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Facilities & Tax exemption for Foreign Investment
Summary:The Council of Ministers, in its June 1996 approval, exempted foreign investors from paying taxes for a period of six years. Foreign activities in deprived areas of the country are entitled to a longer exemption period. According to the legislation, the relevant import and banking regulations will not be applied to machinery and raw materials imported into the country by foreign investors. Regulations pertaining to the free trade zones, however, are not subject to the provisions stipulated in the approval. For example, the tax exemption period operative in Iranian free trade zones is 15 years. Hereunder is the full text of the approval.

The Council of Ministers, in its June 12, 1996 session, approved proposal no. 66080021/31215 dated November 15, 1995, of the Ministry of Economic Affairs and Finance. This proposal pertained to investments that are covered by the Law for the Attraction and Protection of Foreign Investments, which was enacted in 1955. The approval is as follows:

1- The import of machinery, equipment and raw materials as part of the investment contribution of foreign investors, whether in the form of equity capital or shareholder’s loan, is not subject to the Council of Ministers’ decrees relating to import and banking regulations, and shall be merely governed by the Law for the Attraction and Protection of Foreign Investments of 1955, its implementing regulations of 1956, and the subsequent amendments thereto.

The Ministry of Commerce, subject to the approval of the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI) on the basis of the agreement of the Supervisory Board for the Attraction and Protection of Foreign Investments, shall take measures for registering orders and issuing licenses for the delivery of the said machinery, equipment and raw materials from customs.

2- The export of products by joint venture companies in the manner prescribed in permits related to the admission of foreign investments (the relevant decrees) is permitted, to the extent that the foreign currency earned from the aforementioned exports covers the foreign currency requirements of these companies with respect to:

the import of raw materials and semi-fabricated parts required in producing their own products;

other current foreign currency requirements, including repayment of the principal as well as interest payments on loans extended by foreign investors;

foreign currency expenses related to the transfer of technology, management and technical service agreements (according to the relevant decrees); and,

the required foreign currency for remitting the annual dividends payable to foreign investors.

Such exports shall be exempt from existing and/or future government regulations that restrict exports by way of quantity and the disposition of a foreign exchange transaction for the return of foreign exchange derived from exports. Exporters are required, before exporting the goods, to define the sum withdrawable from the foreign currency revenues for each of the purposes allowed under this clause, and seek the approval of the Supervisory Board for the Attraction and Protection of Foreign Investments. The Ministry of Commerce is under obligation to issue export licenses only with the prior confirmation of the OIETAI.

3- The importation of machinery, equipment and raw materials, and in return, the exportation of the products up to approved limits, in projects where the foreign investment is admitted with no equity participation but through project financing mechanisms, are also entitled to the facilities stipulated in clauses 1 and 2 above. Repayment of the principal, as well as payment of interest on financial facilities related to projects under this clause, shall be permitted exclusively out of the export (proceeds) of products derived from the same project.

4- Foreign currency revenues generated from foreign investments in service and tourism-related activities may be utilized for purposes stipulated in clause 2 above, pursuant to the approval of the Supervisory Board for the Attraction and Protection of Foreign Investments. 6- All companies and entities falling under this decree may keep the foreign currency income derived from their activities up to the ceiling approved by the OIETAI, in an escrow account with a local or foreign bank and directly withdraw therefrom for specific purposes.

Note: With regard to companies that are established with the participation of governmental entities, the opening of an account with foreign banks is subject to the approval of the Central Bank of the Islamic Republic of Iran.

7- Activities other than those which fall under first priority, on the basis of Decree No. H11463T/1362 dated May 1, 1995, as well as future substituting decrees, other industrial and mining activities with foreign participation shall be classified as second priority and shall be entitled to a six-year tax exemption. The increase in the number of years of tax exemption as a result of locating the aforementioned units in deprived areas shall continue to be in force.


* Revenues derived from production and mining units are subject to tax exemption as stipulated in Article 132 of the Law on Direct Taxation, as approved on March 1978.

“Article 132 : Revenues derived from production and mining units which have acquired an identification card or an operation permit from the Ministries of Industries, Heavy Industries, Mines and Metals or the Construction Jihad following the approval of this amendment (April 27, 1992), shall be subject to tax exemption from date of operation according to priorities first, second and third, for a period of eight, six and four years, respectively.

For production and mining units located or operating in deprived areas, the exemption period will be extended by 50 percent of the aforementioned periods.”

According to the approval of the Council of Ministers, in case the activities of foreign investors fall under the first priority, these would be subject to an eight-year tax exemption, while a six-year exemption period is provided for those under second priority. It should be noted that in case the foreign investment is made in deprived areas, the exemption shall be increased by 50 percent, to 12 and nine years for first and second priorities, respectively.

* As for tax exemption for foreign investment in free trade zones, according to Article 13 of the Law on Free Trade Zones, all real and legal entities engaged in economic activities in the aforementioned zones, shall be subject to a 15-year tax exemption from the onset of operations. Upon the termination of the 15-year period, the said units shall be subject to tax regulations to be proposed by the Council of Ministers for final approval by the Islamic Consultative Assembly.

Ministry of foreign affairs,
Islamic Republic of IRAN,
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