With the JCPOA, transfer of funds among EU persons, entities or bodies, including EU financial and credit institutions, and non-listed Iranian persons, entities or bodies, including Iranian financial and credit institutions, are permitted. The authorization or notification requirements for fund transfers are no longer applicable. On the other hand, there are still certain authorization procedures to be accomplished in case of transfer of the profits of a foreign investment company in Iran under the Foreign Investment Promotion and Protection Act ("Foreign Investment Act")[3].
  • Investing via Foreign Investment Act is recommended to the foreign investors. Foreign investors in Iran are subject to the same amount of taxes with the Iranians and tax exemption of 80% by the Direct Taxation Law is ensured for 4 years in respect to all the industrial investments. Foreign legal entities residing abroad are subject to taxes 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 commercial activities performed by them, directly or through their agencies in Iran.

At the Davos in early 2014, President Rouhani declared that Iran is open for business and said that over the next three decades, Iran could become a top-10 global economy. Many dismissed this claim as a pipe-dream, but today, with the recent developments, it is likely to become a reality. Please feel free to contact Ms. Serap Zuvin or Mr. Yigit Turker of SZLO for further professional guidance on the topic


* Notes from SZLO's recent visit to Iran between the dates of February 28 and March 2.

[3] http://www.investiniran.ir/en/ebook

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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