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Free Trade-Industrial Zones and Special Economic Zones in the Islamic Republic of Iran

Guiding Principle

There are seven Free Trade-Industrial Zones and many Special Economic Zones in Iran. The Iranian Free Trade Zones are more ambitious in their objective of acting as a tool for attracting Foreign Direct Investment and ultimately for generating a diversified industrial base and promoting Iran’s non-oil exports. On the other hand, Special Economic Zones facilitate transit of goods and improve the supply and distribution networks in Iran.

A.  Introduction

The Islamic Republic of Iran began to implement the First Five-Year Economic, Social and Cultural Development plan aimed at the reconstruction and economic recovery in 1989, after the end of the eight-year war with Iraq. Based on this plan, various locations were assigned and free or special economic zones established in order to fully adopt the principles of a free market and attract the foreign investment.

The Free Trade-Industrial Zones (FTIZs) and Special Economic Zones (SEZs) are those parts of Iranian territory that are managed according to the special laws and bylaws and in some aspects; they are excluded from the laws of the governing mainland.

In FTIZs and SEZs, there is no limitation for the percentage of partnership by foreign investors. According to Art. 5 of Regulations on Investment in the Free Trade-Industrial Zones, foreign investors are allowed to take part in economic activities of the FTIZ with any percentage of partnership.

The geographical location of each FTIZs and SEZs has been marked in the below map:

Geographical location of each FTIZs and SEZs

Geographical location of each FTIZs and SEZs

B.  Free Trade-Industrial Zones

FTIZs in Iran are excluded from the domain of the customs authorities and enjoy the full freedom for inflow and outflow of goods and commodities. The Iranian Parliament approved the Law on the Administration of Free Trade-Industrial Zones of the Islamic Republic of Iran in September 1993.

The Council of Minister approved the by-laws of the free zones in May 29, 1994. These by-laws have defined and set out all regulations pertaining to import, export, investment, insurance, banking, labour and employment of these zones.

The incentives and advantages for investment in FTIZs of Iran are as follow:

  • Tax exemption for the period of 20 years from the date of the commencement of the operation mentioned in the licenses for all economic activities;
  • 100% foreign ownership;
  • Legal guarantees and protection for foreign investment;
  • No limitations on transfer of foreign currency to other Iranian Free Zones or to other countries;
  • Freedom of inflow and outflow of capital and expatriation of profits generated by economic activities in FTIZs;
  • No requirement for entry visa for foreign nationals and easy procedures for issuance of residence permits;
  • Facilitated regulation on labour relations, employment and social security;
  • Transfer of part manufactured goods to the mainland without paying customs duties;
  • No requirement for payment of customs duties on imports from abroad and visa versa; and
  • Utilization of raw materials, oil and gas as feedstock and fuel for all industrial activities.

The list of the FTIZs of the Islamic Republic of Iran are as follows:

  • Qeshm Free Trade-Industrial Zone;
  • Chabahar Free Trade-Industrial Zone;
  • Aras Free Trade-Industrial Zone;
  • Anzali Free Trade-Industrial Zone;
  • Arvand Free Trade-Industrial Zone;
  • Kish Free Trade-Industrial Zone; and
  • Maku Free Trade-Industrial Zone.

C.  Special Economic Zones

SEZs are those parts of territory of Iran, in which the Iranian Customs regulations are not applicable. Special Economic Zones were established close to entry borders of Iran for easing the export and import of commodities and protecting the domestic industry and attracting the new technologies. Iranian Parliament approved the Law on the Establishment and Management of Special Economic Zones
Islamic Republic of Iran on 01.06.2005.

In accordance with Para. (D), Note 25 of the Law for the Second Five-Year Economic, Social and Cultural Development Plan of the Islamic Republic of Iran, which was approved in the year 1993 in order to support domestic products, development of non-oil exports and making the regional economy more active, the Government was authorized to establish special protected zones in entry borders and domestic customs departments in certain parts of the country having the required capacity for this purpose.

As per Article 2 of the executive by-law of the same law, the authorized activities in the zones include:

  • Maintenance of goods in trust;
  • Facilitating and speeding up access to the goods, including raw materials, machinery and other domestic products, in order to make the owners’ scene of activity closer to domestic consumers for supporting the state domestic production;
  • Goods processing or alteration in order to achieve value added price by using potentialities;
  • Providing the required facilities for domestic and foreign whole purchasers to have access to their required goods in these zones; making the regional commercial markets closer and developing the state foreign trade;
  • Creating fields for regional commercial activities while considering the markets of Middle Asian countries, Caucasus and beyond, connections with Asian, European and other countries as well as useful operation of these markets using all domestic and foreign transit, export and re-export facilities; and
  • Absorbing capital and domestic/foreign facilities for the above activities in order to achieve the required goals while abiding by the relevant rules and regulations.

The list of SEZs of the Islamic Republic of Iran are as follows:

  • Arge Jadid Special Economic Zone;
  • Atrak Special Economic Zone;
  • Behshahr Amir Abad Special Economic Zone;
  • Bushehr Port Special Economic Zone;
  • Damghan Special Economic Zone;
  • Dogharon Special Economic Zone;
  • Imam Khomeini Port Special Economic Zone;
  • Jazmourina Special Economic Zone;
  • Kazeroun Special Economic Zone;
  • Lamard Special Economic Zone;
  • Lorestan Special Economic Zone;
  • Mehran Special Economic Zone;
  • Namin Special Economic Zone;
  • Noshahr Special Economic Zone;
  • Pars Special Economic Energy Zone (Assaluye);
  • Payam Airport Special Economic Zone;
  • Persian Gulf Mine and Metal Industry Special Economic Zone;
  • Petrochemical Special Economic Zone;
  • Rafsanjan Special Economic Zone;
  • Salafchegan Special Economic Zone;
  • Salmas Special Economic Zone;
  • Sarakhs Special Economic Zone;
  • Semnan Special Economic Zone;
  • Shahid Rajaee Port Special Economic Zone;
  • Shahrekord Special Economic Zone;
  • Shiraz Special Economic Zone;
  • Sirjan Special Economic Zone;
  • West Islamabad Special Economic Zone; and
  • Yazd Special Economic Zone.

D.  Comparison between FTIZ and SEZ
The below table will show the differences between FTIZ and SEZ:

Comparison between  Free Trade-Industrial Zones and Special Economic Zones in Iran
No. Description FTIZs SEZs
1.  Entry to the Zones No entry visa required for entering into the Zone. Visa shall be issued at entrance Subject to the law concerning foreigner’s entrance into the mainland
2.  Applying for investment Subject to the relevant regulations enforced in FTIZ Subject to the law enforced in the mainland
3.  Registration of a company in the free zone, intellectual property, trademarks, brands, patents, etc. Subject to the relevant regulations enforced in the Free Zone Subject to the relevant regulations enforced in the mainland
4.  The percentage of foreign capital investment allowed in the Zone Up to one hundred percent of foreign capital investment Subject to the law and regulations on foreign capital investment enforced in the mainland (In normal cases, up to one hundred percent of foreign capital investment is allowed in the mainland)
5.  Import of goods from abroad into the Zone to be sold in the zone or re-exported abroad, but not re-imported to the mainland Free from all kinds of taxes and duties, but local levies and fees are collected according to the services rendered by the executive departments Free from all kinds of taxes and duties, but local levies and fees are collected according to the services rendered by the executive departments
6.  Re-exporting imported goods to the Zone to abroad Free from all kinds of taxes and duties Free from all kinds of taxes and duties
7.  Warehousing in Zone Available having no grace period for clearance of goods Available having no grace period for clearance of goods
8.  Goods, semi-finished parts, raw materials from mainland to the Zone If exported from FTIZ, subject to General Exports-Imports regulations in the mainland If exported from SEZ, subject to General Exports – imports regulations in the mainland
9.  Import of goods from abroad into the free zone, then to the mainland Subject to the General Exports-Imports regulations in the mainland Subject to the General Exports- Imports regulations in the mainland
10.  Unloading, loading, transit and 
transshipment of merchandises abroad Free from all kinds of taxes and duties, only warehousing and local charges shall be collected Free from all kinds of taxes and duties, only warehousing and local charges shall be collected
11.  Utilization of land and natural reserves Land is sold and/or leased to the Iranian nationals, but only leased to the foreigners Land is sold and/or leased to the Iranian nationals, but only leased to the foreigners
12.  Foreign Exchange rates Free market exchange rates in the Zone Domestic Banking exchange rates in the mainland
13.  Retail selling Allowed, except in the Arvand, Aras and Anzali Free Zone Not allowed
14.  Offshore banking 
services and operations by private sector Available in FTIZ Only domestic banking services operated by the state banks
15.  Protection of Foreign capital investment Accepted, protected and guaranteed Accepted, protected and guaranteed
16.  Social security, social insurance The mainland social security regulations enforced The mainland social security regulations enforced
17.  Labor law, labor and industrial relations Subject to the regulations enforced in FTIZ Subject to the mainland labor law

 

September, 2015 Zahra Tahsili
Meyer-Reumann & Partners, Tehran Office
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