Foreign investment service center
The Center for Foreign Investment Services (the Center) was established at the premises of the Organization for Investment, Economic and Technical Assistance of Iran, pursuant to Article 7 of “The Foreign Investment Promotion and Protection Act” of 2002. The Center is intended to provide an efficient organization for streamlining and expediting the affairs related to foreign investment undertakings in Iran. For this purpose, fully authorized liaison representatives from relevant executive agencies including the Ministry of Foreign Affairs, the Ministry of Commerce, the Ministry of Labor and Social Affairs, the State Organization for Tax Affairs, the Customs of the Islamic Republic of Iran, the Central Bank, the General Directorate for Registration of Companies and Intellectual Property and the Organization for Protection of the Environment have been stationed at the Center. These representatives will assist foreign investors by ensuring efficient execution of the processing and services entrusted to their relevant agencies in connection with foreign investment projects.
Dissemination of information and provision of necessary guidance to foreign investors concerning investment in Iran. Necessary coordination concerning the issues related to foreign investment including issuance of the declaration of establishment, the environment protection license, the permits for subscriptions relation to water, electricity, fuel and telephone, the license foe exploration and exploitation of mines, etc. from the relevant authorities, prior to the issuance of the investment license. Necessary coordination for the securing of entry visa, residence and employment permits for foreign nationals involved in foreign investment projects. Necessary coordination concerning issues related to foreign investments subsequent to the issuance of the investment license including registration of joint venture company, registration of order for machinery and equipment’s import and issues related to importation and repatriation of capital, customs and tax affairs, etc.
– Coordination among various official agencies in connection with requests and applications made by projects involving foreign investment.
– General supervision concerning the fulfillment of decisions surrounding foreign investment projects.
– Conduct of affairs related to foreign investment by the center has
been organized in a manner that foreign investors can easily lay hand on all required information and services without any need for further referral to a host of different executive bodies. In fact, services rendered by the center are not limited to prior- investment stages; foreign investors may, at any time and any stage ever after, refer to the center and benefit from its services. The performance of the center since its establishment proves that the establishment of the center is an effective step toward expediting the affairs of foreign investment undertakings. It is expected that further development of relations between the Center and foreign investors will increasingly enhance the efficiency of the center in carrying out its assigned duties and responsibilities.
Documents Required by the OIETAl for the Issuance of foreign investment licensing procedure
1. Application form
2. Establishment license / Primary agreement / Preliminary agreement of the pertinent Iranian organization
3. Official letter of the foreign investor to submit to the OIETAl
4. The foreign investors background including a brief history of the company, the year of establishment, area of activities in case of foreign investor is a natural person, a photocopy of passport and resume will be provided.
5. A list of machinery, equipment and CKD part which may be imported into the country as a part of the foreign investor’s capital (if available).
6. In case that part of the foreign investor’s share is in the form of technical know–how, a draft of the contract outlining the conditions of the technology transfer.
7. Any further useful information.
Laws & Rules
Legal system of Iran
The Iranian legal system is a civil law system which is founded on Islamic jurisprudence. The Iranian Civil Code, which comprises of three volumes and 1,335 articles, was enacted between 1928 and 1935 and only minor amendments have since been made to its provisions. The Iranian courts refer to the Civil Code as the main source of law for determining the legal and commercial rights of natural and legal persons. The awards issued by the Iranian courts are not binding as precedent on other courts residing over cases with similar facts. However, in exceptional cases the decisions of the General Board of the Supreme Court concerning similar cases constitute case precedent to be followed by other courts. The Civil Procedure Code of the Public and Revolutionary Courts, which was approved in 2000, set forth the rules and procedures governing adjudication of disputes by the courts of law. The Civil Procedure Code envisages the rules and procedures concerning proceedings which must be observed by the courts, including the Public, Revolutionary, Appeal and Supreme Court.
The Iranian legal profession distinguishes between legal advisers and attorneys at law. Generally, legal advisers provide clients with legal advice, but do not have rights of audience before the Iranian courts. However, legal advisers to government entities are the only exception. Legal advisers must possess a law degree, but do not need to hold any professional qualifications or be licensed by the Iranian Bar Association.
Attorneys are licensed by the Bar Association are able to appear before all courts in Iran, regardless of their experience. There are exams and training periods to complete before an attorney is licensed by the Bar Association. There is a separate qualification route for attorneys to be licensed by the judiciary, rather than the Bar Association. Judiciary attorneys are limited in the types of dispute on which they may act and the courts before which they can appear.
Court system & dispute resolution
The courts of Iran are mostly classified according to their area of jurisdiction, civil or criminal and according to the seriousness of the crime or the litigation. In an Iranian court the judge acts as prosecutor, jury and arbiter; the system is a form of the inquisitorial system. However, according to Article 168 of Iran’s constitution, in certain cases involving the media a jury is allowed to be the arbiter. The judge holds absolute power and all judges are certified under Islamic law and most, but not all are members of the ruling clergy.
Courts of Iran
Courts of First Instance (public courts with jurisdiction over civil and the majority of criminal cases);
The Supreme Court;
The growth in volume of trade and investment in Iran over the recent years, in particular the energy sector, has laid the foundation for the creation of TRAC, which is the first Iranian arbitration institution to provide assistance and support to domestic and international arbitration tribunals. A growing number of Iranian businesses when concluding contracts with foreign companies refer their commercial disputes to arbitral tribunals constituted in accordance with the arbitration rules of TRAC or other ad hoc arbitration rules as agreed between the parties.
Iran is party to more than 50 Bilateral Investment Treaties (BITs), with capital- exporting countries which provide institutional rules of the International Chamber of Commerce (ICC) in Paris or ad hoc arbitration rules of UNCITRAL for settlement of disputes arising out of investment between foreign investors and the Iranian government or state entities.
Major dispute resolution institutions of Iran
The Iranian Chamber of Commerce, Industries and Mines established the Arbitration Tribunal pursuant to a law adopted by the parliament in 2000.
The Tehran Regional Arbitration Centre (TRAC), which was established in 2004.
Iran Customs Administration is a government organization under supervision of Ministry of Economic Affairs and Finance which plays vital role as protector of the country’s economic borders and coordinator at entry and exit gates of the country and is responsible for executing customs Laws & Regulations related to export, import, transit and collecting duties and customs taxes and presenting technical requirements and facilitating the trade
in the country.
Trade laws of Iran & status of goods
Allowed goods do not require permission to be cleared from customs
Conditional goods require permission (s) to be cleared from customs
Prohibited goods illegal by the laws of Islamic Republic of Iran The general guideline of the custom laws of Iran does not prohibit any other goods from entering the country other than the list below but usually certain permits and licenses are required in order to clear your goods from customs.
Weapons, ammunition and explosive goods;
Magazines, photos, films and snaps and those goods, which are against religious and national dignity of the country
Any type of writings which are against the official religion of the country and /or disturbing discipline and public purity and national dignity.
Those types of goods which have legitimate and legal prohibition and /or their import and export have not been allowed according to the customs tariff table or special rules.
The import of all importable commodities by the governmental or non- governmental importers except in following cases will be subject to registration and receiving import certificate from the related Ministries upon observing other stipulated rules and regulations.
Trade certificate is a document for import or export of products. Trade certificates are issued by the Chamber of Commerce, Industries, Mines and Agriculture in Tehran or other provinces for the qualified applicants (whether Iranian or non- Iranian real and legal entities) for one- year period.
The import before export of raw materials and goods needed for manufacturing, finishing, preparation and packaging of export commodities relevant to Article 12 of the Export/ Import Rules and Regulations, passed on Sept. 26, 1993. See more and detail: www.iranbusinesstime.com
There is a minimum national wage applicable to each sector of activity fixed bythe SupremeLabor Council which is revised annually. The comprehensive Labor Law covers all labor relations in Iran, including hiring of local and foreign staff. The Labor Law provides a very broad and inclusive definition of the individuals it covers and written, oral, temporary and indefinite employment contracts are all recognized.
The Iranian Labor Law is very employee- friendly and makes it extremely difficult to lay off staff. Employing personnel on consecutive six- month contracts is illegal, as is dismissing staff without proof of a serious offense. Labor disputes are settled by a special labor council, which usually rules in favor of the employee. The Labor Law provides the minimum standards an employer must adhere to when forming an employment relationship. The minimum age for workers in Iran is 15 years.
Provisions of employment contract
To have a valid contract concluded under the law, the following provisions must be included:
1. Type of work, vocation or duty that must be undertaken by the worker
2. Basic compensation and supplements thereto
3. Working hours, holidays and leaves
4. Place of performance of duties
5. Probationary period, if any
6. Date of conclusion of contract
7. Duration of employment
8. Any other terms and conditions required according to nature of employment.The employer may require the employee to be subject to a probationary period. However, the probation time may not exceed one month for unskilled workers and three months for skilled and professional workers. During the probation period, either party may immediately terminate the employment relationship without cause or payment of severance pay. The only caveat being that if the employer terminates the relationship, he must pay the employee for the entire duration of the probation period.
Suspension of employment contract
The fact that the employment contract can be suspended by an employee under certain conditions presents yet another challenge to employers. What this allows is suspension of the employment contract under the following conditions:
1. The period of military service (active, contingency and reserve), as well as voluntary enlistment during conflicts. This period shall be considered part of the employee’s service record at place of employment
2. The closure of a workshop or parts thereof due to force majeure
3. Educational leave for up to four years
4. The period of detention that does not lead to conviction Once the conditions giving rise to the suspension of the contract are removed, the employer must allow for return of the employee to work. If the position is filled or eliminated, the employer is obligated to provide a similar position for the employee. Failure to do the above is considered wrongful discharge and subject to legal action.
Termination of employment contract
The Law allows for termination of the employment contract only under the following instances:
1. Death of employee
2. Retirement of employee
3. Total disability of employee
4. Expiration of the duration of the employment contract
5. Conclusion of work in task specific contracts
6. Resignation of the employee The employer is bound to pay benefits under all of the above scenarios according to the years of service.
Dismissal of an employee
An employee may only be dismissed upon approval of the Islamic Labor Council or the Labor Discretionary Board. Grounds for dismissal include an employee’s neglect in carrying out his/her duties or violation of disciplinary by- laws of the employer. The employer must have provided written prior notice of the employee’s violations. If the board is not convinced that the employee’s dismissal is justified, the employer must reinstate the employee. Once an employee is dismissed, the employer is obligated to provide the legal severance package.
Severance & termination benefits
The Law mandates the following compensation for terminated, disabled and suspended employee:
1. Suspended Employee – Where an employee is suspended without cause the employer must reinstate the employee and pay for all damages and compensation resulted from the wrongful suspension.
2. Terminated Employee – An employer is under legal obligation to provide thirty (30) days salary for every year of service for employees made redundant or retired.
3. Disabled Employee – The employer must pay 30 days salary for every year of service. Moreover, if disability of an employee is due to working conditions, the employer must pay 60 days salary for every year of employee’s service period.
Working hours & overtime
The workweek in Iran is based on a 44- hour week. Typically, employees work Saturday through Wednesday (8 hours per day) and a half a day on Thursday (4 hours). Any hours worked beyond these will entitle the employee to overtime. The Law mandates a payment of 40% above the hourly wage to employees for any accrued overtime. The employee must consent to overtime work.
Holidays & leave
Employees are entitled to leave on all official state holidays (approximately 22 days a year) and Fridays. Any employee working during these holidays will be entitled to overtime pay. Additionally, employees are entitled to one- month holiday per annum. The annual leave for those employees engaged in hard and hazardous employment shall be five weeks per year. Employees are entitled to save up to 9 days of their annual leave. In case of termination, disability or redundancies, employees must be compensated for any accrued leave. Finally, employees are entitled to 3 days of paid vacation for marriage or death of a spouse, father, mother or child.
Women employees are entitled to 180 days of maternity leave. The employee’s salary during maternity leave will be paid according to the provisions of the Social Security Act. Maternity leave must be considered part of an employee’s service record. Employers must provide returning employees with the same position.
Health care & Social protection
The Iranian constitution entitles Iranians to basic health care and most receive subsidized prescription drugs and vaccination programs. An extensive network of public clinics offers basic care at low cost and general and specialty hospitals operated by the Ministry of Health provide higher levels of care. In most large cities, well- to- do people use private clinics and hospitals that charge high fees. Specialized medical facilities are concentrated in urban areas, but rural communities have relatively good access to primary care physicians at clinics in villages, where the government- sponsored primary health care system has raised the level of health education and prenatal care since the late 1990s. Iran has a comprehensive social protection system with some 28 social insurance, social assistance and disaster relief programs benefiting large segments of the population. These programs include training and job- search assistance, health and unemployment insurance, disability, old- age and survivorship pensions and in kind- or in- kind transfers including subsidies (e.g., housing, food, energy), rehabilitation and other social services (e.g. long term care services for the elderly) and even marriage and burial assistance.
Employer paid – social insurance contributions is 23% (gross salaries)
Employee paid – social insurance contributions is 7% (gross salaries)
Employment of foreign nationals in Iran
The Law forbids employment of foreign nationals without a proper work permit. Diplomats, United Nations employees and foreign press reporters are exempt from this requirement. A work permit to a foreign national will be issued only if the following conditions are met:
1. Lack of expertise among Iranian nationals.
2. The foreign national being qualified for the position.
3. The expertise of the foreign national will be used for training of and later replacement by, Iranian individuals.
Work permits will be issued, renewed or extended for a maximum period of one year. Moreover, no exit visa will be granted to the foreign national unless the national has paid all due taxes, duties, etc.
Foreign nationals are prohibited from working in Iran unless they receive work and employment permits (even if they are supposed to receive wage and salary outside the Iranian territory). The work permit serves as the employment license for the foreign nationals in Iran.
The work permit for the employment of foreign nationals in Iran is issued by the “Department General for Employment of Foreign Nationals” (also called Department for Employment of Expatriates) of the Ministry of Cooperatives, Labor and Social Welfare upon a request by Iranian employers. In provincial capitals it is issued by the Foreign Citizens Divisions of the Department General of Cooperatives, Labor and Social Welfare. (The general procedure for admission of foreign investment has been brought separately in the following part).
The Iranian employers are obligated to seek the permission of the Department General for Employment of Foreign Nationals before concluding any contract that may lead to the employment of foreign citizens in Iran. The rules and regulations for acquiring work permit for the foreign nationals are available in the Labor Law of the Islamic Republic of Iran, ratified in 1990 (articles 120 through 129 and executive bylaw of Article 129). Although due to abundance of educated job- seekers in the country and for the purpose of reducing unemployment rate of the educated and skilled job- seekers the Technical Board for Employment of Foreign Nationals has strict rules and regulations (stipulated in Article 121 of Labor Law) for issuance of work permits. The Foreign Investment Promotion and Protection Act (FIPPA), passed in 2002, has considered promising provisions for issuance of work permits for foreign investors, managers and experts in relation with the investments under FIPPA.
Validity period of work permits
The work permits of foreign nationals is issued, extended or renewed for a period of one year
Extension of work permits
Upon expiry of the work permit, if the Iranian employer still needs the specialty of expatriates, he/she can apply for the extension of the work permit of his foreign laborer or expert. The application is sent to the Technical Board for Employment and upon approval the permit is extended for a period of one year.
Renewal of work permit
Foreign nationals with valid work permits, whose contracts with employer become null and void for any reason, will be subject to renewal of work permit after changing the employer. The renewal of work permit – upon the change in employer or the type of work – will be carried out by the responsible divisions of the Ministry of Cooperatives, Labor and Social Welfare after the approval of the Technical Board for Employment of Foreign Nationals.
Taxable income of foreign persons
Taxable income of foreign natural and legal persons abroad for studying income in Iran or from Iran shall be determined as follows:
Activity type Tax rate (%)
Contract operation and technical services in Iran includes buildings and road affairs, development, utilization, supervision, providing building and installation, planning and technical calculations 20
Contracting and technical services, exploration, development and utilization in upstream hydrocarbon fields. 15
Contract for equipment, in the case that equipment price would not be identified separately from other items listed contracts 10
Carrying cargo and passenger from Iran to abroad. 20
Railway, road fleet, aviation and maritime activities in Iran 18
Provision of training and technical assistance 15
Revenue from investment operations and other economic activities except the mentioned items. 20
Medical diagnostic and treatment services 30
Other services 30