Business law

This area is wide-ranging. To effectively represent clients and advise on various types of business transactions, lawyers should have extensive experience and deep knowledge of the framework of business law and the relevant domestic and international regulations and bylaws. 

Our team advises and represents businesses in formation, development, and entity selection, sale, financing and many other issues. Libra legal services in this area include but not limited to the following:

  • Antitrust (Competition Law) and reviewing the conduct of companies in the commercial marketplace
  • Insurance law
  • Securities Law
  • Disputes related to trade law (Transportation/ carriage of goods)
  • Maritime and shipping law related cases
  • Insolvency, bankruptcy and debt recovery
  • Legal consultancy on tax law related issues
  • Business Franchising
  • Business risk management 

Looking for legal advice? We know what you are going through. You can simply contact our lawyers. 


Business Is Picking Up

The government of Iran tends to offer privileges to companies who not only create job opportunities and transfer technology but also are active in exporting their products from Iran. Iran’s competitive advantage in this regard is that it can be used as a launching pad for expansion into other Persian Gulf States and Central Asia. Earlier, Iran’s legal approach to foreign investors under FIPPA was mentioned in an article on our website site. [Interlink to the article under investment law]

Our general advice is to make use of Iranian expertise and consultants in order to ensure that your achievements and successes continue. Avoid making decisions and potential partnerships with people/companies who insinuate they have the right connections in the right places. The companies and people you choose to have relationships with should be selected based on their merits and experience, and not because of whom they might know.  Foreign companies who are sincere and make efforts to transfer good management and technical know-how are usually received with open arms. Generally, in Iran, foreign companies are generally present through a branch or maintaining shares in an Iranian registered company in relation to a specific investment.

Although business might be as successful as planned, it is imperative to have a future vision and start planning in advance. Experience shows that foreign companies who did not have a clear vision, or companies who were here to make a quick buck, have not been very successful.


Analysis of Legal Vehicles Available for Entry to Iranian Market 

Some of the most common types of presence of foreign companies under Iranian legal system are as followings:

  1.  100% Foreign Legal Entity

Under the present practice, foreign companies can own 100% shares of a company without special formalities in the Free Trade Zones.  FTZ companies may only benefit from the incentives (i.e. 15 year tax holiday) of the zones if their activities are focused in that area. Although the mainland has no legal limitations for foreign ownership in an Iranian company, in practice, there is a preference for some Iranian participation in a project.

Currently FTZs are used by some Foreign Investors involved in industrial activities. They use FTZ as a station for assembling or manufacturing of the final goods to be exported into the Mainland Iran or other countries of the region. Given the fact that foreign investors will be focusing primarily on mainland projects, we do not believe a FTZ registered company to be an optimal solution for the foreign investor

  1.      Iranian Company through a Joint Venture

Foreign companies looking at direct investment in Iran, typically form a joint venture with an Iranian company active in their field of business.  This form of entry is one that is consistently promoted by the Iranian government.  This is due to the fact that a joint venture ensures a long-term commitment on the part of the foreign company, creates jobs, and provides participation by Iranian persons.

Currently, there are no “joint venture” laws in existence in Iran.  Rather, the foreign and Iranian companies refer to the commercial code and jointly form a corporate structure.  Typically, this structure is in the form of a private joint stock company that requires a minimum of three shareholders.  However, under the Iranian commercial code, other forms of corporate structures such as limited liability companies, limited partnerships and general partnerships are also permitted.  The Iranian commercial code concisely delineates the rights and duties of the shareholders under each structure.  Moreover, shareholders also regulate their relationship through a shareholder agreement executed among the parties.

In the case of a foreign party being a minority shareholder, it is imperative that adequate legal safeguards be designed through a shareholders agreement and articles of association to safeguard the rights and interests of the foreign party.

Our experience has also shown that the foreign investment board will not support an Iranian company that is not formed for a specific project.  This means that such a structure may be inappropriate if the main task is to merely establish a presence in Iran for future projects.  Moreover, it is doubtful that the company registration office will register an Iranian company with a significant foreign shareholding without FIPPA approval and license.

Aside from the above, a corporate entity registered in Iran, will be deemed 100% independent and not related to the shareholders including the foreign shareholder.  There will be requirements of having regular board and shareholder meetings as well. This will be further compounded by THE CLIENT’s need to manage its relationship with other shareholders in the entity.  Finally, in such a structure, foreign investors will be represented through an entity with existing shareholders for all future projects.  This may limit THE CLIENT’s ability to independently pursue projects and decide on the Iranian participation on a case by case basis.



  1.  Branch Office 

Under Iranian law, any foreign company that is recognized in its country of origin may apply for registration of a branch in Iran subject to their country allowing for registration of Iranian companies.  A foreign company may register a branch or representative office for the following activities:

  1.     After sale services for goods and services provided by the foreign company;


  1.   Executive works for contracts signed between Iranian and foreign companies;


  1.     Review and preparation of grounds for investment by the foreign company in Iran;


  1.     Cooperation with technical and engineering companies in Iran, for performance of projects in a third country;


  1.     Promotion of Iranian non-oil exports;


  1.     Technical and engineering services and transfer of technology and technical know-how to Iran; and


  1.     Activities legally licensed by Iranian government authorities that are authorized to grant such licenses in areas such as transportation, insurance, goods inspection, banking, marketing, etc.

Typically, the following companies have registered branches in Iran:

  • Foreign oil companies have registered branches to manage their service contracts with the National Iranian Oil Company (buy back and exploration agreements).  Those contracts also require the registration of a branch in order to execute the relevant project and to provide accounting and books of expenditures in Iran for NIOC’s review;


  • Foreign companies making sales to Iran of various products.  These branches act as both marketing vehicles as well as after sale service coordinators where required;


  • Foreign banks with offices in Iran to promote relations and manage contracts between the parent and the Iranian banking system and clients;


  • Foreign companies wishing to establish a presence in Iran and to use the branch as means of learning more about the market, marketing, relationship building etc.

In light of the present strategy of foreign investors to establish a presence for future projects in Iran, the registration of a branch and representative office seems to be the most appropriate vehicle for entry into the Iranian market.  Since foreign investors has formulated a long-term strategy for its entry to Iran, this method can be utilized for the following purposes and advantages:


  • Most direct and transparent route to Iran under current realities for foreign companies 


  • Can legally have a direct presence, market and operate under foreign companies  name


  • Eliminates many legal hassles including the ability to sign contracts as foreign companies , hire staff, lease office space


  • The branch may open bank accounts in local and foreign currency


  • Will be an extension of the parent company subject to all its requirements – no issues of control of subsidiary management will exist


  • Will not have to worry about finding and controlling an agent/representative without having much knowledge regarding the market or the representative


  • Avoids conflicts of interest and management style with local agent or representative or other shareholders


  • Provides foreign companies with a solid platform to preposition itself in the market, identify contacts, identify potential future partners, monitor developments, etc.


  • From a tax point of view, the branch if only a cost center should have no tax liability.  Otherwise, the branch will be taxed on a profit and loss basis by the officials with profit being taxed at the rate of 25%.  We recommend that this be discussed in more detail with your tax advisors.
  • Registration of a branch should be a straightforward procedure requiring documents of the parent company to be legalized and translated for registration purposes.
  • The branch would provide a platform for foreign companies to pursue specific projects.  Once a project is identified – depending on the requirements of the project – foreign investors could either participate through the branch or incorporate a company with relevant Iranian shareholders for the operation of that project.


4 .     Representative/Liaison Office

 One method used by some foreign companies, especially those involved in trading goods and services in Iran is the appointment of a representative or liaison office in Iran.  Typically, an Iranian firm or person engaged in a similar business is used as a conduit for presence and activity in the Iranian market.  The representative or liaison office usually acts on behalf of numerous companies.

Depending on the type of activity of a foreign firm, this can be both an appropriate or inappropriate vehicle for entry and access to the Iranian market.  In case of companies involved in trading this method is advantageous in that the foreign company can rely on the expertise and contacts of the representative to sell its products in the market.  To such foreign companies, it is of no concern that the representative is active in various fields as long as their products are being sold and marketed effectively within the market.  Such representatives usually work for a commission and as such have a direct incentive in both marketing and selling the product.

However, in the case of the foreign investors, this may not be an appropriate entry vehicle to the Iranian market for many reasons.  First, foreign investors would have t o conduct an extensive search and due diligence to find an appropriate person or company for such purposes.  This is very important since all the activities, reputation and actions of such a person will have a direct impact on the client’s standing and reputation in Iran.  Second, such a company or individual will have financial interests in foreign investors’ continual support and as such a direct conflict of interest will arise in providing impartial advice.  Third, foreign investors may be among a list of companies that such an individual or company would work for.  This may result in inadequate attention to the interests of foreign investors. Finally, the person may not have the appropriate infrastructure to provide the needed services in pursuing foreign investors interests in Iran.

What can be concluded?

Given the foregoing discussions, combined with foreign investors’ strategic decision to establish a permanent presence in Iran, we believe the option of a branch as a starting point could best serve foreign investors’ purposes. The main advantage being that absent a specific project, foreign investors should avail themselves of all options and potential partners by having a direct presence by itself without need for managing other relationships until a project is identified.

Looking for legal advice for investment or business? Libra lawyers are ready to help you!


Foreign Investors and Iranian Taxation Laws

Are you aware of the investor’s obligation to pay the tax in IRAN?

All foreign investors doing business in Iran or deriving income from sources in Iran are subject to taxation. Depending on the type of activity the foreign investor is engaged in, various taxes and exemptions are applicable, including profit tax, income tax, property tax, etc. The Ministry of Finance and Economic Affairs is the government agency authorized to levy and collect taxes.

Under Iran’s Direct Taxation Act of 1988 and Amendments of 1992 and 2002 (all collectively referred to as the “Act”) the following persons must pay taxes:

  1. All proprietors whether natural or legal persons, to be taxed on their property and estate in Iran;
  2. All natural persons of Iranian nationality residing in Iran, to be taxed on all income earned in Iran and/or abroad;
  3. All natural persons of Iranian nationality residing abroad to be taxed on all income earned in Iran;
  4. All legal persons of Iranian nationality to be taxed on their income earned in Iran or abroad;
  5. All foreign persons (both natural and legal) to be taxed on the following types of income:
  6. Income realized through the grant of license or other rights;
  7. Income realized through training and technical assistance; and
  8. Income realized through transfer of motion pictures.

Thus, foreign investors are exposed to tax liability under two circumstances: First, in the case of direct investment in Iran through a foreign controlled entity; second, as a minority shareholder in an Iranian joint venture. Under this scenario, the joint venture is considered as an Iranian company subject to all taxes.

Moreover, prior to the distribution of profits, a company must pay a flat 25% of its taxable profit as corporate tax. However, companies listed at the Tehran Stock Exchange (TSE) benefit from a reduced 22.5% tax rate.

  • Tax on Liaison, Representative and Branch Offices

Traditionally, representative offices have been exempt from payment of profit taxes. This is based on the understanding that such offices produce no profit and act solely in the fields of research, marketing and liaison. These offices have no income and are reimbursed for their expenses by their head office abroad. Branch offices have to prepare accounting books and pay tax on the income generated.

  • Tax on Property

Although foreign ownership of immovable property is restricted in Iran, foreign investors should be aware of the various rates affecting ownership of real estate either directly (with governmental approval and permit) or indirectly, through participation in a joint venture.  All natural and legal persons must pay a yearly tax on the total value of real estate in Iran.

  • Value Added Tax (VAT)

There was no VAT in Iran until 2008 but the government prepared the Added Value Tax Bill in 2002, upon the recommendation of the International Monetary Fund and in a bid to adjust the economic structure with the regulations of the World Trade Organization. Following the government requests, the Parliament’s Presiding Board finally approved the generalities of the bill in 2005 and it was executed in 2008 at the amount of 3.5%.  Subsequently, in 2011 this amount was increased to 4%.  

  • Withholding Tax

Under the Act, the following withholding taxes are imposed:

  • Dividends – See above. Also, the seller of stocks at the Tehran Stock Exchange must pay a 0.5% tax on the transaction.
  • Interest – Under Iranian tax law, interest income incurs no tax liability.
  • Lease Payments – The leaseholder (in case of a legal entity) of a property must deduct taxes when making payments. The leaseholder is responsible for withholding the relevant tax and submitting it to the tax authorities. If the leaseholder is a natural person, the owner is responsible for tax payments.
  • Other Income – All payments to independent contractors such as accountants and attorneys are subject to a 5% withholding tax. The payer must deduct the tax and submit it to the tax authorities within thirty days. The proof of tax payment must be provided to the payee.
  • Tax Advantages & Exemptions

 The main income tax exemptions are provided hereunder:

  • Mining and manufacturing activities with an operation license or an exploitation or sales contract, issued or concluded after 21 March 2002, shall be 80% exempt from paying tax for a period of four years. In the less developed areas the tax exemption would be 100% and would last for a period of 10 years. The exemption would not include mining and production units which are located within a range of 120 km. from central Tehran, 50 km. from central Isfahan and 30 km. from provincial capitals and cities with a population larger than 300 thousand. However, the industrial zones located in a range of above 30 km. from the provincial capitals and the mentioned cities are exempted from the provisions of this Law. 
  • All the touring and tourism facilities that have received an operation license from the Ministry of Culture and Islamic Guidance, shall be 50% exempt from paying the related taxes. 
  • The total 100% of the income earned through the export of finished industrial products and agricultural, or its related processed products, and also 50% of the income earned through exporting other goods which are exported, with the purpose of achieving the objectives of non-oil exports, shall be exempt from tax.
  • The total 100% of the income earned through the export of different goods which have been/ will be imported to Iran on a transit basis and will be later exported without making any changes shall be exempt from tax.
  • Personal Income Tax of Local Employees

Taxable income consists of salary and benefits. As presented in the following table, income is taxed at 0-35%. Employers are required to make the necessary tax deductions from their employees’ payroll and submit them to the tax authorities. However, when calculating taxable income, exemptions and deductions are allowed. In addition to income tax, employers are required to contribute to the State Social Security Fund and the Employment Fund. 

What can be concluded?

As mentioned earlier in an article published on Libra website [INTERLINK to post in Business law, business is [picking up ], governments tend to attract the attention of foreign investors. Accordingly, Iran also aims to promote FDI in Iran. To this end, there should be a specific mechanism for tax payments.

Looking for legal advice on tax law? Libra’ business lawyers and investment lawyers are ready to help you!


ICT (E-commerce) Regulatory in Iran

In Iran, the Ministry of ICT is responsible for national development of ICT in the whole country and Information Technology Council Excellence (ITCE) is responsible for national level strategic decision-making and IT policies. The ministry of Commerce is responsible for development of E commerce in Iran. Also, The High Council of Data Processing has been vested with the task of classifying and categorizing the computer firms.

Now, a vast number of Iranian people are using the Internet and the number is growing daily. Seminars, conferences and workshops have been held by the Iranian governmental and non-governmental organisations to promote awareness of the effects of e-commerce. In view of that it could be claimed that Iran is providing the infrastructure to enable e-commerce to expand.

Parliament of Iran passed the Electronic Commerce Act. With the passage of the Act, Iran made significant progress towards its e-commerce legislation. Now, this Act is called the Electronic Commerce Law of the Islamic Republic of Iran. The Act was passed to remove concerns about uncertainties over e-commerce and to clarify some of the ambiguities in the Iranian legal system. However, the government has a plan to revise the Act in the next two years.

The Government has long-term plans and programs of development for IT sector as shown in the following section.

For more information with regard to the National IT Strategy and Development Plan of Iran, you can read this article.

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