6 – Foreign Investment Environment in Iran

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The Foreign Investment Promotion and Protection Act (FIPPA) consists of 7 Chapters and 25 Articles.

Chapter 1: Definitions (Article 1)
Chapter 2: General Conditions for Admission of Foreign Capital (Articles 2-4)
Chapter 3: Competent Authorities (Articles 5-7)
Chapter 4: Guarantee and Transfer of Foreign Capital (Articles 8-10)
Chapter 5: Provisions for Admission, Importation and Repatriation of Foreign Capital (Articles 11-18)
Chapter 6: Settlement of Disputes (Article 19)
Chapter 7: Final Provisions (Articles 20-25)

Chapters 2, 4 and 5 are significant.

Some Articles:

Article 2: Admission of Foreign Investment shall be made in accordance with the provisions of FIPPA and with due observance of other prevailing laws and regulations  of the Country, for the purpose of development and promotion of producing activities in industry, 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 exports;
b) Does not pose any threat to the national security and public interests, and cause damage to the environment;  does not disrupt the Country`s economy and jeopardize the production by local investments;
c) Does not entail grant of concessions by the Government to Foreign Investors. Concessions means special rights which place Foreign Investors in a monopolistic position;
d) The ratio of the value of the goods and services produced by Foreign Investments, contemplated in FIPPA, 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 sub-sector (field). The sub-sectors and scope of investment in each sub-sector shall be determined in the Implementing Regulation to be approved by the Council of Ministers. Foreign Investment for the production of goods and services for export purposes, other than crude oil, shall be exempted from the aforementioned ratios.

Note: The “Law for the Ownership of Immovable Property by Foreign Nationals” enacted on June 6, 1921 shall remain in effect. Ownership of land of any type and to any extent in the name of Foreign Investors is not permitted within the framework of FIPPA.

Article 3: Foreign Investments admitted in accordance with the provisions of FIPPA shall enjoy the facilities and protections available under FIPPA. Such investments may be admitted under the following two categories:
a) Foreign Direct Investment (FDI) in areas where the activity of the private sector is permitted;
b) Foreign Investment in all sectors within the framework of “Civil Participation”, “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 BOT schemes referred to in Para (b) of this Article and its accrued profits are not amortized, the exercise of ownership right by the Foreign Investor over the remaining capital in the recipient economic enterprise is permitted.

Article 8: Foreign Investments under FIPPA 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 non-discriminatory manner and against payment of appropriate compensation on the basis of the real value of the investment immediately before the expropriation.

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 FIPPA.

Article 11: Foreign Capital may be imported into the Country by way of one or a combination of the following manners, to be covered under this Act:

a) Cash funds to be converted into Rials;
b) Cash funds not to be converted into Rials, but to be used directly for the purchases and orders related to Foreign Investments;
c) Non-cash items, after valuation by the competent authorities.

Article 14: The profit derived from Foreign Investment 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.