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Complete Text of the New Law on Encouragement and Protection of Foreign Investment (LEPFI), Iran Translation
provided by Cyrus Omron International PJSC Chapter 1 • Definitions Article 1- Words and phrases used in this law have the following meanings: Law: Law of Encouragement and Protection of Foreign Investment Foreign Investor: Natural and judicial persons whether Iranian or non-Iranian who have acquired the investment license as per Article 6 by utilizing a capital from foreign origin. Foreign Capital: All types of capital whether cash or non-cash imported into the country by foreign investor and consisting of following items: A: Cash sums imported into the country in form of foreign exchange convertible through the banking system or other means of money transfer approved by Bank Markazi of Islamic Republic of Iran. B: Machinery and equipment C: Tools and spare parts, CKD parts and raw materials, additives and auxiliary materials. D: Patent right, technical know-how, trade- name and trademark and specialized services. E: Transferable dividends of foreign investor. F: Other permissible items with approval of the cabinet. Foreign Investment: Utilizing foreign capital in a new or existing economic enterprise upon acquiring the investment license. Investment License: A license issued for each foreign investment according to Article 6 of this law. Organization: The Organization for Investment, Economic and Technical Assistance of Iran as per Article 5 of the Law of Establishment of Ministry of Economic Affairs and Finance ratified on 15 July 1974. High Council: High Council of Investment as per Article 7 of the Law of Articles of Association of the Organization for Investment, Economic and Technical Assistance of Iran ratified on 2 June 1975. Board: Foreign Investment Board as per Article 6 of this Law. Chapter 2 • General Conditions of Admission of Foreign Capital Article 2- Admission of foreign investment on the basis of this law and with observance of other prevailing laws and regulations of the country for the purpose of development and productive activities including industrial, mining, agriculture and services, must take place on the basis of following rules: Bring about economic growth, advancement of technology, enhancement of quality of products, increase employment opportunities, increase exports, and entry into the world markets. It should not pose any threat to the national security and public interests, damage the environment, disrupt the country's economy and damage productions which are based on domestic investment. It should not involve granting any concession by the government to foreign investors. Concession means special rights which would place the foreign investors in monopolistic positions. Percentage of value of goods and services produced resulting from foreign investment under this law in relation to the value of goods and services supplied in the domestic market at the time of issuance of the investment license should not exceed 25% in each economic sector and 35% in each field. Determination of fields and rate of investment in each of them shall be laid down under a by-law which will be approved by the Council of Ministers. Foreign investment for production of goods and services for export from the country, except for crude oil, will be exempted from the said ratios. Note: Law related to ownership of real properties by foreign nationals ratified on 6 June 1931 is still in force. Ownership of any type of land to any extent in the name of foreign investor is not permitted within the framework of this law. Article 3 • Foreign investments admitted on the basis of provisions of this law will enjoy the facilities and protections of this law. Such investments are admissible under the two following methods: Foreign direct investment in the fields in which the activity of private sector is allowed. Foreign investments in all sectors within the framework of 'Civil Partnership', 'Buy-Back', and 'Build-Operate-Transfer' in which the return of capital and profits thereof merely result from the economic performance of the invested project and is not dependent on guarantee by the Government, state-owned companies or banks. Note 1: As long as the foreign investment being covered by methods of 'Build Operate Transfer" as per section B of this Article and its accrued profit resulting therefrom is not amortized, exercising ownership right by foreign investor in relation to the remaining capital in the recipient economic enterprise, shall be authorized. Note 2: Regarding investments as per section (B) of Article 3 of the present law, in case enactment of state laws or decrees, cause prohibition or stoppage of implementation of the financial agreements accepted within the framework of the present law, then the resulting loss will be secured and paid by the government, maximum up to the ceiling of the due installments. Limits of acceptable obligations within the framework of this law shall be approved by the Council of Ministers. Article 4 • Investment by the government with foreign governments in the Islamic Republic of Iran, shall be subject to the approval of Islamic Consultative Assembly (Majlis), on a case-by-case basis. Investment of foreign state-owned companies shall be deemed as private investment. Chapter 3 • Competent Authorities Article 5 • 'Organization' is the only official authority for encouragement of foreign investments in the country and dealing with all affairs related to foreign investments. Applications of foreign investors in respect of related affairs including admission, importation, employment and repatriation of capital must be submitted to the Organization. Article 6 • For the purpose of consideration and decision making with respect to the applications as per Article 5, a board entitled 'Foreign Investment Board' will be established under the chairmanship of the Vice Minister of Economic Affairs and Finance as the Director General of the 'Organization', comprising Vice Minister of Foreign Affairs, Deputy Director of State Management and Planning Organization, Deputy Director General of the Central Bank (Bank Markazi) of Islamic Republic of Iran and vice ministers of pertinent ministries, as the case may be. In relation to application for admission, investment license will, after the Board's approval, be issued upon confirmation and signature of the Minister of Economic Affairs and Finance. When giving admission for foreign investment, the 'Board' shall be duty bound to observe the requirements inserted in Article 2 of this Law. Note: Organization is bound to put forward the investment applications, after preliminary reviewal at the latest within 15 days from the receipt thereof, along with its own views at the Board. The 'Board' shall be obligated to deal with the case and to declare its final decision in writing, within one month from the date when such applications are put forward. Article 7 • For the purpose of facilitating and expediting the affairs related to admission and activities of foreign investments in the country, all related organs such as Ministry of Economic Affairs and Finance, Ministry of Foreign Affairs, Ministry of Commerce, Ministry of Labor and Social Affairs, Bank Markazi of Islamic Republic of Iran, Customs Dept. of I.R.I, General Registration Dept. of Companies and Industrial Ownership, and the Environment Protection Organization shall have the duty to introduce to the Organization, a fully authorized representative under the signature of the highest authority of their institutions. The introduced representatives will be recognized as liaison officers and coordinators of all affairs relating to their institution with the Organization. Chapter 4 • Guarantee and Transfer of Foreign Capital Article 8 • Foreign investments subject to this Law shall enjoy the same rights, protections and facilities available to domestic investments in an equal manner. Article 9 • Foreign investment shall not be expropriated or nationalized unless for the sake of public interests, by means of legal process, by a non-discriminatory method against payment of reasonable compensation on the basis of the actual value of such investment immediately before expropriation. Note 1: Request for compensation of inflicted damages must be submitted to the Board at the latest within one year after expropriation or nationalization. Note 2: Disputes arising from expropriation or nationalization will be settled on the basis of Article 19 of this law. Article 10: Transfer of the whole or a part of foreign capital to domestic investors and/or, with the agreement of the Board and confirmation of the Minister of Economic Affairs and Finance, to another foreign investor is permissible. In case of transfer to another foreign investor, transferee should at least have the qualifications of the initial investor and from viewpoint of the provisions of the present law, shall be the successor or partner of the former investor. Chapter 5 • Regulations for Admission, Importation and Repatriation of Foreign Capital Article 11 • Foreign capital may be imported in to the country in one of the following forms or a combination of them in order to be covered by this Law. Cash sums which will be converted into Rials. Cash sums not converted into Rials and being directly used for purchases and orders related to foreign investment. Non-cash items after going through assessment stages by competent authorities. Note: Procedures related to foreign capital assessment and registration will be specified in the executive regulations of this law. Article 12 • Foreign exchange rate applicable at the time of importation and repatriation of foreign capital as well as all transfers of foreign exchange, in case of the applicability of a unified exchange rate, shall be the same rate prevailing in the official network of the country, and otherwise the free rate prevailing as determined by Bank Markazi of I.R.I shall be applicable. Article 13 • The original foreign capital and profits thereof or whatever remains of the original capital in the country will be transferable abroad by giving a 3 month prior notice to the Board and after fulfillment of all obligations and payment of all legally deductible amounts and approval of the Board and confirmation of the Minister of Economic Affairs and Finance. Article 14 • Foreign Investment profit will be transferable abroad upon deduction of taxes, levies and legal reserves with the approval of the Board and confirmation of the Minister of Economic Affairs and Finance. Article 15 • Payments related to the installments of the principal amount of financial facilities of foreign investors and related expenses, agreements and contracts for patent rights, technical know-how, technical and engineering assistance, trade-marks and trade-names, management, and similar agreements, are transferable aboard within the framework of foreign investment on the basis of the decrees of the Board as well as confirmation of the Minister of Economic Affairs and Finance. Article 16 • The transfers as per Article 13, 14 and 15 will be feasible with observance of provisions of section B, Article 3 of this Law. Article 17 • Securing foreign exchange for transfers as per Articles 13, 14 and 15 will be possible through the following methods: Purchase of foreign exchange from the banking system. From the foreign exchange proceeds of export of products or foreign exchange resulting from the rendering of services by the economic enterprise in which the foreign capital has been employed. Export of permissible goods while observing the related laws and regulations. Note 1: Application of one or a combination of the above methods will be specified in the investment license. Note 2: Bank Markazi of I.R.I is obliged to secure the foreign currency equivalent to transferable sums as per section A of this Article with the agreement of the Organization and confirmation of the Minister of Economic Affairs and Finance and to place it at the disposal of the foreign investor. Note 3: In case the investment license is pertaining to section B or C of this Article, such license shall be deemed as export license. Article 18 • Export of that part of foreign capital which is imported into the country within the framework of the investment license but has not yet been employed, is excluded from all foreign exchange, export and import laws and regulations. Chapter 6 • Settlement of Disputes Article 19 • Disputes between the government and foreign investors with respect to mutual obligations within the framework of investments under the present law, if not settled through negotiations, shall be settled by internal courts of justice, unless some other method of dispute settlement has been agreed upon under the ratified bilateral investment agreement law between the government and the government of the foreign investor. Chapter 7 • Final Provisions Article 20 • Pertinent executive organs are bound to take action for issuance of visas, residence permit, work and employment permit for foreign investors, managers and experts as the case may be for the private sector related to foreign investments subject to this law and their next of kin's, upon the request made by the Organization. Note: Cases of dispute between the Organization and executive organs, will be settled under the view of the Minister of Economic Affairs and Finance. Article 21 • The organization is bound to provide the possibility of public access to all data related to foreign investments and investors, investment opportunities, Iranian partners, subject of activities and other data available to the organization. Article 22 • All ministries, governmental corporations, organizations and public institutions the names of which should be expressly mentioned in order to be covered by the law, are obligated to put at the organization's disposal all required data for foreign investment and the reports of the accomplished foreign investments so that the Organization may act on the basis of the above Article. Article 23 • Minister of Economic Affairs & Finance is obligated to forward the performance report of the Organization in respect of foreign investment under the present law to the pertinent commissions of the Islamic Consultative Assembly (Majlis) once every six months. Article 24 • As of the ratification date of this Law and executive regulations thereof, the Law for Attraction and Protection of Foreign Investments ratified on 28 Oct. 1955 and executive regulations thereof will be abolished. Foreign capital already admitted under the said law, shall be covered by the present Law. Provision of this Law shall be amended or abolished by later laws and regulations only in case such amendment or abolishment is expressly mentioned in such laws and regulations. Article 25 • Executive regulations of the present Law will be prepared by the Ministry of Economic Affairs & Finance and approved by the Council of Ministers within 2 months. |