Ground Work

Iran is indeed entering a new era with the implementation of the nuclear deal and the relief of some sanctions. The news has been celebrated widely, and rightly so; though the country was seriously impacted by the sanctions, not only has it proven the power of its economic capacity, it is one of the most resource rich countries in the region and has a young, highly educated, and commercially developed population eager to reconnect with the world. Cautiousness and prudence are, however, detrimental for any business dealings in the first moments of the post-sanctions Iran; while the deal and Iran’s assets are real, many of the hoped-for economic benefits have been slow to manifest, with western businesses and banks extending caution over the possibility of new Western sanctions being placed on the Islamic Republic in the future.

Taxation

Any person or entity doing business in Iran and deriving income from the country is subject to taxation. The British Iranian Chamber of Commerce reports that all companies, either those based in Iran or foreign companies with operational branches in the country, must pay a 10% flat tax on any taxable gains before distributing profits, essentially Iranian income tax. Public companies that are listed on the Tehran Stock Exchange do not have to pay the 10% income tax, but all companies are required to determine their shareholder’s tax liability, set at 25%, and also pay a municipality tax of 3%. On the individual level, taxable income consists of salary and benefits for citizens. Rates are broken down into seven categories from 0-35%, with a 5% increase at each subsequent level. While employees making less than IRR17.4 million will pay no tax, those making over IRR1.06 billion are subject to a 35% tax. Foreigners are also subject to an individual income tax. The government has assumed minimum monthly salaries based on the country of the employee and his or her position. All foreign nationals are taxed at a rate of 35%. The government assumes a managing director from Western Europe or North America to earn a USD7,000 monthly salary, while one from Eastern Europe of Africa is assumed to earn USD3,220 a month. For unskilled laborers, assumed monthly incomes are USD2,500 and USD1,750 for Western Europe and North American employees and for Eastern European and African employees, respectively.

Investment

All potential investors must submit relevant documents to the Organization for Investment Economic and Technical Assistance of Iran, which will process and approve any potential investments. Investors are welcomed and encouraged to invest in a variety of sectors, such as agricultural and transportation. There are guarantees against expropriation and nationalization of foreign capital, and laws have been enacted that would compensate an investor under such circumstances. Any foreign investment can be transferred in foreign currency or goods. Benefits of investing in the Islamic Republic are 10 tax-free years on income based on investments in lesser-developed areas, total tax exemptions on income from exports of industrial, transit, and agricultural goods, and 50% tax exemption for income generated from tourist installations and exporting non-oil goods.

Business Etiquette

The Iranian working week runs from Saturday to Wednesday, with government offices normally operating between 08:00 and 14:00. Shops and markets are open everyday but Friday generally. A handshake is a normal greeting in public but only between members of the same sex. It is usual to engage in social conversation prior to the actual business. Food and drink should be accepted whenever offered in a meeting.

Free Trade Zones and Special Economic Zones

Iran has approximately seven free trade zones and 14 special economic zones. These zones, located in port cities on the Caspian and Gulf, near borders and in major cities, come with benefits such as considerable reduction in regulations and formalities, exemptions from certain taxes and price regulations, and simplified customs clearance regulations.