World Business Year

Iran welcomes boosting trade ties with the European Union in a way that European investors could take advantage of unique opportunities in Iran and Iran’s economy could accelerate the process of its growth and development, according to Central Bank of Iran (CBI) Governor Valiollah Seif.

Seif made the remarks in “The 2nd Business and Banking Forum Iran Europe” which kicked off in Tehran on Saturday and will run until Monday.

In January world powers led by the United States and the European Union lifted sanctions on Iran which had been imposed over its nuclear program. The subsequent leap in Tehran’s stock market in late January and early February gave a hint of the country’s investment potential.

The lifting of sanctions opens a new chapter of economic development and put the country’s potentialities into practice, Seif added.

The ground is laid for more security of foreign investment in the country and also for more economic sustainability, he maintained.

Iranian economy enjoys great advantages such as educated and expert manpower, huge natural resources, cheap price of energy, big market inside the country and also access to the regional markets, the official highlighted.

“I hereby invite all European investors, service institutes and also banks to take the advantage of unique opportunities created in Iran in the post-sanctions time”, the CBI’s governor stated.

He also said that all Iranian banks are now connected to the SWIFT international payment system.

---- 2016 economic growth above 5 percent

Elsewhere in his remarks, Seif said that Iran’s economy is expected to witness an economic growth of more than five percent in 2016.

“Economic growth slowed down in 2015 but domestic and international predictions both indicate that growth in 2016 would be beyond 5 percent,” he added.

*** European banks should avoid conservatism

Addressing the same forum, Mohammad Khazaei, the Iranian deputy economy minister and also the president of the Organization for Investment, Economic, and Technical Assistance of Iran, said: “Let me be honest with you, I see some conservative approaches from European banks to work with Iranian banks. I would like to make it clear here that conservatism is the big enemy of taking advantages in Iran’s market.”

Banks are the routes of collaboration, transferring money, so any problem in this area of course is a big obstacle in the way of cooperation, the official stated.

He went on to say: ”Because Iranian banking system and Iranian businessmen have been away from their traditional counterparts [during the sanctions times]; therefore we need to get together again and know how the banks can get together and there are many issues that we should solve and then we can also move.”

Elsewhere in his remarks, Khazaei said Iranian government has adopted policies to support foreign investment especially in the fields which bring value added, such as transfer of technology and increase of exports.

He mentioned facilitation of investment making through cutting some administrative and trade barriers as one of the mentioned policies.

Iran will take the same approach toward the foreign investors as that towards the Iranian ones; the official stated, adding: “Based on the law, your investment in banking sector in Iran is protected and guaranteed by the laws, so there is no impediment or problem to work in this area.”

The foreign banks and investors will be granted tax exemption of 20 percent in the mainland and 100 percent in the FTZs of Iran, he announced.

*** ‘New, big opportunities in Iran by sanctions removal’

Matthias Machnig, the state secretary at Germany’s Federal Ministry for Economic Affairs and Energy, was the other speaker in the forum.

He said: “Now by lifting of sanctions there are new and big opportunities. It is very crucial that in these conferences we talk together to build up trust. I hope this conference will build up new relations and we will be able to define projects where we can work together and can build new basis for our economic and political relations.”

“We want your country being a constructive partner, not only in this region, but also in the international level and hopefully we are able to take this opportunity and find new ground for a common work together”, he added.

European and Iranian companies now want to take advantage of the resulting opportunity as quickly as possible, Machnig said; adding there are a lot of opportunities for long-term partnership which can benefit both sides.

*** Views of some foreign participants

One of the participants in the forum, Sonke Reimers, the managing director of Germany’s dfv media group, told the Tehran Times: “I think it is a very important forum, to bring together the experts from banking industry.”

Referring to the sanctions removal, he said: “I think it’s the time to come back to the table.”

“The world has changed since the sanctions were put in place, so there are a lot of technical and other issues we should understand. We should understand what’s going on in Iran and I think you should understand what’s going on in Europe”, he stated.

“We had a huge financial crisis in Europe and since then regulations came in place which are even worse than sanctions, so the world of banking and finance is very different if you come to Europe now, from before the sanctions”, he added.

“There are many opportunities and now it’s the time to take the opportunities. There are regulations in Iran that the German companies should know”, said Michael R. Fausel from Beiten Burkhardt, a commercial law practice founded in Germany and active worldwide.

“The conference shows that Iran is open for business, is keen to reconnect to the global banking and financial system. I think this conference is very positive for Iran and also more importantly very positive for Europe and the rest of world”, said William Breeze, an energy finance expert in Britain’s Herbert Smith Freehills, one of the world’s leading law firms.

“The reason for taking a conservative approach toward cooperating with Iranian banks is that European banks are concern about what America would think. I Think and hope that European banks can seek quite what a large opportunity Iran offers and realize that it’s an opportunity that we take and European banks should reengage as quickly as possible”, he noted.

“The forum is important for passing information, for being able to bring together the global institutions and Iranian institutions, so we understand how we can work closely together”, said Charles Blackmore , the CEO of Britain’s Audere International Ltd.

He said: “European banks are conservative because the primary sanctions are still in place. They have been fined many times by the Americans and they are nervous, they want to know, make sure that who they are working with. When they know who they are working with, then they can upset the American sanctions and they will be more relax about releasing money. But also you got to remember that Iran is one country of the whole world and there are many opportunities for finance, so we must evaluate the risks.”

CAP: Central Bank of Iran Governor Valiollah Seif speaking in “The 2nd Business and Banking Forum Iran Europe” in Tehran on Saturday

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Published: 06 March 2016

by : Mohammad Ali Saki

TEHRAN - Iran-Korea Business Forum was held in Tehran on February 29, wherein as many as 500 Korean and Iranian participants from 300 companies were present.

One of the main organizers of the event was Korea International Trade Association (KITA), whose Executive Vice President Chairman Junggwan KIM delivered the opening speech.

According to the association’s website, KITA serves a diverse range of roles, including providing hands-on support to trade companies, drawing trade cooperation from the private sector, formulating new trade strategies, nurturing trade professionals, and building trade infrastructure.

In a short exclusive interview with the Tehran Times, Junggwan KIM has answered three questions. Here is the text of the interview.

TT: One of the main challenges the Iranian economy faces is to join the Word Trade Organization (WTO). How can KITA smooth the path given that Iranian companies need modern technology to compete with global rivals if the country joins the WTO?

A: Joining the WTO has its own regulations and conditions. But I think we can equip Iran with technology and then, this is up to the Iranian partners to build upon the technology, promote it and re-apply it in their own products or develop it.

TT: Given that Korean companies left Iran during the sanctions era, now they are a bit doubtful about partnership with Koreans. For this reason Iran is now looking for long-term contracts. What do you think about it?

A: We had no other choice but to leave Iran’s market, as Korean companies themselves have bilateral relations with their American counterparts and if we violate the game, the U.S. imposes sanctions against us. So, that was our reservation. However, we are now pursuing long-term cooperation with Iran because we have a common goal.

TT: Have you developed your own development model or does it come from other countries’ schemes?

A: At early stages, Korea gained experience by learning from foreign countries, similar to what Iran is doing now. At later stages, advanced educational system in Korea and the determination of Korean people helped develop our domestic model of economy.

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Published: 01 March 2016

A Review of the Iranian Tax System
1. Tax Bases and Rates
The Iranian tax system is divided into two general categories of direct and indirect taxes. The share of direct taxes from the total tax revenues is almost 68% currently. There are two major types of direct taxes including income taxes and property taxes. Each category of direct taxes, in turn, is divided into sub-parts. Indirect taxes include taxes on imports and Value Added Tax (VAT). Taxes on imports are currently collected by the Iranian Customs and are not within the jurisdiction of INTA. Table 1 briefly shows various types of taxes in the Iranian taxation system

Table (1): The Iranian Tax System

Tax Category	Tax Type	Tax Base	Act/ Chapter/Article	Taxable Income	Taxable Persons	Tax Rates
Direct Taxes	Income Taxes	Real Estate Income Tax	DTA - C/I/52-58	Income of persons derived from transfer of rights in immovable properties situated in Iran, less the exemptions: total rent, less a deduction of 25% for expenses, depreciations, and commitments of the owner in regard to the property.	Owners who have rented their immoveable properties to others	15%-35%
		Employment Income Tax	DTA -C/III/82-92	Salaries, wages or any other remuneration received by individuals in respect of their employment services. Payments for works conducted out of Iran, shall be subject to the tax, provided that the payer is an Iranian resident.	Individuals	10% for public sector employees and the others 10-35%
		Individual Business Income Tax	DTA -C/IV/ 93-104	Unincorporated business activities (aggregate sale of goods and services) less the exemptions provided in the DTA	Individuals	15-35%
		Corporate Income Tax	DTA -C/V/105-118	Aggregate profits of companies, and the profits from the profit-making activities of other legal persons, derived from sources in Iran or abroad, less the losses from nonexempt sources and minus the provisioned exemptions	Legal Persons	25%
		Tax on Incidental Income	DTA -C/VI/11119-131	Income earned ex gratia or through favoritism or as an award.	Real or legal person	15-35%
	Property Taxes	Tax on Transfer of Real Properties	DTA -C/I/59-80	Final transfer of real estates & goodwill shall be subject to taxation at the date of transfer.	Real or legal person	5% & 2%
		Tax on Transfer of Shares	DTA -D/I/143	Nominal value of transfer of shares	Joint Stock Companies and other Companies	0.5% & 4%
		Inheritance Tax	DTA -B/IV/17-43	Any estate left from the deceased individual.	Real person	5-65%
		Stamp Duties	DTA -B/5/44-51	Each sheet of check printed by banks (Rls. 200), bill of exchange, promissory notes (0.3%), and other documents and negotiable papers with specified amounts.		As provisioned in Articles 44-51
Indirect Taxes	VAT	Value Added	VATA	Value added resulting from the sale of all goods and services and their imports, except 17 items listed in Article 12 of the VAT Act (VATA) as the exempted ones	Real and Legal Persons	6% currently, to be annually increased for 1% up to 8% by the end of the 5^th Development Plan
Indirect Taxes	Taxes on Imports	Currently collectible by the Iranian Customs Organization.

Some of the most important tax rates are as follows:

Table (2): Most Important Tax Rates

Tax bases		Tax rates
Company Income Tax		25%
Real Persons Income Tax	Rates of the Article 131
	Up to IRR 30,000,000	15%
	30,000,000 to 100,000,000	20%
	100,000,000 to 250,000,000	25%
	250,000,000 to 1,000,000,000	30%
	Over 1,000,000,000	35%
Public Sector Salaries Income Tax		10% on annual income
Private Sector Salaries Income Tax	Up to IRR 42,000,000	10% on annual income
Private Sector Salaries Income Tax	Over IRR 42,000,000	Rates of Article 131
Rental Income Tax		Rates of Article 131
Transfer Tax	Goodwill	2%
	Real properties	5%
	Shares	0.5% (listed companies' shares)
	Shares	4% (other companies)
Value Added Tax		6%

2. Taxation from foreign investors in Iran
Direct Taxes
All non-Iranian real or legal entities for the income earned in Iran and also for the income gained through granting of license or other rights, technical and educational assistance or movie contracts in the territory of Iran are subject to taxation. Depending on the type of activity of the foreign investor, various taxes and exemptions are applicable, including profit tax, income tax, property tax, etc.
Foreign investors in Iran enjoy the same supports and privileges that are offered to the Iranian investors. This means both Iranian and foreign investors pay the same amount of taxes. Tax exemptions and discounts are also equally granted to domestic and foreign investors.
Since foreign investments are usually active as legal entities, we will hereunder focus on rules and regulations for Corporate Income Tax.

Corporate Income Tax
a) General Issues
Foreign legal entities residing abroad shall be taxed at the flat rate of 25% in respect of the aggregate taxable income derived from the operation of their investment in Iran or from the activities performed by them, directly or through the agencies in Iran.
The legal entities shall not be subject to any other taxes on the dividends or partnership profits they may receive from the capital recipient companies.
Legal entities are obligated to, even within the exemption period, submit declaration and profit and loss balance sheets, provided from their official statutory books, maximum four months after the tax year (March 21 each year until March 20 next year) along with the list of partners and shareholders, their shares and addresses to the tax department within the area of the activity of the legal entity. If these legal entities do not submit the documents within the stipulated time span, the tax exemption will be null and void

b) Exemptions

The Direct Taxation Law and other pertinent legislations have considered certain exemptions for the legal entities as table (3):

Table (3): Highlights of Tax Exemptions

Activity	Level of Tax Exemption	Duration of Exemption	Legal Basis (Act- Article)	Incentive Type
Agriculture	100%	Perpetual	IDTA- Article 81	Permanent Exemption
Industry and Mining	80%	4 Years	IDTA- Article 132	Tax Holiday
Industry and Mining in Less-Developed Areas	100%	20 Years	IDTA- Article 132; Paragraph B of Article 159 of the 5^th Year Development Plan	Tax Holiday
Tourism	50%	Perpetual	IDTA- Article 132- Note 3	Tax Credit
Export of Services & Non-oil Goods	100%	During 5^th Development Plan	IDTA- Article 141	Tax Holiday
Handicrafts	100%	Perpetual	IDTA- Article 142	Permanent Exemption
Educational & Sport Services	100%	Perpetual	IDTA- Article 134	Permanent Exemption
Cultural Activities	100%	Perpetual	IDTA- Article 139- Paragraph L	Permanent Exemption
Salary in Less-Developed Areas	50%	Perpetual	IDTA- Article 92	Tax Credit
All Economic Activities in Free Zones	100%	20 Years	Article 13- the Free Zones Act	Tax Holiday
Profits of Private and Cooperative Companies used for development, reconstruction and renovation of existing industrial and mining units	50%	Perpetual	Paragraph A of Article 159 of the 5^th Development Plan, 15% was added to the exemption as of 2010	Tax Credit

c) Deductions
Expenses which are deductible in the assessment of taxable income are listed in the Direct Taxes Act. These expenditures must be supported to a reasonable degree by documentary evidence and are exclusively connected with the earning of income during the year in question.
The categories of deductible expenditure are as follows:
Table (4): Deductible Expenses

The cost of goods and raw materials	Expenses incurred in the maintenance and upkeep of the premises owned by the enterprise
Personnel costs	Transportation expenses
Rental of enterprise's premises in case of being rented	Expenses related to transportation and entertainment for employees, and warehousing costs
Rent of machinery and equipment	Fees paid in proportion to the services rendered
Costs of fuel, electricity, lighting, water and communication	Interest and fees paid for the carrying out of the enterprise operation
Business insurance	Cost of repair and maintenance of machineries and business equipments
Royalties, duties, rights and taxes paid	Abortive exploration expenditures for deemed mines
Research, development and training expenditure	Membership and subscription fees connected with the business operations
Compensation paid for damages resulted from the business operations	Bad debts, if proved
Cultural, sports and welfare expenditures paid to the Ministry of Labour and Social Affairs in respect of workers	Currency exchange losses computed in accordance with accepted accountancy practice
Reserves against doubtful claims	Normal wastage of production
Losses of legal persons	The reserve related to acceptable expenses of the assessment period
Minor expenses incurred in connection with the rented premises of the enterprise	Expenses for purchasing of books and other cultural and art goods for employees and their dependents

Other expenses that are not referred to in the above Table, but are related to the earning of the enterprise's income, shall be accepted as deductible expenses on basis of the proposal of the INTA and approval of Ministry of Economic Affairs and Finance.

d) Losses
Losses sustained by all taxpayers engaged in trading and other activities are accepted by the tax authorities; will be carried forward and written off against future profits for a period of three years.

e) Withholding taxes
● Five percent of every contract payment may be withheld by the payer and accounted for to tax authorities. Such a withheld tax constitutes an advance payment of the final tax due.
● The payers of salaries are obliged, when paying or allocating the same, to compete and withhold therefrom the applicable taxes and to remit, within thirty days, the deducted amounts together with a list containing the names and addresses of recipients and the amount of the payments, to the local tax assessment office.

f) Depreciation
Depreciation of assets is deductible in the assessment of taxable income. Depreciation rates range from 5% to 100% and the period over which assets may be depreciated ranges from 2 to 15 years.

3. Value Added Tax (VAT) in Iran
The VAT in Iran is levied on the sale of all goods and services and their imports, except 17 items listed in Article 12 of the VAT Act (VATA) as the exempted ones. The VATA, however, does not include the export of goods and services through official Customs gates. Therefore, the taxes paid for the export of goods and services will be refundable by submitting the Customs clearance sheets and valid documents.
Currently, the VAT rate stands at 6% (VAT rate for two special goods of cigarettes and jet fuel is relatively higher). To reduce the country’s dependency on oil revenue, the Law on the Fifth Five-Year Development Plan provisioned an annual one-percent increase in the VAT rate to put it at 8% at the end of the Plan, i.e. 2016.
Economic activities in free trade and industrial zones are exempted from the VAT.

4. Agreements for the Avoidance of Double Taxation
To facilitate cooperation between Iranian and foreign residents and to promote trade and economic exchanges with foreign countries, the Government of the Islamic Republic of Iran has applicable mutual Agreements for the Avoidance of Double Taxation:

Table (5): List of Iran's Applicable Agreements for the Avoidance of Double Taxation

France	Turkmenistan	Algeria	Azerbaijan Republic
Kyrgyzstan	Turkey	Indonesia	South Africa
Kazakhstan	Tunisia	Ukraine	Germany
Qatar	China	Bahrain	Austria
Georgia	Russia	Belorussia	Jordan
Lebanon	Sri Lanka	Bulgaria	Armenia
Poland	Switzerland	Venezuela	Uzbekistan
Kuwait	Syria	Pakistan	Spain
Serbia	Sudan	Romania	Tajikistan
Malaysia	Croatia	South Korea	Oman