Knowledge Based Companies in Iran
Knowledge based companies have been put at the center of attention since early 2010s. legalities of this brand-new R&D units are mainly supportive and a spectrum of different laws and regulations has been deployed to boost the facilities in this area.
Policy Perspective to Knowledge Based Companies in Iran
Since early 2010s, Iranian authorities has determined to invest in the cutting-edge science technologies, especially by the means of knowledge-based companies. this investment was supposed to be carried out not directly by fund and loans, but also by providing legal facilities like tax deductions. There is a thread of legal instruments ratified during the last decade, thanks to them we face a rich repertoire and are able to draw a clear road map for those who are interested in this newly born galaxy.
Today, we have more than 5000 knowledge based companies in Iran. A knowledge-based company is known as a high-ranking R&D institution, aimed to commercialize the results. Considering the high risk of investment in this ground, governments usually provide incentives to stimulate private investors to engage, or guarantee to cover the risks on the part of company. So, without further ado, let’s dive in.
Main Laws and Regulations Concerning Knowledge Based Corporations in Iran
The first Category of laws governing this area is the “Law of Supporting Knowledge Based Institutions and Companies and Commercialization of Innovations and Inventions”, which has been passed on late 2010. This law has an executive regulation too that has been issued two years later. The first article of the law underscores the necessity of delivering a high value-added output for companies to be supported thereby. Further, the note under the article excludes companies controlled by public sector. Article 3 provides a list of supports to be given to the companies, including:
- Exemption from paying taxes and customs
- Special bank advances and providing for costs up to a certain amount
- Providing business premises
- Insurance services to cover projects’ risks
The executive regulation is partly repetition and clarification of the law articles, but mainly contains some important indications. According to note 2 under article 2, corporate branches of foreign companies are excluded from the scope of the law. Article 3 establishes a working group to evaluate and confirm the competence of corporations enlisted the support of this law. The deadline for the evaluation process is in two months. Article 5 frames the conditions of government grants. The knowledge based company has to has recruited more than 50 specialists with an experience beyond 5 years.
Setting up a Consortium with universities and foreign companies is allowed, provided that the majority of shares remain in the hands of internal knowledge-based institutions. The amount of grant is up to 20% of commercialization costs, but article 6 shakes the limit off and goes for “up to 50%” in cases of higher importance. Hereinafter, the articles provide various formulae for financing knowledge-based projects, insurance, exemptions and also prioritizing knowledge based companies over others in bids and tenders of administrative bureaus. Article 29 obligates these companies to consider environmental concerns. Besides the law and its executive regulation, there are also some acts and bylaws and even organic laws which are involved with knowledge-based companies as part of development issues. we glanced through this thread of laws in the parts below.
The Law on Elimination of Barriers to Competitive Production and Improvement of the Country’s Financial System and Knowledge Based Corporations
This law has been passed four years after the Law of supporting knowledge-based institutions. Article 21 of this law grants the knowledge based companies the provision of stable working capital. Article 31 of this law is also relevant in terms of tax incentives for R&D units. This article was followed by a regulation, namely the executive regulation of article 132/d of the Law on Direct Taxation, which determines geographical domain of the tax incentives.
The Law on the Sixth Five-Year Economic, Cultural and Social Development Plan (2016-2021) and Knowledge Based Companies
The next line in this column, is the relevant provisions of the sixth development law, which is an organic law and is based on policy factors. Article 31 deals with the agricultural development and for the purposes of this sector, in paragraph e, obligates the government to invest in R&D activities and especially, stresses the role of knowledge-based companies in this regard. Article 36 deals with the issues of drinking water. The legislator indicates to importing technology for the matter, but reinforces that the process has to be managed by knowledge-based companies. Articles 53 and 54 state that aviation and rail transport industries have to be developed, subject to the “principle of supporting knowledge-based company”.
After all, article 65 comes to the upstream and downstream petroleum industries and obligates government to support foreign investment and participation of foreign enterprises in incorporating “internal” knowledge-based companies in this field.
Final words: is incorporating a knowledge-based company in Iran, the way to go?
For now, knowledge based companies in Iran are the most respected enterprise in terms of facilities and financial helps. If you are interested to invest in a field in Iran, first make sure you have no way to incorporate your enterprise in the form of a knowledge-based company. Of course, this is not a way to escape taxes or take a free ride, because the key element: “high tech” is vital and a working group of big heads sit around the table to evaluate it. But any chance you could export the technology to Iran, you are mostly welcome to enjoy the pie.
In case of any questions or second thoughts, get in touch with Iran Best Lawyer and never forget we are available 24/7.
