In 2002, the parliament of Iran ratified the “Foreign Investment Promotion and Protection Act” (FIPPA), which governs foreign business in Iran. The FIPPA and its governing bylaws have improved the legal and operational structure for foreign investors in Iran.
Investment in Iran requires knowledge of legal barriers and government support. If you begin investing unknowingly, you may face barriers during the investment process that will cost you dearly. The consultation of legal experts in this field is the safest way for a profitable investment in Iran. In this regard, Karimi & Associates Law Firm, with a team of experienced and expert lawyers in various legal fields, by providing specialized legal advice, accompanies and supports your interests in this process.
Definition
The law on foreign investment in Iran under the name the “Foreign Investment Promotion and Protection Act “(FIPPA) was ratified by the parliament in 2002. According to FIPPA, every investor from abroad are allowed to invest in Iran’s industries, mining, agriculture, and services. Furthermore, the act offers a variety of incentives to investors and initiatives that use foreign funds.
FIPPA License
The first stage for foreigners interested in investing in Iran is to obtain a FIPPA license. But there is a little point: There is no requirement to obtain a permit to invest in Iran.
However, you must obtain a FIPPA license to be eligible for FIPPA coverage and incentives. To obtain an investment permit, investors must apply to the government organization. This license is referred to as a FIPPA license or a foreign investment certificate.
This license is the highest guarantee for foreign investors in Iran signed by the Minister of Economic Affairs. You may apply for a FIPPA license at any time while investing in Iran; before bringing the capital or during the transfer, even after investment process in Iran.
The Applicable Legislation
There are other regulations governing to the FDI in Iran; The General Policies about Principle 44 of the Constitution of the Islamic Republic of Iran (2005), and later law on Implementation of General Policies of Principle 44 of Constitution Law (The Privatization Act 2008), and the Six Economic Development Plan, are main regulations.
The Scope of the Foreign Investment Regime
All foreign natural and legal persons, international organizations, institutions and enterprises, including foreign-based corporations, are permitted to invest in Iran.
Furthermore, Iranian nationals with a capital sourced from foreign origin are supported by FIPPA. It should be considered that FDI in upstream oil and gas operations is not allowed, but foreign investment could be done in these areas through contractual arrangements. It could be frames of civil partnerships, BOT or buy-back.
The Triggers and Application Levels of the Scheme
A foreign invest should have the criteria below:
- Any threat to the national security and public interest
- It should not cause any damages to the local economy
- It should cause economic growth
The Risks Covered by FIPPA
The license supports the foreign investment against Nationalization: Let us make it clear. How exactly it supports?
- If the government expropriates the foreign business, it undertakes to pay the value of the business on the day before the expropriation.
In order to obtain compensation, the investor must request payment within one year after the seizure.
- Unrestricted Export: According to the FIPPA Act, if you have a license, the government has an obligation to unrestricted export of the foreign investors’ products.
- Easier investment extraction: This process is made easier by the government and if one day you want to extract your investment the facilitation is guaranteed by the government.
Since there are numerous restrictions in Iranian local regulations for foreign exchange extraction, this guarantee is valuable and it happens if you have the license.
The Risks that FIPPA Does not Cover
The most important issue is currency depreciation, which is not covered by FIPPA. Under FIPPA, foreign investors are able to repatriate the principle and benefits without having to abide by the usual currency limits, and there are two options to this:
- If the company in Iran gets foreign exchange through its import and export, the foreign investor can use it to extract the investment. There is no risk in choosing this option.
- But if the business earns money from local businesses, it can buy foreign exchange, and under the FIPPA’s protection, there is no limitation and it is possible to get the exchange from the free market, although there is a risk of losing money in this option due to the IRR experiencing depreciation.
Other Incentives
- Foreign investment will be treated equally with domestic businesses, and the government guarantees that there will not be any discrimination against the foreign businesses.
- After getting the license, you will obtain work and residence permit for 3 years as a foreigner. Furthermore, you can apply for permission for your family and employees.
- The cash and non-cash investments transfer within the country will not require further permits and you can use FIPPA license to clear the equipment from Iran’s customs.
Considering the government’s support for foreign investors and Iran’s strong foreign investment potential, investors are prepared to invest in a variety of industries. So, if you are a foreign investor and interested in FDI in Iran, it is better to start with a legal consultation; contact Karimi & Associates Law Firm through our contact us section and receive specialized legal advice in this field from our team of expert lawyers.