The Establishment Methods and Activities of Foreign Companies According to Iran Rules

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1 The Establishment Methods and Activities of Foreign Companies According to Iran Rules

2 For starting any activity in Iran, the first thing that the International companies should consider is using simultaneously Consulting Services to receive financial-tax and legal services.

3 The risks that companies face during commercial activity in Iran in terms of the amount of risk in order of importance are:

4 Risks related to income tax (The field of Financial Consultants)

5 Risks associated with VAT (The field of Financial Consultants)

6 Risks associated with the insurance premiums contracts and premium s staff (The field of Financial Consultants)

7 Risks associated with the observance of labor legislation on employed workers (The field of Legal - Financial Consultants)

8 Risks associated with How to establish a company and adjustment of the articles of association, registration and bidding company changes (The field of Legal - Financial Consultants)

9 Risks associated with how to write a commercial contract and its provisions (The field of Legal - Financial consultants)

10 As can be seen the lowest risk in terms of the amount was associated with the last three parts, that in these cases, using the finance advisors services is highly required.

11 The formulation of foreign companies legal - finance - tax forms of activity in Iran is in a such way that they fit properly designed and implemented. It will be facilitate greatly the next activity of foreign companies in Iran. If this is not properly designed, the next activities of foreign companies in legal environment will be complex and risky.

12 What makes it easy for foreign companies, especially the German companies, is that the basic financial statements and reports and tax forms in Iran have been perfectly matched with international standards of accounting and auditing. Financial software used in Iran is able to prepare and submit financial reports required for the senior executives of foreign companies.

13 The Tax structure and the value-added rules in Iran are modeled from the European countries. The comprehensive tax software system has been launched in Iran by a French company, therefore many of the concepts of the tax regulations and the value-added rules are close and similar to the tax regulations of European countries.

14 The legal and constitutional structure of establishing a company and continuing economic activity in Iran is one of the most common questions that entrepreneurs and foreign investors at the first place may have. Answers to these questions require knowledge of the aims, activities, the volume of activities, how to use foreign or Iranian staff/ managers, and above all, approach and style foreign investment in Iran.

15 It would be possible to establish a foreign company with 100% foreign shareholders, and with the foreign brand name in Iran s free trade zones such as Kish and Qeshm Islands of Free Trade Zones; The Tax Customs exemptions and the convenience of Visa issuance for individuals and foreign companies have been considered in these areas too, but taking advantage of the above mentioned benefits would be subject to establishing offices in the Free Zone, and compatibility of business activity of these foreign companies with the situation of those area.

16 Even it has been possible to establish a foreign company in Tehran with 100% foreign shares since 2 years ago, but still there would be some limitations on determining and registering the foreign commercial names and brands in Tehran while there would be no limitations like these in Free Trade Zones.

17 We suggest to the foreign companies who want to do business activities in Iran, to be established out of the free trade zones considering all aspects. We recommend the foreign companies who want to establish factories in Iran and manufacturing any kind of products to be established inside the free trade zones by considering some special situations and compatibility with the type of their activity.

18 According to the provisions of Iran s Commercial Code, it would be recommended that the type of company s characteristic which wants to do business activities in Iran a Pvt. Company, and all other legal structures as establishing a Ltd. Kind of company or establishing an institute will not be suggested in Iran for foreign companies.

19 For instance; The Herrenknecht Company, for selling Tunnel machines that the cost of each machine is more than a few million Euros has used established branch method while this company for selling spare parts and support services has attempted to establish a company in the commercial areas.

20 In other words, international companies which are working in the heavy machinery like Herrenknecht- German or Komatsu-Japan, are established foreign branches in Iran but the same companies for after sales services activities are established commercial companies. Companies such as Bosch and BMW, can not search their buyers one by one and sell their goods directly in the opening credit method; because the sale of these goods are in cash.

21 But Herrenknecht AG company can search their buyers (which are mostly large companies and public organizations) one by one and sell their heavy machinery by opening credits. As noted before, foreign branches in Iran are a cost center and for this reason, they do not have any income. Therefore, the branches receive funds from the original company to cover their costs. According to the direct taxes act's provisions is exempt from tax.

22 In Iran s free trade zones such as Kish and Qeshm free zones, the possibility of establishing a foreign company with 100% of foreign shareholders and foreign brand is available; however, if a foreign company wants to establish in Tehran, it can share 49% percent stake in an Iranian company and as a result, it is an Iranian company.

23 It is worth noting except the following methods (export) that the international companies using to sell their products through establishment of the branches or granting agencies, in the other foreign international companies should be established a company or Iranianforeign company in free trade zones for foreign investment. 1. Exporting 2. Licensing 3. Franchising 4. Management Contract 5. Contract manufacturing 6. Foreign Direct Investment A) Joint Ventures B) Wholly Owned Subsidiary 7. Strategic Alliance

24 Which companies are allowed to register a branch or agency in Iran? The registered as a legal entity companies in their own country are allowed. The origin country should mutually permit Iran to establish a company in it.

25 Agencies administration Registered agencies administration according with executive by law, the regulation of foreign companies branch or agency registration must be carried out by one or more natural persons residing in Iran.

26 The Establishment Methods and Activities of Foreign Companies According to Iran Rules

27 The Establishment Methods and Activities of Foreign Companies According to Iran Rules