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In the Name of God
Law and Implementing
Promotion and Protection of
Ratified in 2002
Updated: October 2016
After nearly 48 years, the new law on foreign investment in Iran under the name of“Foreign Investment Promotion and Protection Act” (FIPPA) was ratified by the Parliament in 2002. FIPPA replaced the “Law for the Attraction and Protection of Foreign Investment” (LAPFI) which was ratified in 1955.Goals of FIPPA are providingthe appropriate legal context for the capital enlisting, foreign technology and realizing the economic development of country.
Some speciﬁc enhancements introduced by FIPPA for foreigninvestments in Iran can be outlined as follows:
Granting protection coverage for all the methods of foreign investment Rendering a comprehensive definition of foreign investment and recognition
of different ways of utilization of capital including “Foreign Direct Investment” (FDI) to different types of project financing methods including various “Build- Operate- Transfer” (BOT) “Buy-Back” schemes and etc;
Provide more convenience in the process of admission and approval of investment plans.
Organizing a station called the “Center for Foreign Investment Services” at the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI) inorder to expedite and facilitate in affairs related to the foreign investments in Iran,before and after issuance of license
Introduction of new methods and legal remedies in related to the public investment admission
Provide security to investors through direct government responsibility-taking inrecognition of foreign investor’s fundamental rights.
It should be noted that the ratification of the new investment law is only one part ofthe series of evolutions and programs that have toke place with the aim of economicreforms and protection of investor’s rights and benefits including domestic and foreign.
Some key elements of economic reforms include:
Ratification of the new tax law with various advantages in terms of the rates andexemptions that shall cause increasing the investment and production in thecountry.
Establishing the tariff system instead of using non-tariff procedures;
Creation of several private banks and other private non-banking credit institutions;
Establishing of the single-currency rate system through the exertion of the single-currency rate for all economic activities and eliminating the multiple-currency rate system.
Providing the possibility of the constitution of private insurance Institutions;
Continued emphasis and progress on the privatization of state- owned enterprises including public sector banks.
The full range of reforms and improvements in Iran’s economy, particularly those focused on the attraction and support of foreign investments, has increased the challenges and opportunities facing the management and staff of OIETAI. As the official authority in charge of foreign investment in Iran, OIETAI renders its utmost toensure that the economic and legal reforms are translated into a growing record of foreigninvestments in Iran. Furthermore, in acknowledging a dynamic and fast changingglobal economic and business environment, we shall also ensure that foreigninvestors continue to enjoy competitive and efficient incentives in order to select Iranas a long-term investment platform in the dynamic global economy. The O1ETAI’s management and staff welcome the prospective investors and gladly provide themwith any information and/or assistance required, by way of the following addresses:
The terms and expressions used in FIPPA shall have the following meanings:
The Foreign Investment Promotion and Protection Act.
Non-Iranian natural or juridical persons and/or Iranians using capital with foreignorigin, who have obtained the Investment License referred to in Article (6).
Various types of capital, whether in cash and/or non-cash (in kind), imported into theCountry by the Foreign Investor, and comprising the following:
a) Cash funds in the form of convertible currency, imported into the Country through the banking system or other methods of transfer acceptable to the Central Bank of the Islamic Republic of Iran;
b) Machinery and equipment;
c) Tools and spares, CKD parts and raw, addable and auxiliary materials;
d) Patent rights, technical know-how, trade marks and names, and specializedservices;
e) Transferable dividends of Foreign Investors;
f) Other permissible items approved by the Council of Ministers.
Utilization of Foreign Capital in a new or existing economic enterprise afterobtaining the Investment License.
The license issued for each Foreign Investment in accordance with Article (6) ofFIPPA.
The Organization for Investment, Economic and
Technical Assistance of Iran, referred to in Article (5) of the Law Establishing the Ministryof Economic Affairs and Finance, enacted on July 1974 ,15.
The Foreign Investment Board, referred to in Article (6) of FIPPA.
General Conditions for Admission of Foreign Capital
Admission of Foreign Investment shall be made in accordance with the provisions of FIPPA and with due observance of other prevailing laws and regulations of the Country, for the purpose of development and promotion of producing activities in industry, mining, agriculture and services, and based on the following criteria:
a) Bring about economic growth, upgrade technology and enhance the quality of products, increase employment opportunities and exports;
b) Does not pose any threat to the national security and public interests, and cause damage to the environment; does not disrupt the Country’s economy and jeopardize the production by local investments;
c) Does not entail grant of concessions by the Government to Foreign Investors.Concession means special rights which place Foreign Investors in a monopolistic position;
d) The ratio of the value of the goods and services produced by ForeignInvestments, contemplated in FIPPA, to the value of the goods and servicessupplied to the local market, at the time of issuance of the Investment License, shall not exceed 25 percent in each economic sector and 35 percent in each sub- sector (field). The sub-sectors and scope of investment in each sub-sector shall be determined in the Implementing Regulation to be approved by the Council of Ministers. Foreign Investment for the production of goods and services for exportpurposes, except crude oil, shall be exempted from the aforementioned ratios.
Note. The “Law for the Ownership of immovable Property by Foreign Nationals” enacted on June 1921 ,6 shall remain in effect. Ownership of land of any type and to any extent in the name of Foreign Investors is not permitted within the framework ofFIPPA.
Foreign Investments admitted in accordance with the provisions of FIPPA shall enjoythe facilities and protections available under FIPPA. Such investments may beadmitted under the following two categories:
a) Foreign Direct Investment (FDI) in areas where the activity of the private sector ispermitted;
b) Foreign Investment in all sectors within the framework of “Civil Participation”,“Buy-Back” and “Build-Operate-Transfer” (BOT) schemes where the return of capital and profits accrued is solely emanated from the economic performance of the project in which the investment is made, and such return of capital and profitshall not be dependent upon a guarantee by the Government or government companies and/or banks.
Note: So long as the investment in BOT schemes referred to in Para (b) of this Article and its accrued profits are not amortized, the exert of ownership right by theForeign Investor over the remaining capital in the recipient economic enterprise ispermitted.
Investment by a foreign government or foreign governments in the Islamic Republicof Iran shall be dependent upon the approval of the Islamic Consultative Assembly, on acase by case basis. Investments by foreign government companies are deemedprivate.
The Organization is the sole official authority for the promotion of Foreign Investments in the Country, and for investigation of all issues pertaining to ForeignInvestments. Applications of Foreign Investors in respect of issues such as admission,importation, utilization and repatriation of capital shall be submitted to theOrganization.
For the purpose of investigation and making decision on applications referred to in Article (5), a board under the name of the “Foreign Investment Board” shall be established under the chairmanship of the Vice Minister of Economic Affairs andFinance who is the President of the Organization, comprising of Vice Minister ofForeign Affairs, Vice President of the State Management and Planning Organization,Vice Governor of the Central Bank of the Islamic Republic of Iran and vice ministers ofrelevant ministries, as the case requires. In relation to applications for admission, theInvestment License shall, after the approval of the Board, be issued uponconfirmation and signature by the Minister of Economic Affairs and Finance. At thetime of admission of Foreign Investments, the Board is required to observe the criteriareferred to in Article (2) of FIPPA.
Note: The Organization, after preliminary review, shall submit the investmentapplications along with its own recommendation, to the Board within a maximum period of 15 days as from the date of the receipt of the applications. The Board must review the applications within a maximum period of one month from the date of submission, and notify its final decision in writing.
In order to facilitate and expedite matters related to the admission and activity ofForeign Investments in the Country, all relevant agencies including the Ministry ofEconomic Affairs and Finance, the Ministry of Foreign Affairs, the Ministry of Industry,Mine and Trade, the Ministry of Cooperatives, Labour and Social Welfare, the CentralBank of the Islamic Republic of Iran, the Customs of the Islamic Republic of Iran, the General Directorate for Registration of Companies and Industrial Property, and the Organization for Protection of the Environment are required to designate a fully authorized representative to the Organization with the signature of the highest authority of the agency. These representatives shall act as the liaison and coordinator for all matters related to their respective agency vis-à-vis theOrganization.
Guarantee and Transfer of Foreign Capital
Foreign Investments under FIPPA shall equally enjoy all rights, protections, and facilities available to local investments.
Foreign Investments shall not be subjected to expropriation or nationalization,unless for public interests, by means of legal process, in a non-discriminatory manner, and against payment of appropriate compensation on the basis of the real value of the investment immediately before the expropriation.
Note 1: Application for compensation shall be submitted to the Board within one year from the date of expropriation or nationalization.
Note 2: Disputes arising from expropriation or nationalization shall be settled in accordance with the provisions of Article (19) of FIPPA.
Assignment of the whole or a part of the Foreign Capital to a local investor and/or, uponapproval of the Board and confirmation by the Minister of Economic Affairs and Finance, to another Foreign Investor is permitted. In case of assignment to another Foreign Investor, the assignee who shall have, at least, the same qualifications asthe initial investor, shall replace and/or become a partner to the former investor from the standpoint of FIPPA.
Provisions for Admission, Importation and Repatriation of Foreign Capital
Foreign Capital may be imported into the Country by way of one or a combination of thefollowing manners, to be covered under this Act:
a) Cash funds to be converted into Rials;
b) Cash funds not to be converted into Rials, but to be used directly for the purchases and orders related to Foreign Investment;
c) Non-cash items, after valuation by the competent authorities.
Note: The procedure related to the manner of valuation, and registration of ForeignCapital shall be determined in the Implementing Regulations of FIPPA.
The rate of conversion of foreign exchange applicable at the time of importation or repatriation of Foreign Capital as well as the exchange rate for all foreign exchangetransfers, in case of applicability of a unified exchange rate, shall be the same rateprevailing in the Country’s official network; otherwise, the applicable exchange rateshall be the free market rate as acknowledged by the Central Bank of the IslamicRepublic of Iran.
The principal of the Foreign Capital and profits therefrom, or the balance of capitalremaining in the Country, after fulfillment of all obligations and payment of legal duesand upon the approval of the Board and confirmation by the Minister of Economic Affairand Finance, shall be transferable abroad subject to a three- month prior noticesubmitted to the Board.
The profit derived from Foreign Investment after deduction of taxes, dues and statutory reserves, upon the approval of the Board and confirmation by the Minister of Economic Affairs and Finance, shall be transferable abroad.
Payments related to the installments of the principal of the financial facilities of Foreign Investors and their associated expenses, agreements for patent rights, technical know-how, technical and engineering assistance, trade marks and names,management as well as similar agreements within the framework of the relevantForeign Investment, upon the approval of the Board and confirmation by the Minister ofEconomic Affairs and Finance, are transferable abroad.
Transfers referred to in Articles (13), (I4) and (15), shall be made in compliance with theprovisions of Para (b) of Article (3) of FIPPA.
The foreign exchange required for transfers referred to in Article (14),(13) and (15) of FIPPA may be procured in the following manner:
a) Purchase of foreign currency from the banking system;
b) From the foreign currency earned from the export of the products and/or the foreign currency earned from the service activities of the economic enterprise in which the Foreign Capital is employed;
c) Export of permissible goods specified in the list approved by the Council of Ministers for implementation of this paragraph in compliance with the relevant laws and regulations.
Note 1. Application of one or a combination of the above manners shall be specified inthe Investment License.
Note 2. With respect to investments referred to in Para (b) of Article (3), if, as a result of legislation or Cabinet decrees, the execution of the financial agreements approved within the framework of FIPPA is prohibited or interrupted, the resultinglosses, up to a maximum of installments at maturity, shall be provided and paid by the Government. The scope of acceptable commitments within the framework of FIPPA, shall be approved by the Council of Ministers.
Note 3. The Central Bank of the Islamic Republic of Iran must secure and make available to the Foreign Investor the equivalent foreign currency for the transferable amounts referred to in Para (a)of this Article, upon the agreement of the Organization and confirmation by the Minister of Economic Affairs and Finance.
Note 4. if the Investment License expressly refers to Para (b) and/or (c) of this Article, this license shall be deemed as the export license.
Transfer abroad of the portion of the Foreign Capital imported into the Country within theframework of the Investment License but remained unused, is exempted from all foreignexchange as well as export and import laws and regulations.
Settlement of Disputes
Disputes arising between the Government and Foreign Investors with regard to investments under FIPPA, if not settled through negotiations, shall be referred to domestic courts, unless the Law ratifying the Bilateral Investment Agreement with therespective government of the Foreign Investor provides for another method for settlement of disputes.
The relevant executive agencies are required to take measures in respect of mutual obligations upon the request of the Organization, for the issuance of entryvisa, residence permit, work and employment permit, as the case may be, for ForeignInvestors, managers and experts of the private sector linked to Foreign Investmentsunder FIPPA as well as their immediate relatives.
Note: Differences of opinion between the Organization and executive agencies shall be settled upon the opinion of the Minister of Economic Affairs and Finance.
The Organization is required to ensure the access of the general public to all information related to investment, Foreign Investors, investment opportunities, Iranian partners, fields of activity and other information available to the Organization.
All ministries, government companies and organizations as well as public institutions to whom the inclusion of law is required to be stipulated by name, are underobligation to provide the Organization with reports on Foreign Investments implementedas well as information required for Foreign Investors so that the Organization can proceed in accordance with the preceding Article.
The Minister of Economic Affairs and Finance is required to provide, every six months, the relevant commissions of the Islamic Consultative
Assembly with a report reﬂecting the performance of the Organization with respect to Foreign Investments under FIPPA.
As from the date of enactment of FIPPA and its Implementing Regulations, the Lawfor the Attraction and Protection of Foreign - enacted on November 1955 ,28
- as well as its Implementing Regulations, are repealed. Foreign Capital previously admitted under the said law shall be covered by FIPPA. The provisions of FIPPA shallbe repealed or altered by subsequent laws and regulations provided that the repeal oralteration of FIPPA is expressly stipulated in such laws and regulations.
The Implementing Regulations of FIPPA shall be prepared by the Ministry of Economic Affairs and Finance and subsequently approved by the Council of Ministers within two months.
The above Act comprising of 25 Articles and 11 Notes is enacted by the Islamic Consultative Assembly in its session of Sunday, 10 March 2002.The initial part of Articles (1) and (2) , Para ( c) and (d) of Article (2), Para (b) of Article (3), and Note
(2) of Article (17) have been approved by the Expediency Council in its meeting on Saturday, May 2002 ,25.
Implementing Regulations of FIPPA
All terms and expressions defined in Article (1) of the Foreign Investment Promotion andProtection Act (FIPPA) shall have the same meanings in these Regulations. Otherterms and expressions used in these Regulations shall have the following meanings:
The Implementing Regulations of FIPPA.
A new and/or an existing Iranian company in which the Foreign Capital is utilized underone of the methods specified in FIPPA.
Private and cooperative sectors and non-governmental public institutions and establishments.
The Center for Foreign Investment Services, established in accordance with Article
(7) of FIPPA at the premises of the Organization. Country›sOfficial Monetary Network:
The banking system (the Central Bank and the banking network, being governmental or non-governmental) and non-banking credit institutions which, uponthe permission of the Central Bank, are dealing with monetary and foreign exchangeactivities.
An audit firm, selected by the Organization from among the audit firms which are members of Iran Association of Certified Accountants, subject matter of the “Law the Use of Specialized and Professional Services of Competent Accountants as Official Accountant”, enacted in 1993, or the Auditing Organization.
Investment Methods and Criteria for Admission
Foreign Investments admitted in the territory of the Islamic Republic of Iran on the basis of FIPPA, shall enjoy the facilities and protections available under FIPPA.Admission of such investments is subordinate to the general conditions for admission ofForeign Capital and submission of a written application by the Foreign Investor, and withdue observance of the criteria set forth in these Regulations.
Admission of Foreign Investment, based on FIPPA and the criteria set forth in these Regulations, may be carried out within the framework of the following methods. Thetable of Foreign Investment methods, features and facilities available under FIPPAshall be prepared and published by the Ministry of Economic Affairs and Finance.
a.Foreign Direct Investment (FDI)
b.Foreign Investment within the framework of contractual arrangements including various types of “Build-Operate-Transfer” (BOT),“ Buy-Back ”, and “ Civil Participation 1 ” schemes.
Methods of investment referred to in Article (3) of these Regulations, in respect of theprocedure for investment and the protection coverage of FIPPA and these Regulations,have the following common or specific features and advantages:
a.C ommon features and advantages:
- Foreign Investors enjoy the same treatment as accorded to domestic investors.2.Import of Foreign Capital, being cash or non-cash (in kind), is only subject to theInvestment License and does not require any other license.
- The volume of Foreign Investment in each individual case shall not be subordinate to any limitation.
- Foreign Capital is guaranteed against nationalization and expropriation, and insuch cases the Foreign Investor shall be entitled to receive compensation.
- Transfer of the principal capital, profit and capital gains derived from utilization ofcapital shall be effected in the form of foreign currency or, as the case may be, in theform of goods, as set out in the Investment License.
- The freedom to export goods produced by the Investee Firm is guaranteed and, inthe event of any prohibition on the export, the goods produced may be sold in thedomestic market, and proceeds of sale shall be transferable abroad in the form offoreign currency through the Country’s Official Monetary Network.
b.Speciﬁc features and advantages:
- Foreign Direct Investment (FDI):
1.1. Investment may be made in all areas where the private sector activity is permitted.
1.2. There is no restriction on the percentage of foreign shareholding. 2.Investment within the framework of contractual arrangements: 2.1.Compensation for losses suffered by the Foreign Investment resulting from prohibition and/or interruption in the execution of financial agreements caused byenactment of law and/or Cabinet decrees, up to a maximum of matured installments, shall be guaranteed by the Government.
2.2.In “B.O.T.” and “Civil Participation” schemes where a government agency is the sole purchaser and/or supplier of goods and services at subsidized prices, the purchase of produced goods and services resulting from an investment projectby the government agency as a party to the contract, shall be guaranteed in accordance with the relevant regulations.
Similar to unincorporated partnership-1
Iranian natural and juridical persons applying for investment in the Country, for thepurpose of enjoying the facilities and protections under FIPPA, are required to submit documentary evidences proving their economic and commercial activities outside the Country.
Foreign Investors who have already invested in Iran without the benefit of coverage ofFIPPA may, upon completion of the admission procedure, benefit fiom FIPPA’scoverage for the principal investment already made. Subsequent to the issuance of theInvestment License, the investor shall be entitled to benefit from all privileges of FIPPAincluding, inter alia, the right to transfer profit. This type of investments shall begenerally considered as existing investments to which the general criteria for admissionof Foreign Capital are applicable.
Foreign Investment in existing firms by way of purchasing shares and/or capital increase and/or a combination of the two, subject to completion of the admission procedure, shall benefit from the privileges of FIPPA provided that such investmentcreates added value. The added value so created may result from an increase in investment in the existing firm and/or achievement of certain objectives such as enhancement of management, increase in exports, and/or improvement in the technology level of the existing firm.
The Board, in the course of examining and issuing license for any Foreign Investmentapplication, shall investigate and verify the ratios set out in Para (d) of Article (2) of FIPPAin the following manner:
- Specifications of the proposed project including the type and volume of goodsand services to be produced, the time-schedule for implementation and operation ofthe project, as well as projection for domestic or export sales, will be set out in theapplication forms for investment.
- The official statistics provided by the competent authorities relating to the valueof goods and services supplied to the domestic market in every sector and sub-sector (field) at the time of issuance of the Investment License, shall be obtainedby the Deputy for Economic Affairs of the Ministry of Economic Affairs and Finance. The bases for the Board›s decisions shall be the statistics made available to theOrganization by the aforementioned deputy up to the end of the first quarter ofeach year.
- Sectors and sub-sectors (fields) shall be distinguished on the basis of the list attached to these Regulations.
- The volume of investment in each sector and sub-sector (field) shall be determined by the Board in accordance with the provisions of Para (a), (b) and
(c) of this Article, and the value of goods and services supplied to the domesticmarket, and with due observance of the exception from investment limitation on the export of goods and services derived from Foreign Investment, and, in the eventof approval of the project, the Investment License shall be issued.
Note. Changes in the ratio of the value of goods and services resulting from Foreign Investment and/or changes in the value of goods or services supplied to thedomestic market, which at the time of issuance of the Investment License haveconstituted the bases for the Board›s decision, shall not affect the validity of the Investment License once it is issued.
Assignment of the proprietary rights to the Iranian party designated in “BOT”contracts may, on the basis of the agreement of the parties to the contract, be effected by way of gradual assignment of proprietary rights during the contractperiod, or single assignment of the acquired rights at the end of the contract period.
In “BOT” contracts, the proprietary rights of the Foreign Investor may be assigned to the institution providing the financial facilities to the investment project upon theconfirmation of the Board.
With respect to those investment projects where a government agency is the exclusive purchaser of produced goods and services as well as cases where the goods and services produced by the investment project is supplied at subsidizedprices, the government agency may, within the established legal framework,guarantee the purchase of the goods and services produced at the price andquantity determined in the relevant contract.
The Organization, while carrying out the duties relating to admission and protection ofForeign Investments within the framework of FIPPA, is in charge of performing and conducting foreign investment promotion activities inside and outside the Countryas well as introducing legal grounds and investment opportunities, carrying outstudies and applied researches, organizing conferences and seminars, cooperating with relevant international organizations and institutions, and establishing relationsand coordination with other agencies in gathering, compiling and providing information related to Foreign Investments.
The Board is responsible for investigating and making decision on all investmentapplications including applications for admission, importation and utilization of Foreign Capital as well as repatriation of capital and accrued profits.
The permanent members of the Board are the four deputy ministers specified in Article (6) of FIPPA, and the Board’s meetings require a quorum of at least three permanent members, and decisions shall be made with at least three positive votes.The deputies of other relevant ministries shall, upon invitation of the Chairman of theBoard, attend the meetings with the right to vote. In such cases, decisions are madeby the majority of votes cast.
Investors shall submit to the Organization their written application together with documents specified in the relevant form. After conducting necessary investigations and taking the viewpoints of the ministry responsible for the related sectors, the Organization shall bring the investment application along with its expert advice to theBoard within a maximum period of 15 working days. Enquiries remained unansweredby the relevant ministry, after 10 days from the date of receipt of the enquiry shall beconsidered as agreement of that ministry with the investment concerned. On the basis of the decisions adopted by the Board for which the agreement of the ForeignInvestor has already been obtained, the Investment License shall be adjusted and,upon confirmation and signature by the Minister of Economic Affairs and Finance,shall be issued.
Note: The Investment License shall include the characteristics of the investor(s),type and method of Foreign Investment, the manner for transfer of profits and benefits as well as other terms and conditions relating to the approval of everyinvestment project.
Center for Foreign Investment Services
For the purpose of facilitating and expediting the fulfillment of the Organization›slegal tasks in the areas of promotion, admission and protection of ForeignInvestment in the Country, the “Center for Foreign Investment Services” shall be established at the premises of the Organization where the representatives of the relevant agencies will be settled. This Center shall be the focal point for all referrals by Foreign Investment applicants to the relevant organizations.
The Ministry of Economic Affairs and Finance (the State Organization for Tax Affairs, the Customs of the Islamic Republic of Iran), the Ministry of Foreign Affairs, theMinistry of Industry, Mine and Trade, The Ministry of Cooperatives, Labour and SocialWelfare, the Ministry of Agriculture Jihad, the Central Bank of the Islamic Republic of Iran, the General Directorate for Registration of Companies and IndustrialProperty, the Organization for Protection of the Environment, and other executive agencies determined by the Minster of Economic Afi›ai1s and Finance shall introduce their fully authorized representatives to the Organization with the signature of the highest executive authority of the agency. The designatedrepresentatives, in terms of the employment regulations, shall be considered as the employees of their respective agencies, and in according to need and proportional to the size of foreign investment demands and investors’ referrals, upon the organization request, shall be present in the center so that respond to the referrals according to assigned tasks under this article
The representatives introduced to act on behalf of the relevant agencies shall haveauthority over all executive and service affairs related to their respective agencies inrespect of Foreign Investments. In order to do well tasks that assigned to the representative under FIPPA and these regulations, the relevant executive agency mustnotify tasks, responsibilities, and authorities of the representative to all its othersections and, simultaneously, must review trend of executive affairs related to theForeign Investments in the area of its responsibilities so that facilitate the fulfillment ofthe tasks assigned to the representative in the center.
The relevant executive agency, in order to maintain the continuity of its executiveandserviceactivitiesintheCenter,may,inadditiontothedesignatedrepresentative,introduce another person with the same qualifications as the successor to perform the tasks in the absence of the representative of the agency. If necessary, the relevantexecutive agency may centrally deploy a maximum of two persons at expert-levelfor performing the tasks related to the agency.
The functions of the “Center for Foreign Investment Services” are determined as follows:
1.Provision of information and necessary advices to Foreign Investors. 2.Coordination required in respect of affairs related to securing necessary licenses,including, but not limited to, the declaration of establishment, the license of the Organization for Protection of the Environment, the permits for subscriptions relatingto water, electricity, fuel and telephone, exploration and exploitation licenses for mines, etc. from the relevant agencies, prior to the issuance of the InvestmentLicense.
- Coordination required in respect of affairs related to issuance of visa, residenceand work permits for individuals related to Foreign Investment.
- Coordination required in respect of affairs related to Foreign Investmentsubsequent to the issuance of the Investment License including registration of Joint Venture Company, registration of orders, and issues related to importation and repatriation of capital, customs and tax affairs, etc.
- Coordinationrequiredtobeestablishedbyrepresentativesoftheagenciesamongexecutive departments of their respective agencies in respect of applications for Foreign Investment.
- Monitoring the good performance of decisions made in respect of Foreign Investments.
Provisions for Importation, Valuation and Registration of Foreign Capital
The procedure relating to the importation, valuation and registration of Foreign Capital,being cash or non-cash (in kind), is set forth as follows:
a. Capital in cash
- Cash funds in foreign exchange referred to in Para (a) of Article(1l) of FIPPA imported into the Country in one or several stages with the intention to be converted into Rials, shall, on the date of conversion into Rials and in accordancewith the certificate of the bank, be registered by the Organization in the name ofthe Foreign Investor, and shall be covered by FIPPA. The Rial equivalent of the foreign currency imported shall be deposited in the account of the Investee Finn orin the account of the investment project.
- Cash funds in foreign exchange referred to in Para (b) of Article (11) of FIPPAimported into the Country in one or several stages but not converted into Rials,shall be deposited in the foreign exchange account of the Investee Firm or in theaccount of the investment project. These funds, as from the date of deposit, shall be registered in the name of the Foreign Investor, and shall be covered by FIPPA.The said funds may, under the supervision and confirmation of the Organization, be used for foreign purchasesand orders related to the Foreign Investment.
Note: The Country’s Official Monetary Network is required, in relation to the foreignexchange transfer-drafts of Foreign Investors, tocertify directly to the Organization thedetails of the draft including the name of the transferor, the amount of the foreignexchange, the type of the foreign exchange, the date of receipt, the date ofconversion, the name of the Investee Firm, and, in case of conversion into Rials, the Rialequivalent of the foreign exchange imported.
b. Capital in kind (non-cash)
Foreign Capital in-kind includes those items mentioned in Paras (b), (c) under the definition of the term Foreign Capital in Article (1) of FIPPA for which the procedure for importation, valuation and registration is set out as follows: 1.With respect to the Foreign Capital in-kind referred to in Paras (b) and (c) above (including machinery, equipment, tools and spares, CKD parts, raw, addable and auxiliary materials), the Ministry of Industry, Mine and Trade, after being notified of the Organization’s agreement with the importation of the non- cash Foreign Capital items, shall proceed with the statistical registration of the order and shall notify the matter to the relevant customs office for the purpose of valuation and release of the imported items. The Customs’ valuation on the valueof the imported items shall be considered as the acceptable valuation, and, uponthe request of the investor, the value stated in the import license plus the transportation and insurance expenses, shall be registered in the name of the Foreign Investor, and shall be covered by FIPPA as from the date of release from the Customs. In case of discrepancy between the Customs’ valuation and the price stated in the detailed list (of the non-cash items) approved by the Board, the Customs’ valuation shall be the basis for registration of the Foreign Capital in theOrganization and the General Directorate for Registration of Companies and Industrial Property.
Note1. The Ministry of Industry, Mine and Trade and the Organization are required totake measures, within a period of one month from the date of official notification of these Regulations, for the preparation of a special form for the statistical registrationof orders of the non-cash Foreign Capital items under this paragraph, and to actaccordingly.
Note2. The Customs of the Islamic Republic of Iran is required to assess the value of thesecond-hand machinery and equipment related to Foreign Investments at second-hand price.
Note3. If, by findings, the non-cash Foreign Capital imported into the Country is defective, mutilated, not usable and/or does not conform with the specificationsdeclared in the list approved by the Board, the matter will be brought before the Board,and that part of the value of the imported goods which is not confirmed by the Board shallbe deducted from the account of the imported capital.
2.With respect to capital items referred to in Para (d) of Article (1) of FIPPA(including patent, know-how, trade marks and names, and specialized services), the Organization, after carrying out necessary investigations, shall submit to the Boarda report on the fulfillment of the contractual undertakings under the technology andservice agreements, and the approved sums shall be registered by the Board as Foreign Capital and shall be covered by FIPPA within the framework of a directive tobe drafted by the Board and approved by the Minister of Economic Affairs and Finance.
Provisions on Repatriation of Capital and Capital Gains
All applications for the transfer of capital, profit as well as gains resulting from an increase in the value of capital covered by FIPPA must be supported by the report of anAudit Firm that is a member of Iran Association of Certified Accountants. Suchtransfers shall be feasible, after deduction of all legal dues, up to the amount certified bythe Audit Firm.
Transfer of the principal capital, profit and gains resulting from an increase in the valueof capital related to investments referred to in Para
(a) of Article (3) of FIPPA, is permissible in the form of foreign exchange and/ or,upon the request of the Foreign Investor, by way of export of allowed goods. Repatriation of capital and profits related to investments referred to in Para (b) ofArticle (3) of FIPPA, is permissible out of the foreign exchange earnings from the export of the products and/or out of the foreign exchange earnings from theservices rendered by the Investee Firm, and/or by way of the export of other allowedgoods. The Board, on the basis of the report of the Audit Firm on the latest status of theprincipal capital, amount of profit and capital gains belonging to the Foreign Investor,shall determine the transferable amount and shall issue, upon the confirmation by theMinister of Economic Affairs and Finance, the repatriation permit, on a case by casebasis.
Note. With respect to investments referred to in Para (b) of Article (3) of FIPPA, if, as a resultof impossibility of export, the provision of foreign exchange for transfer of funds in theopinion of the Board is found indispensable and possible, the required foreign exchangeshall be made available through the banking system.
If the Investment License refers to Para (b) and/or (c) of Article (17) of FIPPA, the said license shall be considered as the export license and the Investee Firm may deposit its export earnings in an escrow account in a local and/or foreign bank and directly withdraw therefrom for the purposes specified in the Investment License, and pay to the Foreign Investor. Any amount of foreign exchange acquired in excess of the withdrawal amounts shall be subject to the Country›s foreignexchange regulations. In any event, the Investee Firm, after payment of the relevant amounts, is required, along with submission of the export certificate, to notify the Organization in writing.
The foreign exchange earnings from the exports of Foreign Investment, within the limits prescribed by the Board, is exempt from any regulations restricting export and from foreign exchange regulations such as commitments for reintroducing the export earnings to the Country pursuant to the current and fixture governmentalregulations.
In the event of a legal restriction and/or restriction prescribed by the Government as aresult of which the Investee Firms cannot export their products, so long as the legalrestriction and/or Government decision preventing export is in force, the said InvesteeFirms are authorized to sell their products in the domestic market, and, by providingthe Rial equivalent of the foreign exchange requirements specified in the InvestmentLicense, to purchase the required foreign exchange from the banking system and transfer the same, and/or (should they wish so) to export authorized goods.
The transferable funds as set forth in FIPPA may be purchased, after confirmation of theBoard and upon confirmation by the Minister of Economic Affairs and Finance, by theForeign Investor from the banking system, and be effectively transferred, and theCentral Bank of the Islamic Republic of Iran shall, for this purpose, make available thenecessary foreign exchange to the banking system.
If the Foreign Investor does not transfer abroad the transferable funds within a periodof 6 months from the date of completion of the relevant administrative formalities, the said funds shall be removed from the coverage of FIPPA. The continuance of the applicability of FIPPA in respect of the said funds shall be possible upon the approval of the Board.
The Foreign Investor, if so wishes, may use, with the permission of the Board , all or part of the transferable amounts pursuant to Articles (13), (14) and (15) of FIPPA for capital increase in the same firm, and/or, after completion of thelegal formalities for obtaining the Investment License, may utilize it in a new investment.
The Government, with due observance of Principle (138) of the Constitution of the Islamic Republic of Iran, (hereby) delegates to the member Ministers of the High Council for Investment the authority to determine the scope of acceptable commitments under Note (2) of Article
(17) of FIPPA. The Board is authorized to determine the extent of losses resulting from prohibition and/or interruption in the execution of the relevant financial agreementsup to the ceiling of the matured commitments within the limits of undertakingsacceptable to the High Council for Investment as set out in the Investment License.The bases for making decisions in respect of the authority referred to in this Articleshall be the agreement of the majority members of the said Council. Decisions adopted may be issued, if continued by the President, pursuant to Article (19) of theinternal regulations of the Council of Ministers.
In case the Foreign Investor insures his investment in Iran and, in accordance with the terms of the insurance policy on account of a payment made under the insurance policy to the investor for the compensation of a loss incurred from non- commercial risks, the insurance institution subrogates the investor, the subrogate is entitled to enjoy the same rights on account of which the payment for losses hasbeen made. This subrogation shall not be considered as assignment of capital,unless the provisions of Articles (4) and/or (10) have been complied, accordingly.
The Foreign Investor is required, as from the date of notification of the InvestmentLicense within a period determined on the basis of the peculiarities of the investment project by the Board, to import part of his capital into the Country as a sign ofhis firm intention for the implementation of the project. In the event the investor does notimport part of the capital into the Country within the duration of the determined period,and/or does not apply for the extension of the period by way of submission of justifiable reasons, the Investment License shall be considered as null and void.
The Foreign Investor is required to inform the Board of any change in the name, legalstatus, nationality, and of any change of more than %30 in his ownership.
In cases where the Foreign Investment results in establishment of an Iranian company, the ownership of land in the name of the company is permitted at a size appropriate to the investment project, at the discretion of the Organization.
The related executive organizations including Ministry of Foreign Affairs, Ministry of theInterior and Ministry of Cooperatives, Labour, and Social Welfare, are entitled to act inaccordance with the provisions of this article on the basis of the approval and introduction of the Organization for Investment, Economic and Technical Assistanceof Iran in relation to issuance of visa, residence permit and work permit for the followingpersons:
- Foreign investor
- Managers and experts of the foreign of investor
- Foreign managers and experts of economic institutes in which the foreign capital shall be used
- Spouses, male children under the age of 18, single female children, and the parents under the guardianship of those subject to parts 2 ,1 and 3 herein.
A) Ministry of Foreign Affairs shall issue the license for single-entry visa or multiple-entry visa (at a maximum duration of three years) with the right of 90days of residence on each entry for those subject to parts 1 to 4 within three workdays after receiving the request of the Organization for Investment, Economic andTechnical Assistance of Iran based on the type and duration of the visa applied for,in the event of no legal obstacle. In case of impossibility of issuance of the visa, theministry shall announce the result to the applier and the Organization for Investment, Economic and Technical Assistance of Iran.
B) Ministry of Cooperatives, Labour, and Social Welfare shall issue work permitsor extend the work permit for those subject to parts 2 ,1 and 3 based on the application of the Organization for Investment, Economic and TechnicalAssistance of Iran without considering the type of visa within seven work days in the event of no legal obstacle. In case of impossibility of issuance of the visa, the ministry shall announce the result to the applier and the Organization for Investment, Economic and Technical Assistance of Iran.
C) Ministry of the Interior, with cooperation of Ministry of Intelligence and in partnership with Police Force of Islamic Republic of Iran, shall issue or extendthree-year residence permits for those subject to parts 1 to 4, based on the recognition and approval of the Organization for Investment, Economic and Technical Assistance of Iran, within three work days in the event of no legal obstacle. In case of impossibility of issuance of the visa, the ministry of the Interior shallannounce the result to the applier and the Organization for Investment, Economic and Technical Assistance of Iran.
Note: obtaining residence permit by those subject to parts 1 to 4, shall exempt them from the need the receive commutation visa for exiting from the country and returning to it.
The responsibility of the Organization in relation to the general publication of information, pursuant to Article (21) of FIPPA, is limited to the information that is publishable under business practice. The Board is vested with the authority to determine whether information is publishable.
The Organization and the Board are permitted, for the purpose of carrying out the functions and duties contemplated in FIPPA and these Regulations, to use, whenever required, consultancy and professional specialized services of the AuditFirms member of Iran Association of Certified Accountants and other private or cooperative qualified firms.
All provisions contained in the decrees of the Council of Ministers in respect of Foreign Investment that are contrary to the provisions of these Regulations, shall berepealed from the date of coming into force of these Regulations.
Sectors and Sub-sectors referred toin Para (d) of Article (2) of FIPPA
Methods of Foreign Investment, Features and facilities available nnder FIPPA
Foreign Direct Investment: is the participation of a Foreign Investor in an existing or anew Iranian company.
Contractual Arrangements: includes a set of mechanisms under which the utilization of Foreign Capital is solely based upon contractual agreements made between the parties to the contract.
Build-Operate-Transfer The Foreign Investor by entering into contractualarrangements with an Iranian party will make available the cash and non- cash financial resources for the project in which the investment is made, under his own responsibility by way of establishing an Iranian company and/or establishing a branch office in Iran as the Project Company, and , as the case may be, would embark onto construction and/or operation of the Project BOT has different varietieseach of which enjoy specific features.
Buy-Back Arrangement: The Foreign Investor shall make available the cash and non-cash financial resources for the construction, expansion and/or renovations to the recipient Investee Firm. In this method, the repatriation of capital shall be made in the form of goods and services produced by the investee Firm, and/or other goods.
Civil Participation: is the contractual arrangements entered into for materialization of a jointactivity for which establishment of a legal entity is not required and return of theinvestment as well as profit sharing of the parties to the partnership shall be withdrawable in accordance with the agreement. «Civil Participation» shall constitute all other forms of business undertaking in which the Foreign Investor,without establishing a company, is entitled to take advantage from the investmentAnyhow, all the financial precedents related to the « Civil Participation» shall have to beregistered in Iran in the books of either parties.
Center for Foreign Investment Services
In order to establish an appropriate and practical organization for facilitating and expediting affairs related to the foreign investment in Iran and for focusing up the foreign investors referrals at a single-focal, «the Center for Foreign Investment Services» was founded in the premises of the Organization for Investment, Economic and Technical Assistance of Iran, pursuant to Article 7 of FIPPA of 2002. Inthis center, fully authorized liaison representatives from relevant executive agencies including the Ministry of Foreign Affairs, the Ministry of Industry, Mine and Trade,the Ministry of Cooperatives, Labour and Social Welfare, the State Organization forTax Affairs, the Customs of the Islamic Republic of Iran, the Central Bank, the General Directorate for Registration of Companies and Intellectual Property, and the Organization for Protection of the Environment have been stationed as connecters, coordinators, administration and enforcement services executives in affairs relatedto their relevant agencies. These representatives serve out the Foreign Investors and the Enthusiasts to learn in this area.
Key services offered by the Center include:
Dissemination of information and provision of necessary guidance to foreign investors concerning admission and protection of Foreign Investment in Iran.
Necessary coordination concerning affairs related to Foreign Investment including issuance of the declaration of establishment, the environment protectionlicense, the permits for subscriptions relating to water, electricity, fuel and telephone,the license for exploration and exploitation of mines, etc. from the relevant authorities, prior to the issuance of the investment license.
Necessarycoordinationfor the securing of entryvisa, residenceand employmentpermitsforforeignnationalsinvolvedinforeigninvestmentprojects.
Necessary coordination concerning issues related to foreign investments subsequent to the issuance of the investment license including registration ofJoint Venture Company, registration of order for importation of machinery andequipment, and issues related to importation and repatriation of capital, customs and tax affairs, etc.
Coordination among various official agencies in connection with requests and applications made by projects involving foreign investment.
General supervision concerning the fulfillment of decisions surrounding foreigninvestment projects.
Conduct of affairs related to foreign investment by the Center has been organized in a manner that foreign investors can easily lay hand on all required information andservices without any need for further referral to a host of different executive bodies.In fact, services rendered by the Center are not limited to prior-investment stages; foreign investors may, at any time and at any stage ever after, refer to the Centerand benefit from its services.
The performance of the Center since its establishment proves that the establishment of the Center is an effective step toward expediting the affairs of foreign investment undertakings. It is expected that further development of relations between the Center and foreign investors will increasingly enhance the efficiencyof the Center in carrying out its assigned duties and responsibilities.