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FOREIGN
INVESTMENT LEGISLATION
Direct
foreign investment in Iran is possible only through partnership
with Iranian nationals and with contribution in the share of existing
or newly-established companies. The maximum foreign contribution
allowed in joint ventures is 49%. The Law Concerning the Attraction
and protection of Foreign Investment in Iran, passed in November
1995 outlines the official framework for foreign investment.
According
to Paragraph 1 to the Law, foreign nationals, companies and institutions,
with the permission of the Iranian Government, can import their
capital into Iran in the form of foreign
currencies, machinery, patent rights, export services etc, for developing
productive activity in industry, mineral, agricultural and transportation
fields and shall be entitled to enjoy the facilities provided by
this law. Foreign investors who acquire the necessary permission
for investment shall be entitled to facilities including the transfer
of annual net profit, exit of the principal capital and its interest
from Iran at the selling rate set by Central Bank on the day of
transfer.
GUIDELINES
FOR FOREIGN INVESTMENT IN IRAN
Foreign
investment shall follow the procedures set by the Ministry of Economic
Affairs and Finance as follows:
1.
Identifying an Appropriate Iranian Partner
A
foreign investor may either.
(a)
Contact the relevant ministry, which will in turn introduce to interested
foreign investors those who have obtained the "Principle agreement
" for a project from the relevant ministry or creditable Iranian
investors willing to make joint investment with foreign partners.
(b)
Contact banks, financial institutions of the Chamber of Commerce,
Industries and Mines.
(c)
Contact the Organization for Investment and Economic and Technical
Assistance of Iran. affiliated to the Ministry of Economic Affairs
and Finance for foreign investment regulations.
(d)
Enter into written correspondence with governmental organizations
or companies or through publication of advertisement in newspapers.
2.
Obtaining "Principle Agreement"
After
entering into partnership with an Iranian entity, a foreign investor
must obtain a "Principle agreement " for the plan. The foreign investor
and his Iranian partner are required to present their industrial
plan to the relevant ministry for approval. The plan shall include
a completed questionnaire for establishment of an industrial project
and a copy of the plan's feasibility study.
If
the relevant ministry, after investigating, agrees to the proposed
plan, it may issue a "Principle agreement" for the investor/s. On
the basis of the principle agreement, the investor/s
shall be authorised to establish a factory and import machinery
as well as the means related to the plan's infrastructure.
3.
Applying for contribution and legal Support.
The
foreign investor shall apply to the Organization for Investment,
Economic and Technical Assistance of Iran (OIETAI) simultaneously
with or after doing the above mentioned procedures, for participation
in the approved plan. The application form shall be presented to
the related organization together with the following documents:
(a)
A copy of the application form for importation of capital, filled
by the foreign investor. (The form is deposited with OIETAI.)
(b)
A copy of the plan's feasibility study.
(c)
Copies of the draft agreement if the original investor provides
the technological know-know.
(d)
Copies of the draft agreement if the original investor provides
the technological know-how.
(e)
The letter of attorney of the individual/s signatories and other
materials related to the agreement which have been approved by the
Iranian consulate in the investor's country.
(f)
Copies of the investor's financial reports including balance sheets
and profit and loss accounts of the last three years.
(g)
Other information deemed helpful and suitable.
4.
Review of Application by the Board of Investigation of Attraction
& Protection of Foreign Investment
The
OIETAI, in coordination with the relevant ministries and after reviewing
application forms and the annexed documents, shall prepare a comprehensive
report and sent it to the Board of Investigation. If the application
is considered in the country's interests, the Board shall, after
the Minister of Economic Affairs and Finance's positive response,
submit it to the Council of Ministers for approval and issuance
of permission.
5.
Issuance of Permission by Council of Ministers
After
issuance of permission by the Council of Ministers, the foreign
investor shall be legally authorized to commence importation of
capital into the country. Once the imported
capital is registered, it shall be covered
by the Law Concerning Attraction and Protection of Foreign Investment.
6.
Establishment of Joint Companies
After
the Board of Investigation's affirmative response or upon permission
by the Council of Ministers, the local company and foreign investor's
shall be allowed to form a joint company and commence operations.
Note:
The procedures mentioned above shall apply to all new investments.
In case the foreign partner is interested in contributing in operating
Iranian companies, only Article Nos. 3,4 and 5 shall be observed.
AUTHORITIES
The
Supreme Council of Investment
The
Supreme Council of Investment, on May 6, 1992, discussed the issue
of foreign investment in Iranian companies.
The
Council, considering the current laws and regulations, stressed
the importance of foreign investment, approved the revision of regulations
concerning applications of foreign investors and lifted all restrictions
concerning the amount of foreign investment.
Members
of the Supreme Council of Investment
Policy-making
concerning foreign investment is the responsibility of the Supreme
Council of Investment. The Council's members include.
Minister
of Economic Affairs & Finance,
Minister of Industry,
Minister of Agriculture,
Minister of Mines and Metals,
Minister of Foreign Affairs,
Head of Plan and Budget Organization,
Members
of the Board of Investment
The
Board of Investment for Attraction and protection of Foreign Investment
studies proposals and frames policies. The Board's members include:
-
Deputy Minister of Economy and Head of OIETAI
-
Deputy Minister of Foreign Affairs
-
Deputy Minister of Industry
-
Deputy Minister of Mines and Metals
-
Head of the Plan and Budget Organization
-
Governor of the Central Bank of Iran
-
President of Iran's Chamber of Commerce
LAW CONCERNING THE ATTRACTION AND PROTECTION OF FOREIGN INVESTMENTS
IN IRAN
Article
I.
Persons,
companies, and private firms of foreign nationality, investing in
Iran in accordance with the provisions of Article II of this Law
and by permission of the Iranian Government, either in cash or in
the form of factories, machinery and parts, equipment, patent rights,
expert services and the like, for development, rehabilitation, and
productive activities in industry, mining, agriculture, and transport,
shall enjoy the facilities provided in this Law.
Article
II.
For
the purpose of investigation and making a decision regarding the
merits of the proposals submitted concerning the import of foreign
capitals, a Board shall be formed in Bank Melli Iran under the chairmanship
of the Governor of the said Bank, consisting of the Undersecretaries
of Finance, Foreign Affairs, Commerce, and Industries and Mines,
the General Manager of the plan Organization or one of his assistants,
the President of the Chamber
of Commerce of Tehran or one of the vice-presidents, and the head
of the Exchange Committee. Decisions of the Board shall be submitted,
through the Minister of Commerce (1), to the Council of Ministers
for approval and issuance of a Decree.
Proposals
for investment of foreign capital in provinces shall be given priority
over those for investment in Tehran as regards investigation and
issue of a Decree.
(1-
Minister of Economic Affairs & Finance.)
Article
III.
Capital
imported into Iran in accordance with Article 1 of this Law, as
well as profits accrued therefrom, shall be subject to the legal
protection of the Government; and all the rights, exemptions, and
facilities accorded to the domestic capital and private productive
enterprises shall also apply to foreign capital and firms. The Government
guarantees fair compensation where the promulgation of a special
legislation deprives the owner of capital from ownership; provided
that within three months after the date of expropriation application
for compensation is submitted to the Board mentioned in Art. II.
In
case of disputes, investigation of claims for fair compensation
guaranteed by the Government shall be undertaken by competent Iranian
courts. In such cases the Government can grant Permission for the
transfer abroad of the capital irrespective of the
conditions set forth in Article 5 of this Law.
Note
1: The law concerning ownership of real-estate by foreign nationals
of Khordad 16, 1310 shall remain valid and in force.
Note
2: Persons, companies, and private firms mentioned in Article 1
above are not entitled to transfer their shares,profits, and rights
to their own or other Governments.
Article
IV.
The
owner of capital is permitted to export every year the net profit
derived from the investment of his capital in Iran in the same currency
as that originally imported and up to a limit to be determined in
the regulations implementing this Law.
Article
V.
Transfer
abroad of original capital and accrued profits, or the balance of
such capital and profits remaining in Iran, shall be permitted,
subject to 3 months prior notice to the Board mentioned in Article
2, upon fulfillment of all obligations and with due regard to provisions
of Agreement of the International Monetary Fund of July 1944. However,
the owner of capital is required to retain in Iran, for 6 months,
at least 10 percent of his original capital to meet his contingent
obligations.
Article
VI.
The
Provisions of this Law shall apply to firms and nationals of such
countries where economic activities and reciprocal facilities for
Iranian firms and nationals are made possible.
Article
VII.
The
Government is charged to prepare the appropriate regulations implementing
this Law and to submit the same within 2 months through the Ministry
of Economy to pertinent committees of Houses of Parliament for approval.
REGULATIONS IMPLEMENTING THE LAW ON THE ATTRACTION AND PROTECTION
OF FOREIGN CAPITAL.
Article
1.
Any
natural or legal person, and any foreign firm, transferring capital
to Iran for development, productive, industrial, mining, transport
or agricultural purposes and subsequent activities, or for granting
credit and financial assistance to Iranian firms
engaged
in the said enterprises shall enjoy the privileges of the Law for
the Attraction and Protection of Foreign Capital Investments in
Iran provided:
(a)
Application to invest is submitted for a field open to local private
firms;
(b)
The investment does not involve any monopoly rights or special privileges:
(c)
The capital is privately owned without any foreign government participation.
Note
1: If in the course of operation a foreign government comes to share
in the imported capital in any manner, the said capital should,
within a period prescribed by the Board, be repatriated from Iran.
Note
2: Development and productive activities denote activities which
help raise the production level and income of the country, or, directly
or indirectly earn foreign exchange, or effect an economy in its
expenditure.
Note
3: Foreign banks or their branches established in Iran in accordance
with relevant rules and regulations shall be entitled to enjoy the
protection of the Attraction and Protection of Foreign Capital,
in so far the said protection is in compliance with the Banking
Act and its supplementary regulations.
Article
2.
From
the standpoint of these Regulations the term "Foreign Capital" denotes:
(a)
Foreign exchange imported into Iran through authorized Banks.
(b)
Machinery, machine tools, spare parts, and raw materials as well
as other requirements of this type provided they could be currently
used and the Supervisory Board recognises their suitability as such.
Tools
and spare parts shall be related to the factory machinery which
is imported as capital; their importation may be simultaneous with
that of the main machinery or subsequent thereto and provided that
imported later, they form part of goods specifically imported as
capital, and not as current expenditure;
(c)
Means of transportation-land, sea or air-used in the execution of
the project for which capital has been imported;
(d)
Patent rights, provided they are related to and part of the productive
operation for which the application for the import of foreign capital
has been made, and that it is assessed at the discretion of the
Supervisory Board;
(e)
Technical staff salaries in foreign currency paid before the commencement
of actual exploitation for the purpose of setting up productive
enterprises,
(f)
All of part of the net profit accrued in Iran and added to the original
capital, or invested in some other enterprise covered by the provisions
of the Law concerning the Attraction and Protection of Foreign Investments.
Article
3.
Persons
and firms, referred to in Article 1, intending to import their capital
into Iran, should submit their proposals to the Secretariat of the
Supervisory Board, together with a statement
in Persian, English, or French, covering the following points-
a.
The identity of the person or firm;
b.
The country of origin of capital;
c.
Type of capital, specifying the cash and non-cash amounts;
d.
Legal domicile and the center of activities of the person or firm;
e.
Type of activity and the programme of operation in Iran: and, if
possible, indicating whether operations will be carried out independently
or in partnership;
f.
The sphere of activity in Iran;
g.
References.
Article
4.
The
Board performs its duties in accordance with the Law and the implementing
Regulations; and, should the said Board be in agreement in principle
with the importation of the capital applied for, it will present
its views, through the Minister of commerce, to the Council of Ministers
for approval and the issue of a Decree.
Article
5.
Upon
issue of the Decree of the Council of Ministers, the applicant should,
within a period prescribed with the agreement of the Board, submit
to the Board a detailed list of the non-cash capital which he intends
to import into Iran together with a certificate from international
experts, acceptable by the Board, as to the correctness of its evaluation.
Having
agreed with the said evaluation, the Board will present the foreign
investor or his representative with the license for the import of
capital permitting at the same time commencement
of operations.
Article
6.
The
foreign investor is entitled to insure the capital which he imports
into Iran, should the insurer be a foreign government insurance
institution, and the said institute, as a result of an accident,
replace the investor in accordance with the provisions of the insurance
policy, this replacement does not constitute a transfer of capital.
Article
7.
Within
one year from the date of notification, the holder of the license
is under obligation to take measures to import an appropriate capital
for the commencement of operations; otherwise,
his license shall be null and void. Whenever unexpected events or
other predicaments, justifiable to the Board, call for further delay,
the Board must extend the license for another six months.
Article
8.
The
cash capital which is imported into Iran in lump sum or in installments,
and converted into rials, must be in foreign exchange acceptable
to Bank Melli Iran; and it shall be registered
in the investor's name on the date of its receipt. The amount of
non-cash capital plus the cost of packing, transportation, insurance,
etc., paid outside of Iran, will, after verification, be totally
registered in the investor's name in a special book on the date
of arrival of the goods, supported by documents or pertinent bills,
in a monetary unit agreed upon by Bank Melli Iran and the investor.
Article
9.
Conversion
of foreign currencies due to be converted into rials is effected
at the current buying rate of Band Melli Iran on the date of filing
the application for conversion; and, Bank
Melli Iran is authorized to buy the said foreign currencies or to
retain them as deposit, convert and pay them in rials at a rate
acceptable to both parties, subject to a separate agreement, and
return them, at the time of repatriation, at the same rate.
Article
10.
Foreign
currencies left with the Bank unconverted and not taken as security
against rial payment will be placed at the disposal of their owners,
and, owners of the said currencies are entitled to use such currencies,
without conversion into rials, for the payment of the cost of their
orders placed abroad or for their indispensable expenses within
the limit of expenses for which the capital has been allocated,
or to repatriate them by virtue of Article 5 of the Law concerning
the Attraction and Protection of Foreign Investments in Iran. An
itemized list of expenses and payment in detail will be presented,
at the end of each
month, to the Supervisory Board by Bank Melli Iran.
Article
11.
The
non-cash capital which is imported into Iran by virtue of the present
Regulations is exclued from the annual quota.
Article
12.
If
capital is imported in the form of goods which are, by findings
of experts and accessors, mutilated, defective, or, if they do not
conform with the specifications given in the
application,
or, are declared at a higher value than their actual cost, that
part of the value which is not confirmed by the Supervisory Board
shall not be considered as part of the capital.
Article
13.
Transfer
abroad of foreign capital imported into Iran and utilized by virtue
of Article 1 of Law concerning the Attraction and Protection of
Foreign Investments, as well as the profits derived therefrom whether
in the form of foreign exchange or authorized commodity, shall be
subject to the following regulations:
(a)
The foreign investor, upon examination of his balance sheet and
verification of the annual profit by the Supervisory Board, is entitled,
by permission of the said Board, to transfer abroad the profit accrued
in Iran, after deduction of taxes, dues and statutory reserves,
in the same currency in which he has imported the capital;
The
Supervisory Board may not postpone, without plausible reasons, the
grant of permission for more than three months from the date of
receiving of the balance sheet. In case foreign exchange availabilities
do not permit the Government to transfer abroad
all or part of the investor's profits, permission will be granted
to the investor, upon his request, to export authorized goods without
giving any foreign exchange undertaking;
(b)
The foreign investor who intends to export his capital from Iran
by virtue of Article 5 of the Law for the Attraction and Protection
of Foreign Capital, is under obligation to prepare his balance sheet
at termination of operations in Iran and submit it, together with
the prior notice prescribed in Article 5 of the Law, to the Supervisory
Board. The Supervisory Board, upon appropriate investigations, will
grant permission for the export of foreign exchange requested within
a period of time to be set forth in the permit;
The
period of time set forth in the permit shall not exceed three months,
unless the amounts of capital which are exported are of such magnitude
that, in the Board's opinion, may cause foreign exchange difficulties.
In such a case, a longer period shall be prescribed; the amount
of annual transfer, however, must not be less than 30% of the capital;
(c)
Rate of foreign exchange for transfer of profits or repatriation
of capital shall be the Bank selling rate on the day of the transfer;
(d)
The income, gained from the rise in prices at the time of the sale
of the non-cash capital, shall not be convertible into foreign exchange;
but, the investor has the right to export the equal value in Iranian
goods without any foreign exchange undertaking;
(e)
In case of sale or cession in Iran of original foreign capital or
of equity shares, the owner has the right to transfer abroad the
proceeds of the sale or cession in accordance with the provisions
of the Law Concerning the Attraction and Protection of Foreign investments
and the present Regulations or, he can request to reinvest all or
part of it in Iran if he is so inclined;
(f)
The foreign investor, having due regard to Note 2 Article 3 of the
Law concerning the Attraction and Protection of Foreign Investments,
is entitled to cede to another foreign investor his capital or equity
share subject to the approval of the Supervisory Board; in such
a case, the cedee shall replace the original investor from the standpoint
of the provisions of the Law Concerning the Attraction and Protection
of Foreign Investments and present Regulations;
(g)
If the foreign investor is not inclined to transfer the capital
and accrued net profit abroad within the period prescribed in the
permit, unless he is again granted permission
by
the Supervisory Board in accordance with the provisions of the present
Regulations, the said capital and profit shall remain at his disposal
but shall not be subject to the Law Concerning the Attraction and
Protection of Foreign Investments and the present Regulations;
(h)
Bank Melli Iran and the Foreign Exchange Control Department are,
for the purposes of the above provisions, under obligation to make
abailable to the foreign investor necessary foreign exchange for
the repatriation, within the period of validity of the permit, of
capital, reserve, or the net profit;
(i)
In case the foreign investor is inclined to export in form of commodity
all or part of the net profit, or the original capital and the sales
or session proceeds of capital, or equity shares, with due regard
to the above provisions, the Ministries of Finance and commerce
are under obligation to issue export permit for the said commodities,
without foreign exchange undertaking to the customs and other concerned
authorities. Moreover, if so inclined, the investor has the right
to invest and have registered as capital all or that part of the
annual profits which he has not transferred abroad in the same or
in another field, to be agreed upon by the Supervisory Board.
Note:
At
the time of repatriation of capital, if a loss is suffered by the
investor, as a result of which part of his capital is lost, the
repatriation of only that part of capital which is still existing
according to the balance sheet shall be subject to the above regulations.
Article
14.
The
fair compensation, referred to in Article 3 of the Law Concerning
the Attraction and Protection of Foreign Investments, will be paid
on the basis of normal value prevailing immediately before expropriation.
Article
15.
Firms,
the central offices of which are outside of Iran, shall pay registration
fees only in proportion to the capital transferred to Iran.
Article
16.
In
cases where for specific work certain machinery is imported into
Iran without transfer of foreign exchange, and is not registered
as part of capital, its owner has the right to export from
Iran the same machinery and tools upon the termination of the said
work.
Article
17.
For
the participation of the Undersecretary of National Economy in the
Supervisory Board, subject to the discretion of the Board's Chairman
(Governor of Bank Melli Iran), when the subject of proposal
is related to industrial affairs, the Technical UnderSecretary of
Industries & Mines, and when the subject is related to mining
affairs the Mining Under Secretary of the Industries and Mines,
and when it is related to commercial and banking affairs the Undersecretary
of Commerce, shall participate.
Article
18.
Functions
assigned to the Supervisory Board in the Law concerning the Attraction
and Protection of Foreign Investments are to be regarded as part
of the main functions of the members of the said Board. The personnel
budget of the Secretariat of the Supervisory Board and fees payable
to experts shall be made available by Bank Melli Iran.
The
above Regulations comprises of 18 Articles and 4 Notes, which, subsequent
to the approval of the relevant Committee of the Senate, has been
approved by the Committee on commerce of the Majles and is enforceable
by virtue of the Law Concerning the Attraction and Protection
of Foreign Investments.
Explanations:
According
to Article 2 of the Law concerning the Attraction and Protection
of Foreign Investments in Iran, a Supervisory Board was set up in
Bank Melli Iran, under the chairmanship of its Governor. But later
on, Article 85 section 4 of the Monetary and Banking Law of Iran
provided that a Supervisory Board for the Attraction and Protection
of Foreign Investments, subject of Article 2 of the Act of Azar
7, 1334 (November 28, 1995), concerning the Attraction and Protection
of Foreign Investments be constituted in Bank Markazi Iran under
the chairmanship of the Governor of the Bank.
In
Bahman 1349 (February 1972) the Law transferring the Center for
the Attraction and Protection of Foreign Investments to the Ministry
of Economy was ratified. According to the aforementioned Law, a
Supervisory Board for the Attraction and Protection of Foreign Investments
was set up under the chairmanship of the Minister of Economy or
his Deputy.
According
to Article 5 of the Law on Formation of Ministry of Economic Affairs
and Finance, the title of the Center for the Attraction and Protection
of Foreign Investments was changed to "Organization for Investment,
Economic and Technical Assistance of Iran". A Supervisory Board
for the Attraction and Protection of Foreign Investments was set
up under the chairmanship of the Minister of Economic Affairs and
Finance or his Deputy.
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