Foreign Investment in Iran
Marjan Tehrani Legal & Contracts Advisor ForsatMC Law Firm
There are different types of legal procedures for entering capital to Iran in order to obtain foreign investment license. This may include three following paths:
a) Legal Participation (Direct Investment): is defined as a direct involvement of a foreign investor in the equity capital of a new or existing Iranian company. The right of foreign investor to run and control a company emanates from and is dependent upon his direct contribution in the equity capital of the concerned company. There is no restriction on the level of shareholding as well as percentage of shares belonging to foreign investors in Iranian companies.
All foreign investors are permitted to invest, for the purpose of development and manufacturing activities, in all areas of industry, mining, agriculture and service activities. There are no restrictions on foreign direct investment in Iran due to the percentage of participation and the amount of investment.
b) Contractual Arrangements: is defined as a set of mechanisms under which the utilization of foreign capital is solely based on agreements reached by the contracting parties. In other words, the rights of the foreign investor are not yielded with his direct participation in the capital of the recipient Iranian firm, but through the arrangements agreed upon under a contract. According to The Foreign Investment Promotion and Protection Act Contractual Arrangements are limited to “Buy Back”, “Build-Operate-Transfer” (BOT) and “civil participation”, however these Contractual Arrangements are divided into different types.
This type of investment may be carried out in all the sectors of economy. Under contractual arrangements, the return of capital and accrued profits have to be sourced only out of the economic performance of the investment project.
c) Establishing a Branch or Representative Offices: Foreign companies which are known as legal entity in their country of registration, may, subject to mutual action in their respective countries, be able to register their branch or representative offices in Iran, in accordance with the relevant law and regulation. (Article 1, Act on Registration of Branches or Representatives of Foreign Companies).
The fastest method of foreign investment in Iran is Foreign direct investment. In order to do that, foreign companies need to acquire a FIPPA license. Although getting this license is not compulsory foreign investors shall be granted the license if they tend to enjoy the privileges allowed by the Investment Protection Act.
The procedure for issuance of an investment license is short and simple. Upon submission of the official application for foreign investment addressed to Foreign Investment Organization, the application will be put in the agenda of the Foreign Investment Board for review within 15 working days, and subsequently a draft license will be communicated to the foreign investor for confirmation. After imparting the decision of the board to the foreign investor, the permit is signed by the minister of Economic Affairs and Finance. This stage would take a maximum period of 30 days.
After issuance of investment license, the foreign investor is required to bring an appropriate portion of his capital into the Country, within a period determined by the Investment Board, on the basis of the particularities of the investment project; otherwise the investment license shall be null and void.
Documents Required for the Issuance of Foreign Investment Licensing
- Application Form
- Establishment License / Primary agreement of the pertinent Iranian organization
- Official letter of the foreign investor to submit to the Organization for investment economic and technical assistance of Iran (OIETAI).
- The foreign investor’s background including a brief history of the company, the year of establishment, areas of activities, a photocopy of passport and resume shall be provided
- A list of machinery, equipment which may be imported into the country as a part of the foreign investor’s capital
- In case that part of the foreign investor’s share is in the form of technical know –how, a draft of the contract outlining the conditions of the transfer of technology
- Any further useful information.
Advantages of FIPPA
The most important advantages under FIPPA include:
- No restriction on the percentage of foreign shareholding
- The possibility of registering an Iranian company with 100% foreign capital
- Allowing investing in all areas which are permitted to the private sector
- Issuing a three-year residence Permit for Foreign Investors, directors, experts as well as their immediate family members
- Tax exemptions and discounts to be equally granted to domestic and foreign investors, according to the Direct Taxes Law
- No limitation on exportable profits and capitals
- Freedom of exportation of goods by Investee Company