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The free zone concept has reached Iran for quite some time now. The Iranian government first established free zones in order to achieve certain objectives of export development and attraction of foreign investment. For this purpose, a number of logistics areas have been dedicated as free zones and have been given a special legal and fiscal regime that is regulated and administered by the respective free zone authority. Currently such free zones exist in Anzali, Chabahar, Kish Island, Arvand, Aras and Gheshm Island.
Each free zone is administered by a separate authority and has its own autonomous legal status. Certain laws which govern the economic activities in free zones are different from the laws and regulations governing the same subject on the mainland. In other words, free zones have their own laws and regulations in respect of entry and residence of foreign nationals, banking operations, use of land, import of goods, employment of workforce and insurance. These laws and regulations are designed to provide for easier investment conditions.
Furthermore, free zones provide for all kinds of economic activities and occupations by individuals and corproate entities within the boundaries of the free zone and require special permits from the respective free zone authority.
The utilization of land and national resources within the Free Zones is allowed, but it is clear that these belong to the government. A sale or lease of properties to Iranian nationals is possible. However, it is determined by each Authority according to the respective regulations under what circumstances such transaction may take place. It is worth to mention that foreign nationals are admissible to rent land within the free zones, but a sale of land to foreigners or even partial ownership by foreigners through a joint venture is prohibited.
Based on the existing laws, foreign investors may participate in the economic activities of the free zone in any investment and at any ratio they may wish to. Their legal rights are guaranteed and protected according to existing regulations. It is worth mentioning that repatriation of profits and capital from the free zone is permitted but requires a formal procedure. The free zone authority, however, is obliged to issue a permit for transfer within one week from the date of the receipt of an application for such repatriation. Additionally the approval of the free zone authority is required for any transfer of shares in a free zone company to other investors.
Furthermore, there are tax incentives for individuals and corporate entities who are engaged in any kind of commercial or manufacturing activities in the free zones. They are exempted from revenue taxes and any taxes on assets for a period of fifteen years, as from the date their business operations in the free zone commence.
Equally important the free zone laws and provide for more flexible and less stringent requirements for entry and residence of foreign nationals. Accordingly, foreign nationals who wish to enter free zone areas directly are not required to obtain a visa in advance as for a trip to the Iranian mainland. The immigration officer shall affix the seal of a residence permit on the valid travel documents of such foreign nationals upon arrival. The respective residence permit is issued for a period of two weeks and may be extended to up to six months upon the request made through the free zone authority. Foreigners, who wish to travel to other parts of the country upon their entry into the free zone, are required to obtain an additional permit from the local representative office of the Iranian Foreign Ministry located in the free zone.
It should also be noted that inter alia the following activities are provided for in the free zones: establishment of Iranian banks with a minimum of 51% government participation; the establishment of branch offices of foreign banks, the establishment of Iranian or foreign non-banking credit institutions or the setting up of their branch offices; and the Establishment of foreign exchange dealers to operate within the free zone upon their authorization by the free zone authority.
All in all Iranian free zones provide for a a significant and considerable promotion of foreign investments into Iran and make it easier for foreign investors.
Faezeh Tabatabaei, Tehran office
