Opening a Branch in Iran

What Does The Foreign Company Branch Mean?

A branch is a local unit of the foreign company in Iran, which is directly responsible for conducting activities of the foreign company locally. In accordance to the relevant regulation, branch shall act in Iran in the name and with the responsibility of the foreign company

The Possibility of Establishing a Branch in Iran:

On May 2, 1999 an Executive By-Laws was approved by the Iranian Council of Ministers that allows foreign companies to open and register branch in Iran.

Similar to registration of a company in Iran, opening a branch by foreign company in Iran also fall under the authority of the Corporate Registration Bureau (CRB).

According to Article 1 of the By-Laws, the companies that are considered as legal companies in their countries of origin i.e. have been formed on the basis of the laws and regulations of those countries and are legal entities, may set up their branch.

The Activities Permitted To Be Carried Out by a Branch in Iran:

It must be noted that the branch of a foreign company in Iran is only allowed to conduct the following activities:

• Offering after sales services of foreign products/services;
• Operating contracts signed between Iranians and foreign companies;
• Conducting investigations and providing the pre-requisites for foreign investment in Iran;
• Cooperating with Iranian technical/engineering companies to do projects in other countries.
• Increasing none-petroleum exports of Iran;
• Rendering technical/engineering services and transfer of technology;
• Engaging in activities that have been authorized by legally competent authorities in Iran such as rendering services in transportation, insurance/ inspection of goods, banking, marketing and etc.

Moreover, branch of foreign company in Iran must be managed by one or more than one natural person residing in Iran.

Additionally, registered branches of foreign companies in Iran shall each year submit the annually report of the foreign company including audited financial reports.

Required Documents for Opening a Branch in Iran:

• Written request of the foreign company;
• Legalized and certified Certificate on Registration of foreign company;
• Legalized and certified Articles of Association of foreign company;
• Legalized and certified latest changes of foreign company;
• Legalized and certified latest financial report of foreign company;
• A report containing the followings:
• Information regarding activity of foreign company;
• reasons and requirements for having a branch in Iran;
• verifying type and scope of authorization of the branch for its operation and its place of activity in Iran;
• Estimation on needed local and foreign staff;
• The resources and way of financing the branch for its activity in Iran (both in hard currencies and IRR).
• Providing a Commitment Letter subject to Article 6 of the By-Law, based on which it is committed that if the license of the branch operation would be cancelled by relative authority, the branch would be dissolved within specific period notified CRB;
• Certified copy of the passport and its translation, if a foreign natural person is selected as the manager;
• License from relevant authority in case of requirement (depending on subject of activity of branch).

All the above mentioned documents prepared in the foreign country, shall be confirmed by that country’s relevant authorities (such as Company Registration Bureau), Ministry of Foreign Affairs and Embassy or Representative of Islamic Republic of Iran in that country. After being officially translated into Persian and certified in Iran, the original and translation thereto shall be submitted to the Company Registration Bureau.

Furthermore, it may come to a time that the foreign company decides to dissolve its branch in Iran. To this end, the foreign company’s decision maker organ must prepare a written request by and submit it to the CRB. Moreover, the foreign company must also designate a person as the branch liquidator.

Applicable Tax to the Branch of Foreign Companies in Iran

As a rule, income obtained by branches and of foreign companies in Iran is subject to taxation. The tax rate on income of all legal persons is 25 per cent according to the Iranian Direct Tax. All taxes paid at an earlier point by the branch will be detracted from this sum. If any other fees, except taxes, are required by law to be paid, the amount of tax is calculated after subtracting such amounts from taxable income.

Branches that are not licensed to conduct transactions and exclusively deal with market research for their mother company and receive payments from mother companies to cover their costs are not taxed for such payments received from mother companies.