Opportunities and Incentives in Trade-Industrial Free Zones of Iran
Establishing free-trade industrial zones in Iran, hereinafter referred to as TIFZs, has been used as a vehicle to explore economic power. The TIFZ is regarded as a tool that effectively generates a broad market base that brings about diversity and also attracts foreign investment in Iran. The incentive for the establishment of TIFZs in Iran arose back to 1989 when the country was in need to reconstruct the country’s economy. The first step towards this goal was the implementation of the first Five-Year Economic, Social and Cultural Development Plan. Via the implementation of this plan, certain areas were elected to be free trade areas. The purpose of this was to embrace the concept of a free market, promote non-oil exports, and finally by these means, attract foreign investment. At the present, there are seven TIFZs established in Iran and they are the following:
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- Kish Trade-Industrial Free Zone;
- Qeshm Trade-Industrial Free Zone;
- Chabahar Trade-Industrial Free Zone;
- Aras Trade-Industrial Free Zone;
- Anzali Trade-Industrial Free Zone;
- Makou Trade-Industrial Free Zone;
- Arvand Trade-Industrial Free Zone.
What makes Iran’s TIFZs distinguishable is the geographical location of these zones. The TIFZs that currently exist in Iran all have direct access to international waterways, Kish and Qeshm Islands being proof of this since they are located in the Persian Gulf. Chahbahar has direct access to the Sea of Oman and Anzali has direct access to the Caspian Sea. When contemplating investment in Iran, all these factors are an enabler as foreign investors are put close to regional markets. Having access to these markets also means that the investors will have easy access to the goods and commodities of the neighboring markets such as those of central Asia and the UAE states.
The TIFZs are all administered by an authority formed exclusively for each zone. This authority is organized as a company and possesses its autonomous legal status. The TIFZs have their own special set of laws and by-laws and are thus, therefore, regulated by these. The regulating law for these areas is the “Administration of Free-Trade Industrial Zones of the Islamic Republic of Iran Act”. All matters about import, export, investment, insurance, banking, and labor and employment are covered by the above-mentioned law. What this means is that TIFZs are therefore in the matters related to matters such as issuance of visa, entry, and residence of foreign nationals, monetary and banking operating, and establishing a company excluded from the laws of the mainland in those areas.
The exclusion from the customs authorities is perhaps the biggest advantage attached to TIFZs. This exclusion capacitates the freedom of inflow and outflow of goods and commodities for the TIFZs. However, there are plenty more advantages that come with investing in TIFZs chief among them are:
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- Tax exemption for the period of 20 years from the date of the commencement of the operation mentioned in the licenses for all economic activities;
- Joint ventures do not hold a limit on investment nor shareholding this shareholding, thus resulting in the opportunity of 100% foreign ownership;
- Legal guarantees and protection for foreign investment;
- No limitations on the transfer of foreign currency to other Iranian Free Zones or other countries;
- Freedom of inflow and outflow of capital and expatriation of profits generated by economic activities in TIFZs;
- No requirement for entry visa for foreign nationals and easy procedures for issuance of residence permits;
- Facilitated regulation on labor relations, employment, and social security;
- Transfer of part manufactured goods to the mainland without paying customs duties;
- No requirement for payment of customs duties on imports from abroad and vice versa; and
- Utilization of raw materials, oil, and gas as feedstock and fuel for all industrial activities.
Bayan Emrooz Law Firm renders services to foreign and Iranian natural and legal persons in the field of investment in Trade-Industrial Free Zones of Iran, including consulting, for entrance to the zone, registration of a company, branch, and representative office, labor and tax laws and residency in the zone. Having an experienced and specialized legal staff, Bayan Emrooz is ready to provide the needed legal services in respect to investment and conducting business in Iranian Trade-Industrial Free Zones.
