Challenges and Solutions for Regulating Free Economic Zones in Iran and a Review of Incentives and Tax Exemptions in Various Countries
Free Economic Zones, as a modern phenomenon in the global arena, are recognized as an effective tool for economic development and attracting foreign investment. By creating a favorable environment for commercial and industrial activities, these zones can contribute to the growth and prosperity of national economies. In this context, tax exemptions and economic incentives are provided to economic actors to encourage investment and production. However, examining the compatibility of these exemptions with the national tax system and their impact on government revenues is a key and necessary issue that requires careful analysis and comprehensive research.
Free Trade Zones in Iran
Iran’s free zones, starting with Kish Island, provide tax exemptions, unified management, and capital freedom to attract investment, boost production, create jobs, and support export growth, aligning with national economic policies.
Challenges of Free Zones in Iran
Iran’s free zones face challenges such as inadequate infrastructure, tax evasion, reduced focus on production, and risks of smuggling. Global experience highlights that success depends on production focus, transparency, and proper infrastructure, not mere quantitative expansion.
Experiences of Selected Countries in Applying Tax Incentives in Free Zones
- China: Tax exemptions on imports, VAT, and reduced corporate income tax attract investment, boost exports, adopt technology, and integrate China into the global economy.
- Russia: Temporary income and land tax exemptions, zero customs duties, and administrative support create jobs, improve infrastructure, and drive commercial success.
- Turkey: Income and payroll tax exemptions, duty free imports, and strategic location promote FDI, export-oriented production, trade facilitation, and gradually increase employment.
- India: Customs and income tax exemptions, plus partial domestic sales rights, aim to boost exports; early zones struggled but reforms improved infrastructure and performance.
This study was conducted at Development and Foresight Research Center in collaboration with Younes Teymouri, Bahare Fahimi and Saman Panahi in 2024.
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