FOREIGN INVESTMENT PROMOTION AND PROTECTION ACT IN IRAN (FIPPA)

Chapter One: Definitions
Article (1)
The terms and expressions used in this Law shall have the following
meanings:
Law: The Law for the Promotion and Protection of Foreign Investments.
Foreign Investor: Non-Iranian natural and/or juridical persons or
Iranians using capital of foreign source, who have obtained the
investment license referred to in Article (6).
Foreign Capital: All types of capital, being cash or non-cash, brought
into the country by foreign investors and include the following:
a) Cash funds in the form of convertible currency imported into the
country through banking system or other methods of transfer,
acceptable to the Central Bank of the Islamic Republic of Iran;
b) Machinery and equipments;
c) Tools and spares, CKD parts and raw, addable, and auxiliary
materials;
d) Patent rights, know-how, trade marks and names, and specialized
services;
e) Transferable dividends of foreign investors;
f) Other permissible species approved by the Council of Ministers.
Foreign Investment: Application of foreign capital in a new or existing
economic entity after obtaining the investment license.
Investment License: The license issued for every foreign investment in
accordance with Article 6 of this Law.
Organization: The Organization for Investment, Economic and
Technical Assistance of Iran, subject matter of Article (5) of the Law
establishing the Ministry of Economic Affairs and Finance ratified on
July 15, 1974.
High Council: The High Council for Investment, subject matter of
Article (7) of the Charter of the Organization for Investment, Economic
and Technical Assistance of Iran ratified on June 2, 1975.
Board: The Foreign Investment Board, subject matter of Article (6) of
this Law.
Chapter Two:
General Criteria for Admission of Foreign Investments
Article (2)
Admission of foreign investment shall be made, in accordance with the
provisions of this Law and with due observance of other prevailing laws
and regulations of the country, subject to the following criteria:
a. Help create economic growth, upgrade technology, enhance
,development of the quality of products, increase employment
opportunities, exports, and penetrate into international markets;
b. Does not threaten the national security and public benefits, and
deteriorate the environment; does not distort the country’s
economy and impose unfair implication on products based on
local investments;
c. Does not involve granting of concessions by the Government to
foreign investors. The word concession as used herein 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 investments, subject matter of this Law, to the value ,t of
the goods and services supplied to the local market at the time of
issuance of the investment license, shall not exceed 25% in each
economic sector and 35% in each field (sub- sector). The fields
and investment ceilings in each field shall be determined in the
by-law to be approved by the Council of Ministers.
Foreign investment for the production of goods and services specifically
for export purposes other than oil, shall be exempted from the
aforementioned ratios.
Note. The Law for the Ownership of Immovable Properties by Foreign
Nationals ratified on June 6, 1921 shall remain enforceable. Ownership
of land of any type and at any scale in the name of foreign investors is
not permissible within the framework of this Law.
Article (3)
Foreign investments admitted in accordance with provisions of this Law
shall enjoy the incentives and protections available under this Law.
Such investments may be admitted under the following two categories:
a) Foreign direct investment in areas where the activity of private sector
is permissible;
b) Foreign investments in all sectors within the framework of “civil
participation”, “buy-back” and “build-operate-transfer” arrangements
where the return of capital and profits accrued is solely emanated from
the economic performance of the r project in which the investment is
made, and such return of capital and profit shall not be dependent upon
a guarantee by the Government, state-owned companies or banks.
Note1. So long as the foreign investment subject matter of “build-
operate-transfer” arrangements referred to in Para (b) of this Article,
and its incurred profits thereon are not amortized, the exercise of
ownership right by the foreign investor over the unamortized capital in
respect of the recipient economic entity is permissible.
Note 2. With respect to investments subject matter of Para (b) of this
Article, if, as a result of promulgation of laws or Government resolutions,
the execution of approved financial agreements within the framework of
this Law is prohibited or : interrupted, the accrued losses, to a maximum
of due installments shall be committed and paid by the Government.
The scope of acceptable commitments shall be approved, within the
framework of this Law, by the Council of Ministers.
Article (4)
The investment by a foreign government or foreign governments in the
Islamic Republic of Iran shall have to be approved by the Islamic
Consultative Assembly on a case by case basis. The investment by
foreign state-owned companies is considered to be private.
Chapter Three: Competent Authorities
Article (5)
The Organization is the only official authority for the promotion of
foreign investments in the country, and for Investigation of all Issues
pertaining to foreign Investments. Applications of foreign investors in
respect of issues such as admission, importation, employment and
repatriation of capital shall have to be submitted to the Organization.
Article (6)
For the purpose of investigation and making decision on applications
subject matter of 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 and Finance who is ex-officio the
President of the Organization Vice Minister of Foreign Affairs, Deputy
Head of the State Management and Planning Organization, Deputy
Governor of the Central Bank of the Islamic Republic of Iran and vice
ministers of relevant ministries, as the case requires.
In relation to applications for admission, the investment license shall,
after the approval of the Board, be issued upon confirmation and
signature by the Minister 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 Law.
Note. The Organization, after preliminary appraisal, is required to take
the investment applications, along with its own considerations, to the
Board within a maximum period of 15 days as from the date of receipt of
the applications. The Board is under obligation to 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 accelerate issues related to the admission and
activity of foreign ,investments in the country, all relevant bodies
Including the Ministry of Economic Affairs and Finance, Ministry of
Foreign Affairs, Ministry of Commerce, Ministry of labor and Social
Affairs, Central Bank of the Islamic Republic of Iran, Costumes
Administration of the Islamic Republic of Iran, Directorate General for
Registration of Companies and Industrial property, and the Organization
for Environment Protection are required to introduce to the Organization
a fully authorized representative whose designation is signed by the
highest authority of the body. The representatives so introduced are
recognized to act as medium and coordinator for all issues related to
their respective body vis-à-vis the Organization.
Chapter Four:
Guarantee and Transfer of Foreign Capital
Article (8)
Foreign investments under this law shall equally enjoy all, rights,
protections, and facilities provided for domestic investments.
Article (9)
Foreign Investments shall not be subjected to expropriation or
nationalization, unless for public purposes, in accordance with due of
law, in a non-discriminatory manner, and upon payment of appropriate
compensation on the basis of the real value of the investment
immediately before the expropriation.
Note1. Application for compensation shall have to be submitted to the
Board within one year from the date of
re- expropriation or nationalization.
Note 2. Disputes arising from expropriation or nationalization shall be
settled by virtue of the provisions of Article (19) of this Law.
Article (10)
Ceding the whole or part of the foreign capital to domestic investor
and/or, upon approval of the Board and confirmation of the Minister of
Economic Affairs and Finance, to other foreign investor is permissible.
In case of ceding to another foreign investor, the cedee shall, at least,
have the same qualifications as the initial investor, and shall replace
and/or become a partner to the former investor from the standpoint of
this Law.
Chapter Five: Provisions on Admission, Importation and
Repatriation of Foreign Capital
Article (11)
Foreign capital may be imported into the country by way of one or a
combination of the following manners to be protected by this Law:
a) Sums of cash to be converted into Rials;
b) Sums of cash not to be converted into Rials but to be used directly
for purchases and orders related to foreign investment;
c) Non-cash items after evaluation by the competent authorities.
Note. Arrangements related to the manner of evaluation, and
registration of foreign capital shall be determined in the Implementing
Regulations of this Law.
Article (12)
The rate of conversion of foreign exchange applicable at the time of
importation or repatriation of foreign capital as well as the rate for all
transfers, in case of applicability of a unified rate of exchange, shall be
the same rate prevailing in the country’s official network; otherwise, the
applicable rate shall be the free-market rate as acknowledged by the
Central Bank of the Islamic Republic of Iran.
Article (13)
The original foreign capital and the accrued profits, or the balance of
capital remaining in the country subject to a three month prior notice,
after fulfillment of all obligations and payment of legal deductions, and
upon confirmation by the Minister of Economic Affair and Finance, shall
be transferable abroad.
Article (14)
Dividends of foreign investments 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.
Article (15)
Payments related to the installments of the principal of the financial
facilities of foreign investors and relevant expenses, agreements for
patent rights, know-how, technical and engineering assistance, trade
marks and names, management as well as similar agreements within
the framework of the relevant foreign investment, upon the approval of
the Board and confirmation by the Minister of Economic Affairs and
Finance, are transferable abroad.
Article (16)
Transfers referred to in Articles (13) , (14) and (15), shall be made
subject to the provisions of Para (b) of Article (3) of this Law.
Article (17)
Foreign exchange required for the transfers referred to in Articles (14),
(15) and (16) of this Law may be secured by way of the following
methods:
a) Purchase of foreign currency from the banking system;
b) Out of the foreign exchange earnings from the export of the products
and/or out of the foreign exchange earnings from service activities of
the economic entity in which the foreign capital is employed;
c) The export of permissible goods subject to the relevant laws and
regulations.
Note1. Application of one or a combination of the above methods shall
be specified in the investment license.
Note 2. The Central Bank of the Islamic Republic of Iran is under
obligation, to make available to the foreign investor the equivalent
foreign currency for the transferable sums referred to in Para (a), upon
agreement of the Organization and confirmation by the Minister of
Economic Affairs and Finance.
Note 3. In case the investment license expressly refers to Para (b)
and/or (c) of this Article, this license is regarded as an export license.
Article (18)
Transfer abroad of the portion of the foreign capital imported into the
country within the framework of the investment license but remains
unused, is released from all foreign exchange, and export and import
laws and regulations.
Chapter Six: Settlement of Disputes
Article (19)
Disputes arising between the Government and the foreign investors in
respect of the mutual obligations within the framework of investments
under this Law, if not settled through negotiations, shall be referred to
domestic courts, unless another method for settlement of disputes have
been agreed under the Law for Bilateral Investment Agreement with the
respective Government of the foreign investor.
Chapter Seven: Final Provisions – Article (20)
The relevant executive bodies are required to take, measures, upon the
request of the Organization, for the issuance of entry visa, residence
permit, work and employment permit, as the case may be, for foreign
investors, managers and experts working for the private sector involved
in foreign investments under this Law, as well as their immediate relatives.
Note. Differences of opinions between the Organization and executive.
bodies. Will be settled upon the opinion of the Minister of Economic
Affairs and Finance.
Article (21)
The Organization is required to provide for the public to have access to
all information related to investments, foreign investors, investment
opportunities, Iranian partners, fields of activity and other information
available to the Organization.
Article (22)
All Ministries, state-owned companies and organizations as well as
public institutes to whom the applicability of law is required to be
stipulated by name, are under obligation to provide the Organization
with reports on foreign investments implemented as well as information
required for foreign investors I so that the Organization can proceed In
accordance with the above Article.
Article (23)
The Minister of Economic Affairs and Finance is required to provide,
every six months, the relevant committees in Islamic Consultative
Assembly with a report on the performance of the Organization with
respect to foreign investments under this Law.
Article (24)
As from the date of ratification of this Law and its t Implementing
Regulations, the Law for the Attraction and Protection of Foreign
Investments ratified on November 28, 1945 – as well as its
Implementing Regulations are repealed. The provisions of this Law shall
be repealed or altered by subsequent laws and regulations in the event
that repeal or alteration of this Law would have been stipulated in those
laws and regulations.
Article (25)
The Implementing Regulations of this Law shall be prepared by the
Ministry of Economic Affairs and Finance and shall be subsequently
approved by the Council of Ministers within two months.
The above Law comprised of 25 Articles and 11 Notes has been
approved by the Islamic Consultative Assembly in its session.