Iran’s Free Trade Zone features
The Islamic Republic of Iran began to implement the first five-year economic plan aimed at the reconstruction and economic recovery in 1989, after the end of the eight-year Iraqi imposed war. The main objective of this plan was to transform the managed economy of the war into an open economy based on market forces and establish and maintain relations with the world economy. Due to the existing limitation for the application of the market economy, concern for the side effects of such a sharp transformation on the social wellbeing of the society it was decided to assign some locations and establish free or special economic zones to completely apply the principle of a free market economy. This way, enough attraction incentives could be introduced for absorbing foreign investment.
According to the legally accepted definition, the free trade zones and special economic zones are those parts of the Iranian territory that are managed according to the special laws and by-laws and are excluded from the laws of the governing motherland. These zones are excluded from the domain of the customs authorities and enjoy the full freedom for the in and out of the flow of goods and commodities. Unique geographical locations, sufficiently developed infrastructure, and the foreign investment incentives have provided ample opportunity for internal as well as foreign investment in the zones. The Iranian Parliament approved the Free Zones Act in September of 1993. According to this act, Kish Island, Qeshm Island, and the Port of Chābahār was declared as the Free Zones of Iran. The council of ministers later adopted the bylaws of the free zones. These bylaws have defined and set out all regulations about import, export, investment, insurance, banking, labor, and employment of these zones. Iran’s most important free trade zone is Kish Island, Qeshm Island, Chābahār.
Geographical Advantage
All three of Iran’s Free Trade -Industrial Zones:
- Are located at the southern coasts of the country and connected to the major international waterways via the Persian Gulf, the Oman Sea, and the Indian Ocean;
- have easy access to major air, sea, and land transportation routes at the local, regional, and international levels;
- Are in proximity to regional markets concerning the import of raw materials, and intermediate or manufactured goods, and easy access to local and neighboring markets specially those of western, southern and central Asia and the Persian Gulf;
- have reliable Public utilities and services; • have availability to skilled and semi-skilled manpower with reasonable (competitive) wage demands in the region;
- have appropriate access to abundant sources of energy such as natural gas (2nd in the world) and crude oil (4th in the world);
- have wealth of mineral resources, unique in the Middle East, required for industrial production and exports; • have an international reputation as major trade centers;
- have appropriate climate and tourist attractions.
Investment
- Investment independently or in partnership with Iranian persons;
- no restrictions on the percentage of the shareholdings;
- Free repatriation of net profits and capital;
- exemption from all kinds of taxes for the first 15 years;
- The legal rights of foreign investors are guaranteed; in the event of nationalization, the Authority of each Zone shall make the compensation;
- Foreign investors may lease land with reasonable rents, and own the buildings and other installations built on the land.
Banking Facilities
- The offshore banking and non-banking credit activities regulations in the Zones are flexible and compatible with international offshore banking practices and standards;
- Foreign banks and financial institutions may open head offices, branches, and counters independently or in partnership with domestic partners;
- no foreign exchange control; the conversion of the Iranian Rial to any other currency is readily permitted; • Transfer of foreign currencies and Iranian Rials abroad is permitted.
Engagement of Manpower
- All matters related to manpower employment are dealt with according to the contract and agreement initially concluded between the employer and the employee;
- The labor regulations practiced in the Free Zones are unique and they are formulated following ILO recommendations;
Arbitration
- Any probable disputes will be settled according to the relevant terms of the contract originally concluded between the parties.
Salient Features
– joint venture with no limit on investment and shareholding;
– Proper employment regulations;
– 15 years of tax exemption;
– Foreign investments up to any ratio (of capital investment);
– Investment guarantee from any viewpoint;
– national and international banking facilities;
– Offshore banking and non-banking credit practices;
– no currency restrictions; – 100% repatriation of capital and profit;
– Abundant sources of energy;
– the vast pool of manpower at all levels of skills and various trades;
– no bureaucratic regulations and avoidance from red tape;
– Tourism attractions;
– no entry visa requirement for foreign nationals;
Imports & Exports
- All goods imported into the Zones are exempt from customs duties and commercial benefit tax;
- exports of goods from the Zones to the mainland, to the extent of the added value plus the value of the used domestic raw materials, are exempt from customs duties and commercial benefit tax;
- All goods, shipped to the Zones from the mainland, are deemed domestic transference;
No entry visa requirement
- Foreign nationals who choose direct entry to the Zones, do not need to apply for the visa in advance;
- For entry into adjacent zones, a double-entry visa can be obtained from the embassies or consulates of the I.R. of Iran in any country from which they wish to apply.