Foreign Investment Promotion and Protection Act (FIPPA) Features and Advantages of FIPPA

• There is no restriction on the percentage of foreign shareholding
• The possibility of registering an Iranian company with %100 foreign capital.
• Transfer of principal capital, dividend and the profits gained through the utilization of capital in the form of foreign currency or goods.
• Enjoyment of same and equal treatment as accorded to domestic investors by foreign investors.
• The possibility of investment by foreign natural and juridical persons and Iranians living abroad.
• Allowing investing in all areas which are permitted to the private sector.
• Granting protection coverage to different foreign investment schemes.
• Quick approval of the Foreign Investment Application
• Issuing a three-year residence Permit for Foreign Investors, directors, experts as well as their immediate family members

Risks covered under FIPPA:

• Expropriation and Nationalization
• Unlimited transfer of capital and dividend

• Guarantee of the Purchase of the goods and services resulting from investment projects in BOT investment schemes where the government acts as the sole purchaser

Tax Exemption

1.Agricultural

The income derived from all agriculture and horticulture activities, animal rearing, fish farming, bee- keeping, poultry husbandry, fishing, sericulture, revival of pastures and forests, is exempt from payment of tax. All the natural and juridical persons (Iranian and Foreign) can enjoy above mentioned exemption at the outset of their activities.

2.Salary Income exemption

50% of the salary tax of the employees working in less developed regions, as per the list prepared by the State Organization of Management and Planning shall be spared. All natural persons (Iranian and foreign) working in the less developed regions can enjoy tax exemption until their workplace is included in the above-mentioned list.

3.Sport, Services and Education Activities Expemtion

The income derived from education  and  training  activities  by non-profit schools, whether elementary, junior or senior secondary, technical or vocational, or by non-profit universities and higher education institutions, as well as the income derived from taking care of mental and physical invalids by  the institution engaged in such activities, shall be exempt  from tax, provided the aforesaid institution having permission from the respective authorities.

The income of sporting institutions and clubs having permission from the physical training organizations shall also be exempt from tax, if it is derived purely from sport activities.

4.Cultural Activities Exemption

All cultural, artistic, and journalistic activities licensed by Iran’s Islamic Culture and Guidance Ministry are tax-free. All the natural and juridical persons (Iranian and Foreign) can enjoy the said exemption by observing the regulations of note 3 of the above article.

5.Cooperative Exemption

100% of the income derived from cooperative companies formed by villagers, tribesmen, farmers, hunters, workers, clerks and students are tax-free.

6.Export Exemption

1. 100 % of income derived from Export of Services, Non-oil goods, Agricultural Products and 20% of income derived from Export of Non – Processed goods
2. 100% of the income derived from exportation of different goods which have been, or will be, imported to Iran on  transit, and are exported without  making  any  changes  in  the substance there of, or doing any works on them, shall be Exempt from Tax.

7.Handicraft Exemption

• The revenues of handicraft and carpet weaving workshops and the relevant cooperative firms and production unions are tax-free.
•  All real and juridical persons can enjoy above mentioned exemption by observing the regulation

8.Production Activities Tax Exemption

Income Tax with Rate of 0.0%	Duration of Exemption
Industry, Mining & Services (Hospital & Hotels)	5 Years
Industry, Mining & Services (Hospital & Hotels) in Industrial Parks and Special Economic Zones.	7 Years
Industry, Mining & Services (Hospital & Hotels) in Less Developed Areas	10 Years
Industry, Mining & Services (Hospital & Hotels) in Less Developed Areas located at Industrial Parks and Special Economic Zones	13 Years
100% of Income Derived from Agricultural Activities	Perpetual
100 % of Income Derived from Export of Services, Non-oil goods, Agricultural Products and 20% of Income Derived from Export of Non – Processed goods	Perpetual

In companies with more than 50 employees, in case of increasing the employment volume up to 50% in comparison to last year, one-year exemption will be added to the duration of exemptions period (mentioned in above schedule).

In the case that foreign companies with reliable Brand produce goods using production capacity of Iranian companies and export at least 20% of total production, can enjoy 50% on Tax Rate for the income derived from sales of products (it means total tax rate will be12.5 % instead of 25%) after the end of above duration.

Costum Exemption

• Exemption of production line machineries and equipment from payment of customs tariffs(first- hand machineries)

Guide on Iranian Taxation System for Foreign Investors

Similar Taxation for Iranian and Foreign Investors

Foreign investors in Iran enjoy the same supports and privileges that are offered to the Iranian investors. In this connection, the Direct Taxation Law passed in 1987 and the following amendments have considered no discrimination in taxation of domestic and foreign investors. This means both Iranian and foreign investors pay the same amount of taxes. Tax exemptions and discounts are also equally granted to domestic and foreign investors

The Direct Taxation Law, passed in 1987, is regarded as the core of the taxation system in the Islamic Republic of Iran. The law was extensively reviewed and reformed in 2015 to be in tandem with the ongoing economic conditions in the country. Production and investment promotion in line with the economic development of the country was one major factor behind the need for amendment of the law (supporting the newly established manufacturing and mineral units according to Article 132 and investment promotion according to article 138).

Taxable Real and Legal Entities According to Direct Taxation Law

1. All owners, whether real or legal, for their properties inside Iran according to the taxation rules under Chapter 2 of the Direct Taxation Law
2. Any real person residing in Iran for the incomes earned inside and outside the country
3. Any Iranian real person residing abroad for all the income he she makes in Iran
4. Any Iranian legal entity for the incomes earned inside or outside the country
5. Any non-Iranian real or legal entities for the income earned in Iran and also for the income gained through delegation of authority, dealership, technical and educational assistance or movie contrast 

Types of Taxes in Direct Taxation Law

a: Property Tax

• Inheritance Tax
• Stamp duty (It is a type of tax levied on some documents such as checks, bills of exchange, promissory notes, negotiable instruments, stocks and shares, … according to Articles 44 through 51 of Direct Taxation Law)

b: Income tax

• Property income Tax
• Agricultural Income Tax
• Salary Income Tax
• Self-employment Tax (the type of income a person earns in Iran through self-employment)
• Corporate income tax (special for legal entities)

Since manufacturing units and economic enterprises are usually active as legal entities, we will hereunder focus on rules and regulations for taxation of legal entities income and their exemptions

Legal Entity Income Tax

The aggregate income of companies, and also the income from the profit-making activities of other juridical persons, derived from different sources in Iran or abroad, less the losses resulting from non-exempt sources and minus the prescribed exemptions, shall be taxed at the flat rate of 25%, except the cases for which separate rates are provided under the present Direct Taxation Law. Persons, whether legal or real, will not be taxable for the stocks or the dividends of their shares in other capital corporations.

The Direct Taxation Law and other pertinent legislations have considered certain exemptions for the legal entities as the following:

Factory owners and legal entities are obligated to, even within the exemption period, submit declaration and profit and loss balance sheets, provided from their official statutory books, maximum four months after their tax year (March through February in Iran) along with the list of partners and shareholders.

Highlights of Tax Holidays

Industry, Mining & Services (Hospital & Hotels)     5 years

 

Industry, Mining & Services (Hospital & Hotels) in Industrial Parks and Special Economic Zones     7 years

Industry, Mining & Services (Hospital & Hotels) in Less Developed Areas     10 years

 

Industry, Mining & Services (Hospital & Hotels) in Less Developed Areas located at Industrial Parks and Special Economic Zones     13 years

 

100% of  Income  derived  from Agricultural Activities   perpetual

 

100 % of Income derived from Export   of Services, Non-oil goods, Agricultural Products and 20% of Income derived from Export of Non – Processed goods perpetual