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1. Iran export overview
As of 5 November 2018, US nuclear-related sanctions have been re-imposed on Iran following the US withdrawal from the Joint Comprehensive Plan of Action (otherwise known as the Iran Nuclear Deal) on 8 May 2018.
On 16 January 2016, Iran received extensive economic and financial sanctions relief following confirmation from the International Atomic Energy Agency (IAEA) that Iran had met its obligations under the nuclear deal agreed on 14 July 2015, meaning the country is now able to trade more freely globally.
The UK government supports expanding our trade relationship with Iran and we encourage UK businesses to take advantage of the commercial opportunities arising from the lifting of sanctions.
The Department for International Trade (DIT) – based both in the UK and in the British Embassy in Tehran – is on hand to support trade and investment between our 2 countries.
Re-opening of the British Embassy in Tehran in 2015, the upgrade in diplomatic relations and the appointment of Nicholas Hopton as British Ambassador to Iran on 5 September 2016, marked an important step forward in diplomatic relations between the two countries.
There is a positive outlook for UK-Iran trade relations. Iran is the biggest new market to enter the global economy in over a decade, offering significant opportunities in most sectors, with potential to grow as the market in Iran expands.
Iran’s significant oil and gas reserves will be an important driver of economic growth. Other sectors in this diversified economy with the potential to contribute to the country’s Gross Domestic Product (GDP) growth and employment and where UK business has particular strengths include:
- airports and aviation
The Iranian government is keen to attract foreign investment and technology transfer across all sectors.
Contact a DIT Iran export adviser for a free consultation if you are interested in exporting to Iran.
1.1 Trade and sanctions - summary
Most financial and economic sanctions against Iran were lifted following the International Atomic Energy Agency’s verification that Iran had completed all necessary steps to reach Implementation Day (16 January 2016).
Read the full text of the agreement and annexes.
Some sanctions remain in place, however, including sanctions related to human rights, proliferation of restricted goods and technology and Iran’s support for terrorism.
Some ongoing sanctions mean you need to consider whether the product or material you want to trade is restricted, and how payments will be made.
UK companies must also consider whether their proposed activity is subject to US sanctions. If in any doubt you should seek legal advice. It is important to ensure appropriate due diligence measures take place before engaging in any business activity.
An information note on EU sanctions to be lifted under the JCPoA can be found on the Europa website.
Guidance issued by the US Office of Foreign Assets Control (OFAC) with further information on US sanctions can be found on the US Department of the Treasury website.
1.2 Benefits of doing business in Iran - summary
Benefits of trading in Iran for UK businesses include:
- attractive projected growth prospects
- the Iranian government’s encouragement for foreign investment
Strengths of the Iranian market include:
- a population of around 80 million (the second largest in the Middle East after Egypt)
- a young population (60% are estimated to be under 30 years old)
- a highly educated workforce
- plentiful natural resources
- its strategic location
EU trade with Iran in 2016 stands at around USD 8 billion and is expected to quadruple by 2018.
Iran’s main imports are:
- iron and steel
- chemicals and related products
- transport vehicles
2. Preparing to do business in Iran
To do business in Iran, UK businesses first need to be aware of:
- national economic issues in Iran
- information specific to the sectors they want to invest or operate in
- relevant sanctions and possible political risk
- practical and legal considerations specific to Iran
- the need to ensure that a bank has been identified willing to facilitate payments and that British businesses wishing to conduct business with Iran have access to adequate financial channels in place
This will help them to best:
- take advantage of opportunities
- avoid foreseeable market risk
- make sure they don’t violate sanctions or other legal prohibitions on business
- avoid unnecessary legal costs or delay
Businesses preparing to do business in Iran should familiarise themselves with the relevant sections of this guidance. They may also want to seek legal or business advice where they aren’t confident of their understanding of any relevant legal or market-related issues.
3. The Iranian economy and doing business in Iran
3.1 Economic growth in Iran
Iran has the second largest economy in the Middle East after Saudi Arabia. It’s estimated nominal GDP was USD 397 billion in 2015.
Iran’s economic performance is expected to improve following the recent lifting of some sanctions.
The Iranian government is taking steps to reduce inflation, which stood at 14% in 2015. Iran grew by 4.3% in 2014 according to the World Bank.
Iran is aiming for 8% annual GDP growth up to 2020. Non-Iranian estimates forecast growth of around 5% a year.
3.2 Structure of Iran’s economy
The Iranian state acts as both the regulator of, and an important player in, the country’s economy. Regulations can be complex, and consumer and employee protection is often given preference over ease of doing business.
The government creates regular economic plans and these have a significant impact on the direction of the country.
The Iranian government owns the largest companies which are typically in the extraction and manufacturing industries. These include:
- National Iranian Oil Company
- Iranian Mining Industries Development and Renovation Organisation
- Industrial Development and Renovation Organisation
- Social Security Investment Company
Iran’s economy is also home to a large number of entities that are owned by organisations that are related to the state. True private sector companies (with no links to the state) are estimated to account for only 20% of economic activity.
Iran’s economy is relatively diversified. However, the oil and gas sector still dominates. Iran has:
- the world’s seventh largest mineral reserves
- a large consumer market
- a strong industrial manufacturing base
- significant agricultural and service sectors
3.3 Iran’s labour market
Iran’s labour market is characterised by:
- a young, growing, highly educated workforce
- high unemployment, at 11.7% in April 2016 (Source: World Bank)
- low female labour force participation, with 12% of women active
- low minimum wages by international standards (USD 216 per month in 2014)
Investors may need to commit significant resources to training local staff. Economic isolation in recent years has meant that international best practice is not always followed and international standards have not been met, especially in technology-dependent industries such as oil and gas. However, this is an area that the government of Iran is trying to address.
4. Opportunities for UK businesses in Iran
DIT provides free international export sales leads from its worldwide network. Search for export opportunities.
4.1 Oil and gas sector in Iran
Iran’s oil and gas sector is the largest sector in the Iranian economy, comprising 23% of GDP in 2014.
The sector is mature but with huge potential for expansion. Iran has the world’s largest gas reserves and wants to double gas production to 1.3 billion cubic metres per day by 2020, particularly through further development of the South Pars gas field.
Iran has the world’s fourth largest oil reserves (158 billion barrels), equivalent to more than 150 years of production at 2014 extraction rates according to the 2015 BP Statistical Review of World Energy.
It has raised oil production from below 3 million barrels of oil per day prior to the Joint Comprehensive Plan of Action (JCPOA) to around 3.6 million barrels per day by mid-2016, and aims to produce 5 million barrels of oil per day by 2020 To achieve this, the Iranian Ministry of Petroleum will require an estimated USD 105 billion of capital investment to replace old technology.
The lifting of sanctions means Iran is looking to regain market share by increasing exports. Iran’s oil exports doubled in the period between January 2016 when sanctions were lifted and May 2016 (Source: Opec).
Industry analysts have predicted that Iran will achieve sizeable increases in both oil and gas production, but that its targets will be easier to reach in a timely and efficient manner with foreign investment and the latest technology.
The Iranian government is seeking foreign partners by using a new contract structure offering foreign partners more favourable terms. However, Iran’s oil and gas sector will remain largely in the hands of the state, with constitutional limits on levels of foreign participation in the upstream sector.
Opportunities for UK companies include:
- upgrading Iran’s oil and gas technology
- enhanced oil recovery (EOR) projects
- construction of liquefied natural gas (LNG) export facilities
Certain goods, software and technology require a licence for export outside the EU. Check whether you require an export licence.
4.2 Petrochemicals in Iran
Iran’s petrochemical sector produces around 60 million tons per year generating annual revenue of around USD 20 billion.
The Iranian petrochemical industry covers almost all chemical production processes.
Iran’s petrochemicals sector production is mostly in private or semi-private hands. Many of these companies have previously received financing or entered into partnerships with international investors. They are likely to be looking for international partners in the future.
An estimated USD 80 billion will be needed over the next 10 years to expand Iran’s petrochemicals sector. Much of this is expected to come from foreign investors.
Some goods, software and technology require a licence for export outside the EU. Check whether you require an export licence.
4.3 Industrial manufacturing in Iran
Iran’s main industrial outputs are automobiles, manufactured metals, cement, and processed steel and copper.
Iran’s cheap, abundant energy gives it a significant competitive advantage in the production of metals and other industrial goods. As a result, heavy industry is concentrated in Iran’s southern provinces close to its energy resources.
The Iranian government is providing around USD 15 billion of funding to increase manufactured metal production.
Many European car makers have also announced an interest in Iran.
Opportunities for UK companies include:
- technology to upgrade Iran’s manufacturing plant
- plant maintenance and supply chain
- capital investment and joint ventures
Some goods, software and technology require a licence for export outside the EU. Check whether you require an export licence.
4.4 Infrastructure in Iran
Iran is likely to need more than 1 trillion USD of investment in infrastructure over the next 10 years. This will be necessary to meet the ambitious plans the Iranian government has laid out for transport, power and water.
Airports and aviation in Iran
Iran has 54 airports, including 8 international airports which are managed by Iranian Airports Company. Iran’s aviation infrastructure is in significant need of investment, both in terms of its airports and air fleet (as 300 may be needed in the next 5 years).
An increase in tourist and business visitors has led to plans for investment in airports. These plans include a requirement to increase the capacity of Tehran’s main airport 6-fold.
Ports in Iran
Iran’s Ports and Maritime Organisation plans around USD 900 million of projects.
Power in Iran
Iran will need additional power generation and infrastructure to meet its projected economic growth, particularly in energy-intensive industries.
The government plans to add more than 5GW of generation capacity a year to reach a total capacity of 96 GW by 2020. It is likely that this will largely be through increased gas-powered generation capacity and the development of renewable sources. Iran’s renewable energy plans emphasise in particular wind power, to meet 5GW target by 2020, with wind-power likely to play a major part in this.
Rail in Iran
Iran’s rail network is operated by Islamic Republic of Iran Railways (RAI), which is controlled by the Ministry of Roads and Urban Development.
The RAI has plans to at least double the size of the country’s rail network with 25,000 km of track by 2025. There are also plans to extend Tehran’s metro service to more areas of the city.
Water infrastructure in Iran
Iran faces severe water shortages which threaten food production and other water-intensive industries.
The Iranian government has committed USD 7 billion of annual spending to develop its water infrastructure, including desalination plants in the Persian Gulf region and water distribution pipelines.
4.5 Financial services in Iran
Iran’s financial services sector generated 2% of GDP in 2014.
The government plays a significant role in the sector, which is regulated by the Central Bank of Iran. There are 8 state-owned banks active in the market. Iran’s capital markets are small by international standards but growing rapidly. The Tehran Stock Exchange has a market capitalisation of around USD 100 billion.
Although the financial services sector in Iran is relatively small, and foreign investment faces limitations, there are opportunities for UK businesses.
Foreign capital and expertise will be needed to help the industry as it develops.
4.6 Healthcare and pharmaceuticals in Iran
Iran has one of the most developed healthcare and pharmaceutical sectors in the Middle East.
Healthcare in Iran
Around 90% of the population of Iran is covered by government insurance schemes. Healthcare spending is expected to increase due to:
- population growth
- increased average age
- an increase in long-term and lifestyle-related diseases and disabilities as opposed to infectious diseases
The median age is set to increase by 8 years from 2010 to 2025 and the disease burden is shifting towards chronic, non-communicable conditions.
Government regulation keeps medical costs low, but many healthcare providers face financial problems because insurance firms sometimes fail to pay for care. As a result many hospitals are unable to afford up-to-date medical equipment or the most effective drugs.
Iran’s government wants to develop and modernise healthcare by:
- building new hospitals, adding 115,000 extra beds by 2021
- developing up to 50 new medical laboratories
- creating 13 comprehensive cancer centres
- investing USD 280 million in new imaging centres
- investing USD 130 million in new dialysis centres
- developing more dental medical centres
International companies such as Samsung and Daelim are already involved in developing new Iranian hospitals.
Pharmaceutical industry in Iran
The pharmaceutical industry in Iran was worth £1.86 billion in 2015, including £1.24 billion of locally manufactured, mostly low-value, high-volume products.
Imports of pharmaceuticals comprised just 5% of sales volume but 38% of the value.
A lack of modern technology means Iran can’t produce the most advanced medicines. Some international pharmaceuticals companies have maintained activity in Iran over the last 5 years, and more are planning on entering the market in the near future.
However, the Iranian government tightly regulates the cost of treatment and has protectionist tariffs defending local manufacturers from foreign competitors. Exceptions are made for advanced technology and drugs that cannot be produced locally.
The Iranian government wants to develop its domestic pharmaceutical capability and is looking for business partners that are able and willing to transfer technology to Iranian organisations.
4.7 Retail in Iran
Iran’s retail sector is very traditional for the region, with wholesalers generally supplying independent outlets from central ‘bazaars’ in the major cities.
Change to the retail sector in Iran will be driven by the lifting of sanctions, and the growth of the middle class, increased access to internet and the relatively young population. With the easing of economic sanctions, interest in the Iran market has developed from UK retailers. Iran is a wealthy market and with many sanctions now lifted, there is an expected appetite for western brands.
These trends are likely to increase demand for premium clothing and consumer product brands, convenience products and services.
Future opportunities look promising in groceries, premium clothing and through online retailers.
5. Challenges and risks of doing business in Iran
5.1 US withdrawal from JCPoA
On 8 May 2018, the President of the United States of America announced the withdrawal of the US from the Joint Comprehensive Plan of Action, otherwise known as the Iran Nuclear Deal.
In a joint statement, the leaders of the UK, France and Germany emphasised their continued commitment to the JCPoA. As such, the UK government continues to fully support expanding our trade relationship with Iran and encourages UK businesses to take advantage of the commercial opportunities that arise.
On 7 August 2018 the existing EU Blocking Regulation was updated to include re-introduced US sanctions on Iran following their withdrawal from the JCPoA. This aims to protect EU companies doing legitimate business with Iran from the impact of US extra-territorial sanctions. The EU Commission has issued online guidance relating this regulation.
As of 5 November 2018, US nuclear-related sanctions have been re-imposed on Iran.
Consult guidance issued by the US Office of Foreign Assets Control (OFAC) on the US Department of the Treasury website if you have any queries relating to US sanctions.
The UK government continues to fully support expanding our trade relationship with Iran and encourages UK businesses to take advantage of the commercial opportunities that arise.
The UK fully implements UN, EU and UK domestic sanctions law. The re-imposition of the US sanctions against Iran may have commercial and legal implications for UK businesses and individuals dealing with Iran. Where necessary, legal advice should be sought.
Certain EU and UN nuclear sanctions continue to be suspended, as detailed in the JCPoA.
5.2 Business challenges in Iran
Despite the lifting of many sanctions, Iran can be a difficult place to do business. UK businesses looking to trade or invest in Iran should be aware of:
- sanctions that remain in place, trade regulations and export controls, and ensure all trade activity is sanctions compliant
- political exposure, via connections with current or former government organisations or individuals that remain sanctioned
- terrorist financing or financial crime, such as money-laundering, bribery or fraud
- risk to a company’s reputation through work with people or organisations allegedly involved in human rights violations, corruption or litigation
Breaching sanctions is illegal. UK businesses need to carefully determine what risks they might want to take on the less clear-cut issues of political or reputational risk, and ensure that they undertake appropriate and adequate levels of due diligence.
5.3 Bureaucracy in Iran
Iran is a highly centralised country and the government regulates nearly all activities. Basic requests can require complex forms, administrative processes and stamps of approval and these can lead to delays.
5.4 Political risks in Iran
The division between public and private sectors in Iran is often blurred by the presence of a number of semi-autonomous organisations closely aligned to the state.
Most prominent among these are charitable foundations known as bonyads or setads, many of which are now equivalent to large business conglomerates. Some large religious organisations and even branches of the military also function as bonyads. These political and economic links could be of concern to investors.
5.5 Sanctions on Iran
Sanctions that remain in place will continue to limit what UK businesses can legally do in Iran.
Sanctions remaining in place include:
- EU sanctions against a small number of Iranian banks and as well as individuals and other organisations
- arms embargo restricting export of goods, software or technology on the UK military lists
- human rights sanctions
- US sanctions
Read our guidance on embargoes and sanctions on Iran for more detailed information.
Check the HM Treasury Consolidated List of Targets to see which organisations and individuals are subject to an asset freeze. It is worth noting that it is your responsibility to find out whether sanctions still affect you.
You must ensure that any proposed agreements do not deal, either directly or indirectly, with a designated entity either in the supply of material or services or in the payment route used.
You are not allowed to make funds and economic resources available to sanctioned entities, directly or indirectly, without a licence. To deal with an entity subject to financial sanctions you must contact HM Treasury with information about the proposed dealings and the relevant grounds for licensing. HM Treasury would then consider whether a licence can be issued.
Applications for a licence with respect to financial sanctions should be made to the Office of Financial Sanctions Implementation:
Office of Financial Sanctions Implementation
Office of Financial Sanction Implementation
1 Horse Guards Road
General enquiries 020 7270 5454
Enquiries relating to asset freezing or other financial sanctions should be submitted to the Office of Financial Sanctions Implementation.
Businesses should consider seeking legal advice on whether they could be affected in the event some or all sanctions were re-imposed on Iran. This situation has been described as a ‘snapback’, where some or all sanctions could potentially be re-imposed in the event of significant non-performance by Iran of its JCPOA commitments.
It should be noted that snapback is a measure of last resort. In the event of a significant non-performance and after having exhausted all recourse possibilities under the dispute resolution mechanism, the snapback will be considered by the other JCPoA participants.
US sanctions on Iran
Read OFAC’s guidance on US sanctions on the US Department of the Treasury website
US primary sanctions on Iran remain in place. This means that British businesses must consider their US connections, including the presence of employees holding US citizenship or green cards, before undertaking Iran-related activity.
British businesses may still be subject to US secondary sanctions relating to individuals or entities remaining on the Special Designated Nations (SDN) list. This includes the Iranian Revolutionary Guard Corps (IRGC).
The sanctions remaining in force also prevent Iran-related transactions from passing through the US financial system. This complicates payments into and out of Iran.
UK export controls on Iran
Read our UK sanctions on Iran page to check whether you need a licence.
When a UK business exports certain goods, services and technology to Iran, strict controls remain in place throughout the entire process. In addition to the items on the UK Military List and EU Dual Use controls, there are a number of national UK controls on the export of some goods software and technology to Iran. These include:
- certain telecommunications equipment
- certain marine vessels
- related technology
It is essential to conduct due diligence on ‘end use’.
Items on the UK Military List are covered by the EU Arms Embargo, and none of these listed items can be exported. Items on the dual use list require an export licence. There are also EU and international controls. Remaining sanctions mean that some items are completely prohibited from export. All controls apply to ‘intangible’ transfers such as technology and software or technical assistance.
Use the Goods Checker Tool to determine whether your goods require a licence to export.
Nuclear-related activities can only be authorised if they have been approved in advance by the UN Security Council through the newly-established procurement channel. A UK business wishing to supply these goods or services to Iran, or to accept an investment by an Iranian person, must seek a licence from the Export Control Organisation (ECO) in DIT.
ECO will consider the application and where appropriate seek the required authorisation from the UN.
Read ECO’s detailed guidance on the procurement channel.
Read embargoes and sanctions on Iran for more detailed information on export controls.
5.6 State regulation of Iran’s economy
The dominance of the state in Iran’s economy means that it has complex regulations, often giving consumer and employee protection precedence over ease of doing business.
Government enforcement can be ineffective, allowing companies to take advantage of informal networks to win business.
Foreign businesses operating in Iran may also find their actions opposed by vested political and economic interests.
5.7 Corruption in Iran
Before you engage in business in Iran ensure you’ve carried out due diligence measures. Seek legal advice if you have any doubts about whether you’re exposed to compliance or reputational risks.
Iran’s bribery and corruption regulation is covered in several non-specific laws, but it is drawing up corruption and transparency measures.
You should ensure you take the necessary steps to comply with the requirements of the UK Bribery Act.
5.8 Banking and finance in Iran
On the whole, banks in the UK remain cautious of facilitating Iran-related transactions, due to remaining sanctions on Iran and the cost of fulfilling compliance requirements. As a result, many European banks including those in the UK may judge that re-engaging with Iranian entities falls outside of their risk appetite, except in a few cases for existing customers.
This presents a challenge for UK business seeking banking services to facilitate trade with Iran. This could include services such as processing transactions, trade finance, and lending facilities.
The UK government is working with the US government to address the issues that banks and business have raised. This has already resulted in clearer guidance from OFAC, and we are continuing to work with US authorities to get further clear guidance and reassurance for banks and business.
Iran will also need to make progress to meet international regulatory standards and to build confidence with international banks for them to re-engage in Iran-related business.
Following the lifting of many financial and economic sanctions, Iran’s financial institutions are starting to work with the international banking system. Banking changes include:
- more than 30 Iranian banks are reconnected to Society for Worldwide Interbank Financial Telecommunication (SWIFT) network
- more than 200 international banks have started correspondent relations with Iranian banks
- Iranian banks have opened more than 400 accounts with non-Iranian banks
- some banks are seeking to either open foreign branches or start relationships with international banks
- some Asian and Middle Eastern banks are beginning operations within Iran
The Iranian government is reforming its financial system, but banking problems remain due to:
- non-performing loans, which are estimated to make up 15% to 40% of total lending
- low levels of liquidity means banks and businesses find it hard to get credit
- the presence of a large “shadow” banking sector, accounting for as much as 25% of all banking activity
- banking systems, processes and skills do not meet international standards for anti-money laundering and counter terrorist finance nor for “know your customer” standards
5.9 Exchange rates in Iran
Banking and money transfer problems in Iran are exacerbated by the unpredictable exchange rate for the Iranian rial.
The rial (IRR) has been volatile in recent years and has seen marked depreciation due to high inflation and international sanctions. The rate of depreciation is showing signs of slowing down, however.
There are currently 2 foreign exchange rates used in Iran – a market rate and an official rate, set and maintained by the Central Bank of Iran (CBI).
CBI policy is trying to unify the exchange rates by allowing the official rate to depreciate gradually until it meets the market rate. The annual depreciation of the dollar to rial should not exceed more than 10% per year.
There are indications that a local ‘forwards market’ may be created to allow businesses to reduce risk in the rial exchange rate.
When large sums of foreign capital are transferred in and out of the country, it is conducted by the CBI at the official exchange rate.
Smaller sums of money can be handled in the private exchange market, with transactions conducted at the market rate.
Removing money from Iran through the CBI is by the Iranian securities market law. This allows the CBI to only transfer foreign capital in 4-monthly instalments over the course of one year, rather than a single lump sum.
Capital invested under Iran’s Foreign Investment Protection and Promotion Act can only be removed from the country after a 3-month notice period and only if there are no outstanding fees owed.
Transfer of profits and dividends out of the country are subject to the approval of the Minister of Finance, and only allowed after outstanding fees or taxes are deducted.
5.10 Finance for exporting to Iran
UKEF, the UK’s export credit agency, has reintroduced cover to support UK companies seeking to compete for business in Iran.
Cover is now available on a case-by-case basis in Pounds Sterling and Euros for exports in all sectors, including early priority areas such as aerospace, financial and professional advisory services, infrastructure, technology and oil and gas sectors.
UKEF will also consider applications for direct lending to purchasers of British exports to Iran.
UKEF is only prepared to consider sterling or euro denominated contracts to reduce risks due to continuing US sanctions on Iran.
UKEF can support UK firms to win export contracts provided the transaction meets minimum risk standards.
6. Starting up in Iran
The best approach to starting business in Iran will depend on a company’s circumstances and activity.
Individuals and companies intending to conduct any economic activity in Iran need a ‘commercial card’ which is granted after registering with the:
6.1 Setting up a company in Iran
All commercial entities engaged in activities in Iran must be registered on the commercial register.
Businesses can be established in Iran itself or in one of the many economic free zones.
Non-Iranians can establish:
- a private joint stock company, limited liability company, branch office, or a representative office in Iran.
- joint stock companies (limited by shares) are the most common type of business set up by foreign investors, but company type will depend on the nature and extent of the business
All official company documents must be in Farsi. Any documents that need to be filed with an Iranian court also need to be translated by an official translator and certified by the judiciary, or notarised by the Iranian Embassy in London.
Foreign investors in Iran need to register with the relevant government authorities. These include:
- Iranian Foreign Investment Board
- companies registrar
- Ministry of Cooperatives, Labour and Social Welfare
- local municipality
- Iranian National Tax Administration
You are advised to take legal advice to ensure you’ve identified all requirements relevant to your business operation and location.
7. Legal system in Iran
Iran is an Islamic Republic and its legal system is based on Sharia principles.
It also borrows much from the French commercial code and company law.
Codified areas of business law in Iran include:
- 1990 labour law
- 1990 copyright law and 2009 intellectual property law
- Foreign Investment Law 1956 (regulations enacted in 1999)
7.1 Labour law in Iran
Employment in Iran is governed by the Labour Code of 1990 which applies to both Iranian and foreign employees. The code is broadly similar to employment laws in other Middle Eastern countries. It differs in that resignation requires a month’s notice. However, employees are permitted to change their mind about the resignation within 15 days.
Non-Iranian nationals need immigration permission and work permits to be able to work in Iran. There are strict rules on employment of non-Iranian nationals if Iranian citizens are similarly qualified and able to perform the work in question.
7.2 Foreign investment in Iran
Iran’s foreign investment laws:
- allow 100% share ownership except in a number of industries
- enable a free choice of legal form provided under Iranian Commercial Law
Foreign investment is subject to limitations in 3 sectors:
- nationalised oil and gas sector
- real estate where land ownership is forbidden in certain geographical locations (determined by the Ministry of Interior)
- banking and insurance (unless investment is made offshore)
Foreign Investment Promotion and Protection Act 2002 (FIPPA)
FIPPA protects non-Iranian investors and incentivises foreign investment by:
- protecting the investor throughout their operation in Iran
- guaranteeing privileges to foreign investments, such as an equal treatment standard
- allowing the transfer of capital and dividends out of Iran
- providing for compensation in the case of nationalisation or expropriation
- allowing for easier and faster investment licensing and approvals
- giving access to foreign dispute resolution forums
- assisting foreign investors in their relations with the Iranian authorities
- giving foreign investors the same protections afforded to local investors
Under FIPPA, foreign capital is defined broadly and can be in cash, in kind, or shareholder loans.
FIPPA allows investment across most industries and fields including major infrastructure projects and tends not to restrict:
- the manner, type and volume of investment
- percentage of shareholding or profit
- capital repatriation
- internal relations between the parties
- foreign investment in all sectors open to private sector
Foreign direct investment via FIPPA can be through:
- equity participation in the share capital of Iranian companies
- through contractual arrangements, such as buy-back arrangements or project financing
Indirect investment is permitted in closed areas of the market if the investor does not have an equity stake, but an FIPPA licence is required for protection.
An FIPPA licence also gives privileges relating to visas, residency and work permits.
Foreign investors need a licence from the Organisation for Investment, Economic and Technical Assistance of Iran (OIETAI) first to operate under FIPPA.
Licences are usually issued promptly, if you can demonstrate your business activities are eligible. A business plan may also need to be submitted.
To get an investment licensing permit under FIPPA you must submit a formal application with supporting documentation to the OIETAI.
The OIETAI present the application to the Foreign Investment Board and the relevant ministry. The Foreign Investment Board review normally takes up to 15 days with foreign investors representatives usually invited to take part.
You will be sent a draft licence to review, and if agreeable, the investment will be licence issued.
This process will usually be complete within 60 days.
7.3 Dispute resolution in Iran
Iranian law allows for the freedom of choice of law only in circumstances where the contractual agreement was signed outside of Iran.
If a contract is signed in Iran, Iranian law applies.
If the contract between an Iranian and a foreign national includes an arbitration clause, the law chosen by the contracting parties will be recognised. This includes provisions under business law regulating the import of goods or pharmaceutical products, but also mandatory contractual provisions.
Non-Iranian companies can choose to resolve disputes through:
- the courts of Iran
- the courts of another jurisdiction (if the contract was concluded abroad)
The Iranian legal system is a civil law system, which means that case law does not act as a binding precedent. However, the judgments of the General Assembly of the Supreme Court in respect of similar cases constitute case precedent to be followed by other courts.
7.4 Arbitration in Iran
Under Iranian law, an arbitration clause can be agreed as part of a commercial contract.
Arbitration clause should reference internationally accepted arbitration rules such as those of the (International Chamber of Commerce International Court of Arbitration, the Swiss Chambers Arbitration Institute or the German Institute of Arbitration.
Under the Iranian constitution, the Council of Ministers and the Parliament has to approve the referral of disputes concerning public and governmental parties to arbitration.
A judicial decision has found approval should have been sought before entering into a contract.
While this may not be binding on an international arbitration tribunal, an arbitration award may be unenforceable in Iran.
7.5 Intellectual property (IP) in Iran
Iran is a signatory to the International Convention for the Protection of Industrial Property of the World Intellectual Property Organisation (WIPO) known as the ‘Paris Union’.
The Iranian Industrial Property Office promotes IP protection and encourages accession to international agreements and treaties.
Patents and trademarks in Iran
Patents in Iran are valid from 5 to 20 years. The length of patents is decided by the inventor who pays an annual fee. Patent applications are examined only for the correctness of documents and compliance with patent specifications.
Trademark registrations are effective for 10 years following the date of filing and are renewable. Trademark infringements can be challenged for up to 3 years.
Rejected applications for registration of trademarks and patents can be appealed in the Iranian courts.
Copyright in Iran
Copyright is not regulated under Iranian law. Iran is not a party to the Berne convention for the protection of literary and artistic works.
The law for protection of the rights of authors, composers and artists can be invoked if it has been determined that someone’s work has been published without their permission.
The national law also protects foreign nationals, who create artistic, literary or technical works in the Islamic Republic of Iran.
8. Tax and customs considerations in Iran
8.1 Taxation in Iran
The UK has no double taxation agreement with Iran, which means you may not be able to claim tax relief if taxed in Iran and the UK.
Tax in Iran is calculated through a self-assessment system.
Company profits are taxed at the corporate level in Iran and dividends distributed to shareholders are exempt from tax.
Iranian residents are taxed on worldwide income. Foreign entities are taxed on income derived from sources in Iran or from activities performed in Iran.
A company is resident in Iran if it’s established under the Iranian Commercial Code, or if it is managed from Iran. For tax purposes, the Iranian calendar year, starting 21 March and ending 20 March of the following year is generally used, but a company or branch may use its own accounting year if different. Tax filings in Iran are based on a company’s fiscal year.
All Iranian entities and branches of foreign companies must file an annual corporate income tax return and submit their balance sheet and ‘profit and loss’ account within 4 months of the end of the fiscal year.
Iran has no rules on tax on transactions between connected companies and there are no specific rules about capital gains tax.
Tax registration in Iran
Companies must register with the State Tax Organisation and Social Insurance Organisation for:
- value added tax
- corporate income taxes
- customs related tariffs
- social taxes and employment-related taxes
You must have an economic code (similar to a tax identification code) to operate in Iran. This is either a commercial code for companies registered in Iran or a comprehensive commercial code for foreign companies. This comprehensive commercial code is needed for these companies to let Iranian customers pay them.
Any payment made to a supplier without an economic code will be added back to the profit and loss account of the Iranian entity and no tax deduction will be allowed for the expense.
It’s expected that foreign investors will receive tax breaks under Iran’s sixth 5-year development plan (2016 to 2021).
Value Added Tax (VAT) in Iran
The standard VAT rate in Iran is 9%. VAT rates applied to special goods are:
- 15% on cigarettes and tobacco products
- 30% on gasoline and aircraft fuels
- 11% on fuel oil
17 types of goods and services are VAT exempt including basic food, medicines, agricultural products, financial services, immovable property and handmade carpets.
Corporate tax rate in Iran
The corporate tax rate is 25% and applies to both resident and foreign entities (except insurance enterprises and non-Iranian airline and shipping companies).
Resident entities are assessed on an actual profits basis. Non-resident entities are taxed on a deemed profits basis of 10% to 40%. This means the effective tax rate is 2.5% to 10%).
Withholding taxes in Iran
There is no withholding tax on dividends paid by Iranian companies. Interest paid to a non-resident is subject to a 3% withholding tax. Royalties paid to a non-resident are subject to corporate tax on a deemed profits basis of 10% to 40%.
Iran’s most recent budget removed Iran’s withholding tax on services.
Income tax in Iran
Income tax is levied at progressive rates up to 20%. The rates for the fiscal year to 20 March 2016 were:
- 0% up to IRR 138 million
- 10% on income between IRR 138 million and IRR 966 million
- 20% on income over IRR 966 million
Income tax is levied on salaries, allowances and all types of remuneration.
Non-Iranian nationals are subject to Iranian tax on any income earned in Iran.
Other taxes in Iran
Iran imposes an environmental tax amounting to 1% of the sales on contaminating production units, including refineries and petrochemical factories.
Iran also levies a car transfer tax and excise on intra-city transport services and motor vehicles.
Tax incentives in Iran
Iran offers incentives for manufacturing and mining companies, which apply automatically if the specified conditions are met.
Manufacturing companies set up in special economic zones can qualify for a tax exemption (of 80% or 100%) for up to 10 years.
Companies that are registered and licensed to operate in a free trade zone (FTZ) are exempt from corporate tax for 15 years on income derived from their activity in the FTZ. Income derived from operations carried out outside the FTZ is taxable on the same basis as non-FTZ companies.
8.2 Customs in Iran
Duty rates in Iran can be as high as 75%.
The customs value of imported goods is generally calculated on the basis of the cost, insurance and freight value.
The Islamic Republic of Iran’s Customs Administration is responsible for customs laws and regulations.
Iran has observer status at the World Trade Organization (WTO) and is a signatory to international treaties including:
- the customs convention on the ATA carnet for the temporary admission of goods
- the convention on the international transport of goods under cover of TIR carnets
- the harmonised system convention
Iran’s main customs legislation comprises:
- the export-import regulation act
- the executive ordinance to the export-import regulation act
- the regulations on exports, imports and customs in the free trade industrial zones
Customs regulations in Iran
Importers must register with the Ministry of Economic Affairs and Finance for customs duty and tax payments and must also register online with the Trade Promotion Organisation of Iran. Iranian customs regulations distinguish 3 categories of goods in terms of import procedures:
- permissible goods which are given a licence or approval provided import criteria are met
- conditional or restricted goods requiring a licence or authorisation such as foodstuffs and telecommunications equipment
- prohibited goods which are forbidden under Islamic Sharia law or other Iranian law, for example alcoholic drinks
Restrictions and conditions can also apply to imports that are similar to locally manufactured goods. Storing goods in bonded warehouses is allowed in Iran, for a limited period and as long as applicable customs procedures are followed.
Free trade zones (FTZ) in Iran
Goods imports from outside Iran into its FTZs are not subject to import duties provided they’re sold within the FTZ or re-exported from Iran.
Imports of items such as construction materials, production equipment, spare parts and tools are duty free provided they are used for production or construction within the FTZ.
Goods manufactured in the FTZs are subject to customs duties when imported into mainland Iran in proportion to the amount of non-Iranian raw materials and components used in their production.
You can find more about import tariffs in the Market Access Database.
9. Entry requirements for doing business in Iran
The Iranian government doesn’t recognise dual nationality. This means that if you travel to Iran as a dual national and you encounter difficulties or are detained, the British Embassy will be unable to offer consular assistance or get access to you.
You need a visa to visit Iran. Iranian visas:
- are denied to travellers with Israeli stamps in their passport
- are complex to acquire with waiting times of months
- are only available to female applicants wearing a hijab (a scarf covering the hair) in passport application photos
- can complicate entry into other countries such as the US and Saudi Arabia
9.1 Types of visa for Iran
Business trips can be made to Iran using:
- a single, double, or multiple-entry visa for business visitors for non-fee earning trips of up to a month
- an entry visa for business visitors with right to work
- an investor visa of up to 3 years, for employees of companies investing in Iran under FIPPA
Iran business visitor entry visa
To get a business visitor visa for Iran, an Iranian-registered business must sponsor your application. It must provide a letter of invitation, or submit the application directly to the Iranian Ministry of Foreign Affairs on your behalf.
The sponsor’s letter, application form and personal documents must then be sent to the Iranian Embassy.
If your visa application is approved you should receive a visa permit number by email.
You will then need to visit the Iranian Embassy or Consulate for passport visa endorsement, which may include an interview and having your fingerprints taken.
Iran business entry visa with right to work
To work in Iran you need an entry visa that includes the right to engage in specific work and a valid work permit under Article 120 of the Iran Labour Law.
This type of visa is valid for 3 months starting from the date of notification to the Ministry of Foreign Affairs (in practice the work permit should be obtained within a month).
A work permit is available for a maximum period of 1 year, but is extendable every year.
If recruitment of a non-Iranian national is deemed urgent, an emergency provisional work permit can be issued for up to 3 months.
To get a visa for Iran, the Iranian employer will need to apply for it for you from the Iranian Department for Employment of Expatriates of the Ministry of Labour, Cooperatives and Social Welfare.
The company’s application must include a copy of the announcement of the company’s establishment or its recent changes published in the Official Gazette (in Persian) to substantiate the request for recruiting extra non-Iranian employees.
If approved, the visa is sent to the consular section of the Iranian Ministry of Foreign Affairs or its representative office.
You must then visit the Iranian embassy to receive the entry stamp in your passport.
To get a work permit for Iran your employer must submit an application to the local Iranian Ministry of Cooperatives, Labour and Social Welfare branch up to a month of the date of your arrival in Iran. It’s recommended that this is submitted within 7 days of your arrival.
If you are staying in Iran for more than 6 months, your application must include your academic or professional certification approved by the Embassy of the Islamic Republic of Iran in the UK.
Some steps can be bypassed, but this requires approval of the Technical Board for Employment of Foreign Citizens and the ratification of the Islamic Consultative Assembly (Iran’s parliament).
Iranian investor visas
If you are investing USD 300,000 or more under FIPPA, you may be eligible for an investor visa. To get a visa for Iran as an investor you must arrange for the OIETAI to approach the Iranian Ministry of Foreign Affairs to confirm your status as an investor and to request visas, residence permits and work permits for you and any immediate family members.
If approved, the Ministry of Foreign Affairs will authorise the Iranian embassy in the UK to issue a single-entry visa or a 3-year multi-entry visa with a 3-month residence permit automatically granted upon each entry into Iran.
To get a 3-year residence permit, you will need to submit the OIETAI’s official confirmation of the coverage of the investment under FIPPA.
The Iranian Ministry of Labour, Cooperatives and Social Welfare should then issue a work permit.
The investor residence permit means that you will not need entry and exit visas for traveling to or from Iran.
9.2 Work permit rules in Iran
Work permits are only granted to foreign nationals if:
- there are no qualified Iranian citizens able to perform the role
- the foreign national has sufficient skills and expertise for the role
- the role can be filled by an Iranian after skills transfer and training
9.3 Residence permits
If you’re planning on staying in Iran for more than 3 months you must obtain a residence permit from Iran’s Central Police Administration.
If you are not an investor, a residence permit will only be issued or renewed if you have a valid work permit. Residence permits only remain valid the time a work permit is valid.
You must obtain an exit visa if you leave Iran after a stay of longer than 3 months. When applying for an exit visa you will need to show proof that all taxes have been paid to the Ministry of Economic Affairs and Finance.
9.4 Advice on travelling to Iran
If you are travelling to Iran for business, check the Foreign and Commonwealth Office (FCO) travel advice first.
10. Contacts in Iran
In the first instance, companies should contact their local International Trade Adviser.
Contact the DIT team in Iran.