Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

ISLAMIC REPUBLIC OF IRAN

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of December 31, 2006)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: September 6, 2004.
Exchange Measures
Restrictions and/or multiple currency practicesThe staff report for the 2005 Article IV consultation with the Islamic Republic of Iran states that as of March 8, 2006, the Islamic Republic of Iran maintained one exchange restriction and two multiple currency practices subject to Fund jurisdiction under Article VIII, Sections 2(a) and 3. The exchange restriction arises from limitations set out in the by-laws adopted to implement the Foreign Investment and Promotion Act on the transferability of (periodic) rial profits from certain foreign direct investments. The multiple currency practices arise from: budget subsidies for foreign exchange purchases in connection with payments of certain letters of credit opened prior to March 21, 2002, under the previous multiple exchange rate system; and obligation of entities that had received allocation of foreign exchange for payments based on subsidized “allocated rates” under the previous multiple exchange rate system to surrender unused allocations to the Central Bank of Iran (CBI) at the allocation rate. (Country Report No. 06/154)
International security restrictions
In accordance with IMF Executive Board Decision No. 144-(52/51)All banking, finance, and credit institutions have been instructed to freeze suspected accounts, based on an official list. These measures were taken in accordance with UN Security Council resolutions.
Other security restrictionsYes.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of the Islamic Republic of Iran is the Iranian rial.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementAlthough the Islamic Republic of Iran continues to maintain a de jure crawling peg arrangement based on a basket, the rate of crawl of the exchange rate has been near zero vis-à-vis the dollar since October 2006. As a result, the exchange rate arrangement has been reclassified effective October 1, 2006, to the category conventional pegged arrangement to a composite from the category crawling peg.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
References to legal instruments and hyperlinksn.a.
Arrangements for Payments and Receipts
Prescription of currency requirements
Use of foreign exchange among residentsThe use of foreign exchange for domestic transactions among residents is not permitted, except for internationally linked transactions with prior approval of the CBI.
Payments arrangements
Bilateral payments arrangementsAll bilateral payments arrangements have been terminated, and the outstanding credit balances are in the process of being settled.
Clearing agreementsThe Islamic Republic of Iran is a member of the ACU. Bimonthly settlements of current transactions with the member countries of the ACU take place in convertible currencies.
Administration of controlA negative list of imports and exports is regulated and issued periodically by the Ministry of Commerce (MOC). Foreign exchange may be purchased for authorized goods and services.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)
On external tradeAuthority to trade in gold for monetary purposes is reserved for the Bank of Markazi Jomhouri Islami Iran (BMJII). The exportation of Iranian gold coins for numismatic purposes requires prior BMJII approval.
Controls on exports and imports of banknotes
On exports
Domestic currencyTravelers are allowed to export up to Rls 500,000 a person a trip.
Foreign currencyTravelers are allowed to export up to $5,000 a person a trip.
On imports
Domestic currencyThe import of up to Rls 500,000 a person is permitted.
Foreign currencyNo limit applies to the amount of foreign exchange that foreign travelers may bring into the country, but a customs declaration is required for amounts exceeding $5,000.
References to legal instruments and hyperlinksn.a.
Resident Accounts
Foreign exchange accounts permittedResidents may purchase foreign currency up to $1,000 to open these accounts.
Held domesticallyIranian nationals may open foreign-currency-denominated (FCD) accounts both domestically and abroad.
Held abroadYes.
Approval requiredApproval is required only for public institutions.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyNo.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedForeign exchange funds deposited in these accounts may be transferred abroad without limitations, subject to anti-money laundering regulations.
Approval requiredYes.
Domestic currency accountsYes.
Convertible into foreign currencyNonresidents may convert funds in rial accounts into foreign exchange at the market rate to repatriate their income from contracts and permitted activities. Such conversions require submission of supporting documents and evidence of income tax payment. Rial incomes not converted and transferred within six months from the transaction date will be considered as capital balances.
Approval requiredYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
Preshipment inspectionThis applies only for commodities subject to minimum standards.
Letters of creditYes.
Import licenses used as exchange licensesYes.
OtherYes.
Import licenses and other nontariff measuresAll importers must obtain import licenses from the relevant ministries (mainly the MOC). Clearance through customs is authorized on presentation of shipping documents endorsed by an authorized bank and a permit issued by the MOC. Certain goods, such as pharmaceuticals, must be accompanied by a special permit issued by the Ministry of Health, Treatment, and Medical Education. Telecommunication devices require a permit issued by the Ministry of Communication and Information Technology.
Negative listSome goods on the negative list may be imported under certain conditions with special permits. Imports from Israel are prohibited.
Import taxes and/or tariffsImports are subject to import tariffs of at least 4%, and to a commercial benefit tax that varies by product category.
State import monopolyNo.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesNo.
Export taxesNo.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersInvisible payments may be made in excess of limits established by the BMJII from externally financed FCD accounts on presentation of satisfactory supporting documents.
Trade-related paymentsFreight charges may be transferred through LCs, bills of exchange, money orders (up to the equivalent of $10,000), or cash fund credits. Only Iranian insurance companies may issue insurance policies for the import of goods. The payment of commissions is not controlled.
Prior approvalApproval is granted for payments of unloading and administrative charges on a case-by-case basis.
Payments for travel
Quantitative limitsThe limit is €2,000 a person a trip.
Indicative limits/bona fide testAmounts in excess of the limit may be approved by the CBI on presentation of satisfactory documents.
Personal paymentsApplications for payment of registration fees for participation in research projects must be submitted to the relevant ministry for approval.
Quantitative limitsAllowances are provided on a monthly basis to students on scholarships abroad, approved by the Ministry of Higher Education. All other students abroad may purchase the needed amounts of foreign exchange for tuition and board on submission of justification. Individuals who seek medical treatment abroad may obtain a foreign exchange allowance of up to $30,000 on presentation of the diagnosis by an Iranian physician; allowances exceeding this limit may be provided with justification.
Indicative limits/bona fide testYes.
Foreign workers’ wages
Quantitative limitsForeign workers with work permits are allowed to transfer their salaries without limitation, on confirmation by their employers.
Indicative limits/bona fide testYes.
Credit card use abroad
Quantitative limitsA limit of $10,000 applies.
Other payments
Prior approvalPayment of consulting or legal fees is permitted with the approval of the Bureau of Legal Services.
Quantitative limitsYes.
Indicative limits/bona fide testYes.
References to legal instruments and hyperlinksn.a.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsYes.
Repatriation requirementsNo.
Controls on capital and money market instruments
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsSubject to prior approval by the MOF, nonresidents may invest in instruments traded on the Tehran Stock Exchange in accordance with the Foreign Investment Promotion Act.
Sale or issue locally by nonresidentsYes.
Bonds or other debt securities
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
On money market instruments
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
On collective investment securities
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Controls on derivatives and other instruments
Purchase locally by nonresidentsn.a.
Sale or issue locally by nonresidentsn.a.
Controls on credit operationsControls apply to all credit operations and all transactions in sureties, guarantees, and financial backup facilities.
Controls on direct investment
Outward direct investmentYes.
Inward direct investmentIf the investment takes place in accordance with the Law on Attraction and Protection of Foreign Capital Investment, controls are administered by the Organization for Investment and Economic and Technical Assistance of the Ministry of Economic Affairs and Finance (OIETA-MEAF).
Controls on liquidation of direct investmentThe repatriation of capital is guaranteed, with the approval of the OIETA-MEAF.
Controls on real estate transactions
Purchase locally by nonresidentsYes.
Sale locally by nonresidentsYes.
Controls on personal capital transactions
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsYes.
Settlements of debts abroad by immigrantsYes.
Transfer of assets
Transfer abroad by emigrantsYes.
Transfer of gambling and prize earningsYes.
References to legal instruments and hyperlinksForeign Investment Promotion Act; Law on Attraction and Protection of Foreign Capital Investment.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadYes.
Maintenance of accounts abroadYes.
Lending to nonresidents (financial or commercial credits)Yes.
Lending locally in foreign exchangeYes.
Purchase of locally issued securities denominated in foreign exchangen.a.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsYes.
Liquid asset requirementsYes.
Interest rate controlsYes.
Credit controlsYes.
Differential treatment of deposit accounts held by nonresidents
Reserve requirementsYes.
Liquid asset requirementsYes.
Interest rate controlsYes.
Credit controlsYes.
Investment regulations
Abroad by banksYes.
In banks by nonresidentsYes.
Open foreign exchange position limits
On resident assets and liabilitiesYes.
On nonresident assets and liabilitiesYes.
Provisions specific to institutional investorsn.a.
References to legal instruments and hyperlinksn.a.
Changes during 2006
Exchange arrangementOctober 1. The exchange rate arrangement was reclassified to the category conventional pegged arrangement from crawling peg.

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