Territorially large and densely populated, Iran offers great opportunities in many business sectors as well as tax incentives aimed at attracting foreign investment. Below is a brief outline of certain tax incentives available to foreign investors.
While the Iranian corporate income tax has a flat rate set at 25%, there is a 0% corporate income tax for foreign investors who invest in certain industries including mining or services related to construction of hospitals or hotels as well as tourism-related services. More specifically, investors can use a 100% tax exemption during the first 5 years, a period whose duration can be extended up to 20 years if the investment is located in an industrial park, economic special zone, less developed area or a free trade zones in Iran.
Tax exemptions for certain sectors (including mining and provision of various services) in different zones of Iran are granted for the following periods:
- 5 years for normal zones
- 7 years for industrial parks and economic special zones
- 10 years for less developed areas
- 13 years for less developed areas located in industrial parks and economic special zones
- 20 years for all activities in free trade zones
Furthermore, income derived from agricultural activities and export of services, non-oil goods and agricultural products is 100% tax exempt while 20% of income derived from export of unprocessed goods is also tax exempt.
Companies with more than 50 employees can extend the duration of the exemption by one year provided they increase the employment volume by 50% in comparison to the previous year.
Additionally, there is also a 50% exemption on the tax rate on income from sale for foreign globally recognized brand name companies manufacturing goods while using Iranian company’s capacities and exporting at least 20% of their production. This means that a foreign company is liable to pay only 12.5%, instead of 25% tax of income after the tax exemption period.
Foreign companies can use the custom exemption when they import manufacturing line machines and equipment as well as raw materials used for production of export commodities. An additional advantage is the lack of duties and tax for export.
Iran has over 35 special economic zones and 7 free trade zones which are located across the country with different availability of resources and in different climates. Free trade zones are located in the Persian Gulf, Oman Sea in south and Caspian Sea in north and in the north-east and south east of Iran.
The advantages of free trade zones include the following:
- 20 year tax exemption for all economic activities
- No visa needed for foreigners
- Custom exemption for raw materials and industrial machineries for production
- Possibility of exporting products to the Iranian mainland
- Easy re-export and transit of commodities
By taking advantage of the above incentives as well as other benefits the Iranian system provides as well as paying particular attention to choosing the proper approach, , foreign investors can utilize the attractive promotional programs and maximize their benefit from this developing market.
Ali Najm
Country executive, Eurofast Iran
T. : +357 22699222
E.: ali.najm@eurofast.eu
