5-Foreign Investment Environment in Iran

legal-small

After nearly 48 years, the new law on foreign investemtment in Iran under the abreviation FIPPA was ratified by the parliament in 2002. FIPPA replaced the “Law for the Attraction and Protection of Foreign Investment  (LAPFI)”, which was in effect since 1955. The rest of the 1st part everybody may get in the “Forums” under Newsletter Archive.

FIPPA is a significant complement to a whole host of reforms taking place in Iran´s general macroeconomic framework and structural mechanisms. These economy-wide reforms are intended to stimulate and benefit both foreign and local investments.

Some key elements of economic reforms in recent years include:

  Introduction of a new tax regime with a single and competitive flat tax rate of 25% and a range of exemptions for manufacturing enterprises and total exemption for export-generated revenues
  Elimination of a wide range of non-tariff barriers and further liberalization of the foreign trade regime
  Creation of several private banks and other private non-banking credit institutions
  Unification of the foreign exchange rate and significant liberalization of the foreign exchange regime
  Legal reforms for the establishment of private insurance companies
  Continued emphasis and progress on the privatization of state-owned enterprises including public sector banks

Let´s start to have a look at FIPPA itself:

Terms

Foreign Investor: Non-Iranian natural or juridicial persons and /or Iranians using capital with foreign origin, who have obtained the Investment License referred to in Article 6 of FIPPA

Foreign Capital: Various types of capital, whether in cash and/or non-cash (in kind), imported into the country by the foreign investor and comprising the following:

  Cash funds in the form of convertible currency, imported into the country through the banking system or other methods of transfer acceptable to the Central Bank of the Islamic Republic of Iran
  Machinery and equipments
  Tools and spares, CKD-parts and raw, addable and auxiliary materials
  Patent rights, technical know-how, trade marks and names and specialized services
  Transferable dividends of foreign investors
  Other permissible items approved by the Council of Ministers

Investment License: The License issued for each foreign investment in accordance with Article 6 of FIPPA

Foreign Investment: Utilization of foreign capital in a new or existing economic enterprise after obtaining the Investment License

Contractual Arrangements: Includes a set of mechanisms under which the utilization of foreign capital is solely based upon contractual agreements made between the parties to the contract

Built-Operate-Transfer: The foreign investor by entering into contractual arrangements with an Iranian party will make available the cash and non-cash financial resources for the project in which the investment is made, under his own responsibility by way of establishing an Iranian company and/or establishing a branch office in Iran as the project company and as the case may be would embark onto construction and/or operation of the project. BOT has different varieties each of which enjoy specific features

Buy-Back Arrangement:  The foreign investor shall make available the cash and non-cash financial resources for the construction, expansion and/or renovations to the recipient investee firm. In this method the repatriation of capital shall be made in form of goods and services produced by the investee firm and/or other goods

Civil Participation: Is the contractual arrangements entered into for materialization of a joint activity for which establishment of a legal entity is not required and return of the investment as well as profit sharing of the parties to the partnership shall be withdrawable in accordance with the agreement. “Civil Participation” shall constitute all other forms of business undertaking in which the foreign investor without establishing a company is entitled to take advantage from the investment. Anyhow, all the financial precedents related to the “Civil Participation” shall have to be registered in Iran in the books of either party.

After nearly 48 years, the new law on foreign investemtment in Iran under the abreviation FIPPA was ratified by the parliament in 2002. FIPPA replaced the “Law for the Attraction and Protection of Foreign Investment  (LAPFI)”, which was in effect since 1955. The rest of the 1st part everybody may get in the “Forums” under Newsletter Archive.

FIPPA is a significant complement to a whole host of reforms taking place in Iran´s general macroeconomic framework and structural mechanisms. These economy-wide reforms are intended to stimulate and benefit both foreign and local investments.

Some key elements of economic reforms in recent years include:

  Introduction of a new tax regime with a single and competitive flat tax rate of 25% and a range of exemptions for manufacturing enterprises and total exemption for export-generated revenues
  Elimination of a wide range of non-tariff barriers and further liberalization of the foreign trade regime
  Creation of several private banks and other private non-banking credit institutions
  Unification of the foreign exchange rate and significant liberalization of the foreign exchange regime
  Legal reforms for the establishment of private insurance companies
  Continued emphasis and progress on the privatization of state-owned enterprises including public sector banks

Let´s start to have a look at FIPPA itself:

Terms

Foreign Investor: Non-Iranian natural or juridicial persons and /or Iranians using capital with foreign origin, who have obtained the Investment License referred to in Article 6 of FIPPA

Foreign Capital: Various types of capital, whether in cash and/or non-cash (in kind), imported into the country by the foreign investor and comprising the following:

  Cash funds in the form of convertible currency, imported into the country through the banking system or other methods of transfer acceptable to the Central Bank of the Islamic Republic of Iran
  Machinery and equipments
  Tools and spares, CKD-parts and raw, addable and auxiliary materials
  Patent rights, technical know-how, trade marks and names and specialized services
  Transferable dividends of foreign investors
  Other permissible items approved by the Council of Ministers

Investment License: The License issued for each foreign investment in accordance with Article 6 of FIPPA

Foreign Investment: Utilization of foreign capital in a new or existing economic enterprise after obtaining the Investment License

Contractual Arrangements: Includes a set of mechanisms under which the utilization of foreign capital is solely based upon contractual agreements made between the parties to the contract

Built-Operate-Transfer: The foreign investor by entering into contractual arrangements with an Iranian party will make available the cash and non-cash financial resources for the project in which the investment is made, under his own responsibility by way of establishing an Iranian company and/or establishing a branch office in Iran as the project company and as the case may be would embark onto construction and/or operation of the project. BOT has different varieties each of which enjoy specific features

Buy-Back Arrangement:  The foreign investor shall make available the cash and non-cash financial resources for the construction, expansion and/or renovations to the recipient investee firm. In this method the repatriation of capital shall be made in form of goods and services produced by the investee firm and/or other goods

Civil Participation: Is the contractual arrangements entered into for materialization of a joint activity for which establishment of a legal entity is not required and return of the investment as well as profit sharing of the parties to the partnership shall be withdrawable in accordance with the agreement. “Civil Participation” shall constitute all other forms of business undertaking in which the foreign investor without establishing a company is entitled to take advantage from the investment. Anyhow, all the financial precedents related to the “Civil Participation” shall have to be registered in Iran in the books of either party.