Introduction. Iran is situated at the geographic nexus of the Middle East, Levant, Russia, Central Asia and Indian subcontinent. It connects the Caspian Sea and the Persian Gulf, and lies on the ancient and modern route from the Mediterranean to the subcontinent and China. It shares land borders with Iraq, Turkey, Armenia, Azerbaijan, Turkmenistan, Afghanistan and Pakistan; and is a maritime neighbor of Russia, Kazakhstan, Oman, UAE, Qatar, Bahrain, Saudi Arabia and Kuwait. It is the only country connecting the two large energy fields of the Caspian Sea and Persian Gulf regions, and itself ranks among the top five countries globally in both oil and gas reserves. legal500
Iran’s area approximates Western Europe’s. Ringed by mountains and waters, it has had stable and secure borders for centuries, and benefits from internal stability in a tumultuous region. Iran’s civilisation, culture and language have long been resonant throughout the region. Persian was the language of administration and culture for the Mongols and Arabs and in India; it is spoken in over 25 countries today, about the same as Chinese and Spanish.
Iran’s population of over 85 million people is slightly larger than Germany’s, with about two-thirds under the age of 30. A quarter of the population have university degrees and nearly 60% of university-age people are enrolled in university.
Iran is a middle-income country with a nominal 2018 GDP of about USD450 billion (IMF). It has an industrialised and relatively diversified economy. While oil, gas and petrochemicals are preponderant, there are notable manufacturing, mining, metals, agriculture, power and water sectors. In the past decade, Iran has witnessed rapid growth in the renewables, technology and e-commerce industries as well.
An otherwise attractive market, Iran’s business environment has been significantly affected by US-led economic sanctions unprecedented in their scope and harshness. The country experienced a relatively short respite from most sanctions and a modest increase in foreign investors’ participation following the 2015 Iran nuclear deal (otherwise known as the JCPOA) and prior to the US withdrawal from the JCPOA in May 2018. Current US sanctions targeting key sectors (such as oil, petrochemicals, metals, automobiles and aviation) and the Iranian banking system have constrained trade and diminished the access of almost all business sectors to capital and cross-border banking services.
Attractions and challenges of doing business in Iran. The key attractions of doing business in Iran are its large consumer market, educated workforce, diverse economy, infrastructure investment needs, potential as a regional hub and new paradigms of privatisation and foreign investment. On the other hand, US primary and secondary sanctions, risk perceptions of foreign financial institutions, an inadequate domestic financial system, a weak private sector, complex and unreceptive regulatory environment, out-dated labour and corporate laws and FX volatility constitute the key challenges of doing business in Iran.
Privatisation and the government’s role. Iran’s economy has been characterised by the wide presence of state and quasi-state entities. Against this background, the government embarked on an ambitious privatisation initiative in the early 2000s, resulting in the promulgation of a major privatisation law in 2008 and its implementation thereafter. Over a decade later, the expansion of direct government ownership is tightly controlled but containing indirect control of state and quasi-state entities over the economy remains an elusive objective. The private sector, struggling to simultaneously cope with sanctions and a cumbersome financial and regulatory environment, still plays a relatively small role in the national economy.
Foreign investment. Iranian law now allows full foreign ownership in most economic sectors, while the Foreign Investment Promotion and Protection Act 2002 (FIPPA) offers a number of incentives and protections for those who obtain a license under that Act. Examples include protection against nationalisation and expropriation, national treatment, guaranteed repatriation of investment proceeds and a simplified visa procedure. FIPPA allows foreign direct investment in the private sector as well as foreign investment in the public sector through contractual arrangements (such as buy-backs, BOOs and BOTs). In addition, Iran has entered into bilateral investment treaties with close to 60 countries.
Market entry. In most cases, those interested in doing business in Iran enter the market by: (i) establishing or acquiring a subsidiary (including for the purpose of incorporated joint venture arrangements), (ii) opening a branch or representative office, (iii) establishing an unincorporated joint venture arrangement with local entities, or (iv) entering into a sale or distribution agreement with a local entity. Establishing or acquiring a subsidiary allows the parent company to engage in the full range of corporate activities. Acquisition of an existing local entity may be attractive particularly where the entity holds the necessary licenses, land or other relevant assets or know-how. In recent years, there has been an increase in the number of M&A transactions in Iran, resulting in an increase in the number of opportunities for potential foreign investors. Foreign companies who wish to have a limited local presence may open a branch or representative office, which can engage in specified activities such as conducting market research or providing after-sale services. A branch is exempt from corporate tax as long as it does not conduct any commercial activity. Entering into joint venture arrangements with local counterparts (whether or not through a joint venture company) is also a common approach but requires careful structuring to avoid legal, tax and operational hurdles. Finally, sales and distribution agreements are another option that allows market presence through a local representative or agent while managing liabilities and risks.
Corporate matters. Common corporate vehicles used by foreign participants to establish an Iranian entity are private joint stock companies and limited liability companies. However, corporate registration and maintenance in Iran can be quite demanding due to a formalistic and sometimes inconsistent approach taken by the corporate registrar; it therefore requires time and involvement of senior management to avoid the onerous liabilities for a company and its directors that can follow from unintended lapses.
Regulatory environment. Iran has a complex, multi-layered, overlapping and at times ambiguous regulatory environment, and a significant number of new regulations are issued each year. In certain areas, such as import-export, foreign exchange or banking, regulation can change with dizzying speed. This constantly evolving regulatory landscape requires business owners and managers to keep abreast of new regulatory requirements and opportunities to manage their costs and risks.
Banking and capital markets. Iran’s banking system is, for the most part, government owned or controlled, although a number of private banks have successfully emerged in the past decade. Bank loans are the most important source of debt financing, although banks are undercapitalised and laden with large arrears from the government, credit is limited, financing instruments are rigid and regulations can be out-dated. The government budget has limited development funding, and most project and infrastructure funding comes from the country’s sovereign wealth fund, the National Development Fund (NDF). A number of banks act as agents and intermediaries for NDF’s Iranian rial and foreign currency loans, which support projects that meet NDF’s mandate. While Iran has a legal framework allowing foreign banks to open a local branch or representative office, there is no longer a significant presence of international banks due to sanctions. The capital markets are regulated and supervised by the Securities and Exchange Organisation. The Tehran Stock Exchange, founded in the 1960s, is the oldest in the Middle East, and its market capitalisation in July 2019 was approximately USD90 billion (at prevailing market exchange rates). The debt capital market is much smaller, and is dominated by government debt. All onshore debt financing, whether through banking or capital market instruments, is Sharia-compliant.
Currency exchange. Iran has long had a multiple-rate FX regime. Currently, there is a low, official rate exclusively allocated by the central bank for import of “essential goods” (mostly food and medicine), a much higher open market rate, and an intermediate “NIMA” rate for imports of non-essential goods. Exporters are under a general obligation to repatriate their export revenues, which are intended to support the currency needs of importers of non-essential goods via the NIMA platform, where the NIMA rate is determined on a managed supply-and-demand basis. The current FX regime, which was introduced in April 2018 following the significant devaluation of the Iranian rial, is still in flux and further transformation in the near future can be expected. Therefore, it is essential for businesses for whom foreign currency is material to closely monitor and respond to changes in the FX regulatory environment.
AML. In recent years, concerns over anti-money laundering standards and recommendations of the Financial Action Task Force (FATF) have led the legislative and executive branches of the government to take major steps to pass several AML laws and regulations. A Financial Intelligence Unit has been established within the Ministry of Economic Affairs and Finance, and AML compliance and enforcement is gradually emerging as a significant area of concern for larger business owners, financial institutions and judicial authorities. Despite these developments, Iran’s AML regime is not yet functionally comparable with international standards and best practices.
Labour. The Labour Law 1990 covers many aspects of employment relations, most of which are mandatory. Failure to fulfil employee-related social security and tax obligations could in particular have significant adverse consequences for the company and its directors and principal shareholders.
Taxation. The Iranian tax code generally imposes a flat 25% tax rate on corporate income, subject to numerous reliefs, exemptions and reduced rates based on, among other things, industry sector (e.g., manufacturing, power generation or mining) or location (e.g., special economic zones, free trade-industrial zones or designated “less developed” areas) of the enterprise. In free trade-industrial zones, for instance, there is a 20-year exemption from property and income taxes, starting from the issue date of the taxpayer’s activity license. Iran has also entered into double taxation avoidance treaties with over 50 countries.
Dispute resolution. Most business disputes in Iran go through the court system, which is under-resourced and lacks the necessary expertise to deal with sophisticated commercial disputes. As a result, in recent years there has been a growing interest in the use of ad hoc or institutional arbitration to resolve commercial, investment and other business disputes. The two local arbitration institutions are Tehran Regional Arbitration Centre (TRAC) and the Arbitration Centre of Iran Chamber of Commerce (ACIC), although the parties may choose arbitration by a foreign institution such as the International Chamber of Commerce or the London Court of Arbitration. Government entities must obtain the approval of the Council of Ministers, and in certain cases including where there is a foreign counterparty, the approval of the Parliament, before they can submit to arbitration. Iran is a party to the 1958 New York Convention on Recognition and Enforcement of Foreign Arbitral Awards.- iran Search in ecosia - iran Search in yandex - iran Search in infospace - iran Search in MSN - iran Search in myway - iran Search in aol.com - iran Search in aol.co.uk - iran Search in webcrawler - iran Search in bt
um.dk The Iranian business environment
Iran’s economy is dominated by the oil- and gas sector, agriculture and services sectors, and a noticeable state presence in manufacturing and financial services. Economic activity and government revenues to a large extent depend on oil revenues and therefore remain sensitive to the global oil prices.
Iranian authorities have adopted a comprehensive strategy encompassing market-based reforms. The new strategy envisages reforms of state-owned enterprises, the financial and banking sector, and the allocation and management of oil revenues. The strategy aim to shift Iran away from having an oil-dependent economy towards relying on manufacturing, high-tech solutions and bolster a knowledge based economy. This also entails a focus on strengthening innovation and competiveness among private Iranian companies.
Even though the security situation in Iran is stable, in comparison to many of its regional neighbours, the political situation is more volatile. The geopolitical situation of Iran has always caused a combination of political risks and business opportunities. Therefore, please contact the Embassy for any update
The Iranian business culture and etiquette
The Iranians are a proud people and very conscious about their country’s long history, cultural legacy and many traditions. Beside the country’s great Persian heritage, Iran has throughout its long history been influenced by multiple cultures and political movements.
Prior to the 1979 revolution, Iran had experienced great changes in terms of adopting western viewpoints on women and religion. However, the western values were perceived as a threat to Iran’s Islamic values and traditions by the religious establishment. As a result of the 1979 revolution, the new Islamic Republic of Iran attempted to shelter the country from western values and ideas. Nevertheless, western influence have continued to impact the Iranian business culture, since many key financial leaders and businesspersons have remained in touch with the international community. Iran also has a large diaspora in the US, Canada and Europe, which have remained in touch with family members in Iran and thereby maintained the cultural link between Iran and the West. The Iranian business culture is therefore a mix between traditional, Islamic inspired values and western norms and customs.
It is thus important to stress that there remains a great differences between the Iranian and Danish business culture and etiquette. Even though many Iranians are themselves critical towards the Iranian political system, it is considered impolite if a foreigner presents the same critique of Iran. Further, there is a strong perception in the Iranian public, also among Iranian businesspeople, that western countries have an unfair and unreasonable critical stance towards Iran.
In cases where it is necessary with business contact to an Iranian authority, it is common that the Iranian authority representative is not capable of taking a decision nor signing an agreement at the spot, but merely act as a representative for a complex bureaucracy with a blurred decision-making structure. Contracts and legal or financial documents are normally issued in Farsi with an English translation attached. Business meetings and discussions are increasingly conducted in English, but for some negotiations it is necessary to hire an interpreter.
When arranging meetings or hosting negotiations, delays are common. During negotiations it is not uncommon, that there are attempts of signing ‘oral agreements’, also after the contract has been signed. This factor needs to be taken into account, when negotiating a sales price for a service with an Iranian partner.
A business relation with an Iranian partner is first and foremost based on trust between the partners. The trust is build up through frequent visits and gradual development of the business relation. On a formal level, the Danish partner might need to secure professional assistance to draw up agreements and contracts. In principle, financial or legal disagreements can be solved through a civil court. However, this is a time-consuming and expensive process with an often unpredictable end-result. The Iranian law is complicated and thus does not provide a foreign partner many opportunities to achieve its legal rights.
Iranian culture is characterized by politeness, which from the outside might seem superficial. The politeness is, however, imperative for creating a good dialogue and build trust between the partners and expressions in Farsi are very well received. Further, loud voice and high temper is looked down upon in Iran and should be avoided. As in other Muslim countries, there are certain restriction for dress code and social behaviour, which needs to be followed carefully. Dress code for male business persons are jacket and tie. Except face, hands and feed, women should cover up the whole body. source: iran Search in Bing - iranSearch in Google - iran Search in Ask - iran Search in qwant - iran Search in duckduckgo
The Trump administration's maximum pressure campaign against Iran reached a milestone on November 5, 2018, with the re-imposition of powerful U.S. sanctions aimed at Iran's banking, energy, and shipping sectors – and at the governments and companies around the world still engaging with those sectors. The administration also designated an unprecedented 700 entities, including some 70 Iranian financial institutions. Speaking on November 5, Treasury Secretary Steven Mnuchin promised that this “unprecedented financial pressure on Iran […] is only going to mount from here.”
Indeed, the administration has continued to ratchet up economic pressure since then. In April 2019, several U.S. government agencies announced a combined settlement of $1.1 billion with British bank Standard Chartered for facilitating access to the U.S. financial system on behalf of Iranian entities, in violation of sanctions. Also in April 2019, with the aim of reducing Iran's oil exports "to zero," Secretary of State Mike Pompeo announced that the United States would not renew sanctions waivers that had allowed some countries to continue purchases of Iranian oil.
Sanctions targeting other key sectors of Iran's economy followed. On May 8, 2019, the United States sanctioned Iran’s iron, steel, aluminum, and copper sectors, which account for Iran’s largest export revenue other than oil. In June 2019, the Trump administration sanctioned Iran’s largest petrochemical company and its subsidiaries. In January 2020, the administration imposed sanctions on four additional sectors of the Iranian economy: construction, mining, manufacturing, and textiles.
Below are key dates related to the U.S. withdrawal from the nuclear agreement with Iran and the re-imposition of sanctions waived or suspended under the agreement. Each date includes a description of the U.S. sanctions that took effect. A summary of sanctions mitigation efforts by the EU and efforts to ensure humanitarian trade is also included below. Go to key dates: May 8, 2018; August 7, 2018; and November 5, 2018, as well as Sanctions Mitigation Efforts.
Following these entries is a table that tracks decisions by companies around the world regarding trade and investment with Iran. Go directly to the table.
May 8, 2018
President Trump announced the U.S. withdrawal from the nuclear agreement, or Joint Comprehensive Plan of Action (JCPOA), with Iran. Effective immediately, U.S. nuclear sanctions on Iran were reinstated and the President warned that "any nation that helps Iran in its quest for nuclear weapons could also be strongly sanctioned by the United States."
In a briefing on the same day, then-U.S. National Security Advisor John Bolton said that the President's announcement was effectively "reinstituting all of the nuclear-related sanctions that were waived" as part of the JPCOA, and that "any new or prospective contract" in a proscribed sector would now be "forbidden."
According to guidance published by the Treasury Department, sanctions waivers were issued during a wind-down period of 90 (August 7) or 180 days (November 5) to allow for existing contracts to be closed. In order to avoid exposure to U.S. secondary sanctions, foreign firms were "advised to use these time periods to wind-down their activities with or involving Iran that will become sanctionable at the end of the applicable wind-down period."
August 7, 2018
President Trump issued a new Executive Order on August 6 re-imposing sanctions on Iran. With the conclusion of the 90-day wind-down period, authorizations related to the import of Iranian carpets and foodstuffs and the sale of commercial aircraft to Iran were revoked.
In addition, the United States re-imposed secondary sanctions related to the purchase or acquisition of U.S. dollar banknotes by the Iranian government, trade with Iran in gold or precious metals, trade or transfers to or from Iran of certain metals, significant transactions involving the Iranian rial, the purchase of Iranian debt, and support of Iran's automotive sector.
November 5, 2018
At the conclusion of the 180-day wind-down period, the United States revoked authorizations that previously permitted foreign subsidiaries of U.S. companies to engage in certain business with Iran.
The United States also reimposed secondary sanctions related to Iran’s port and shipping sector, petroleum-related purchases from Iran, transactions with Iran’s Central Bank and other Iranian financial institutions, the provision of specialized financial messaging services, the provision of insurance, and engagement or investment in Iran’s energy sector.
In a press briefing on November 2 announcing the snapback of Iran sanctions, Treasury Secretary Steven Mnuchin confirmed that Belgium-based Society for Worldwide Interbank Financial Telecommunications (SWIFT) – a messaging network used globally to send secure information about financial transactions – would be a potential target of U.S. sanctions and that Treasury had “advised SWIFT that it must disconnect any Iranian financial institution that we designate as soon as technologically feasible to avoid sanctions exposure.” In a statement on November 5, SWIFT promised to cut off from its service all sanctioned Iranian banks.
On November 5, 2018, Treasury added more than 700 individuals, entities, vessels, and aircraft to its specially designated nationals (SDN) list, freezing their assets in the United States, prohibiting their dealings with U.S. persons, and creating secondary sanctions exposure for non-U.S. persons continuing to do business with them.
The European Union created a "Special Purpose Vehicle" in an effort to support continued trade with Iran that is permitted by the JCPOA. INSTEX SAS, or the Instrument for Supporting Trade Exchanges, was registered on January 31, 2019, with France, Germany, and the United Kingdom as initial shareholders. On June 29, the EU announced that INSTEX was operational and processing its first transactions. Nevertheless, the initial line of credit was only several million euros, a small fraction of European-Iranian trade.
Sanctions Mitigation Efforts
On May 18, 2018, EU leaders announced a series of planned measures in order to "preserve the interests of European companies investing in Iran and demonstrate the EU's commitment" to the JCPOA. These included updating the "Blocking Statute," which aims to protect European companies from the extraterritorial effects of U.S. sanctions, and facilitating financing activities in Iran by the European Investment Bank (EIB). The "Blocking Statute" was updated in August 2018.
On September 25, 2018, the European Union announced the creation of a "Special Purpose Vehicle" in an effort to support continued trade with Iran that is permitted by the JCPOA. This Vehicle, called INSTEX SAS, or the Instrument for Supporting Trade Exchanges, was registered on January 31, 2019, with France, Germany, and the United Kingdom as initial shareholders. On June 29, the EU announced that INSTEX was operational and processing its first transactions. Additional European countries joined the initiative in December 2019, including Belgium, Denmark, Finland, the Netherlands, Norway, and Sweden. However, the first transfer of goods took place on March 31, 2020, more than a year after the mechanism’s initial launch.
In a separate initiative to facilitate the flow of humanitarian goods into the country, the United States and Switzerland launched a humanitarian trade channel in January 2020, allowing companies to export medical supplies, agricultural goods, and basic necessities to Iran without the risk of violating sanctions.
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Iran Watch Business Tracker
Faced with the re-imposition of U.S. sanctions, and despite EU efforts to counter their impact, companies around the world have been abandoning trade and investment with Iran that they had resumed following the JCPOA. The table below relies on news media sources to track the decisions by these companies. The table, which is sortable by industry, country, and date, is updated on a rolling basis as new announcements are made. iranwatch.org