Establishing a legal presence in Iran is a significant strategic and legal consideration for foreign companies seeking to enter the Iranian market. For foreign companies seeking to register a branch or representative office in Iran, selecting the appropriate legal structure is essential. Under Iranian law, foreign companies may establish their presence primarily through two legal mechanisms: registering a branch office or appointing a representative office. Although both structures enable foreign companies to operate in Iran, they differ substantially in terms of legal personality, scope of authority, liability, relationship with the parent company, and registration requirements. Therefore, understanding these distinctions is crucial for foreign companies and foreign investors seeking to make informed decisions regarding their legal and operational presence in Iran.

The establishment of branch and representative offices of foreign companies in Iran is governed by the Permitting Registration of Branches and Representative Offices of Foreign Companies Act 1977 (hereinafter Act) and Executive Regulations on Permitting Registration of Branches and Representative Offices of Foreign Companies Act 1999 (hereinafter Executive Regulation).

 

Differences Between a Branch and a Representative Office

To properly assess the available options, it is first necessary to understand the legal definitions of a branch and a representative office under Iranian law.

According to Article 2 of the Executive Regulations, “A branch of a foreign company is a local unit subordinate to the parent company that directly performs the subject matter and functions of the parent company. The branch shall operate in the name of and under the responsibility of the parent company.”

Accordingly, a branch is not an independent legal entity separate from the parent company; rather, it is an extension of the foreign company itself. Its powers, scope of activities, and operational authority are determined by the parent company, and all legal obligations and liabilities arising from the branch’s activities are borne directly by the parent company. Consequently, if a branch enters into contracts, incurs liabilities, or commits violations, the parent company remains legally responsible.

By contrast, Article 4 of the Executive Regulations defines a representative of a foreign company as “a natural or legal person who, based on a representative agreement, undertakes to perform part of the subject matter and duties of the represented company in a specific location. The representative shall be responsible for the activities conducted under such representation.”

Unlike a branch, a representative office is established through a contractual relationship and may be operated by either a natural person or a legal entity. The representative possesses a degree of legal independence from the parent company and is generally responsible for activities carried out within the framework of the representative agreement. Therefore, while a branch functions as a direct extension of the parent company, a representative office serves as an independent intermediary acting on behalf of the foreign company under contractual terms.

Eligibility to Register a Branch or Representative Office in Iran

The Sole Article of the Act provides that foreign companies may register a branch or representative office in Iran only if:

  1. The foreign company is legally registered in its home country; and
  2. The principle of reciprocity is satisfied, meaning that the company’s home country must permit Iranian companies to establish similar entities there.

Accordingly, only foreign companies whose countries of origin provide reciprocal rights to Iranian companies may register branches or representative offices in Iran, and such registration must be within the fields permitted by Iranian laws and regulations.

 

Permitted Fields of Activity

Under Article 1 of the Executive Regulations, branches and representative offices are permitted to engage in the same categories of activities in Iran, including:

  1. Providing after-sales services for the goods or services of the foreign company;
  2. Performing executive obligations under contracts concluded between Iranian persons and the foreign company;
  3. Examining and preparing the grounds for foreign investment in Iran;
  4. Cooperating with Iranian technical and engineering companies for projects in third countries;
  5. Promoting non-oil exports from the Islamic Republic of Iran;
  6. Providing technical and engineering services and transferring technical knowledge and technology;
  7. Carrying out activities authorized by relevant governmental authorities, including transportation, insurance, goods inspection, banking, marketing, and similar sectors.

Required Documents for Registering a Branch Office

Pursuant to Article 3 of the Executive Regulations, a foreign company applying to register a branch in Iran must submit the following documents to the Companies Registration Office:

  1. A written application for branch registration;
  2. Certified copies of the parent company’s Articles of Association, certificate of incorporation, and latest registered amendments;
  3. The latest audited financial statements of the foreign company;
  4. A report containing:
    • Information regarding the company’s activities;
    • Reasons for and necessity of establishing the branch in Iran;
    • The type, scope of authority, and location of the branch in Iran;
    • Estimated local and foreign workforce requirements;
    • The method of financing branch operations in both Iranian Rial and foreign currency;
  5. A certified copy of the power of attorney or related authorization documents, if registration is conducted through a representative.

 

Required Documents for Registering a Representative Office

According to Article 5 of the Executive Regulations, an applicant for registration of a representative office (whether a natural person or legal entity) must submit the following original documents, together with official Persian translations, to the Companies Registration Office:

  1. A written application for registration;
  2. A certified copy of the representative agreement;
  3. Identification documents of the applicant:
    • For natural persons: identification documents and residence address;
    • For legal entities: Articles of Association, certificate of incorporation, and latest amendments;
  4. Evidence of the applicant’s prior experience in activities specified in the representative agreement;
  5. The foreign company’s Articles of Association, certificate of incorporation, and latest amendments;
  6. A report on the foreign company’s activities and the reasons for obtaining representation in Iran;
  7. The latest audited financial statements of the foreign company;
  8. A letter of introduction from the relevant ministry or competent governmental authority.

It should also be noted that foreign branches and representative offices registered in Iran are subject to continuing legal obligations, including:

  • Branches must annually submit reports on the parent company, including audited financial statements, to relevant authorities (Article 7);
  • Branches and representatives must submit annual reports on their Iranian activities, together with audited financial statements, within four months after the end of each fiscal year (Article 8);
  • Management of branches or representative offices must be conducted by one or more natural persons residing in Iran (Article 9).

Additionally, under Note 3 of Article 107 of the Direct Taxation Act, branches and representative offices engaged solely in market research, economic data collection, or marketing activities—without conducting commercial transactions or receiving funds from the parent company for expenses—may be exempt from income tax.

Conclusion

In summary, Iranian law provides foreign companies with two principal legal frameworks for establishing a presence in Iran: branches and representative offices. Each structure carries distinct legal, operational, and liability implications. A branch is generally more suitable for companies seeking direct operational control and full corporate presence, whereas a representative office may be preferable for companies seeking a more flexible or limited form of market participation through an independent intermediary.