Karimi & Associates Law Firm and Smart Invest Iran Joint Newsletter for September 2017 is published.

As one of the richest countries in the world in terms of hydrocarbon reserves, Iran’s great foreign investment attractions are undeniable and recognizing the potentials in the Iranian market is a must for every foreign investor who is looking to invest in this growing economy. These incentives, however, are yet to be properly introduced in order for potential foreign investors to approach Iran’s market with open eyes.
Of all the numerous legal incentives to promote foreign investment in Iran, creation of Free Trade-Industrial Zones (FTIZ) on the one hand and Special Economic Zones (SEZ) on the other hand is considered as one of the most important ones.
Enacting “ The Law on Administration of Free Trade-Industrial Zones” (LAFTIZ, 1999-06-21) was a major step taken by Iranian legislator towards accelerating the accomplishment of infrastructures, development, economic progress, investment, increase of public income, creation of productive employment, regulating of goods and labor market, to be actively present in regional and world market and to produce and to export the industrial and processing goods as well as rendering public services, as reflected in Article 1.
As with SEZs, the main set of governing rules could be found in the “Law on Establishment and Management of Special Economic Zones of Iran, 2005-10-26
One of the main incentives provided in the governing laws of both types of zones is tax exemptions and advantages, providing a special treatment different from that offered in the mainland. It is important to note that tax exemptions and incentives are regulated differently in each type of these zones and must therefor be addressed independently. In this edition we seek to recognize and make a general assessment of tax incentives in FTIZs.
Tax Incentives in Free Trade-Industrial Zones
Tax incentives provisioned in the governing regulations of FTIZs may be divided into three categories including Direct Tax Exemptions, Value Added Tax Exemption and Duties Exemptions as described below.
I. Direct Tax Exemption
Direct tax exemptions in FTIZs and SEZs are addressed in distinct sections in this article.
I.I.I. Free Trade-Industrial Zones
Pursuant to Article 13 of LAFTIZ “Natural and legal persons engaged in any kind of economic activity in a Zone are exempt from payment of income and property tax subject to Direct Taxes Law as for a duration of 20 calendar year from the date of the commencement of the operation mentioned in the permit with respect to any type of economic activity in the Free Zone…”.
A. Duration of Exemption
Currently LAFTIZ provides for a twenty-year exemption of taxes in FTIZs. Legal Technicalities to extend the exemption period to a 25 years period are currently under process and the relevant amending bill must be ratified in the Islamic Consultative Assembly (Majlis) before entry into force.
B. Submitting Tax Return
Pursuant to Article 132 of DTA, in order to benefit from any type of tax exemptions, legal and natural persons must submit their tax return in conformity with the samples provided by Iranian National Tax Administration within the required period .Tax return of legal persons include balance sheet and profit and loss account.

II. Value Added Tax
Exemption from VAT will be addressed in three different categories here: Economic activities within the boundaries of FTIZs, Import and Export between FTIZs and other counties, Entry and Exit of goods between FTIZs and the mainland.
A. Economic Activities within the boundaries of FTIZ
In accordance with Paragraph 1 of the Tax Affairs Organization Circular No.54409, subject to “Residing in FTIZs and SEZs” and “Exchange being carried out inside the boundaries of FTIZs and SEZs”, Persons engaged in economic activities can benefit from VAT exemption. Again obtaining permits is a precondition to enjoy this type of tax exemption as was the case with direct taxes.
B. Import and Export between FTIZs and Foreign Countries
Pursuant to Value Added Tax Act 2008-01-29(VATA) “- Exportation of goods and services abroad, via formal departure gates shall not be liable to the tax subject of this Act and taxes paid on such terms shall be refunded upon providing bill of export issued by the customs (as regards goods) and proving documents and certificates.”
C. Transfer of goods and services between FTIZs and Mainland
Unlike the VAT exemption for import and export of goods and services between FTIZs and foreign countries, none of the applicable laws and regulations provides for a VAT exemption for entry of goods and services from mainland to FTIZS or vice-versa, from FTIZs to mainland.

III. Duties
Pursuant to Article 112 of the Law for the 5th Five year National Development Plan -FYDP (2010-2015) , “exchange of goods between FTIZs and abroad and among different FTIZs shall be exempt from all duties (except for duties provisioned under LAFTIZ Article 10 ), taxes and costume duties”. Therefor the only type of duties prescribed by law were those provisioned by LAFTIZ Article 10.
In an attempt to provide an ample opportunity for internal as well as foreign investment, Free Trade-Industrial Zones and Special Economic Zones were designed to provide investors with advantages and incentives not available in the mainland. One of the most important advantages provided in these zones are those related to tax and duties,
As discussed above, different set of rules govern tax exemptions and advantages in Free Trade-Industrial Zones and Special Economic Zones with regard to direct tax ,value added tax and duties A more detailed study of legal terms and conditions to enjoy these exemptions is certainly required in order to gain a deeper understanding in regards to the addressed matter.

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