Review of the Law of "Trade and Industrial Free Zones"

Article 1 of this law describes the purpose of the act as follows:

• Expediting the pace relating to the development of infrastructure installations, development activities, and economic growth;
• Encouraging investments and thus increasing the income of the general public;
• Creating sound and productive employment;
• Regulating the markets for labor and goods;
• Maintaining active presence in international and regional markets;
• Production and export of industrial goods and the provision of public services.

For achieving these objectives, the government as per this law is granted the authority to establish trade and industrial free zones at Kish and Gheshm Islands and Chahbahar.

As per Article 5 of this law, each zone is to be administered by an independent legal organization, the required capital of which is to be financed by the government. Such organizations and their subsidiary companies shall be exempt from following the rules and regulations governing state run companies and other general regulations of the country and shall be governed by this specific law and its related by-laws. In cases for which no provision in made in this law, then such cases shall be treated in accordance with the present "Commerce Code".

As per Article 8, the organization and their subsidiaries subject to this law are authorized to sign agreements (within the context of the constitution Law) with natural persons and legal entities. Also they are permitted to enter into partnership with foreign investors for development and production projects.

Disputes shall be settled in accordance with terms and undertakings outlined in the contracts/agreements signed by the parties concerned.

Articles 13, 15 and 16 of this act deal with tax and customs duties exemption. Natural persons and legal entities involved in various economic activities shall be exempt from capital tax and direct income tax for a period of 15 years from the date of production commencement. After 15 years, they will be subject to a tax law which shall be prepared by the council of ministers and ratified by the Parliament. Products produced in the free zone and exported to other parts of Iran shall totally or partially be exempt from customs duties and commercial tax to the extent of their added value. Products partially or totally made of domestic raw materials shall be partially or totally exempt from customs duties and commercial tax imposed on such raw materials.

Article 14 of this law states that commercial transactions of the zones with other countries shall not be subject to the country's import and export regulations, but commercial exchanges with other parts of Iran are governed by such regulations.

As per articles 19, 20, 21 and 22 of this law, for the implementation of their infrastructure projects, the Organizations of each free zone may obtain the required funds from local or foreign sources, provided that prior authorization is granted by the Council of Ministers. The export and import of capital and profits derived from commercial activities shall not be hindered. Relevant regulations related to the attraction and protection of investments in each of the zones and the share of foreign investors' participations in the various zones shall be approved by the Council of Ministers. Upon approval of the Council of Ministers, each Organization in each Zone may provide the necessary guarantees to the foreign investors against losses incurred as a result of divesting of ownership or nationalization of their business. Such guarantees may be given on the strengh of the Organization's own financial resources, or through guarantees obtained from financial institutions or insurance companies.

The registration of companies, industrial, and copyright ownership, as well as registration of vessels and aircraft shall be done by the Organization of the concerned zone.

Article 24 of the Law specifically emphasizes that the lease of land to foreigners in the Zones is permitted, but the sale of property is forbidden.