How can a foreigner open a company in Iran

One of the most promising and developing countries in the Middle East is Iran. Registering a company in Iran can provide a number of advantages to foreign investors.

Here are a few key benefits:

1. A large domestic market. Iran is one of the largest economies in the Middle East, with a population of around 80 million. Registering a company in Iran allows foreign investors to access this large domestic market and use its potential to expand their business.
2. Natural resources. Iran has significant reserves of oil, gas, mineral resources and other natural resources. Registering a company in Iran can give foreign investors access to these resources and the opportunity to mine, process or export them.
3. Geographic location. Iran is strategically located between Western Asia and Central Asia. Registering a company in Iran can be a good starting point for expanding business in the region and using Iran as a transit country for trade with other countries.
4. Respect for foreign investors. Iran is taking steps to attract foreign investment and promote business development. There are various incentives and benefits for foreign investors, including tax benefits, protection of property rights, and opportunities to participate in government projects.
5. Low labor costs. Iran offers low labor costs compared to some other countries. This may be attractive to investors looking to reduce production and service costs.

Despite the loyalty of Iranian legislation to non-resident entrepreneurs, it is impossible to buy a ready-made company in this country. This is due to increased control over the activities of local businesses.

Foreigners can register a company in Iran only in the format of a joint-stock company or a representative office of a foreign company. To do this, you must go through a series of procedures according to established rules. Mistakes made at the stage of registering a company in Iran may result in a denial of registration or restriction of opportunities.

Iranian legislation provides non-residents with equal opportunities to do business along with residents. More favorable business conditions, including offshore registration and a significant reduction in the tax burden, are available on the territory of Free Economic Zones (FEZ). FEZ enterprises are exempt from paying corporate tax for the first 15 years of operation and receive VAT benefits.

In Iran, the registration process is carried out differently depending on the purpose and type of company. Today, unlike in the past, this process is not complicated and time-consuming, and thanks to the development of e-government, the stages of this work can be completed much faster and with less time and money.

According to Iranian law, non-Iranian individuals and legal entities can establish companies in Iran and own up to 100% of the company's shares.

The main laws governing companies in Iran are the Commercial Code of Iran of 1932 and its amendment of 1969.

The most common corporate method for foreign traders and investors to set up an Iranian enterprise is Private Joint Stock Companies (JSC) and Limited Liability Companies (LLC).

The above commercial companies are legal entities and must be represented by an individual when doing business in Iran. Foreign traders and investors can appoint a company manager in Iran.

Private Joint Stock Company (PJSC)

A PJSC can be created by three or more persons (individuals or legal entities) as shareholders who are liable up to the value of their shares.

PJSC is a suitable company for commercial persons wishing to participate in a tender or receive bank loans in the future. This type of company is usually created to deal with more complex issues.

Promotions

A private joint-stock company can issue both bearer and registered shares. The main differences between bearer shares and registered shares lie in the transfer of shares and tax issues. The company can provide its shares in simple and preferred types. The preferred type of shares has some priorities, such as multiple voting rights, dividend priority and asset allocation in case of liquidation.

Capital

Payment for shares can be cash and assets. The amount of capital for this type of company must be at least 1 million Iranian reais at the time of incorporation. Shareholders must transfer 35% of the subscribed capital to a selected local bank account before registration is completed. Within five years, the board of directors (BoD) and shareholders will demand payment of the remaining part of the authorized capital.

If all or part of the capital is in the form of non-monetary assets, then an official appraiser from the Ministry of Justice or the Investment and Economic and Technical Assistance Organization of Iran must appraise the value of the property. Ownership of all property, including title documents, will belong to the selected local bank. Shareholders must submit a bank certificate along with other documents to the Company Registration Office (CRO).

Management

The joint-stock company is managed by the Board of Directors (BoD).

The first election of the Board of Directors is held by all shareholders. The Board of Directors selects directors from among the shareholders (national or foreign citizens). A legal entity can also be a member of the Board of Directors. In this case, the representative of such a legal entity is responsible for its obligations.

The Board of Directors has all the powers to manage the company and make decisions within the scope of the company, with the exception of matters that, in accordance with the provisions of the Iranian Commercial Code, fall under the jurisdiction of the General Meetings of Shareholders of the company.

Creating and registering a PJSC

Charter

Shareholders must approve the Articles of Association and put their signatures before the company can be registered.

Capital payment

The capital must be fully subscribed and shareholders must pay at least 35% of the capital at the time of registration. Shareholders must then provide a bank receipt to the CRO.

Meeting of founders

When establishing the Company, shareholders must convene a constituent assembly.

The meeting of founders must:

• Elect directors and inspectors
• Get approval from directors and inspectors
• Approve the Charter of the Society

You need to choose a widely circulated newspaper to publish the company's legal notices.

Company name

Five Persian names should be selected and presented to the CRO. Titles must be at least three words long. Then CRO specialists will select a name for the company. The name of the company cannot be the same as the name of another company registered in Iran.

Additionally, the name should be:

• In the state language of Iran — Farsi, not in Latin form
• Do not contradict the traditions and culture of the Islamic Republic of Iran
• Make a difference in Farsi

Submit required documents

In order to create a PrJSC, the documentation that must be submitted to the Company Registration Office includes:

• Applicant's ID
• Individual (copy of passport for individuals)
• Legal entity (published legal notice of registration, published notice of recent company changes, articles of association, appointment of a representative with a signed power of attorney from the company and a copy of his passport
• The articles of association are signed by all shareholders or their authorized representatives
• A completed application signed by all shareholders or their authorized representative

Resolution of the founder, including:

• Document signed by all shareholders confirming the election of directors and supervisors
• Signed consent of directors and inspectors
• Declaration of the appointment of the newspaper that publishes company notices
• Announcements that the shares are subscribed along with the bank receipt
• Original authorization letter from the appropriate authority for activities requiring permissions
• Actual power of attorney if registration is done by a lawyer

All documents must be translated into Farsi and certified by the Iranian consulate in the investor's country.

Publication

Shareholders must publish a notice of registration both in the Official Gazette and in the general circulation newspaper chosen by the Founder Shareholders. This process can usually take up to 30 days, but business can continue with a certified copy of the notice obtained from the official bulletin.

Beginning of legal existence

Directors and inspectors are required to accept their proposed positions in writing. Adopting a position ipso facto is considered to be strong evidence that directors and inspectors are fully aware of their rights and obligations. The company is considered to be properly constituted from the date of such acceptance.

State Tax Service Notice

According to Article 177 of the Iranian Direct Taxation Law, any new company must notify the State Tax Service of the commencement of its activities.

VAT registration

Companies must now proceed with VAT registration with the tax organization. Receive sealed company accounts within 30 days of company formation.

Within 30 days of company incorporation, an application for sealed ledgers must be filed with the CRO. CRO studies the issue and delivers books to the company.

Stamp duty

According to Article 48 of the Iranian Direct Taxation Law, the stamp duty is 0.05% of the nominal value of the subscribed capitals and must be paid within 60 days after the establishment of the company to Melli Bank.

Receiving a commercial code within 60 days from the date of registration

A commercial code or commercial number is required for all companies doing business in Iran. The IRS issues a Commercial Code for companies and companies can apply for it online through the IRS website.

Registration with the Department of Labor

Founding shareholders must enroll employees in the social security program and obtain a social security number.

Registered Iranian address

Each legal entity registered in Iran must have an actual (not nominal) registered office address in Iran.

Expenses

• Registration fee from $10
• Fees for notification of formation published in the Official Gazette
• Fee for an education notice published in a general circulation newspaper
• Stamp duty on share certificates
• Attorney's fee

Limited Liability Company (LLC)

LLC — it is the simplest type of company in the Iranian legal and registration system. If foreign export companies are interested in import, export and commercial activities, and not in complex projects or obtaining financial loans in Iran, then this type of company is suitable for doing business.

LLC — is a company formed by two or more people for business purposes. Foreign citizens can own 100% of the shares of an LLC. Shareholders may be individuals or legal entities and are liable only to the extent of their capital in the Company.

Capital

The minimum capital requirement is 1 million rials. There is no requirement to deposit capital into a bank account before the formation of the company. A shareholder's contribution to the Company's capital may be in cash or in kind. In the case of a non-monetary contribution, one or two experts must assess its value. Experts may be formal or informal, and shareholders will be jointly and severally responsible for evaluating such contributions.

According to Iranian law, an LLC is not considered to be properly registered if the entire cash capital has not been fully contributed, even if non-cash contributions have been assessed and made by partners.

Managers

The shareholders of a limited liability company must appoint a managing director of the company. The Managing Director or General Director of the Company is not required to be a shareholder, he may be an Iranian citizen or a foreign national and may be appointed for an indefinite period.

Supervisory Board

If the number of shareholders in an LLC exceeds twelve, Iranian law requires the formation of a Supervisory Board (SB). The SB may appoint a general meeting of shareholders at least once a year.

Selling shares

The transfer of shares of each participant in the LLC is carried out with the consent of the shareholders, who own three-quarters of the company's capital, and also have a majority in the shareholders.

The transfer of shares is possible only by drawing up an official act.

Shareholder voting rights

Each shareholder has the right to vote in proportion to the amount of his contribution to the capital.

Creation and registration of a limited liability company (LLC)

Company name

Five names of at least three words must be selected before registering a company, and then the CRO will choose one of them.

Selected titles must include the term LLC. Otherwise, the company will constitute a form of general partnership in relation to third parties, creating unlimited liability for shareholders.

If any shareholder is mentioned anywhere in the company's name, that particular shareholder will be considered a general partner and will therefore have unlimited liability to third parties.

Name should be:

• In the state language of Iran — Farsi, not in Latin form
• Do not contradict the traditions and culture of the Islamic Republic of Iran
• Make a difference in Farsi
• Not registered as the name of an existing company in Iran

Required Documents

• Two completed LLC registration forms signed by all shareholders (must be obtained from CRO)
• Two completed Forms of Memorandum of Understanding signed by all shareholders of the company (to be obtained from the Company's Registered Office)
• Two Articles of Association signed on all pages by all shareholders
• Minutes of the General Meeting of Founders in duplicate, signed by all shareholders
• A limited liability company is not required to appoint a board of directors. However, if the BoD is to be formed in accordance with the Articles of Association, the minutes of the BoD signed by a member of the board must be submitted to the CRO
• Copies of passports of shareholders, managing director (if not a shareholder), members of the board and managers (if any), translated into Farsi and certified by the Iranian consulate
• Letter of recommendation for a representative of a shareholder of a legal entity or members of the board
• Notice of registration of the Company and the latest changes in the company, translated into Farsi and certified by the Iranian Consulate.
• A statement by members of the board of a shareholder of a legal entity that such a legal entity is not an owned company because, under Iranian constitutional law, any owned legal entity is prohibited from being a board member or CEO of a private company.
• In the case of non-cash authorized capital, an assessment of such funds is required, in addition to the document of ownership of real estate.
• Obtaining a license to operate from the relevant authority (if required)
• Documents relating to the legal address of the Company are required. The title deed must be either commercial or administrative, not a residential title deed

Registration

• Providing a scanned copy of the necessary documents to the Website of the Registration Office of the company
• Publication of notice of registration in the Official Gazette and Gazette
• Registration of a company in a tax organization
• Sending the originals of the required documents to the Registration Chamber of the company
• Receiving approved documents from CRO after review by experts
• Payment of state duty and stamp duty
• Receipt of sealed ledgers for the Society
• Get commercial code
• After registering with the tax authorities, the commercial code must be obtained for the company within 60 days from the date of registration of the company

Expenses

• Registration fee from $10
• Fees for notification of formation published in the Official Gazette
• Fee for an education notice published in a general circulation newspaper
• Stamp duty on share certificates
• Bank account opening fee
• Attorney's fee

Commercial card for export-import companies

In accordance with Article 2 of the Export-Import Law of Iran (1993), all companies engaged in export-import activities must obtain a commercial card from the Iranian Chamber of Commerce. The commercial card is valid for one year.

Foreign individuals or entities may apply for a commercial card if the same service is available to Iranians in their country. In some cases, the Ministry of Industry, Mining and Trade may allow the issuance of a commercial card, even if such a service is not available to Iranian citizens in the foreigner's country of residence.