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Friday, August 7, 2020

Welcome to Tadbir Investment advisory Group

Welcome to Tadbir Investment advisory Group

The purpose of this department is to collect information, statistics and latest news on approved laws of the Islamic Republic of Iran and offer legal advice to investors.

By Neda Tajeri, Director of Legal Department of Tadbir Investment Advisory Group

Welcome to Tadbir Investment advisory Group

 Dear Manager...

The purpose of this department is to collect information, statistics and latest news on approved laws of the Islamic Republic of Iran and offer legal advice to investors. The contents put in this section of the Legal Department of Tadbir Investment Advisory Group are merely a reference to certain current investment laws approved in Iran, and with regard to the changes or quick amendments some laws may change, thus they per se should not be considered as a basis for acting without getting some legal advice in this regard.

We can provide you with information on the latest laws and regulations approved by the Islamic Republic of Iran in the field of foreign investment.

Best Regards

By Neda Tajeri, Director of Legal Department of Tadbir Investment Advisory Group

The set of rules and regulations governing foreign investment in the Islamic Republic of Iran includes the Law on the Promotion and Protection of Foreign Investments and its implementing regulations, as well as laws governing the establishment and administration of economic activities in the country.

While potential investors are advised to be fully aware of laws directly related to their interests, familiarity with certain laws, such as laws on the establishment and management of companies (trade law), registration of companies, branches and foreign agencies, Export and Import Regulations, Taxation, Protection of Intellectual and Industrial Property, Regulations on Foreign Nationals (Entry, Residency, and Work License), Banking and Insurance, Rules for Free and Special Economic Zones, which are essential for the Company's daily operations, is also important.

Some specific enhancements introduced by FIPPA for foreign investments in Iran can be outlined as follows:

  1. Broader fields for involvement by foreign investors including in major infrastructure;
  2. Recognition of new investment methods covering  all types of  investments  from  “Foreign  Direct  Investment”  (FDI)  to different  types  of  project  financing  methods   including  “Buy-Back” arrangements and various “Build-Operate- Transfer” (BOT) schemes;
  3. Streamlined   and    fast-track    investment   licensing application and approval  process;
  4. Creation of a one-stop   shop   called   the “Center for Foreign Investment Services” at the Organization for Investment, Economic and Technical Assistance of Iran (OIETAI) for focused and efficient support for foreign investment undertakings in Iran;
  5. More flexibility and facilitated regulatory practices for  the  access  of  foreign investors  to  foreign  exchange  for  capital transfer  purpose;
  6. Introduction of new legal options governing the government_investor(s) relations.
  • Guarantee of compensation in case of nationalization and expropriation, (Article 9 of the Law)
  • Guarantee of compensation for losses caused by the prohibition or interruption of the execution of the financial agreements on foreign investments by way of contractual arrangements due to enactment of legislation or Cabinet decrees (Article 17 of the Law and Article 26 of the Implementing Regulations)
  • Guarantee of the purchase of the goods and services produced by the foreign investment project where a government agency is the exclusive purchaser or supplier of produced goods and services at subsidized prices ( Article 11 of the Implementing Regulations)
  • Rights and facilities:
  • Foreign Investors enjoy the same treatment (rights, facilities and protections) as accorded to domestic investors (Article 8 of the Law)
  • Free transfer of the principal capital and profits derived from investment in the country in the form of foreign currency or goods. ( Articles 13-18 of the Law)
  • The possibility of a 100% foreign investment in investment projects (Article 4 of the Implementing Regulations)
  • Acceptance of foreign investment in all fields of production, industry and agriculture, transportation, communications, services and supply of electricity, gas and energy
  • The possibility of referring investment disputes to international authorities (Article 19 of the Law).
  • The possibility of the land ownership in the name of the company (registered in Iran) in joint ventures (Article 34 of Implementing Regulations)
  • The issuance of three year residence visa for Foreign Investors, managers and experts, as well as their immediate relatives and the possibility of its extension (Article 20 of the Law and Article 35 of Implementing  Regulations)
  • Decision making on foreign investors’ requests within a maximum time of 45 days (Article 6 of the law). (Please note the subheading of the chart (1))
  • Selection of the investment method in the intended project in the form of  “Foreign  Direct  Investment”  (FDI)  or contractual arrangements   including “Civil Participation”,  “Buy-Back” arrangements, and various “Build-Operate- Transfer” (BOT) schemes by the investor (Article 3 of the Law)
  • Acceptance of investment by Iranian natural and juridical persons investing capital with foreign origin in the country and grant Foreign  Investment    Promotion     and  Protection   facilities to them (Article 1 of the Law)
  • For approval of their annual financial reports on the projects the foreign investor should select an audit firm from the list (provided by the Organization) of approved audit firms which are members   of   Iran Association of Certified Accountants (Articles 22, 23 & 1 of the Implementing Regulations).

3 - Obligations and Legal Requirements of the Investor:

  • Applications of Foreign Investors in respect of issues such as admission, importation, utilization and repatriation of capital shall be  submitted to the Organization (Article 5 of the Law)
  • The foreign investor is required to inform the Organization of any change in the name, address, legal status, nationality, and of any change of more than 30% in his ownership (Article 33 of Implementing Regulations)
  • If the foreign investor intends to assign his capital to other investors, it is essential for the foreign investor to inform the Organization (OIETAI) . In the case of assignment to another Foreign Investor, it is necessary that the necessary arrangements be made for winning the approval of the Board and obtaining a license from the Organization. (Article 10 of the Law)
  • All applications for the transfer of capital, profit as well as gains resulting from an increase in the value of capital covered by FIPPA must be supported by the report of an Audit Firm that is a member of Iran Association of Certified Accountants (Article 22 & 23 of Implementing Regulations)
  • The foreign investor is required, as from the date of notification of the investment license within a determined period (usually 6 months), to import part of his capital into the country for the implementation of the project. In the event the investor does not import the mentioned capital into the country within the duration of the determined period, and in order to prevent the revocation of the license, it is necessary for the investor to apply for the extension of the period by way of submission of justifiable reasons (Article 32 of Implementing Regulations).

The foreign investor is obliged to notify the Organization for investment of importation of his Foreign Capital, whether in cash and/or non-cash (in kind), into the country within the framework of the Investment License issued by the OIETAI, to be registered in the Organization and covered under the Foreign    Investment    Promotion     and Protection   Act (FIPPA).  Failure to register the imported Foreign Capitals in the Organization means that those capitals won’t benefit coverage of FIPPA. (Article 11 of the Law and Article 24 of the Implementing Regulations).

Article 5: Iranian applying for investment in the country using capital with foreign origin, for the purpose of enjoying the facilities and protections under FIPPA, are required to submit documentary evidences proving their economic and commercial activities outside the country (Article 5 of Implementing Regulations)  

Acceptance of foreign investment in existing Iranian firms and commercial enterprises (purchase of shares) is subject to the creation of added value in the intended economic unit after purchasing shares. (Article 7 of the Code)

4- Other Benefits and Facilities

Foreign investors can borrow part of their capital by taking out a loan from domestic and foreign sources. Obviously, the borrower is obliged to guarantee the repayment of the loan.

Foreign capital can be imported into the country by the investor whether in cash and/or non-cash (in kind) i.e. machinery and equipment, raw materials, technical know-how and other forms of intellectual property rights and is covered by the  Foreign  Investment Promotion and Protection Act.  The manner of importation and registration of Foreign Capital by the foreign investor is indicated in chart (2).

  • 80% of income from the production and mining units located in developed regions is exempt from tax for 4 years.
  • 100% of income from the production and mining units located in less developed regions is exempt from tax for 10 years
  • Travel and tourism facilities are exempted from paying 50% of the annual tax
  • 100% of income from export of industrial and agricultural goods as well as processing and complementary industries is exempt from tax.
  • 50% of the proceeds from the goods exported with the objective of developing non-oil products exportation is exempt from tax.
  • 100% of the proceeds from the export of the goods entering the country under the transit is exempt from taxes
  • Re-investment of cooperative and private companies with the aim of development, reconstruction and completion of the existing industrial and mining units is exempted from 50% of the allocated tax.

For registration of foreign companies, the following documents are required to be submitted to the Company Registration and Industrial Property General Offices:

 Companies and Industrial Property:

1-Registartion statement

2- A certified copy of the company’s articles of association

3- A certified copy of the company’s general authorization letter, and in case the company has several independent representatives in Iran, a certified copy of their letter of authorization

4- A license (a legal contract) from one of the Ministries or Government Agencies or, if it is a foreign company, the conditions of its activities must be determined according to the correct and systematic privileges.

The companies’ statement of registration should be written in Persian and include the full name of the company, type of the company such as joint stock company, mixed joint stock company and etc., the company’s central office, its correct address, the company's citizenship, the amount of the its capital on application date and other items specified in Article 6 of the implementing regulations for enforcement of Company Registration Law approved in 1931.

The company’s Articles of Association and authorization letter of its main agency and other representatives in Iran, as well as the company’s latest balance sheet must be confirmed at the central office of the company by a person or persons authorized to sign on behalf of the company, and their signatures are also to be certified by the competent authorities of the country where the signature is available or a political or consular representative of the concerned government in Iran.

In addition to the above documents (statements and annexes), the Companies Registration Office asks for the minutes of the General Assembly of the founders and the board of directors, if the company is a privately held company, and bank capital receipt of at least 35% of the capital. After the above steps, in accordance with Article 20 of the Regulations, within a month from the registration date of any foreign company or branch, the Companies Registration Office should publish the following points in government gazette and one of the daily newspapers of Tehran:

1-  Summary of the company’s  Articles of Association

2-   Name of the company's major representative in Iran, and if the company has several independent representatives in Iran, all the name should be mentioned.

3-   Name of the persons entitled to sign the agreements.

4-  Name of the person or persons residing in Iran who are qualified to receive all announcements related to the company.

Upon the company’s registration, a confirmation letter issued by the Registration Office is delivered to the applicant.

How to register a Foreign Company Branch

If a foreign company registered in Iran applies for the establishment of a branch, it should submit the Persian registration statement, a certified copy of the document confirming the company’s registration in Iran, and a certified copy of the representative’s authorization letter who is the branch manager. (Article 8 of the statement letter).

Note: In case the apply for branch registration is submitted simultaneous with the apply for registration of the company, there would be no need to submit the certified copy of the company’s registration document.]

The penal provisions of persons who act as commercial, industrial or financial agents in Iran and who do not apply for registration before the expiration of the due date begins upon the prosecutor’s request and the convicted person will be sentenced to delay in Tehran’s trial Court; after the issuance of the sentence, he will be fined 5 to 50 Tomans. If the verdict is finalized and violation continues until three months after the violation notification date, the government will prevent from the operation of the representative or the manager of the offending company.

Article 5 of the Companies Registration Act.

If a representative or manager of a branch of any foreign company is engaged in commercial or industrial or financial operations before being registered as a representative or manager of the company's branch in Iran, it will be fined. Therefore, only the attention and demand of the attorney general (Tehran prosecutor) causes the punishment imposed on the violation of the non-registration of the foreign company.

23 تیر 1395
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