CHAPTER ONE: DEFINITIONS
Article 1.
The terms used in this Act have the following meanings:
The Act:
The Foreign Investment Promotion and Protection Act.
Foreign Investor:
Non-Iranian legal and/or juridical Iranian or non-Iranian entities using capital with foreign origin, who have obtained the Investment License referred to in Article (6).
Foreign Capital:
Various types of capital, whether in cash or otherwise, brought into the country by the Foreign Investor comprising the following:
a) Cash in form of convertible currency, brought into the country through the banking system or other methods of transfer acceptable by the Central Bank of the Islamic Republic of Iran;
b) Machinery and equipment;
c) Tools and spare parts, CKD parts, raw material, additives, and auxiliary materials;
d) Patents, technical know-how, trademarks and names, as well as specialized services;
e) Transferable dividends of foreign investor;
f) Other permissible items approved by the Cabinet of Ministers.
Foreign Investment:
Utilization of Foreign Capital in a new or existing economic enterprise after obtaining the Investment License.
Investment License:
The license issued for each Foreign Investment in accordance with Article 6 of this Act.
Organization:
“Iran’s Organization for Investment, Economic and Technical Assistance”, as referred to in Article (5) of the law concerning establishment of the Ministry of Economic Affairs and Finance, ratified on July 15,1974.
Board:
The Foreign Investment Board, referred to in Article (6) of this Act.
CHAPTER TWO: GENERAL CONDITIONS FOR ADMISSION OF FOREIGN INVESTMENT
Article 2
Admission of Foreign Investment shall be made in accordance with the provisions of this Act and with due consideration to other prevailing laws and regulations in the country, for the purpose of development and promotion of industrial activities in manufacturing, mining, agriculture and services, and based on the following criteria:
a) Bring about economic growth, upgrade technology, enhance the quality of products, increase employment opportunities and promote exports;
b) Does not impose any threat to the national security and public interests, and does not cause any damage to the environment; does not disrupt the country’s economy and jeopardize production through local investments;
c) Does not entail granting concessions by the government to Foreign Investor. “Concession” means special rights, which place the Foreign Investors in a monopolistic position.
d) The ratio of the value of the goods and services produced by the Foreign Investment, subject matter of this Act, to the value of the goods and services supplied 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 field (subsector). The field and extent of investment in each field shall be determined in the by-laws to be approved by the Cabinet of Ministers. Foreign Investment for the production of goods and services for export purposes, other than crude oil, shall be exempted from the above ratios.
Note: The law concerning ownership of real property by foreign nationals ratified on June 6,1921 shall remain in effect. Ownership of land of any kind and to any extent in the name of Foreign Investors is not permitted within the framework of this Act.
Article 3
Foreign Investments authorized in accordance with the provisions of this Act, shall enjoy the incentives and protections foreseen in this Act. Such investments may be admitted under the following two categories:
a) Foreign direct investment (FDI) in such fields where the activity of the private sector is permissible;
b) Foreign investments in all sectors within the framework of “Civil Partnership”(joint venture), “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 profit shall not be dependent upon a guarantee by the Government or government companies and/or banks.
Note: So long as the investment in “Build-Operate-Transfer” (BOT) schemes referred to in Paragraph (b) of this Article, and accrued profits thereto are not amortized, the exercise of ownership right by the Foreign Investor over the remaining capital in the recipient economic enterprise in permitted.
Article 4
The Investment by a foreign government or foreign governments in the Islamic Republic of Iran shall depend upon the approval of the Islamic Consultative Assembly, on a case-by-case basis. Investments by foreign government companies are deemed as private.
CHAPTER THREE: COMPETENT AUTHORITIES.
Article 5
The Organization is the sole official authority for the promotion, as well as investigation of all issues pertaining to Foreign Investments in the country.
Applications of foreign investors in respect of such issues as acceptance, admission, utilization and repatriation of capital shall be submitted to the Organization.
Article 6
For the purpose of review and making decision regarding applications referred to in Article (5), a board by the name of the “Foreign Investment Board” shall be established under the chairmanship of the Vice Minister of Economic Affairs and Finance, who is ex-officio, president of the Organization; the Board comprises of Vice Minister of Foreign 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 of relevant ministries, as the case requires.
In connection with the applications for admission, the Investment License shall, be issued after the approval of the Board, and upon confirmation by and signature of the Minster of Economic Affairs and Finance.
At the time of admission of Foreign Investments, the Board is required to observe the criteria referred to in Article(2) of this Act.
Note: The Organization, after preliminary review, shall submit the investment applications, along with its own recommendations, to the Board, within a maximum period of 15 days from the date application is received. The Board must review the applications within a maximum period of one month from the date of submission and announce its final decision in writing.
Article 7
In order to facilitate and expedite admission related issues and activity of foreign investments in the country, the highest authorities of all relevant agencies including Ministry of Economic Affairs and Finance, Ministry of Commerce, Ministry of Labor and Social Affairs, the Central Bank of the Islamic Republic of Iran, the Customs Administration of the Islamic Republic of Iran, Office of Registration of Companies and Industrial Property, and Organization for Protection of Environment are required to designate a fully authorized representative to the Organization.
The representatives will act as liaison and coordinator for all issues related to their respective agency vis-a-vis the Organization.
CHAPTER FOUR: GUARANTEE AND TRANSFER OF FOREIGN CAPITAL.
Article 8
Foreign Investments under this Act shall equally enjoy all rights, protections, and facilities available to local investments.
Article 9
Foreign Investments shall not be subjected to expropriation or nationalization unless for public interests, by means of legal process, in a nondiscriminatory manner, and against payment or appropriate compensation on the bases of the real value of the investment immediately before the expropriation.
Note 1. Application for compensation of damages shall be submitted to the Board maximum 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 this Act.
Article 10
Assignment of the whole or a part of the Foreign Capital to a local investor and/or, upon approval 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 as the initial investor, shall replace and/or become a partner to the former investor from the standpoint of this Act.
CHAPTER FIVE: REGULATIONS CONCERNING ADMISSION, IMPORTATION AND REPATRIATION OF FOREIGN CAPITAL.
Article 11
Foreign Capital can be imported into the country by way of one or a combination of the following manners, and be covered under this Act:
a) Cash to be converted into Rials;
b) Cash not to be converted into Rials but to be used directly for purchases and orders related to the Foreign Investment;
c) Non-cash items (assets), after evaluation by competent authorities.
Note. Arrangements related to the manner of evaluation and registration of Foreign Capital shall be determined in the Executive By-laws of this Act.
Article 12
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 exchange transfers, in case of a unified exchange rate, shall be the same rate prevailing in the country’s official network; otherwise, the applicable exchange rate shall be the free market rate as acknowledged by the Central Bank of the Islamic Republic of Iran.
Article 13
The principal amount of the Foreign Capital and profits therefrom, or the balance of capital remaining in the country, after fulfillment of all obligations and payment of legal deductions, and upon approval of the Board and confirmation by the Minister of Economic Affair and Finance, shall be transferable abroad subject to a three month prior notice submitted to the Board.
Article 14
Profit derived from the foreign investment after deduction of taxes, dues and statutory reserves shall be transferable abroad upon the approval of the Board and confirmation by the Minister of Economic Affairs and Finance.
Article 15
Payments pertaining to the installments of the principal amount of the financial facilities of Foreign Investors and the expenses, as well as payments pertaining to contracts for patents, technical know-how, technical and engineering assistance, trade marks and names, management as well as similar agreements within the framework of the relevant Foreign Investment are transferable abroad upon approval of the Board and confirmation by the Minister of Economic Affairs and Finance.
Article 16
Transfers referred to in Articles (13),(14) and (15), shall be made in compliance with the provisions of paragraph (b) of Article (3) of this Act.
Article 17
Provision of foreign exchange, required for the transfers referred to in Article (14),(15) and (16) of this Act, may be made in the following manners.
a) Purchase of foreign currency from the banking system.
b) Out of foreign exchange earned from exports of the products and/or foreign exchange earned from the service activities of the economic enterprise in which the Foreign Capital is being used.
c) Export of permissible goods specified in the list approved by the Cabinet of Ministers for implementation of this paragraph, commensurate with the relevant laws and regulations.
Note 1. Application of one or a combination of the above manners shall be specified in the Investment License.
Note 2. As for the investments referred to in paragraph (b), Article (3) of this Act, if as a result or promulgation of legislation or governmental decrees, the execution of the financial agreements approved within the framework of this Act is prohibited or interrupted, the resulting losses, up to a maximum of due installments (matured), shall be provided and paid by the Government.
The extent of acceptable commitments within the framework of this Act, 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 Paragraph (a) above, upon agreement of the Organization and confirmation by the Minister of Economic Affairs and Finance.
Note 4. In case the investment license expressly refers to Paragraph (b) and/or (c) of this Article , this License shall be deemed as the export license.
Article 18.
Transferring abroad the portion of the Foreign Capital imported into the country within the framework of the Investment License but remained unused, is exempted from all foreign exchange as well as export and import laws and regulations.
CHAPTER SIX: SETTLEMENT OF DISPUTES .
Article 19.
Disputes arising between the Government and the Foreign Investors as regards their respective reciprocal obligations within the context of investments under this Act, if not settled through negotiations, shall be referred to domestic courts, unless a bilateral Investment Agreement with the respective Government of the foreign investor, provides for another method for settlement of disputes.
CHAPTER SEVEN: FINAL PROVISIONS
Article 20
The relevant executive agencies are required to take measures, upon the request of the Organization, for the issuance of entry visas, residence permits, work and employment permits, as the case may be, for foreign investors, managers and experts for the private sector linked to Foreign Investments under this Act, as well as their immediate relatives.
Note. Differences of opinion between the Organization and executive agencies shall be settled (based on) the views of Minister of Economic Affairs and Finance.
Article 21
The Organization is required to ensure the access of the general public to all information related to investments and foreign investors, investment opportunities, Iranian partners, fields of activity and any other information available to the Organization.
Article 22
All ministries , governmental companies and organizations as well as public institutions, to whom the applicability of law is required to be mentioned, must provide the Organization with reports on foreign investments as well as any other information required for foreign investors so that the Organization can fulfill its duties as mentioned here above.
Article 23
The Minister of Economic Affairs and Finance is required to provide, every six months, the relevant committees of the Islamic Consultative Assembly, with a report reflecting the performance of the Organization as to foreign investments under this Act.
Article 24
As from the date of ratification of this Act and its executive by-laws and regulations, the Law for Attraction and Protection of Foreign Investments ratified on November 28,1955 as well as its executive regulations, are revoked. Foreign capital previously admitted under the said law, shall be covered by (the provisions of) this Act. The provisions of this Act shall be revoked or altered by subsequent laws and regulations only if such revocations or alterations are expressly stipulated in the relevant laws and regulations.
Article 25
The Executive By-laws and implementing regulations of this Act shall be prepared by the Ministry of Economic Affairs and Finance and subsequently approved by the cabinet of Ministers within two months.
The above Act comprising 25 Articles and 11 notes is ratified by the Islamic Consultative Assembly in its session of Sunday, 10 March 2002. The initial parts of Articles (1) and (2), Paragraph (c) and (d) or article (2), Paragraph (b) of Article (3), and note (2) of Article (17) have been ratified by the Expediency Council in its meeting of Saturday, May 25,2002.