Economy, Domestic Economy

Major Tax Breaks for Foreign Companies

Major Tax Breaks for Foreign Companies
Major Tax Breaks for Foreign Companies

Foreign companies who set up business in Iran will receive corporate tax breaks of up to 50 percent, if they export part of their products.

Foreign companies who set up factories in Iran and export at least a third of their products will be exempt from paying half of their corporate taxes, according to the head of Trade Promotion Organization of Iran.

"The government decided to extend tax breaks in order to attract foreign investors," said Valiollah Afkhamirad.

The government is also providing tax exemption and easier visa regulations for Iran's special economic zones and free trade zones such as South Pars and Kish Island, in order to ease doing business for foreigners.

Currently, corporate tax stands at 25 percent, yet with the new tax-exemption program, foreign manufacturing companies will only need to pay 12.5 percent tax on their revenues.

The new lowered tax rate for foreign companies will put Iran in the league of small tax havens, such as Cyprus, Oman and some Canadian provinces.

Considering Iran's improved business infrastructure and low-cost labor, the move is expected to turn Iran into an irresistible destination for foreign manufacturers, provided that sanctions against the country are eased.

Iran is currently under Western sanctions over its nuclear energy program which it maintains is strictly peaceful. The Iranian government is negotiating with the six world powers to alleviate the sanctions, which encompass various industries and organizations, in exchange for restraining its nuclear activities.

A deal between Iran and its negotiation counterparts, the United States, Britain, France, Germany, Russia and China, would be good news for the government, businesses and also foreign companies who wish to enter Iranian market.

Iran has seen a surge in the number of western business delegations over the past few months, as the government mulls expansion of ties with international players.

In February, representatives of over 100 French companies came to Tehran – the largest foreign trade mission Iran has ever hosted. Business delegations from Canada, Europe and even the US have also visited the country recently.

Furthermore, companies that were previously active in Iran, such as France's Total SA, and ArcelorMittal, the world’s foremost steelmaker, have uttered their interest in returning to the country.

If sanctions against Iran are lifted the country would become the final frontier for global equity investors, according to a 14-page report entitled “Iran: A New Hope,” released by Renaissance Capital, a leading Russian investment bank which specializes in operating in high-opportunity emerging markets. RenCap itself is now looking for avenues to invest in Iran's financial markets, especially its equity market.