Comparison between Establishment of Branch Office and an Iranian Company

As two most popular forms of direct investment, branch office and 100% owned Iranian company are compared based on different elements and factors:

Titles Company Branch
Registration -In accordance with Iran Commercial Code

– can be owned 100% by foreign companies

– requires at least two shareholders

– In accordance with the Law Permitting Registration of Branches and Representatives Offices of Foreign Companies Approved (1997)
Registration authority Companies and Non-Commercial Associations Registry Office Companies and Non-Commercial Associations Registry Office in Tehran (NOT OTHER CITIES)
Legal Personality Has an independent legal personality Is only a representative of foreign company. lacks separate legal personality
Nationality Considered as an Iranian company even if 100% owned by foreign companies Considered as a foreign company
Required Documents 1- Draft Articles of Association signed by all shareholders
(b) Statement that the shares have been subscribed together with a bank certification that the required amounts have been paid in2- A document signed by all shareholders evidencing the election of directors and inspectors

3- Signed acceptances of the directors and inspectors

4- Statement designating the general circulation newspaper in which the legal notices of the company will be published

5- A declaration (on a form furnished by the Companies Registration Office).

1-Filled out Application form.

2-“Justification Report” explaining envisaged activities, justification and purposes, type and scope of authority, estimation of Iranian and non-Iranian employees, methods for company financing.

3-A certified copy of the “articles of association” of the mother company.

4-A certified copy of license of establishment with the latest alterations.

5-Certified latest financial report of the mother company.

6-A Letter of certification issued by the relevant ministry, department, or state run organization indicating that an agreement has been concluded with the foreign company and that they work together (If exist) 

 Tax Subject to all tax obligations applicable to Iranian Companies – Similar to Iranian Companies, shall submit tax declaration and pay tax.

– According to Note 2 to Article 177 of Direct Taxation Act, the responsibility to submit tax declarations and to pay the tax applicable to the tax payers domiciled outside Iran as well as such institutes and companies whose head  office or headquarters are situated abroad, shall rest with their representatives in Iran, if any.

– According to Note 3 and 4 to above Article, branches shall pay tax for that part of revenue acquired in Iran.

– Detailed procedures of applying tax to branches is delineated in Circular Letter No.232/1623/18921 regarding the Mode of Taxation of Branches and Representative Offices of Foreign Companies in Iran.

– However, the calculation of tax for a foreign branch can be deeply affected by the Tax officials and might in certain cases result to double taxation

Ownership of immovable properties Being considered as an Iranian company, it can own immovable properties. Subject to restrictions
Requirement to deposit bond in Civil Procedural Law No requirement Foreign companies, when filing a civil suit against an Iranian party, are required, upon request by defendant, to deposit bond in order to guarantee damages which may be incurred by defendant during the lawsuit.
Ownership of immovable properties Being considered as an Iranian company, it can own immovable properties. Subject to restrictions