LAW FOR THE ATTRACTION AND PROTECTION OF
FOREIGN INVESTMENT IN IRAN
Article 1.
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 reviewing and taking a decision on
the merits of the applications submitted concerning the import of foreign capital, 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, 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 with respect to the
review of the application and issuance of a Decree.
Article Ill.
Capital imported into Iran in accordance with Article
1 of this Law, as well as profits accrued thereon, shall enjoy the legal protection of the
Government; and all rights, exemptions, and facilities accorded to domestic capital and
private productive enterprises shall also apply to foreign capital and firms. The
Government guarantees fair compensation where the enactment of special legislation
deprives the foreign investor from ownership; provided that an application for
compensation is submitted to the Board mentioned in Art. II. within three months after the
date of expropriation.
In case of dispute, the review of claims for fair
compensation guaranteed by the Government shall be undertaken by Iranian courts of
competent jurisdiction. 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 of Khordad 16, 1310 concerning
ownership of real-estate by foreign nationals shall remain valid and in force.
Note 2: Persons, companies, and private firms
mentioned in Article I above are not allowed 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 the original capital and accrued
profits, or the balance of such capital and profits remaining in Iran, shall be permitted,
subject to a 3 month prior notice to the Board mentioned in Article 2, upon fulfillment of
all obligations and with due regard to provisions of the Agreement of the International
Monetary Fund of July 1944. However, the owner of capital is required to retain in Iran at
least 10 per cent of his original capital for 6 months 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 are made
available to Iranian firms and nationals.
Article VII
The Government is charged with preparing appropriate
regulations implementing this Law and to submit the same within 2 months through the
Ministry of Economy to relevant committees of the Houses of Parliament for
approval.
IMPLEMENTING
REGULATIONS OF THE LAW FOR THE ATTRACTION AND PROTECTION OF FOREIGN INVESTMENT IN IRAN
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 said enterprises shall enjoy the benefits
of the Law for the Attraction and Protection of Foreign Investments in Iran provided:
(a) The investment application 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, said capital
should, be repatriated from Iran within a period prescribed by the Board.
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 a cost saving.
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 Law for the Attraction and Protection of Foreign Investments,
insofar as said protection complies with the Banking Act and its supplementary
regulations.
Article 2.
From the standpoint of these Regulations the term
"Foreign Capital" means:
(a) Foreign exchange imported into Iran through
authorized Banks.
(b) Machinery, machine tools, spare parts, and raw
materials as well as other items of this type provided they can be used currently and the
Supervisory Board recognizes 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 if imported later, they form
part of goods specifically imported as capital, and not as items of 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 this determination is made in the sole judgment 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 or 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 for 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 applications 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 the capital;
c. Type of capital, specifying the cash and non-cash
amounts;
d. Legal domicile and the center of activity
of the person or firm;
e. Type of activity and the program of operations in
Iran; and, if possible, indicating whether operations will be carried out
independently or in joint venture;
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, if said Board agrees 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 issuance of a Decree.
Article 5.
Upon issuance of the Decree of the Council of
Ministers, the applicant should, within a period prescribed with the Board's agreement,
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.
Upon the Board's agreement with the evaluation, it
will deliver to the foreign investor or his representative the license for the importation
of capital permitting at the same time the 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 institution, as a result of an
accident, should be substituted for the investor in accordance with the provisions
of the insurance policy, this substitution shall not be deemed 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 the
appropriate capital for the commencement of operations; otherwise, his license shall
expire. 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 entire amount of non-cash capital plus the cost of packing,
transportation, insurance, etc., paid outside of Iran, will, after verification, be
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 into Rials is
effected at the current buying rate of Bank Melli Iran on the date of filing the
application for conversion; and, Bank Melli Iran is authorized to buy said foreign
currencies or to retain them on 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 payments will be placed at the disposal of their
owners, and, owners of said currencies are allowed 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 for the Attraction and
Protection of Foreign Investments in Iran. An itemized and detailed list of expenses and
payments will be presented to the Supervisory Board by Bank Melli Iran at the end of each
month.
Article 11.
The non-cash capital which is imported into Iran by
virtue of the present Regulations is excluded from the annual quota.
Article 12.
lf capital is imported as goods which are, by
findings of experts and assessors, mutilated, defective, or, non-conforming with the
specifications in the application, or, which are declared at a higher value than their
actual cost, then 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 I of the Law For the Attraction and Protection of
Foreign Investments, as well as the profits derived therefrom whether in the form of
foreign exchange or authorized commodities, 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 imported
the capital;
The Supervisory Board may not delay, without
reasonable cause, the grant of permission for more than three months from its receipt of
the balance-sheet. In case foreign exchange availability does 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 obligated to prepare his balance sheet at termination of operations in
Iran and submit it, together with the prior notice prescribed in Article 3 of the Law, to
the Supervisory Board. The Supervisory Board, after appropriate review, will grant
permission for the export of the foreign exchange requested within a period of time set
forth in the permit.
The period of time set forth in the permit shall not
exceed three months, unless the amount of capital which are exported is of such magnitude
that, in the Board's opinion, it 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 percent of the capital.
(c) The rate of foreign exchange for the transfer of
profits or repatriation of capital shall be the Bank selling rate on the day of transfer.
(d) Income from the rise in value of the non-cash
capital at the time of sale, 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 assignment in Iran of the
original foreign capital or of equity shares, the owner has the right to transfer abroad
the proceeds of sale or assignment in accordance with the provisions of the Law for the
Attraction and Protection of Foreign Investments and these 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
of Article 3 of the Law For the Attraction and Protection of Foreign Investments, is
allowed to assign to another foreign investor his capital or equity share subject to the
approval of the Supervisory Board; in such a case, the assignee shall be substituted for
the original investor from the standpoint of the provisions of the Law For the Attraction
and Protection of Foreign Investments and these Regulations.
(g) If the foreign investor is not inclined to
transfer the capital and accrued net profits abroad within the period prescribed in
the permit, then said capital and profit shall remain at his disposal but shall not be
covered by the Law For the Attraction and Protection of Foreign Investments and these
regulations; unless he is again granted permission by the Supervisory Board in accordance
with the provisions of these Regulations.
(h) Bank Melli Iran and the Foreign Exchange Control
Department are, for purposes of the above provisions, obligated to make available to the
foreign investor necessary foreign exchange for the repatriation, within the period of
validity of the permit, of the capital, reserves, or the net profits.
(i) In case the foreign investor is inclined to
export all or part of the net profits, or the original capital and the sales or assignment
proceeds of capital, or equity shares, in the form of goods, the Ministries of Finance and
Commerce are obligated, with due regard to the above provisions, to issue export permits
for said goods, without the necessity for foreign exchange undertakings 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 another field to be agreed upon by the Supervisory
Board.
Note:
If a loss is suffered by the investor at the time of
repatriation of capital which results in the loss of part of his capital, the repatriation
of only that portion 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 For the Attraction and Protection of Foreign Investments, will be paid on the
basis of the market value prevailing immediately before expropriation.
Article 15.
Firms, the main offices of which are outside of Iran,
shall pay a registration fee only in proportion to the capital transferred to Iran.
Article 16.
In cases where certain machinery is imported into
Iran for specific work without transfer of foreign exchange, and it 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 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 the application concerns
industrial affairs, the Technical Undersecretary of Industries & Mines, and when the
subject concerns mining affairs, the Mining Undersecretary of Industries & Mines, and
when, it concerns commercial and banking affairs the Undersecretary of Commerce, shall
participate.
Article 18.
Functions assigned to the Supervisory Board in the
Law for the Attraction and Protection of Foreign Investments are to be regarded as part of
the main functions of the members of 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 comprised 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, at its session on Mehr 17,1345, is
enforceable by virtue of the Law for the Attraction and Protection of Foreign Investments.
Explanations:
According to Article 2 of the Law for 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 Khordad 7, 1339 provided that a Supervisory
Board for the Attraction and Protection of Foreign Investments, subject of Article 2 of
the Act of Azar 1334 (November 28, 1955), concerning the Attraction and Protection of
Foreign Investments be constituted in Bank Markazi Iran under the chairmanship of the
Governor of said Bank.
In Bahman 1349 (February 1972) the Law transferring
the Center for the Attraction and Protection of Foreign Investment 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 dated Tir 1353, the title of the Center for the
Attraction and Protection of Foreign Investment 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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