Foreign Investments in Iran
Published by Iran Chamber of Commerce, Industries and Mines
The Ministry of Economic Affairs and Finance, had announced the complete Regulations for Foreign investments in the Islamic Republic of Iran.
The following are some of the topics explained in this collection:
Organization for Investment, Economic and Technical
Assistance of Iran (OIETAI) has arranged the procedure in such a way that all the applications, before any commitment of either side, must go through the supervisory board for attraction and protection of foreign investments, and in case of approval of the Board they may proceed further for obtaining the decree by the Council of Ministers and for implementation of project(s).
Iran Chamber of Commerce, Industries and Mines has decided to publish the text in English for interested parties, with the hope that it shall serve the purpose. Iran Chamber of Commerce, Industries and Mines
Foreign Investment in the Islamic Republic of Iran
Foreign direct investment in Iran is allowed only through participation of foreign persons in the equity capital of existing and new Iranian companies. Maximum foreign participation in the joint companies is 49% however, this proportion will be determined on merits of each project. The Law for the Attraction and protection of Foreign investments of 1995 (The Law) provides the legal framework for the approval of all foreign investments in Iran.
In accordance with Article I of the Law, foreign natural or legal persons importing capital, either in cash or in the form of machinery, etc. into Iran with the permission of the Government of Iran for the purpose of development and productive activities in industry, mining, agriculture and transportation shall enjoy the facilities provided in the Law. Such facilities shall be granted to those investors who obtain the required approval. In general, the facilities referred to among other things, are the annual transfer of net profits in the currency of the original investment, repatriation of the original capital and the accrued profits derived there from and proceeds of the sale of capital or shares and the remaining portion of capital in the event of liquidation Government guarantee of fair compensation in the event of expropriation pursuant to law, all at the exchange rate of the Central Bank's selling rate on the day of actual transfer, and the legal facilities accorded to the domestic investors.
The Procedure to be followed by prospective foreign investor to get his investment approved involves different stages:
Upon announcement of the Board's positive decision or after issuance of the Decree, the local and foreign investors may form joint company for commencement of operations.
The above procedure must exactly be followed in all new investments. The process of foreign participation in existing Iranian companies of development plans supply of technology and or increasing productivity is limited to stages 3,4 and 5 above.
Application for the Import of Capital
A- SPECIFICATIONS OF THE APPLICANT
Please enclose complete project report as well as a complete list of machinery and equipment showing their capacities.
Having studied the Law and Regulations for the Attraction and protection of Foreign Investments, I have filled and completed the abroad application and hereby apply for approval.
LAW CONCERNING THE ATTRACTION AND PROTECTION OF FOREIGN INVESTMENTS IN IRAN
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 service and the like, for development, rehabilitation, and productive activities in industry, mining, agriculture, and transport, shall enjoy the facilities provided in this Law.
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 formd 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 (3), 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 investments in Tehran as regards investigation and issue of a Decree.
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 this Law.
Note 1: The law concerning ownership of real-estate by foreign nationals of Khordad 16, 1310(A.H.) shall remain valid and in force.
NOTE 2: Persons, companies, and private firms mentioned in Article I above are not entitled to transfer their shares, profits, and rights to their own or other Governments.
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.
Transfer abroad of the 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 fulfilment 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.
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.
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 HTE ATTRACTION AND PROTECTION OF FOREIGN CAPITAL.
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:
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.
Note2: 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.
Note3. 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.
From the standpoint of these Regulations the term "Foreign Capital" denotes:
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.
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 (4), to the Council of Ministers for approval and the issue of a Decree.
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 licence for the import of capital permitting at the same time commencement of operations.
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.
Within one year from the date of notification, the holder of the licence is under obligation to take measures to import an appropriate capital for the commencement of operations; otherwise, his licence shall be null and void. Whenever unexpected events or other predicaments, justifiable to the Board, call for further delay, the Board must extend the licence for another six months.
The cash capital which is imported into Iran in lump sum or in instalments, and converted into rials, must be in foreign exchange acceptable to Bank Melli (5) 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 (6) Iran and the investor.
Conversion of foreign currencies due to be converted into rials is effected at the current buying rate of Bank Melli (7) Iran on the date of filing the application for conversion; and, Bank Melli (8) 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.
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 (9) Iran.
The non-cash capital which is imported into Iran by virtue of the present Regulations is exclued from the annual quota
If capital is imported in the form of goods which are, by findings of experts and assessors, 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.
Transfer abroad of foreign capital imported into Iran and utilized by virtue of Article I 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:
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 subject to the above regulations.
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.
Firms, the central offices of which are outside of Iran, shall pay registration fees only in proportion to the capital transferred to Iran.
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.
For the participation of the Undersecretary of National Economy in Supervisory Board, subject to the discretion of the Board's Chairman (Governor of Bank Melli) (12), when the subject of proposal is related to industrial affairs, the Technical Undersecretary of Industries and Mines, and when the subject is related to mining affairs the Mining Undersecretary of the Industries and Mines, and when it i related to commercial and banking affairs the Undersecretary of Commerce, shall participate.
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 (13) Iran.
The above Regulations comprised of 18 Articles and 4 Notes, which, subsequent to the approval of the relevant Committee of the Senate, had been approved by the Committee on commerce of the Majles, at its sitting on Mehr 17, 1345 (A.H.), is enforceable by virtue of the Law concerning the Attraction and Protection of Foreign Investments.
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 ratified on Khorded 7, 1339 (A.H.) provided that a Supervisory Board for the Attraction and Protection of Foreign Investment, 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 Centre 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 Attraciton and Protection of Foreign Investments was set up under the chairmanship of the Minister of Economy or his Deputy.
According to Article of the Law on Formation of Ministry of Economic Affairs and Finance dated Tir 1353 (A.H.), the title of the Centre 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.
1- The Application Form is available at anytime upon request of the applicants.