General business and commercial atmosphere in Iran
It is prevalently assumed that merchants can perform commercial activities concerning all the occasions of business. That is absolutely acceptable idea under Iranian law. However, there are a few fields of commercial activities under Iranian Law that merchants are not capable of operating. Therefore, we tried to compile a selection of thematic limitations (i.e. the restrictions based on the subject of activity) regarding commercial activities under Iranian law to facilitate the procedure for international merchants and entities to choose the appropriate field of activities.
Thematic Limitations or the specific subject of businesses that are in somehow restricted in Iran
The commercial limitations and restrictions are mainly assigned by the government in the matter of controlling the main financial politics in Iran. There are also some monopolistic activities in Iran based on their nature or in accordance to the public benefit.
Limitations of commercial activities in Iran
Notwithstanding the variety of commercial activities of merchants, the government performs a few monopolistic commercial activities. The monopolistic activities are demonstrated in Article 44 of the Constitution Law. To study the Iranian's Constitution please click here " Constitution Law of Iran – Iranian Constitution "
However, the government recently has restricted the governmental monopoly in the Law of Execution of main politics of Article 44 of the Constitution Law. The ordinary law also expresses other kinds of governmental monopolies. You should know that in the recent years there are lots of exemptions adopted by the government of Iran on the monopolistic activities in order to encourage domestic and international investment by the private sector.
Monopolistic Activities of the Government of Iran
1- Oil and gas industry
There could be a large number of profitable commercial activities in this field for the private sector. Fortunately, the Ministry of Petroleum has recently offered several relevant activities for the non-governmental sector to perform. The main restriction is indeed about the ownership of the oil and gas fields. Private companies may perform the following commercial activities in the field of the oil and gas industry:
A . The knowledge-based enterprises
Knowledge-based companies must manage the risks and the charges of the oil recovery. And also the scientific aspect of the operation is very important to decrease the potential risks.
B . The companies of exploitation and production with or without the involvement of the international companies.
The private companies can be involved in the process of investment, design, and management of the Exploitation Operations, Tank Engineering, submission of a practical plan for each tank, management of the projects, and utilization of upstream facilities pertinent to the oil industry. And in this case, they can use the capacity of OSC or EPCs. For more information regarding the different types of upstream petroleum contracts under Iranian law, please click here " Types of Upstream Petroleum Contracts in Iran "
2- Providing each kind of Gas
Creation of all facilities and pieces of stuff, in this case, distribution of the natural gas system and save gasoline. Please note that they are several private companies active in these kinds of activities through the Joint-venture agreements with the government of Iran.
For example, the private sector is the main gas distributor in some provinces such as Sistan and Baluchistan.
3- Electricity production
4- Establishment and expansion and exploitation of telecommunication system
Recently, some important parts of relevant activities are within the reach of the private sector.
5- Wheat – Sugar – Tea
Preparation and save of wheat and sugar and tea as the essential consumable goods of Iranian people.
6- Discharge and warehousing and protection of public and Customs' warehouses
This is merely about the ownership and management of the warehouses located at the border Customs.
7- Exploration and exploitation of forest and natural woodlands
8- The monopoly of tobacco Act
It is worth mentioning that the government has determined some exceptions in this monopolistic commercial activity to simplify the foreign investment and has permitted some foreign companies to merchandise in the field of production of tobacco e.g. JTI and BAT. The international tobacco companies in recent years are very active in Iran, they have their own factories, tobacco farms and distribution channels.
9- Services of postage
Within the recent past, Post National Company of Iran has assigned some essential services to private companies, and simultaneously the private sector is capable of collaborating with foreign companies in the case of fundraising.
10- Preparation of seeds and saplings
This monopolistic activity is on account of the promotion of this field.
11- Vaccine Production
Activities of the private sector in this field do not have any legal obstacles. However, the relevant activities must be under the supervision of the government.
12- Special Facilities
A certain amount of companies in the case of production and trade are monopolistic for the reason that command several special facilities; for instance; governmental trade company and the petrochemical industries national company. In the case of presenting the facilities to the nongovernmental sector, they can also perform in this field of commercial activities.
13- Monopoly as regarding the petrochemical industries national company
Professional experts in the field of the industry believe that the participation of the private sector in this field can help to improve the activity. And eventually, several private companies have started industrial activities in the field of the petrochemical industry, for instance, Persian Gulf Petrochemical Industries Company is one of the greatest petrochemical companies in the Middle East.
Commercial activities that need special permission under Iranian law
There are some commercial activities that require a special license to perform.
1- Freight and passenger transportation services in Iran
In the case of starting a commercial activity in the field of transportation e.g. suburban transportation, Road transportation, Passenger transportation, transit, air transportation, Air travel services, and Aviation you must acquire a license from the Ministry of Road and Cities or the National Aviation Organization of Iran.
To privatize the abdicated governmental companies, all the decisions and changes must be licensed from the Privatization Agency.
Point: The formation of governmental companies in less developed areas is legally acceptable in the case of participation of the expansion organization.
3- Activities concerning monetary and banking affairs
As a pioneer in the field of monetary affairs, you must procure the required permissions from the Central Bank of the Islamic Republic of Iran for the following activities:
- Establishment of the monetary institutions such as banks, Exchanges, and leasing companies
- Gold and Silver trade and exchange office activities.
- Establishment of the representative agencies of foreign banks (Only in Tehran and Free trade Zones)
Point: Receipt of bank claims does not need to gain permits.
4- Military activities and Armed Forces
With the aim of commencing commercial activity in the vocation connected to military services e.g. production of weapons, ammunition, registration and establishment of military companies, Defence industries, the Army, the Navy, and the Air Force gaining a license from the Ministry of Defense and Armed Forces Logistics is necessary.
5- Activities regarding the official Translation
The official translation of the documents is an important and professional activity with a kind of delicacy that makes it essential to be licensed from the Presentation of the official translator license of the Judiciary.
6- Activities connected to the field of oil and gas
The exploitation and mining of oil and petrochemical Gas mines, Oil, Gas, and petrochemical industries have a sensitive situation in Iran because of the scarcity of oil sources and also the sensitivity of exploitation. Consequently, there should be particular permission from the Ministry of Petroleum and National Oil Company.
7- Activities related to the Chamber of Commerce
The registration of any Chamber of commerce, Joint chamber of Commerce of Iran and the other countries, and Joint Economic Council needs a kind of license from the Iran Chamber of Commerce to be registered in Iran.
Point: Network Marketing is prohibited
Restriction of commercial activities for aliens and foreign investors under Iranian Law
Despite practical efforts of the government to encourage foreign investment in Iran, there are also a few restrictions for the commercial activity of the Aliens.
1 -The limitation of buying properties is one of the most essential limitations in this case. For more information, please check the relevant article " Buy Property by Foreigners in Iran " at Iran Best Lawyer.
2 -The establishment of a NGOs or attending an NGO as a partner.
3- The stockbrokers in Iran must have Iranian Nationality according to Article 12 of financial instruments and exchange law
4- Each foreign company in the field of trade or industry that wants to start a representative agency in Iran must be legally known in the main country and also must be registered in the Deeds Registration Department of Tehran.
5- Foreign noncommercial industries must be registered in the main country to be capable of being registered in Iran. (The Registration only takes place in the Company Registration Office in Tehran.)
Iranian Active Commercial Law for the aliens
In recent years, the government has verified various codes and Regulations in contemplation of encouragement of foreign investment in Iran and also has delimitated the areas of the commercial limitations. Eventually, Iranian Commercial Law is an active commercial code for the aliens and despite some governmental and national limitations, there is not much distinction between national and foreign commercial activities in Iran.
Choosing an appropriate field for commercial activities is one of the most important decisions of a foreign investor in Iran to achieve success in future. Our lawyers and experts at Iran Best Lawyer are always ready to help you finding the best practical solution for your business in Iran.
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.