Legal guarantee available for a foreign company to rely on when a contract with an Iranian company is established. According to the Foreign Investment Promotion and Protection Act (FIPPA), the government of the Islamic Republic of Iran extends its protection to all foreign capital imported into the country and the profits earned therefrom. Legal entitlements, exemptions and facilities for capital investment provided under different laws, including laws pertaining to taxation, are also applicable to foreign investors. For example, foreign investors wishing to engage in economic activities in Free Trade-Industrial Zones (FTZ), enjoy the same privileges (flexible labor and social security regulations) in these FTZ as Iranian nationals.
The Central Bank of Iran (CBI) guarantees investment and its return, according to the rules of FIPPA: • The right to transfer profits and capital and its gains in foreign currency, • The right to receive damages resulting from expropriation and nationalization of foreign capital. • The right to receive damages arising from government legislation or approvals that would ban or stop foreign investor’s financial contracts execution. • The possibility of referring investment disputes to international arbitration courts. • Non-inclusion of criteria for pricing, distribution, non-construction and domestic construction requirements.
Some specific enhancements introduced by FIPPA for foreign investment in Iran can be outlined as follows: 1.Broader fields for involvement by foreign investors including in major infrastructure, 2.Streamlined and fast track investment licensing application and approval process; 3.More flexibility and facilitated regulatory practices for the access of foreign investors to foreign exchange for capital transfer purpose Iran’s foreign investment laws: allow 100% share ownership except in three sectors. (nationalized oil and gas sector, Real estate, where the ownership is forbidden in certain geographical locations and banking and insurance unless the investment is made off-shore) enable a free choice of legal form provided under Iranian Commercial Law FIPPA protects non-Iranian investors and incentivizes foreign investment by: protecting the investor throughout their operation in Iran guaranteeing privileges to foreign investments, such as an equal treatment standard providing for compensation in the case of nationalization or expropriation allowing for easier and faster investment licensing and approvals Under FIPPA, foreign capital is defined broadly and can be in cash, in kind, or shareholder loans.
FIPPA allows investment in many industries and fields including major infrastructure projects and tends not to restrict: the manner, type and volume of investment percentage of shareholding or profit capital repatriation
Foreign direct investment via FIPPA can be through: equity participation in the share capital of Iranian companies through contractual arrangements, such as buy-back arrangements or project financing Indirect investment is permitted in closed areas of the market if the investor does not have an equity stake, but an FIPPA license is required for protection. A FIPPA license also gives privileges relating to visas, residency and work permits. Foreign investors need a license from the Organisation for Investment, Economic and Technical Assistance of Iran (OIETAI) first to operate under FIPPA. Licenses are usually issued promptly, if you can demonstrate your business activities are eligible. A business plan may also need to be submitted. To get an investment licensing permit under FIPPA you must submit a formal application with supporting documentation to the OIETAI.
Some of the required Documents for the issuance of Foreign Investment License 1.Application Form 2.Establishment License / Primary agreement / Preliminary agreement of the pertinent Iranian organization 3.Official letter of the foreign investor to submit to the OIETAl 4.Any further useful information. To conclude, as one of the world’s largest oil exporting country Iran possesses many accounts in the countries that buy its oil. Oil buyers pay for Iran oil depositing money into the accounts of their domestic Central Banks. If in one of the banks of the country purchasing the Iranian oil LC is issued from Iran, the costs will be paid from the Iranian bank through the oil accounts of the Central Bank. Iran joined the Asian Infrastructure Investment Bank (AIIB) in order to be able to operate in the markets of the member countries and to access to funding for infrastructure projects. Iran’s responsible for the rotating presidency of the Council of Islamic Services (IFSB) for the year 2017.