Law Concerning the Attraction and Protection of Foreign Investments
in Iran

Article I

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 investigation and making a decision regarding the merits of the proposals submitted concerning the import of foreign capitals, 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 he submitted through the Minister of Commerce( 1), 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 as regards investigation and issue of a Decree.

Article III.

Capital imported into Iran in accordance with Article 1 of this Law, as well as profits accrued therefrom, shall be subject to the legal protection of the Government; and all the rights, ex emptions, and facilities accorded to the domestic capital and private productive enterprises shall also apply to foreign capital and firms. The Government guarantees fair compensation where the promulgation of a special legislation deprives the owner of capital from ownership; provided that within three months after the date of expropriation application for compensation is submitted to the Board mentioned in Art. II. In case of disputes, investigation of claims for fair compensation guaranteed by the Government shall be undertaken by competent Iranian courts. 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 concerning ownership of real-estate by foreign nationals of Khordad 16, 1310 shall remain valid and in force.

Note 2: Persons, companies, and private firms mentioned in Article I above are not entitled 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 3 months prior notice to the Board men tioned in Article 2, upon fulfillment of all obligations and with due regard to provisions of Agreement of the International Monetary Fund of July 1944. However, the owner of capital is required to retain in Iran, for 6 months, at least 10 per cent of his original capital 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 for Iranian firms and nationals are made possible.

Article VII

The Government is charged to prepare the appropriate regulations implementing this Law and to submit the same within 2 months through the Ministry of Economy to pertinent committees of Houses of Parliament for approval.

Regulations Implementing the Law on the Attraction and Protection of Foreign Capital

Article 1

Any natural or legal person, and any foreign firm, transfer-ring 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 the said enterprises shall enjoy the privileges of the Law for the Attraction and Protection of Foreign Capital Investments in Iran provided;

• (a) Application to invest 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, the &aid capital should, within a period prescribed by the Board, be repatriated from Iran.

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 an economy in its expenditure.

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 Capital, in so far as the said protection is in compliance with the Banking Act and its supplementary regulations.

Article 2.

From the standpoint of these Regulations the term "Foreign Capital" denotes:

• (a)Foreign exchange imported into Iran through authorized Banks.
• (b)Machinery, machine tools, spare parts, and raw materials as well as other requirements of this type provided they could be currently used and the Supervisory Board recognizes their suita bility 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 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 that it is assessed at the discretion 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 concerning 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 proposals 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 capital;
• c. Type of capital, specifying the cash and non-cash amounts;
• d. Legal domicile and the centre of activities of the person or firm;
• e. Type of activity and the programme of operation in Iran: and, if Possible, indicating whether operations will be carried out independently or in partnership;
• 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, should the said Board be in agreement in principle with the importation of the capital applied for, it will present its views, through the Minister of Commerce (1), to the Council of A4inisters for approval and the issue of a Decree.

Article 5.

Upon issue of the Decree of the Council of Ministers, the applicant should, within a period prescribed with the agreement of the Board, 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. Having agreed with the said evaluation, the Board will present the foreign investor or his representative with the license for the import of capital permitting at the same time 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 institute, as a result of an accident, replace the investor in accordance with the provisions of the insurance policy, this replacement does not constitute 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 an ap propriate capital for the commencement of operations; otherwise, his license shall be null and void. 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 (1) Iran; and it shall be re gistered in the investor's name on the date of its receipt. The amount of non-cash capital plus the cost of packing, transpor tation, insurance, etc., paid outside of Iran, will, after verification, be totally 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(2) Iran and the investor.

Article 9.

Conversion of foreign currencies due to be converted into Rials is effected at the current buying rate of Bank Melli(3) Iran on the date of filing the application for conversion; and, Bank Melli(4) Iran is authorized to buy the said foreign currencies or to retain them as 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 payment will be placed at the disposal of their owners, and, owners of the said currencies are entitled 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 concerning the Attraction and Protection of Foreign Investments in Iran. An itemized list of expenses and payment in detail will be presented, at the end of each month, to the Supervison Board by Bank Melli(5) Iran,

Article 11.

The non-cash capital which is imported into Iran by virtue of the present regulations is exclude from the annual quota.

Article 12.

if capital is imported in form of goods which are, by findings of experts and assessors, mutilated, defective, or, if they do not conform with the specifications given in the application, or, are declared at a higher value than their actual cost, 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 Law concerning the Attraction and Protection of Foreign Investments, as well as the profits derived therefrom whether in the form of foreign exchange or authorized commodity, 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 has imported the capital;
• The Supervisory Board may not postpone, without plausible reasons, the grant of permission for more than three months from the date of receiving of the balance-sheet. In case foreign exchange availability do 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 under obligation to prepare his balance sheet at termination of operations in Iran and submit it, together with the prior notice prescribed in Article 5 of the Law, to the Supervisory Board. The Supervisory Board, upon appropriate investigations, will grant permission for the export of foreign exchange requested within a period of time to be set forth in the permit;
• The period of time set forth in the permit shall not exceed three months, unless the amounts of capital which arc exported are of such magnitude that, in the Board's opinion, 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 3O% of the capital;
• (c) Rate of foreign exchange for transfer of profits or repatriation of capital shall be the Bank selling rate on the day of the transfer;
• (d) The income, gained from the rise in prices at the time of the sale of the non-cash capital, 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 un dertaking;
• (e) In case of sale or cession in Iran of original foreign capital or of equity shares, the owner has the right to transfer abroad the proceeds of the sale or cession in accordance with the provisions of the Law concerning the Attraction and Protection of Foreign Investments and the present 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 Article 3 of the Law concerning the Attraction and Protection of Foreign Investments, is entitled to cede to another foreign investor his capital or equity share subject to the approval of the Supervisory Board; in such a case, the cedee shall replace the original investor from the standpoint of the provisions of the Law concerning the Attraction and Protection of Foreign Investments and present Regulations;
• (g) If the foreign investor is not inclined to transfer the capital and accrued net profit abroad within the period prescribed in the permit, unless he is again granted permission by the Super visory Board in accordance with the provisions of the present Regulations, the said capital and profit shall remain at his disposal but shall not be subject to the Law concerning the Attraction and Protection of Foreign Investments and the present Regulations;
• (h) Bank Melli( 1) Iran and the Foreign Exchange Control Department are, for purposes of the above provisions, under obligation to make available to the foreign investor necessary foreign exchange for the repatriation, within the period of validity of the permit, of capital, reserve, or the net profit;
• ( i ) In case the foreign investor is inclined to export in form of commodity all or part of the net profit, or the original capital and the sales or cession proceeds of capital, or equity shares, with due regard to the above provisions, the Ministries of Finance and Commerce 2) are under obligation to issue export permit for the said commodities, without foreign exchange undertaking 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 in another field, to be agreed upon by the Supervisory Board.

Note: At the time of repatriation of capital, if a loss is suffered by the investor as a result of which part of his capital is lost, the repatriation of only that part 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 concerning the Attraction and Protection of Foreign Investments, will be paid on the basis of normal value prevailing immediately before expropriation.

Article 15.

Firms, the central offices of which are outside of Iran, shall pay registration fees only in proportion to the capital transferred to Iran.

Article 16.

In cases where for specific work certain machinery is imported into Iran without transfer of foreign exchange, and 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 the 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 (1) Iran), when the subject of proposal is related to industrial affairs, the Technical Undersecretary of industries & Mines, and when the subject is related to mining affairs the Mining Undersecretary of the Industries and Mines, and when it is related to commercial and banking affairs the Undersecretary of Commerce, shall participate.

Article 18.

Functions assigned to the Supervisory Board in the Law concerning the Attraction and Protection of Foreign investments are to be regarded as part of the main functions of the members of the said Board. The personnel budget of the Secretariat of the Supervisory Board and fees payable to experts shall be made available by Bank Melli( 1) 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 sitting on Mehr 17, 1345, is enforceable by virtue of the Law concerning the Attraction and Protection of Foreign Investments.

Explanations:

According to Article 2 of the Law concerning 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 7 1334 (November 28, 1955), concerning the Attraction and Pro tection of Foreign Investments be constituted in Bank Markazi Iran under the chairmanship of the Governor of the Bank.

In Bahman 1349 (February 1972) the Law transferring the Centre for the Attraction and Protection of Foreign Investments to the Ministry of Economy was ratified. According to the afore mentioned Law, a Supervisory Board for the Attraction and Protection of Foreign Investments was set up under the chair manship 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 Centre for the Attraction and Protection of Foreign Investments was changed to "Organization for Investment, Economic and Technical Assistance of Iran". A Supervisory Board for the At traction and Protection of Foreign Investments was set up under the chairmanship of the Minister of Economic Affairs and Fin ance or his Deputy.