Ministry of Economic Affairs and Finance General Directorate of Economic Affairs and Financial of Kermanshah kermanshah investment services center

Investment Opportunities and Projects and Investment Guide in Kermanshah Province

Book’s title: Investment Opportunities and Projects and Investment Guide in Kermanshah Province Author(s): Ali mohammadi, Farid Khalili, Ali Ayaseh Editor(s): Taeobeh Amirian Layout: Ali Ayaseh Circulation: 1000 Publication: 1st

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Imam Khomaini (God’s blessing be upon him): Involve people and assing them with doing things that are not necessary for government.

Supreme Leader of Revolution: Investment and Entrepreneurship are great works and kinds of worship.

The Popular President: Kermanshah is Iran's western gate of Business and Economy. Faster solving of province unemployment problem is available through energy, industrial, agriculture and tourism capacities. Free zones should be a platform for export, not to import of poor- quality products Ministry of Economic and Finance: The high- volume of released securities, by the government of Islamic Republic in 1395, is one of the important attractions for foreign investors, and I would recommend foreign investors that they do not lose this great opportunity in the field of investment.

Governor General of Kermanshah: Doubtless, due to the geographical location, excellent interchanges, suitable Climate, abundant water resources, fertile soil and a lot of tourist potential, Kermanshah province can be entitled the land of great investment opportunities .

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CONTENTS

1- Introduction of Investment Services Center of Kermanshah Province ...... 4 2- Key services offered by the Center include: ...... 1 3- Introduction of coordinates of Kermanshah province ...... 2 4- Investment opportunities of Kermanshah province in 2016(1395) ...... 9 4-1 Investment opportunities in urban scope and municipality ...... 9 4-2 Investment opportunities in West Regional Electricity ...... 11 4-3 Investment opportunities in Health and Medical ield ...... 11 4-4 Opportunities in the ield of industrial cities ...... 12 4-5 Investment opportunities in the ield of industry and mining ...... 13 4-6 Investment opportunities in the ield of cultural heritage ...... 14 4-7 Investment opportunities in the ield of agriculture and animal husbandry ...... 15 4-8 Cooperation organization of municipalities of Kermanshah province ...... 18 5- Work group and Address ...... 19 6- Foreign Investment Promotion and Protection Act (FIPPA) ...... 21 7- Implementing Regulations of Foreign Investment Promotion and Prote ...... 27 8- Frequently Asked Questions on Foreign Investment in Iran ...... 41 9- Registration of Companies ...... 57

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1- Introduction of Investment Services Center of Kermanshah Province

This center has been established in order to foreign investments license. This center facilitate and accelerate the performance of responds to the investment applicant’s legal duties in fields of encouragement and questions in fields repeated to executive protection of investment in province and organizations Stationed in center. In representatives of all relevant organizations addition, Domestic and foreign investors can have been deployed in where. It is referral benefit from Guidance and of assistance of center for domestic and foreign investment center In order to communicate with other applicants. By referring to this center, organizations about the project. Organizing foreign investors in person meetings with affairs and workflow in the service center are experts, investors will be familiar with in such a way those investors will access to encouragers and advantages and facilities of all information and necessary solutions and FIPPA and also the process of obtaining they do not need to frequent referring.

Responsibility of services given by the center Furthermore, the center is ready to examine is not restricted to pre-steps of the decision the completed application form of foreign to invest, but investors can always and investment and other documents prepared during the process of their investment before the official presentation on return to the foreign investment services Investment organization to resolve its center and benefit from its cervices. violation.

Address: Kermanshah-Naft square (Sepah e Pasdaran)- Jamejam boulevard- Investment services center.

Phone: 083-38388041 – and 083- 38384665 Fax: 083-38383519

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1- Key services offered by the Center include:

§ Dissemination of information and and applications made by projects provision of necessary guidance to involving foreign investment. foreign investors concerning § General supervision concerning the investment in Iran. fulfillment of decisions surrounding § Necessary coordination concerning foreign investment projects. the issues related to foreign § Conduct of affairs related to foreign investment including issuance of the investment by the Center has been declaration of establishment , the organized in a manner that foreign environment protection license, the investors can easily lay hand on all permits for subscriptions relation to required information and services water, electricity, fuel and telephone, without any need for further referral the license foe exploration and to a host of different executive exploitation of mines, etc. from the bodies. In fact, services rendered by relevant authorities, prior to the the Center are not limited to prior- issuance of the investment license. investment stages; foreign investors § Necessary coordination for the may, at any time and any stage ever securing of entry visa, residence and after, refer to the Center and benefit employment permits for foreign from its services. nationals involved in foreign § The performance of the Center since investment projects. its establishment proves that the § Necessary coordination concerning establishment of the Center is an issues related to foreign investments effective step toward expediting the subsequent to the issuance of the affairs of foreign investment investment license including undertakings. It is expected that registration of joint venture Company, further development of relations registration of order for importation between the Center and foreign of machinery and equipment, and investors will increasingly enhance issues related to importation and the efficiency of the Center in carrying repatriation of capital, customs and out its assigned duties and tax affairs, etc. responsibilities. § Coordination among various official § The Centers with the same tasks agencies in connection with requests mentioned above established in the center of all provinces.

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2- Introduction of coordinates of Kermanshah province

Kermanshah province is located in a mountainous area in25900 of sq.m, in the west of county, on the border of Iraq and leads to Kurdistan Province from the north and to Lorestan and Elam from the south and to Hamadan from the east.

Kermanshah province now has 14 countries, 21twons, 31regions, 86 rural districts, 2793 villages inhabited, the Kermanshah city is the provincial capital of Kermanshah province, and The most important cities are as follows: Islamabad-e Gharb, Paveh, Javanrood, Sarpol-e Zahab, Songhor, Sahneh, Qasr-e Shirin, Kangavar, Gilan-e Gharb and Harsin. The average elevation above sea level of province is 1200 m, 36% of its area is Agricultural Lands, and 198% are Forest lands 44% Grasslands and 20% Residen al areas. Kermanshah has been located in the main ways of East to the West of the country, North West to the southern regions, in the main route of transit and services to Iraq and on the main route of Holy Shrines ('Atabat-e 'Aliat). Kermanshah province due to its geographical location and being among Zagros Mountains, has a diverse Climate. As far as, Kermanshah is called the four seasons.

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3- Potentials and capabilities of Kermanshah province

In terms of popula on, this province with more than 2 million populations is a demographic Perspective, that the majority of its population is young people who have the best condi ons, In terms of being ac ve. Almost 72 percent of the popula ons 15-64 years are at the age of their ac vi es. Only 27% of the popula on is in other ages. It means that the province has a massive power of active youth who They are needed for growth and development.

Kermanshah province has a Historical past. From the archaeologists perspective, Kermanshah is on the third stage of Antiquities after Shiraz and Shoosh (jakson:1860), and it has attracted many explorers. This province has landscapes and Indicator phenomena. Most of the prominent antiquities like Bisotun and Taq-e Bostan, are located within the city. This province has 6 tourist areas and 14 tourist centers and more than 100 tourist spots. These capaci es can be attractions for Domestic and foreign tourists. The most important tourist attractions are: Taq-e Bostan, traditional bazaar, central mosque, Niloofar springhead, catacombs, Ganz darre historic hill, Dariush Inscription, Shah Abbasi Caravanserai, Anahita Temple, Dar bans springhead of Sahneh, Riijab River, Yazd Gerd Castle, Abu Dojaneh Tomb,Goori Ghaleh cave, Ravansar springhead, Rijab Waterfall, Hajij village and shamshir, Bazi Deraz mountain, Direh catacomb(Rahimzade,1391)

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4-1-Agriculture and Animal Husbandry : The province has relatively high ability in the agricultural sector, Due to the suitable environmental conditions. Appropriate diversity of climate has caused that various products are marketed at frequent times. For example: when Wheat scores on the tropical regions, one or two months later, the cold regions the province, like Kangavar, submits its wheat crop. This ability causes that one crop is submitted a few times to the consumer market on a brief interval, in the province. The most important crops which are exported outside the province: it could be pointed to: Wheat, Barley, Rapeseed, Sugar beet, Pea. This province has high capacity for different types of agricultural (farming) and Animal Husbandry Including: Turkey growers and Ostrich, Livestock, Aquaculture production, beekeeping, Gardening. Despite the Favorable climatic conditions, Water and suitable soil, the province has the agricultural Core with the production of various products, the susceptibility in the field of Alternate industries and abundant natural resources, for the production of raw materials(Rahimzade,1391.

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4-2- Industrial and mining: The province has rich resources of Oil, natural gas, Mines of bitumen, Mines of construction materials of decorative stone, gypsum stone, rubble stone, Limestone and marl and… Metal and non-metal Mines of Ironstone… Silicon, Feldspar, Industrial soil and… due to appropriate population and Higher Education, this province has many massive workforce, Experienced Designers and professional experts in the fields of Handmade Carpet, artisan, Mining, Commercial.

Profile of Mines of Kermanshah proven Type of Annual extraction No. Number reserves mineral (Tons) (Million tons) Stone 1 124 412.5 11019 rubble 2 Bitumen 32 1 73 Dolomite and 3 31 27 334 dolomitic marble Decorative 4 22 21 249 stone Mixture 5 20 48 1514 mountain Gypsum 6 9 40.5 470 stone 7 Silica 6 22 146 8 Feldspar 4 1 80 Argillaceous 9 4 505 3600 limestone Industrial 10 2 2 48 Soil 11 Schist 1 1 15 12 Manganese 1 0.21 3 Pgatyt 13 1 0.29 5 micaceous

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4-3- Trade and Export Province Commerce capabilities include two international customs of Khosravi and Parviz Khan border markets in Qasr-e Shirin, are Dayalah province neighbors, and Shoshami in Nosood and Sheykh salah in Salas Baba jani are Solaymanieh in Iraq neighbors.

Karbala highway has caused that 48% of Iran exports are exported via Parviz Khan Border and also 150 m truck carrying goods are exported daily via Khosravi border. In addition, National projects railway Tehran – Khosravi, will causes close to khosravi border that it is supposed to be finished on Khosravi border in 2017. According to the statistics, custom and Parviz Khan Market are the biggest and The most bulky exporter of goods to Iraq and the most foreign exchange market of Iran after Bandar Abbas, the biggest export customs of Iran, and 48% Iran exports are exported through this Market. This market is one of the economic hubs in Iran.

Kermanshah province has three Special Zones such as: Islam Abad e- Gharb Special Economic Zone and a free zone. Islam Abad e- Gharb Special Economic Zone has 860 hectares and has all provincial and na onal license and now has Benefits and conditions such as: Conducted comprehensive studies, executive plans, The first phase Topographic maps in 150 hectares, Package and investment opportuni es, 1MW Power Ra ng, Deep well water with a depth of 35 Dubai LPs.

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4-4- Infrastructure

The length communication ways of highway of Karbala, International Airport of Kermanshah province is 2796km. this Kermanshah and railway are under province has the largest airport in the west construction. All of These roads have with displacement capacity of nearly 960000 provided infrastructure power of the travelers. Kermanshah province has 12 province for development of other economic Special National and provincial projects in sectors. the Road and rail Transport sector. The main

Kermanshah province has 16 ac ve have Infrastructure services such as water, Industrial cities in different sectors. electric and gas and Most of them are on the Furthermore, this province has several transportation route. under construction Industrial cities which

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Charistristics of Kermanshah industrial units Name Space number of Location industrial units Islam Abad e- 74 52 Islam Abad e-Gharb-5km road of Islam Abad e- Gharb Gharb-Kermanshah Bisotun 179 95 Kermanshah-12km road of Kermanshah- Tehran Pave 20 10 Pave-Bayangan road-8km Pave road Salas Babajani 46 - Salas-3/5km road of salas-Kermanshah Javanrood 43 - Javanrood-crossroad-5km road of Javanrood- Kermanshah Dalahoo 90 1 Dalahoo-5km road of Kerend -Kermanshah Rawansar 80 52 Rawansar-5km road of Rawansar-Kermanshah Sarpolzohab 43 34 Sarpolzohab-5km road of sarpolzohab- Kermanshah Sonqor 42 30 Sonqor-5km road of Sonqor- Kermansha. Sahneh 76 12 Sahneh-50km road of Kermanshah- Tehran Faraman 220 274 Kermanshah-14km road of Kermanshah- Tehran Qasr-e Shirin 75 10 Qasr-e shirin-8km road of Qasr-e Shirin- Kermanshah Kangavar 63 32 Kangavar-5km road of Kangavar- Kermanshah. Gilan e- Gharb 24 14 Gilan –e Gharb- Goor Sefid-12km road of Gilan e- Gharb-Qasr e-shirin Harsin 68 2 Harsin-14km road of Harsin- Kermanshah

In Kermansha province there are universities Also the province has several Specialized and such as: Razi University, University of ultra-specialized hospitals with specialist and Medical Sciences, University of Applied sub-specialist medical personnel which have Science, Azad university, Payam Noor prepared to accept the patients of university, in Majors and Different courses neighboring provinces and even the patients including: Associate, Bachelor, Master, Ph.D, Of Iraq. Imam Ali and Imam Khomaini and has scientifically empowered the province. Muhammad Kermanshahi hospitals, all of

8 them are unique in the fields of heart treatment and types of cancer and burn and specialized pediatrics .

4- Investment opportunities of Kermanshah province in 2016(1395)

4-1 Investment opportunities in urban scope and municipality

Minimum Required Human execution capital Investment Subject land resources time considerations requirement method (Hectare) (Person) (mounth) (Billion rials) Tagh e- Bostan BOT Telecabin 500 37.5 30 18 Kermanshah modern 450 17 70 24 BOT Velayat bridge Amusement park Fruit and Islam abad e-Gharb vegetable market Partnership 1000 72 400 36 road of Kermanshah Partnership or In front of Hekmat Fajr Hotel 200 2.2 25 24 BOT Abad Milad Complex administrative, Public Azadi Square service 500 0.76 100 36 participation andCommercial Tagh e- Bostan BOT Amusement park 120 0.6 40 12 Sarab Ghanbar Forest Park and 2000 160 100 60 BOT recreational Revolving Restaurant, Hotel Public and commercial 150 1.5 30 36 participation complex of Park Shirin Amusement park of Azadegan 10 0.3 60 24 BOT Square Flower Gallery of BOT Welayat 200 22 30 24

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Commercial recreational and BOT services Complex 7500 75 - 36 of Park Sharghi

Minimum Required Human execution capital Investment Subject land resources time considerations requirement method (Hectare) (Person) (mounth) (Billion rials) Modaress street- Noor Commercial Public nexe to the Biston project 80 0.22 - 24 participation vertical parking Public Shahid Kaviani City Center project participation Or 4500 30 - 40 terminal BOT Commercial project-street Public radiating from 50 0.1 - 12 participation Keshavarz Boulevard Public Station complex of Expert participation Or Basij crossroad Urban Train assessments 5.06 - 30 BOT Current Location of Public Station complex of Expert Office of participation Or Urban Train assessments 0.8 - 24 Enforcement BOT

Station complex of Urban Train and Public Expert Office Complex participation Or Modarres Street assessments 50 - 36 and Heshmatollah BOT al-saltana Parking

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4-2 Investment opportunities in West Regional Electricity

Dependent Annual Minimum land Human resources Subject of Productive Productive production requirement requirement opportunity sector sector capacity (Hectare) (person) solar power electricity electricity 25MW 37.5 6 station Small-scale power electricity electricity 10MW 0.3 6 plants

4-3 Investment opportunities in Health and Medical field

Place of type of Required Investment Subject of opportunity performanc project (Grand) e of project Building 1500beds hospital building Kermanshah 13000 Building Comprehensive Cancer Center of building Kermanshah 2000 country west type 2&3 Comprehensive Center for Women building Kermanshah 4000 diseases in country west Health city building Kermanshah 10000 student dormitory1,000 building Kermanshah 200 Cultural comforts sport Complex and building Kermanshah 300 University Conference Center Medical tourism company building Kermanshah 50 research training tourism company building Kermanshah 50 Welfare Service Complex &Imaging Kermanshah 300,000 Center

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4-4 Opportunities in the field of industrial cities

Minimum capital Unit Staffing Annual Required Subject requirements(Bill Weight requirements capacity land (Sq. M.) ion riyals) (ton) (person) Gasoline Anti-freeze 7.726 525 Ton 2.500 19 Gasoline Alternative Fuel From natural 6.085 3.000 Ton 2.000 9 sources Synthetic brake fluids 8.960 3.000 Ton 1.000 10 Soundproof 37.901 180000 Meter 6.000 14 Olefin copolymers 40.162 1.500 Ton 5000 40 Activated clay 11.603 5.400 Ton 5.000 11 EP additives 6.325 600 Ton 2.000 11 Boiler chiller 28.258 200 Ton 8.000 46 Glass recycling 30.000 22.000 Ton 4.000 15 Production of non- 9.000 5.600 Kg 1.500 8 metallic nanopowders Production of 4.500 23.000 Device 2.000 19 hydraulic jacks eatable color 15.000 50 Ton 9.000 31 Production Nano filter Production 9.000 80 Ton 1.000 17 Production of steel 45.000 12 Ton 4.000 22 belts Laminated parquet 26.000 1.200 Ton 4.000 36 production Flexible sanding 13.898 200.000 Meter 2.600 20 Organic fertilizer from 25.138 100 Ton 5.000 26 agricultural waste Hydraulic press 30.597 10 Device 6.000 29 Nano-composite 24.891 30.000 Meter 4.000 14 Colored aluminum 138.649 4.000 Ton 5.000 24 profiles

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4-5 Investment opportunities in the field of industry and mining

Minimum Annual Minimum Capacity minimum staffing Subject of opportunity production Required required unit requirements capacity land(hectare) capitalization (person) Melting Iron 3000000 Ton 50 3000 30000 Solar panels of silicon metal- 3000 Ton 10 1250 21000 Wafers and Solar Panel Crystal Melamine 3000 Ton 4 240 1800 Seamless pipes(Manysman) 3000 Ton 25 600 10000 ferroalloy with priority Silicon- 25000 Ton 10 200 1500 manganese Ferro Hot galvanized sheet High capacity Ton 20 500 3200 Magnesium ingot 1200 Ton 10 120 1750 washing powder and Folic Acid 102000 Ton 3 150 700 Bio-ethanol 100000 Ton 10 135 2300 Modern Stonecutting 1000000 Sq. M. 20 60 500 Float glass 180000 Ton 10 350 2700 Glass fiber and yarn 30000 Ton 2 130 3000 Car Airbags 400000 Number 0.6 52 125 Blocks and concrete panel and 285000 M³ 5 30 700 Light Concrete and Dry Mortar Polyethylene pipes and fittings 5000 Ton - 70 340 Cold-generating compressor 10000 Number 0.2 26 40 Under the reputable brand Manganese Sulfate 10000 Ton 0.8 82 175 Winding rods 22000 Ton 0.35 60 310 Lithium-ion battery Mobile 300000 Number 0.6 98 100 Bio-diesel 15000 Ton 0.6 35 825 Activated carbon 1000 Ton 0.5 33 165 composite guard rail 80000 Branch 0.5 62 45 Styrene Bvtaydn Rubber 60000 Ton 10 310 4500 Nano-membrane water purification reverse 50000 Modules 1 103 530 Slmz(Membrane modules) Gelatin from animal waste 500 Ton 0.45 58 70 Compressor Oils CNG Mineral- 3.000 Ton 0.25 38 30 base be cleaned Float glass 306500000 Sq. M. 5 131 1700 Injector needles for diesel 600000 Ton 0.2 52 1000 engines Carbon fiber production 100 Ton 1 76 600 inhibitor Schuchat ethylene 20 Ton - 11 27 Polyethylene network 5000 Ton - 67 123 production

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Minimum Annual Minimum Capacity minimum staffing Subject of opportunity production Required required unit requirements capacity land(hectare) capitalization (person) Super behalf powder Production 2000 Ton - 37 297 Thermo band coating production 2100 Ton - 40 215 recombinant Tylosin production 500 Ton - 30 48 Production of high-efficiency air 100000 Device - 33 225 conditioning systems Production of blood bags 1500000 Number - 33 82 Production of molecular 200000 Number - 25 39 diagnostic kits Compound fertilizers micro Zul 1200 Ton - 25 43 Production of absorbable 500000 Number - 34 135 surgical thread Production of of polymer 1500 Ton - 33 165 nanocomposites Processing and Production of 3000 Ton - 31 185 nano-silica

4-6 Investment opportunities in the field of cultural heritage

Return Capacity Human Net present of Internal Rate of Subject Investment Persion- resources value(Billion capital Return(Percent) year riyals) period Tagh e- Bostan Telecabin 1.300 110.000 100 2050 5 37 Ghoori Ghalee Recreational and tourist 152 150.000 20 250 3 34 complex

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4-7 Investment opportunities in the field of agriculture and animal husbandry

Annual staffing capital Subject land requirement production requirements requirements of opportunity (Hectare) capacity (Person) (Billion riyals) agricultural City Establishing for Zahab plain greenhouse 6000 40 480 800 production(Hydroponic) Greenhouse complex Pishgaman Diar Gharb Company (Islam Abad 8400 56 672 671 e- Gharb) Miyandar Ghorotak Greenhouse 3000 20 240 400 complex Aznab Dinevar Greenhouse 3000 20 240 400 complex Haydar Abad Harsin 4500 30 360 600 Greenhouse complex Baba Vali al- din Greenhouse 3000 20 240 400 complex Tonog Kesht Greenhouse 15000 100 1200 2000 complex Pardis Keshavarzi Greenhouse 30000 200 2400 4000 complex Chelleh Gilan Gharb 600 4 45 50 Greenhouse complex tropical system 76500 510 6120 10200 Sorting and packing fruit and 5000 10000 80 120 Refrigerator potato Processing 5000 10000 60 90 Production malt and beer from 5000 10000 57 85 barley Production of starch and corn 1000 8000 53 80 gluten in Rawansar Processing, Freezing, Packaging fresh fruits and vegetables IQF 5000 3500 47 71 method in Kermanshah Onion and vegetable processing 6000 8000 33 51 of Harsin Production of gelatin from 1000 3000 32 48 animal waste of Kermanshah Cereal-based baby food of 500 2500 20 31 Kermanshah Livestock slaughter of Javanrood- 1200 10000 17 25 Kangavar Drying and packaging of medicinal plants and Production 500 3000 17 25 of herbal tea- Dalahoo- Sahneh- Kermanshah

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capital Annual land staffing Subject requirements production requirement requirements of opportunity (Billion capacity (Hectare) (Person) riyals) pea process(protein-starch separation)Kermanshah- 3000 5000 13 20 Dalahoo extracts from medicinal plants Production - 100 3000 13 20 Kermanshah Grape processing(raisin production and 7500 5000 13 20 packing)Sahneh Production of bio- fertilizers. Kermanshah- 1000 4000 13 20 Sar pol Zahab Glycyrrhizin extract and Flavonoids of Licorice 150 5000 10 15 extracts. Sahneh- Kermanshah Processing and packaging of types of fodder - 3000 3000 7 10 Kangavar Processing and packaging 1500 1500 6 9 of figs. Dalahoo Meat packing. Kermanshah- Islam Abad 600 3000 5 8 e- Gharb Dehydrated packing (Berry Walnut) 1000 1000 5 8 Javanrood. Pea Processing(semi cooked, Canned, 500 2000 5 7 freezed Processing and packaging of edible 2000 1000 3 20 mushrooms. Sahneh Complex of Dairy cattle. Ghaleh Shahin 1500 5 280 300 Sar Pole Zahab Animal Husbandry City- Deh Laili 3000 8.5 15 45 Ravansar Animal Husbandry City- Cheleh Gilan e- 3000 4 15 30 Gharb

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Annual land staffing capital Subject production requirement requirements requirements of opportunity capacity (Hectare) (Person) (Billion riyals) Creation and development of 100000 2 16 400 rearing units ornamental birds Creation of unit dairy cattle. 2000 20 350 600 Sahneh(Chenar Shoo) Creation of unit dairy cattle in Animal Husbandry City. 3000 28 400 225 Miyanrahan- Dinevar- Sahneh. Animal Husbandry City villeh Beunij - 14400 7.5 48 11 Dalahoo Breeder hens 50000 2 74 75 Training Animal Husbandry City Ezgelleh – Salas 6900 6.5 35 45 Babajani Animal Husbandry City Vijeh Nan Gilan 300 2 15 40 e- Gharb Rearing and Improvement of 100 2 10 60 Thoroughbred horses-Kermanshah Production chain of Chicken meat, egg, 50 16 60 Breeder hens. Sonqor e- Kolyaei

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4-8 Cooperation organization of municipalities of Kermanshah province

Minimum Annual minimum land Minimum staffing capital Subject of opportunity production requirement requirements requirements capacity (Hectare) (Person) (Billion riyals) Tableware production IML 1500 Ton 7000Sq. M. 18 46603 Production LCD 300000Device 4000Sq.M. 40 100122 Production OCP 1500Ton 5000Sq.M. 40 40044 Brick clay Production 100 m 2000 SQ.M. 15 61095 Amalgam Production 50Ton 2000Sq.M. 18 44210 canned pineapple Production 1300Ton 10000Sq.M. 20 66170 Metal barrels Production 3400Ton 4500Sq.M. 24 19460 unit-package Production 2000Device 2000Sq.M. 15 5780 35 Boilers 700 Oilfield Equipment Production 100000Sq.M. 20 40470 Tanks Park Pole Production - 2000Sq.M. 10 3990 Printing and Packaging Production - 2000Sq.M. 15 61974 Activated clay Production 5400 Ton 5000Sq.M. 11 13923 Road color machine 2200Ton 2800Sq.M. 15 12090 Synthetic brake fluids Production 3000Ton 1000Sq.M. 10 74710 Alternative fuel of Gasoline 3000Ton 2000Sq.M. 9 7645 Prepared and semi-prepared foods 6000Ton 4000Sq.M. 25 39460 International Airport Build - 20000Sq.M. 20 100000 Water Cooler Production 20000Device 5000Sq.M. 20 80300 Greenhouse complex build - 10000Sq.M. 15 170000 Bitumen from Petroleum bitumen 8000 Ton 9960Sq.M. 15 1272150 Industrial dietary Pharmaceutical 300Device 2000Sq.M. 14 8488 Machinery

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5- Work group and Address

Managers

Mr. Neematullah Haghighi Mr. Farid Khalili Mr. Ali Mohammadi Mr. Asadullah Razani Tetrarch head of the organization of Deputy Director of Economy General Director of Economic of Kermanshah province and Industry, Mine and Trade and Finance of Kermanshah Affairs and Finance of President of Investment ksh.mimt.gov.ir province and Investment Kermanshah province and vice services center services center chairman of Investment services www.ostan-ks.ir investin-ksh.ir Center km.mefa.gov.ir

Kivan Kashefi Dr. Shahbazi Arash Rezaee Mr. Balaei Chamber President of Head of the Agricultural Jihad Mayor of Kermanshah Director General of Cultural Kermanshah Province Organization www.kermanshah.ir Heritage www.kermanshah.maj.ir kermanshah.ichto.ir

Mr, Hazrati Dr. Karim Abdollah Bahadori Sirus Shahbazi Managing Director of the President of the University of General Director of Roads and Managing Director of Gas Municipal Cooperation Medical Sciences Urban Development hamyari-ksh.ir www.kums.ac.ir mrt-ks.ir

Mr. Amirian Mr. Kurdistani Managing Director of Regional Managing Director of Water Company Industrial estates Company www.kshrw.ir www.kiec.ir

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Experts

Organizational No. Name TelePhone Extension E-mail SMS position info@investin- 1 Erfan Yusefi Head of Department 08338388041 118 30002349921706 ksh.ir info@investin- 2 Ali Ayaseh Head of Department 08338388041 121 30002349921706 ksh.ir info@investin- 3 Ahmad Latifi responsible expert 08338388041 120 30002349921706 ksh.ir info@investin- 4 Ahmad Rezaei responsible expert 08338388041 110 30002349921706 ksh.ir Fariborz info@investin- 5 expert 08338388041 120 30002349921706 Shahbazi ksh.ir info@investin- 6 Boshra Rezaei expert 08338388041 117 30002349921706 ksh.ir info@investin- 7 Taebeh Rashidi expert 08338388041 101 30002349921706 ksh.ir 8 Asghar Karami serviceman 08338388041 112 9 Amir Ahmadi Driver 08338388041 112

Representatives

No. Name Post Agents Telephone Extension E- mail 1 Sabeti Manesh Housing and Urban 08338388041 102 info@investin- Development ksh.ir 2 Fakhri Housing 08338388041 102 info@investin- Foundation ksh.ir 3 Chalangar Poor Veterinary 08338388041 108 info@investin- ksh.ir 4 Sarhad dar Natural resources 08338388041 113 info@investin- Haydari ksh.ir 5 Talaei Regional Water 08338388041 110 info@investin- ksh.ir 6 Talaei Regional Water 08338388041 110 info@investin- ksh.ir 7 Ehsani gas company 08338388041 110 info@investin- ksh.ir 8 Zareei environment 08338388041 102 info@investin- ksh.ir 9 Malek Fahad Regional Electricity 08338388041 102 info@investin- ksh.ir

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6- Foreign Investment Promotion and Protection Act (FIPPA)

Chapter One Definitions

Ar cle 1: The terms and expressions used in this d) Patent rights, technical know-how, Act (FIPPA) shall have the following meanings: trade marks and names, and specialized The Act: The Foreign Investment Promotion and services. Protection Act. e) Transferable dividends of Foreign Foreign Investor: Non-Iranian legal or juridical Investors. persons and/or Iranians using capital with foreign f) Other permissible items approved by the origin, who have obtained the Investment License Council of Ministers. referred to in Ar cle (6). Foreign Investment: Utilization of Foreign Capital Foreign Capital: Various types of capital, whether in a new or existing economic enterprise after in cash and/or non-cash (in kind), imported into obtaining the Investment License. the country by the Foreign Investor, and Investment License: The license issued for each comprising the following items: Foreign Investment in accordance with Ar cle (6) a) Cash funds in the form of convertible of FIPPA. currency, brought into the country Organization: The Organization for Investment, through the banking system or other Economic and Technical Assistance of Iran, methods of transfer acceptable to the referred to in Ar cle (5) of the law concerning the Central Bank of the Islamic Republic of Establishing the Ministry of Economic Affairs and Iran. Finance, enacted on July 15, 1974. b) Machinery and equipments. Board: The Foreign Investment Board, referred to c) Tools and spares, CKD parts and raw, in Ar cle (6) of FIPPA addable and auxiliary materials. .

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Chapter Two General Conditions for Admission of Foreign Capital

Ar cle 2- Admission of Foreign Investment shall Property by Foreign Nationals” ratified on be made in accordance with the provisions of June 6, 1921 shall remain in effect. FIPPA and with due consideration of other Ownership of land of any type and to any prevailing laws and regulations of the country, for extent in the name of Foreign Investors is the purpose of development and promotion of not permitted within the framework of producing and manufacturing activities in FIPPA. industry, mining, agriculture and services, and based on the following criteria: Ar cle 3- Foreign Investments admitted in a) Bring about economic growth, upgrade accordance with the provisions of FIPPA shall technology, enhance the quality of enjoy the incentives, facilities and protections products, increase employment available under FIPPA. Such investments may be opportunities and exports. admitted under the following two categories: b) Does not pose any threat to the national a) Foreign Direct Investment (FDI) in areas security and public interests, and cause where the activity of the private sector is damage to the environment; does not permitted. disrupt the Country’s economy and b) Foreign Investment in all sectors within jeopardize the production by local the framework of “Civil Participation”, investments. “Buy-Back” and “Build-Operate- c) Does not entail grant of concessions by Transfer”(BOT) schemes where the return the Government to Foreign Investors. of capital and profits accrued is solely “Concession” means special rights which emanated from the economic place Foreign Investors in a monopolistic performance of the project in which the position. investment is made, and such return of d) The ratio of the value of the goods and capital and profit shall not be dependent services produced by Foreign Investments, upon a guarantee by the Government or contemplated in FIPPA, to the value of the government companies and/or banks. goods and services supplied to the local Note - So long as the investment in “Build- market, at the time of issuance of the Operate-Transfer”(BOT) schemes referred Investment License, shall not exceed 25 to in Paragraph (b) of this Article, and its percent in each economic sector and 35 accrued profits are not amortized, the percent in each sub-sector (field). The sub- exercise of ownership right by the Foreign sectors and scope of investment in each Investor over the remaining capital in the sub-sector shall be determined in the recipient economic enterprise is permitted. Implementing Regulation to be approved by the Council of Ministers. Foreign Ar cle 4- Investment by a foreign government or Investment for the production of goods foreign governments in the Islamic Republic of and services for export purposes, other Iran shall be dependent upon the approval of the than crude oil, shall be exempted from the Islamic Consultative Assembly, on a case by case aforementioned ratios. basis. Investments by foreign government Note - The “Law for the Ownership of Immovable companies are deemed private.

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Chapter Three Competent Authorities

Ar cle 5- The Organization is the sole official authority for the promotion of Foreign Note - The Organization, after preliminary review, Investments in the Country, and for investigation shall submit the investment applications of all issues pertaining to Foreign Investments. along with its own recommendation, to the Applications of Foreign Investors in respect of Board within a maximum period of “15 issues such as admission, importation, utilization days” as from the date of the receipt of the and repatriation of capital shall be submitted to applications. The Board must review the the Organization. applications within a maximum period of one month from the date of submission, Ar cle 6- For the purpose of investigation and and notify its final decision in writing. making decision regarding applications referred to Ar cle 7- In order to facilitate and expedite issues in Ar cle (5), a board under the name of the related to the admission and activity of Foreign “Foreign Investment Board” shall be established Investments in the Country, all relevant agencies under the chairmanship of the Vice Minister of including the Ministry of Economic Affairs and Economic Affairs and Finance who is ex-officio the Finance, the Ministry of Foreign Affairs, the President of the Organization, comprising of Vice Ministry of Commerce, the Ministry of Labor and Minister of Foreign Affairs, Vice President of the Social Affairs, the Central Bank of the Islamic State Management and Planning Organization, Republic of Iran, the Customs of the Islamic Vice Governor of the Central Bank of the Islamic Republic of Iran, the General Directorate for Republic of Iran and vice ministers of relevant Registration of Companies and Industrial ministries, as the case requires. In relation to Property, and the Organization for Protection of applications for admission, the Investment License the Environment are required to designate a fully shall, after the approval of the Board, be issued authorized representative to the Organization by upon confirmation and signature by the Minister the highest authority of the agency. These of Economic Affairs and Finance. At the time of representatives shall act as the liaison and admission of Foreign Investments, the Board is coordinator for all issues related to their required to observe the criteria referred to in respective agency vis-a-vis the Organization. Ar cle (2) of FIPPA.

Chapter Four Guarantee and Transfer of Foreign Capital

Ar cle 8- Foreign Investments under FIPPA shall the basis of the real value of the investment equally enjoy all rights, protections, and facilities immediately before the expropriation. available to local investments. Note 1- Application for compensation shall be submitted to the Board within one year Ar cle 9- Foreign Investments shall not be from the date of expropriation or subjected to expropriation or nationalization, nationalization. unless for public interests, by means of legal process, in a non-discriminatory manner, and Note 2- Disputes arising from expropriation or against payment of appropriate compensation on nationalization shall be settled in

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accordance with the provisions of Article another Foreign Investor is permitted. In case of (19) of this Act. assignment to another Foreign Investor, the assignee who shall have, at least, the same Ar cle 10- Assignment of the whole or a part of qualifications as the initial investor shall replace the Foreign Capital to a local investor and/or, upon and/or become a partner to the former investor approval of the Board and confirmation by the from the standpoint of FIPPA. Minister of Economic Affairs and Finance, to

Chapter Five Provisions for Admission, Importation and Repatriation of Foreign Capital

Ar cle 11- Foreign Capital may be imported into prior notice submitted to the Board. the Country by way of one or a combination of the following manners, to be covered under this Act: Ar cle 14- The profit derived from Foreign a) Cash funds to be converted into Rials. Investment after deduction of taxes, dues and b) Cash funds not to be converted into statutory reserves, upon the approval of the Board Rials, but to be used directly for the and confirmation by the Minister of Economic purchases and orders related to Foreign Affairs and Finance, shall be transferable abroad. Investment. c) Non-cash items, after valuation by the Ar cle 15- Payments pertaining to the competent authorities. installments of the principal amount of the Note- The procedure and arrangements related to financial facilities of Foreign Investors and their the manner of valuation, and registration of associated expenses, agreements for patent Foreign Capital shall be determined in the rights, technical know-how, technical and Implementing Regulations of FIPPA. engineering assistance, trade marks and names, management as well as similar agreements within Ar cle 12- The rate of conversion of foreign the framework of the relevant Foreign exchange applicable at the time of importation or Investment, upon the approval of the Board and repatriation of Foreign Capital as well as the confirmation by the Minister of Economic Affairs exchange rate for all foreign exchange transfers, in and Finance, are transferable abroad. case of applicability of a unified exchange rate, shall be the same rate prevailing in the Country’s Ar cle 16- Transfers referred to in Ar cles (13), official network; otherwise, the applicable (14) and (15), shall be made in compliance with exchange rate shall be the free market rate as the provisions of Paragraph (b) of Ar cle (3) of acknowledged by the Central Bank of the Islamic FIPPA. Republic of Iran. Ar cle 17- provision of foreign exchange, required Ar cle 13- The principal of the Foreign Capital and for transfers referred to in Ar cle (13), (14) and profits there from, or the balance of capital (15), of FIPPA may be procured in the following remaining in the Country, after fulfillment of all manner: obligations and payment of legal dues and upon a) Purchase of foreign currency from the the approval of the Board and confirmation by the banking system. Minister of Economic Affair and Finance, shall be b) Out of the foreign exchange earned transferable abroad subject to a three-month from the export of the products and/or the

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foreign exchange earned from the service within the framework of FIPPA shall be activities of the economic enterprise in approved by the Council of Ministers. which the Foreign Capital is employed. Note 3 - The Central Bank of the Islamic Republic c) Export of permissible goods specified in of Iran must secure and make available to the list approved by the Council of the Foreign Investor the equivalent foreign Ministers for implementation of this currency for the transferable amounts paragraph in compliance with the relevant referred to in Para (a) of this Article, upon laws and regulations. the agreement of the Organization and Note 1- Application of one or a combination of the confirmation by the Minister of Economic above manners shall be specified in the Affairs and Finance. Investment License. Note 4 - In case the Investment License expressly Note 2 - With respect to investments referred to refers to Para (b) and/or (c) of this Article, in Para (b) of Ar cle (3), if, as a result of this license shall be deemed as the export enactment of legislation or Cabinet license. decrees, the execution of the financial agreements approved within the Ar cle 18- Transfer abroad of the portion of the framework of FIPPA is prohibited or Foreign Capital imported into the Country within interrupted, the resulting losses, up to a the framework of the Investment License but maximum of installments at maturity, shall remained unused, is exempted from all foreign be provided and paid by the Government. exchange as well as export and import laws and The scope of acceptable commitments regulations.

Chapter Six Settlement of Disputes

Ar cle 19- Disputes arising between the unless the Law ratifying the Bilateral Investment Government and Foreign Investors with regard to Agreement with the respective government of the investments under FIPPA, if not settled through Foreign Investor provides for another method for negotiations, shall be referred to domestic courts, settlement of disputes.

Chapter Seven Final Provisions

Ar cle 20- The relevant executive agencies are of Economic Affairs and Finance. required to take measures in respect of mutual obligations upon the request of the Organization, Ar cle 21- The Organization is required to ensure for the issuance of entry visa, residence permit, the access of the general public to all information work and employment permit, as the case may be, related to investment, foreign Investors, for Foreign Investors, managers and experts of the investment opportunities, Iranian partners, fields private sector linked to Foreign Investments under of activity and other information available to the FIPPA as well as their immediate relatives. Organization. Note - Differences of opinion between the Organization and executive agencies shall Ar cle 22- All ministries, government companies be settled upon the opinion of the Minister and organizations as well as public institutions to

25 whom the applicability of law is required to be Act and its Implementing Regulations, the Law for stipulated by name, are under obligation to the Attraction and Protection of Foreign provide the Organization with reports on Foreign Investments - enacted on November 28, 1955 - as Investments implemented as well as information well as its Implementing Regulations, are required for Foreign Investor so that the repealed. Foreign Capital previously admitted Organization can proceed in accordance with the under the said law shall be covered by FIPPA. The preceding Article. provisions of FIPPA shall be repealed or altered by subsequent laws and regulations provided that Ar cle 23- The Minister of Economic Affairs and the repeal or alteration of FIPPA is expressly Finance is required to provide, every six months, stipulated in such laws and regulations. the relevant commissions of the Islamic Consultative Assembly with a report reflecting the Ar cle 25- The Implementing Regulations of FIPPA performance of the Organization with respect to shall be prepared by the Ministry of Economic Foreign Investments under FIPPA. Affairs and Finance and subsequently approved by the Council of Ministers within two months. Ar cle 24- As from the date of ratification of this

The above Act comprising of 25 Ar cles and 11 Notes is ra fied by the Islamic Consulta ve Assembly in its session of Sunday, 10 March 2002. The ini al part of Ar cles (1) and (2), Paragraphs (c) and (d) of Ar cle (2), Paragraph (b) of Article (3), and Note (2) of Ar cle (17) have been approved by the Expediency Council in its mee ng on Saturday, May 25, 2002.

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7- Implementing Regulations of Foreign Investment Promotion and Protection Act

Ar cle 23- The Minister of Economic Affairs and the repeal or alteration of FIPPA is expressly Finance is required to provide, every six months, stipulated in such laws and regulations. the relevant commissions of the Islamic Consultative Assembly with a report reflecting the Ar cle 25- The Implementing Regulations of FIPPA performance of the Organization with respect to shall be prepared by the Ministry of Economic Foreign Investments under FIPPA. Affairs and Finance and subsequently approved by Ar cle 24- As from the date of ratification of this the Council of Ministers within two months. Act and its Implementing Regulations, the Law for The above Act comprising of 25 Ar cles and 11 the Attraction and Protection of Foreign Notes is ratified by the Islamic Consultative Investments - enacted on November 28, 1955 - as Assembly in its session of Sunday, 10 March 2002. well as its Implementing Regulations, are The ini al part of Ar cles (1) and (2), Paragraphs repealed. Foreign Capital previously admitted (c) and (d) of Ar cle (2), Paragraph (b) of Ar cle (3), under the said law shall be covered by FIPPA. The and Note (2) of Ar cle (17) have been approved by provisions of FIPPA shall be repealed or altered by the Expediency Council in its meeting on Saturday, subsequent laws and regulations provided that May 25, 2002.

Chapter One Definitions

Ar cle 1- All terms and expressions defined in Country Official Monetary Network: The banking Ar cle (1) of the Foreign Investment Promo on system (the Central Bank and the banking and Protection Act (FIPPA) shall have the same network, being governmental or non- meanings in these Regulations. Other terms and governmental) and non-banking credit institutions expressions used in these Regulations shall have which, upon the permission of the Central Bank, the following meanings: are dealing with monetary and foreign exchange Regulations: The Implementing Regulations of activities. FIPPA. Audit Firm: An audit firm, selected by the Investee Firm: A new and/or an existing Iranian Organization from amongst the audit firms which company in which the Foreign Capital is utilized are members of Iran Association of Certified under one of the methods specified in FIPPA. Accountants, subject matter of the “Law Non-governmental Sector: Private and governing the Use of Specialized and Professional cooperative sectors and non- governmental public Services of Competent Accountants as Official institutions and establishments. Accountant”, enacted in 1993, or the Audi ng Center: The Center for Foreign Investment Organization. Services, established in accordance with Ar cle (7) of FIPPA at the premises of the Organization.

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Chapter Two Investment Methods and Criteria for Admission

Ar cle 2- Foreign Investments admitted in the nationalization and expropriation, and in such territory of the Islamic Republic of Iran on the basis cases the Foreign Investor shall be entitled to of FIPPA, shall enjoy the facilities and protections receive compensation. available under FIPPA. Admission of such 5- Transfer of the principal capital, profit and investments is subject to the general conditions capital gains derived from utilization of capital for admission of Foreign Capital and submission of shall be affected in the form of foreign currency or, a written application by the Foreign Investor, and as the case may be, in the form of goods, as set out with due observance of the criteria set forth in in the Investment License. these Regulations. 6- The freedom to export goods produced by the Investee Firm is guaranteed and, in the event of Ar cle 3- Admission of Foreign Investment, based any prohibition on the export, the goods produced on FIPPA and the criteria set forth in these may be sold in the domestic market, and proceeds Regulations, may be carried out within the of sale shall be transferable abroad in the form of framework of the following methods. foreign currency through the Country’s Official The table of Foreign Investment methods, Monetary Network. features and facilities available under FIPPA shall B. Specific Features and Advantages: be prepared and published by the Ministry of 1- Foreign Direct Investment (FDI): Economic Affairs and Finance. 1-1 Investment may be made in all areas a) Foreign Direct Investment (FDI) where the private sector activity is b) Foreign Investment within the permitted. framework of contractual arrangements 1-2 There is no restric on on the including various types of “Build-Operate- percentage of foreign shareholding. Transfer (BOT),” Buy-Back “, and “Civil 2- Investment within the Framework of Participation” schemes. Contractual Arrangements: 2-1 Compensa on for losses sustained by Ar cle 4- Methods of investment referred to in the Foreign Investment resulting from Ar cle (3) of these Regula ons, in respect of the prohibition and/or interruption in the procedure for investment and the protection execution of financial agreements caused coverage of FIPPA and these Regulations have the by enactment of law and/or Cabinet following common or specific features and decrees, up to a maximum of matured advantages: installments, shall be guaranteed by the A. Common Features and Advantages: Government. 1- Foreign Investors enjoy the same treatment as 2-2 In “B.O.T.” and “Civil Par cipa on” accorded to domestic investors. schemes where a government agency is the 2- Import of Foreign Capital, being cash or non- sole purchaser and/or supplier of goods cash (in kind), is only subject to the Investment and services at subsidized prices, the License and does not require any other license. purchase of produced goods and services 3- The volume of Foreign Investment in each resulting from an investment project by the individual case shall not be subject to any government agency as a party to the limitation. contract, shall be guaranteed in accordance 4- Foreign Capital is guaranteed against with the relevant regulations.

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projection for domestic or export sales, Ar cle 5- Iranian natural and juridical persons will be set out in the application forms for applying for investment in the Country, for the investment. purpose of enjoying the facilities and protections b) The official statistics provided by the under FIPPA, are required to submit documentary competent authorities relating to the evidences proving their economic and commercial value of goods and services supplied to the activities outside the Country. domestic market in every sector and sub- sector (field) at the time of issuance of the Ar cle 6- Foreign Investors who have already Investment License, shall be obtained by invested in Iran without the benefit of coverage of the Deputy for Economic Affairs of the FIPPA may, upon completion of the admission Ministry of Economic Affairs and Finance. procedure, benefit from FIPPA’s coverage for the The bases for the Board’s decisions shall principal investment already made. Subsequent to be the statistics made available to the the issuance of the Investment License, the Organization by the aforementioned investor shall be entitled to benefit from all deputy up to the end of the first quarter of privileges of FIPPA including, interalia, the right to each year. transfer profit. This type of investments shall be c) Sectors and sub-sectors (fields) shall be generally considered as existing investments to distinguished on the basis of the list which the general criterion for admission of attached to these Regulations. Foreign Capital is applicable. d) The volume of investment in each sector and sub-sector (field) shall be Ar cle 7- Foreign Investment in existing firms by determined by the Board in accordance way of purchasing shares and/or capital increase with the provisions of Paragraphs (a), (b) and/or a combination of the two, subject to and (c) of this Article, and the value of completion of the admission procedure, shall goods and services supplied to the benefit from the privileges of FIPPA provided that domestic market, and with due such investment creates added value. The added observance of the exception from value so created may result from an increase in investment limitation on the export of investment in the existing firm and/or goods and services derived from Foreign achievement of certain objectives such as Investment, and, in the event of approval enhancement of management, increase in of the project, the Investment License shall exports, and/or improvement in the technology be issued. level of the existing firm. Note- Changes in the ratio of the value of goods and services resulting from Foreign Ar cle 8-The Board, in the course of examining Investment and/or changes in the value of and issuing license for any Foreign Investment goods or services supplied to the domestic application, shall investigate and verify the ratios market, which at the time of issuance of the set out in Para (d) of Ar cle (2) of FIPPA in the Investment License have constituted the following manner: bases for the Board’s decision, shall not a) Specifications of the proposed project affect the validity of the Investment License including the type and volume of goods once it is issued. and services to be produced, the time- schedule for implementation and Ar cle 9- Assignment of the proprietary rights to operation of the project, as well as the Iranian party designated in “BOT’ contracts

29 may, on the basis of the agreement of the parties Ar cle 11- With respect to those investment to the contract, be effected by way of gradual projects where a government agency is the assignment of proprietary rights during the exclusive purchaser of produced goods and contract period, or single assignment of the services as well as cases where the goods and acquired rights at the end of the contract period. services produced by the investment project is supplied at subsidized prices, the government Ar cle 10- In “BOT’ contracts, the proprietary agency may, within the established legal rights of the Foreign Investor may be assigned to framework, guarantee the purchase of the goods the institution providing the financial facilities to and services produced at the price and quantity the investment project upon the confirmation of determined in the relevant contract. the Board.

Chapter Three Admission Regime

Ar cle 12- The Organization, while carrying out the Board, attend the meetings with the right to the duties relating to admission and protection of vote. In such cases, decisions are made by the Foreign Investments within the framework of majority of votes cast. FIPPA, is in charge of performing and conducting foreign investment promotion activities inside and Ar cle 15- Investors shall submit to the outside the Country as well as introducing legal Organization their written application together grounds and investment opportunities, carrying with documents specified in the relevant form. out studies and applied researches, organizing After conducting necessary investigations and conferences and seminars, cooperating with taking the viewpoints of the ministry responsible relevant international organizations and for the related sectors, the Organization shall bring institutions, and establishing relations and the investment application along with its expert coordination with other agencies in gathering, advice before the Board within a maximum period compiling and providing information related to of 15 working days. Enquiries remained Foreign Investments. unanswered by the relevant ministry, a er 10 days from the date of receipt of the enquiry shall Ar cle 13- The Board is responsible for be considered as agreement of that ministry with investigating and making decision on all the investment concerned. On the basis of the investment applications including applications for decisions adopted by the Board for which the admission, importation and utilization of Foreign acceptance of the Foreign Investor has already Capital as well as repatriation of capital and been obtained, the Investment License shall be accrued profits. drafted and, upon confirmation and signature by the Minister of Economic Affairs and Finance, shall Ar cle 14- The permanent members of the Board be issued. are the four deputy ministers specified in Article Note- The Investment License shall include the (6) of FIPPA, and the Board’s mee ngs require a particulars of the investors), type and quorum of at least three permanent members, method of Foreign Investment, the manner and decisions shall be made with at least three for transfer of dividend and profit gained as positive votes. The deputies of other relevant well as other terms and conditions relating ministries shall, upon invitation of the Chairman of to the approval of every investment

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project.

Chapter Four Center for Foreign Investment Services

Ar cle 16 - For the purpose of facilitating and on behalf of the relevant agencies shall have accelerating the fulfillment of the Organization’s authority over all executive and service issues legal duties in the areas of promotion, admission related to their respective agencies in respect of and protection of Foreign Investment in the Foreign Investments. The relevant executive Country, the “Center for Foreign Investment agency, for the purpose of good performance of Services” shall be established at the premises of the duties assigned to the representative under the Organization where the representatives of the FIPPA and these Regulations, is required to notify relevant agencies will be stationed. This Center the duties, responsibilities and authorities of the shall be the focal point for all referrals by Foreign representative to other departments of its Investment applicants to the relevant organization and, simultaneously, to conduct a organizations. review on the administrative procedures relating to Foreign Investments under its authority in a Ar cle 17- The Ministry of Economic Affairs and manner to facilitate fulfillment of the duties Finance (the State Organization for Tax Affairs, the assigned to the representative in the Center. Customs of the Islamic Republic of Iran), the Ministry of Foreign Affairs, the Ministry of Ar cle 19- The relevant executive agency, in order Commerce, the Ministry of Labor and Social to maintain the continuation of its executive and Affairs, the Ministry of Industry and Mines, the service activities in the Center, may, in addition to Ministry of Jihad-e-Agriculture, the Central Bank of the designated representative, introduce another the Islamic Republic of Iran, the General person with the same qualifications to represent Directorate for Registration of Companies and as the alternate to perform the duties in the Industrial Property, the Organization for absence of the representative of the agency. If Protection of the Environment, and other necessary, the relevant executive agency may executive agencies determined by the Minster of place in the Center a maximum of two more Economic Affairs and Finance shall introduce their persons at senior level for issues related to that fully authorized representatives to the agency. Organization with the signature of the highest executive authority of the agency. The designated Ar cle 20- The functions of the “Center for Foreign representatives, from the standpoint of the Investment Services” are determined as follows: employment regulations, shall be considered as 1- Provision of information and necessary advice the employees of their respective agencies, and as to Foreign Investors. situation requires and in proportion to the volume 2- Coordination required in respect of affairs of Foreign Investment applications and enquiries related to securing necessary licenses, including, by investors, shall, upon the Organization’s but not limited to, the declaration of request, be present in the Center in order to establishment, the license of the Organization for respond to the enquiries in accordance with the Protection of the Environment, the permits for duties assigned to them under this Article. subscriptions relating to water, electricity, fuel and telephone, exploration and exploitation licenses Ar cle 18- The representatives introduced to act for mines, etc. from the relevant agencies, prior to

31 the issuance of the Investment License. registration of orders, and issues related to 3- Coordination required in respect of affairs importation and repatriation of capital, customs related to issuance of visa, residence and work and tax affairs, etc. permits for individuals related to Foreign 5- Coordination required to be established by Investment. representatives of the agencies among executive 4- Coordination required in respect of affairs departments of their respective agencies in related to Foreign Investment subsequent to the respect of applications for Foreign Investment. issuance of the Investment License including 6- Monitoring the good performance of decisions registration of Joint Venture Company, made in respect of Foreign Investments.

Chapter Five Provisions for Importation, Valuation and Registration of Foreign Capital

Ar cle 21- The procedure relating to the exchange transfer-drafts of Foreign importation, valuation and registration of Foreign Investors, to certify directly to the Capital, being cash or non-cash (in kind), is set Organization the details of the draft forth as follows: including the name of the transferor, the A. Capital in Cash amount of the foreign exchange, the type of 1- Cash funds in foreign exchange referred to in the foreign exchange, the date of receipt, Para (a) of Ar cle (11) of FIPPA imported into the the date of conversion, the name of the Country in one or several stages with the intention Investee Firm, and, in case of conversion to be converted into Rials, shall, on the date of into Rials, the Rials equivalent of the foreign conversion into Rials and in accordance with the exchange imported. certificate of the bank, be registered by the B. Capital in Kind (non-cash) Organization in the name of the Foreign Investor, Foreign Capital in-kind includes those items and shall be covered by FIPPA. The Rials equivalent mentioned in Paragraphs (b), (c) and (d) under the of the foreign currency imported shall be defini on of the term Foreign Capital in Ar cle (1) deposited in the account of the Investee Firm or in of FIPPA for which the procedure for importation, the account of the investment project. valuation and registration is set out as follows: 2- Cash funds in foreign exchange referred to in 1. With respect to the Foreign Capital in-kind Para (b) of Ar cle (11) of FIPPA imported into the referred to in Paras (b)and (c) above (including Country in one or several stages but not converted machinery, equipments, tools and spares, CKD into Rials, shall be deposited in the foreign parts, raw, addable and auxiliary materials), the exchange account of the Investee Firm or in the Ministry of Commerce, after being notified of the account of the investment project. These funds, as Organization’s agreement with the importation of from the date of deposit, shall be registered in the the non-cash Foreign Capital items, shall proceed name of the Foreign Investor, and shall be covered with the statistical registration of the order and by FIPPA. The said funds may, under the shall communicate the issue to the relevant supervision and confirmation of the Organization, customs office for the purpose of valuation and be used for foreign purchases and orders related release of the imported items. to the Foreign Investment. The Customs’ valuation on the value of the Note- The Country’s Official Monetary Network is imported items shall be considered as the required, in relation to the foreign acceptable valuation, and, upon the request of the

32 investor, the value stated in the import license hand price. plus the transportation and insurance expenses, Note 3- If, by findings, the non-cash Foreign shall be registered in the name of the Foreign Capital imported into the Country is Investor, and shall be covered by FIPPA as from defective, mutilated, not usable and/or the date of release from the Customs. In case of does not conform with the specifications discrepancy between the Customs’ valuation and declared in the list approved by the Board, the price stated in the detailed list (of the non-cash the matter will be brought before the items) approved by the Board, the Customs’ Board, and that part of the value of the valuation shall be the basis for registration of the imported goods which is not confirmed by Foreign Capital in the Organization and the the Board shall be deducted from the General Directorate for Registration of Companies account of the imported capital. and Industrial Property. 2.With respect to capital items referred to in Para Note 1- The Ministry of Commerce and the (d) of Ar cle (1) of FIPPA (including patent, know- Organization are required to take how, trade marks and names, and specialized measures, within a period of one month services), the Organization, after carrying out from the date of official notification of these necessary investigations, shall submit to the Board Regulations, for the preparation of a special a report on the fulfillment of the contractual form for the statistical registration of orders undertakings under the technology and service of the non-cash Foreign Capital items under agreements, and the approved sums shall be this paragraph, and to act accordingly. registered by the Board as Foreign Capital and Note 2- The Customs of the Islamic Republic of shall be covered by FIPPA within the framework of Iran is required to assess the value of the a directive to be drafted by the Board and second-hand machinery and equipments approved by the Minister of Economic Affairs and related to Foreign Investments at second- Finance.

Chapter Six Provisions on Repatriation of Capital and Capital Gains

Ar cle 22- All applications for the transfer of profits related to investments referred to in Para capital, profit as well as gains resulting from an (b) of Ar cle (3) of FIPPA, is permissible out of the increase in the value of capital covered by FIPPA foreign exchange earnings from the export of the must be supported by the report of an Audit Firm products and/or out of the foreign exchange that is a member of Iran Association of Certified earnings from the services rendered by the Accountants. Such transfers shall be affected, Investee Firm, and/or by way of the export of after deduction of all legal dues, up to the amount other authorized goods. The Board, on the basis of certified by the Audit Firm. the report of the Audit Firm on the latest status of the principal capital, amount of profit and capital Ar cle 23- Transfer of the principal capital, profit gains belonging to the Foreign Investor, shall and gains resulting from an increase in the value determine the transferable amount and shall of capital related to investments referred to in issue, upon the confirmation by the Minister of Para (a) of Ar cle (3) of FIPPA, is permissible in the Economic Affairs and Finance, the repatriation form of foreign exchange and/or, upon the permit, on a case by case basis. request of the Foreign Investor, by way of export Note - With respect to investments referred to in of authorized goods. Repatriation of capital and Para (b) of Ar cle (3) of FIPPA, if, as a result

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of any export constraint, the provision of export authorized goods. foreign exchange for transfer of funds in the opinion of the Board is found expedient and Ar cle 27- The transferable funds as set forth in possible, the required foreign exchange FIPPA may be purchased, after confirmation of the shall be made available through the Board and upon confirmation by the Minister of banking system. Economic Affairs and Finance, by the Foreign Investor from the banking system, and be Ar cle 24- In the event the Investment License effectively transferred, and the Central Bank of the refers to Paragraphs (b) and/or (c) of Ar cle (17) of Islamic Republic of Iran shall, for this purpose, FIPPA, the said license shall be considered as the make available the necessary foreign exchange to export license and the Investee Firm may deposit the banking system. its export earnings in an escrow account in a local and/or foreign bank and directly withdraw there Ar cle 28- In the event that the Foreign Investor from for the purposes specified in the Investment does not transfer abroad the transferable funds License, and pay to the Foreign Investor. Any within a period of 6 months from the date of amount of foreign exchange acquired in excess of completion of the relevant administrative the withdrawable amounts shall be subject to the formalities, the said funds shall be removed from Country’s foreign exchange regulations. In any the coverage of FIPPA. The continuance of the event, the Investee Firm, after payment of the applicability of FIPPA in respect of the said funds relevant amounts, is required, along with shall be possible upon the approval of the Board. submission of the export certificate, to notify the Ar cle 29- The Foreign Investor, if so wishes, may Organization in writing. use, with the permission of the Board , all or part of the transferable amounts pursuant to Articles Ar cle 25- The foreign exchange earnings from (13), (14) and (15) of FIPPA for capital increase in the exports of Foreign Investment, within the the same firm, and/or, after completion of the limits prescribed by the Board, is exempt from any legal formalities for obtaining the Investment regulations restricting export and from foreign License, may utilize it in a new investment. exchange regulations such as commitments for reintroducing the export earnings to the Country Ar cle 30- The Government, with due observance pursuant to the current and future governmental of Principle (138) of the Cons tu on of the Islamic regulations. Republic of Iran, (hereby) delegates to the member Ministers of the High Council for Ar cle 26- In the event of a legal restriction and/or Investment the authority to determine the scope restriction prescribed by the Government as a of acceptable commitments under Note (2) of result of which the Investee Firms cannot export Ar cle (17) of FIPPA. The Board is authorized to their products, so long as the legal restriction determine the extent of losses resulting from and/or Government decision preventing export is prohibition and/or interruption in the execution of in force, the said Investee Firms are authorized to the relevant financial agreements up to the ceiling sell their products in the domestic market, and, by of the matured commitments within the limits of providing the Rials equivalent of the foreign undertakings acceptable to the High Council for exchange requirements specified in the Investment as set out in the Investment License. Investment License, to purchase the required The bases for making decisions in respect of the foreign exchange from the banking system and authority referred to in this Article shall be the transfer the same, and/or (should they wish so) to agreement of the majority members of the said

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Council. Decisions adopted may be issued, if investor for the compensation of a loss incurred confirmed by the President, pursuant to Article from non-commercial risks, the insurance (19) of the internal regula ons of the Council of institution subrogates the investor, the subrogee Ministers. is entitled to enjoy the same rights on account of which the payment for losses has been made. This Article 31- In case the Foreign Investor insures his subrogation shall not be considered as assignment investment in Iran and, in accordance with the of capital, unless the provisions of Ar cles (4) terms of the insurance policy on account of a and/or (10) have been complied, accordingly. payment made under the insurance policy to the

Chapter Seven General Provisions

Ar cle 32- The Foreign Investor is required, as Technical Assistance of Iran’s approval and from the date of notification of the Investment introduction regarding the issuance of visas, License within a period determined on the basis of residence permits and work permits for the the peculiarities of the investment project by the following persons: Board, to import part of his capital into the 1- Foreign investor Country as a sign of his firm intention for the 2- Managers and experts of the foreign investor implementation of the project. In the event the 3- Managers and foreign experts employed in the investor does not import part of the capital into economic firms in which foreign capital is used the Country within the duration of the determined there. period, and/or does not apply for the extension of 4- Spouse, male children below 18 years, the period by way of submission of justifiable unmarried women and parents of dependent reasons, the Investment License shall be persons subject to Ar cles (1), (2) and (3). considered as null and void. a) The Ministry of Foreign Affairs is required, upon receipt of the request of the Organization for Ar cle 33- The Foreign Investor is required to Investment, Economic and Technical Assistance of inform the Board of any change in the name, legal Iran and depending on the type of visa requested, status, nationality, and of any change of more than to communicate the applicant or the Organization 30% in his ownership. for Investment, Economic and Technical Assistance of Iran, the authorization for the Ar cle 34- In cases where the Foreign Investment issuance of single entry visa, or multi-entry visa results in establishment of an Iranian company, (for three years) with a 90 days residence permit the ownership of land in the name of the company on each entry for the relevant individuals subject is permitted at a size appropriate to the to the Ar cles (1) to (4), in the case of absence of investment project, at the discretion of the any obstacle in terms of export laws and Organization. regulations and in case of impossibility of issuance. b) The Ministry of Labor and Social Affairs is Ar cle 35- The relevant executive agencies, obliged to issue work permit or renewals for the including the Ministry of Foreign Affairs, the individuals subject to Ar cles (1), (2), (3) upon the Ministry of Interior, the Ministry of Labor and request of the Organization for Investment, Social Affairs are required to proceed according to Economic and Technical Assistance of Iran the Organization for Investment, Economic and regardless of the type of visa within 7 working

35 days, in the case of absence of any obstacle in Ar cle 36- The responsibility of the Organization terms of export laws and regulations, and in case in relation to the general publication of of impossibility of issuance, declare the result to information, pursuant to Ar cle (21) of FIPPA, is the Organization for Investment, Economic and limited to the information that is publishable Technical Assistance of Iran. under business practice. The Board is vested with c) The Ministry of Interior in coordination with the the authority to determine whether information is Ministry of Intelligence of the Islamic Republic of publishable. Iran, upon receipt of the request of the Organization for Investment, Economic and Ar cle 37- The Organization and the Board are Technical Assistance of Iran is obliged to issue permitted, for the purpose of carrying out the work permit or renewals for the individuals functions and duties contemplated in FIPPA and subject to Ar cles (1) to (4), within 3 working days, these Regulations, to use, whenever required, in the case of absence of any obstacle in terms of consultancy and professional specialized services export laws and regulations, and in case of of the Audit Firms member of Iran Association of impossibility of issuance, declare the result to the Certified Accountants and other private or Organization for Investment, Economic and cooperative qualified firms. Technical Assistance of Iran. Note - Obtaining a residence permits by foreign Ar cle 38- All provisions contained in the decrees investors subject to Ar cles (1) to (4), as s pulated of the Council of Ministers in respect of Foreign above, shall exempt them from entry and exit Investment that are contrary to the provisions of visas required for traveling to or from the country. these Regulations, shall be repealed from the date of coming into force of these Regulations.

The above Act comprising of 38 Ar cles and 7 Notes have been approved by the Islamic Consulta ve Assembly on September 15, 2002 and according to the proposal of No.29778 on August 14, 2002 of Ministry of Economic Affairs and Finance and based on ar cle 25 of FIPPA ra fied in 2002.

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Sectors and Sub-sectors referred to in Paragraph (d) of Ar cle (2) of FIPPA

Sector Sub-Sector

- Farming and horticulture - Livestock and sericulture Agriculture - Forestry and pastures - Fishery and aquaculture - Crude oil and natural gas (exploration, extraction and transfer) Mining - Other mines (exploration and extraction and processing) - Food Industries, beverages and tobacco - Textile, clothing and leather Industries - Cellulosic (wood, paper, etc.), print and publication - Chemicals, oil derivatives, rubber and plastic - Non-metallic minerals other than oil and coal Basic metals - Transport equipment & Industries and automotives Industry - Electrical and electronic machinery & equipments (Radio & Television and other communication devices and apparatus) - Electrical and electronic machinery & equipments (not classified elsewhere) - Medical, optical and precision instruments - Recycling Sector Sub-Sector - Collection, purification, supply, transfer and distribution of water and Water, Electricity and sewerage Gas Supply - Generation, transfer, and distribution of electricity - Refinement and distribution of natural gas - Infrastructures Construction - Building and housing - Construction materials - Railway transport - Road transport - Pipe transport Transport and - Water transport Communications - Air transport - Supporting services - Post and telecommunication - Financial services (insurance, bank, etc.) - Tourism - Public affairs Services - Urban services - Education and research - Other services (engineering, design and etc.)

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Methods of Foreign Investment Features and Facilities available under FIPPA

METHODS OF INVESTM TYPE AND VOLUME CAPITAL FOREIGN EXCHANGE INVESTMENT ENT MANNER OF OF SECURITY / TRANSFERS AREAS IMPORTATION INVESTME GUARANTEES PRINCIPAL AMOUNTS ON OF INVESTMENT NT AND CAPITAL PROFIT TECHNICAL (CASH AND SHAREHOL AND SERVICE NON-CASH) DING CONTRACTS PERCENTA GE Foreign Direct All areas - Subject to No limitation Guarantee for - No limitation, - No Investment open to approval of Foreign compensation against in the form of limitation, in (FDI) private Investment Board expropriation and foreign the form of sector (FIB) to be specified nationalization. exchange. foreign in the Investment - Guarantee for - No limitation, exchange. License. export, and for export- - No - No other license is availability of foreign oriented limitation, required. exchange resulting projects in the for export from export form of goods. oriented prohibition. projects in - Enjoy equal the form of treatment accorded lo goods. domestic investors. Contractual All areas - Subject to No limitation - Guarantee for - No limitation, Arrangements: open to approval of Foreign compensation against in the form of “Build- private and Investment Board expropriation and foreign Operate- governmen (FIB) to be specified nationalization. exchange. Transfer” : t sectors in the Investment - Guarantee for -No limitation, (B.O.T) License. export, and availability for export- schemes - No other license is of foreign exchange oriented required. resulting from export projects in the prohibition. form of goods. - Enjoy equal treatment accorded to domestic investors. -Guarantee for compensation for losses resulting from prohibition or interruption in the implementation of financial agreements incurred from enactment of laws or Cabinet Decrees. - Guarantee for purchase of goods, in cases where a government body is the exclusive purchaser of the produced goods and services.

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Methods of Foreign Investment Features and Facilities available under FIPPA(Continued)

METHODS INVESTME TYPE AND VOLUME OF CAPITAL SECURITY / FOREIGN EXCHANGE OF NT AREAS MANNER OF INVESTMENT GUARANTEES TRANSFERS INVESTME IMPORTATION AND PRINCIPAL AMOUNTS ON NT OF SHAREHOLDI CAPITAL/ TECHNICAL INVESTMENT NG PROFIT AND SERVICE (CASH AND PERCENTAGE CONTRACTS NON-CASH) BUY-BACK All areas - Subject to - No limitation - Guarantee for - No open to approval of Foreign in respect of compensation against limitation, in private and Investment Board volume of expropriation and the form of government (FIB) to be specified investment. nationalization. goods sectors in the Investment - Shareholding - Guarantee for export, License. percentage is and availability of foreign - No other license is not applicable. exchange resulting from required. export prohibition. - Enjoy equal treatment accorded to domestic investors. - Guarantee for compensation of loses resulting from prohibition or interruption in the implementation of financial agreements incurred from enactment of laws and/orCabinet Decrees. CIVIL All areas - Subject to No limitation - Guarantee for - No - No PARTICIPA open for approval of Foreign compensation against limitation, in limitation, in TION private and Investment Board expropriation and the form of the form of government (FIB) to be specified nationalization. foreign foreign sectors in the Investment - Guarantee for export, exchange. exchange. License. and availability of foreign - No No limitation, - No other license is exchange resulting from limitation, in in the form of required. export prohibition. the form of goods or Enjoy equal treatment goods for export accorded to domestic export projects. investors. projects. Guarantee for compensation of loses resulting from prohibition or interruption in the implementation of financial agreements incurred from enactment of laws and/or Cabinet Decrees.

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Definitions: Foreign Direct Investment: is the participation of a Foreign Investor in an existing or a new Iranian company. Contractual Arrangements: includes a set of mechanisms under which the utilization of Foreign Capital is solely based upon contractual agreements made between the parties to the contract. Build-Operate Transfer: The Foreign Investor by entering into contractual arrangements with an Iranian party will make available the cash and non-cash financial resources for the project in which the investment is made, under his own responsibility by way of establishing an Iranian company and/or establishing a branch office in Iran as the Project Company, and, as the case may be, would embark onto construction and/or operation of the Project. BOT has different varieties each of which enjoy specific features. Buy-Back Arrangement: The Foreign Investor shall make available the cash and non-cash financial resources for the construction, expansion and/or renovations to the recipient Investee Firm. In this method, the repatriation of capital shall be made in the form of goods and services produced by the Investee Firm, and/or other goods. Civil Participation: is the contractual arrangements entered into for materialization of a joint activity for which establishment of a legal entity is not required and return of the investment as well as profit sharing of the parties to the partnership shall be withdrawable in accordance with the agreement. “Civil Participation” shall constitute all other forms of business undertaking in which the Foreign Investor, without establishing a company, is entitled to take advantage from the investment. Any how, all the financial precedents related to the “Civil Participation’’ shall have to be registered in Iran in the books of either parties.

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8- Frequently Asked Questions on Foreign Investment in Iran

Introduction: The collection of questions and answers already set, we tried to collect together all possible contains questions that are commonly raised by questions in one book. Obviously, investors may those interested in investing in the Islamic need more accurate information on any subject Republic of Iran. We hope that the answers which in this case, in addition to referring to the provided here, makes it possible for those other publications of the Organization for interested to learn the foreign investment policy Investment, Economic and Technical Assistance of of the Islamic Republic of Iran, as well as providing Iran, specifically, a guidebook for foreign comprehensive information about the legal investment in Iran, you can communicate directly framework for adoption of the investments and with this center or have a visit. In order to facilitate how to obtain the authorization process. Although the finding of answers, we recommend our there may be some questions need not be directly readers first, referring to table of contents and related to the issue of foreign investment, but search for the answers to their questions in the since it was intended to provide a comprehensive relevant section.

Chapter One: General Information

1. Is Foreign Investment permi ed in Iran? However, from the standpoint of the Iranian Foreign investment in the Islamic Republic of Iran government, only those investments shall be is permitted in accordance with the prevailing laws eligible to enjoy the privileges and protections and regulations of the Country. All foreign under the Foreign Investment Promotion and investors are permitted to invest, for the purpose Protection Act (FIPPA) that have obtained the of development and producing activities, in all required license under the FIPPA. areas of industry, mining, agriculture and services.

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2. What objec ves are to be achieved by foreign contract. This type of investment may be investment? carried out in all sectors of economy. Under The main objectives are: contractual arrangements, the return of capital - Enhancing economic growth. and accrued profits have to be sourced only out - Increasing employment opportunities. of the economic performance of the project in - Access to and development of new technologies which the investment is made without being and managerial skills, as well as upgrading quality dependent upon a repayment guarantee by the of products and boosting export capabilities. government, by the banking system as well as state owned companies. 3. Under what legal or contractual framework, foreign investment may be admitted in Iran? 5. In what sectors foreign direct investment is Foreign investment in Iran is admitted under all permissible? forms of legal participation (Foreign Direct Foreign direct investment is permissible in all Investment) and/or contractual arrangements. By areas open to Iranian private sector. contractual arrangements we mean all forms of project financing methods within the framework 6. In what sectors foreign investment under of civil participation, buy back arrangements, and contractual arrangement is permissible? different types of Build, Operate and Transfer Foreign investment under contractual (BOT) schemes. arrangement is permissible in all sectors of economy. However, foreign investment in sectors 4. How do you define foreign investment? reserved for the Government may only be carried Foreign investment is defined as employment of out under contractual arrangements. capital in an activity in which a level of risk involved. FIPPA classified foreign investment 7. What legal structure is recommended for under two broad categories: foreign investment? a) Legal participation (direct investment): is There are seven types of juridical entity or defined as a direct involvement of a foreign company which can be established under the investor in the equity capital of a new or Iranian Commercial Code. From among all these existing Iranian company. There is no restriction different types, Joint Stock Company, in which the on the level of shareholding as well as capital is divided by shares, is the most common percentage of shares belonging to foreign and acceptable type of company. investors in Iranian companies. The right of 8. Is it obligatory to have local partner(s)? foreign investor to run and control a company Of course not. It is by no means obligatory to have emanates from and is dependent upon his local partner, but usually foreign investors due to direct contribution in the equity capital of the the familiarity of Iranian partners with working concerned company. conditions, business environment, administrative b) Contractual arrangements: is defined as a rules and regulations, the use of local facilities and set of mechanisms under which the utilization etc. want to have a local partner. of foreign capital is solely based on agreements reached by the parties to a contract. In other 9. Is there a ceiling or a restric on for foreign words, the rights of the foreign investor is not investment in Iran? yielded with his direct participation in the There is no minimum and maximum for foreign capital of the recipient Iranian firm, but through investment in respect of percentage of the arrangements agreed upon under a shareholding, nor is any restriction on the amount

42 of investment for foreign investment in Iran. called zones have so far been established? Special Economic Zones are restricted customs 10. If there is no restric on imposed in Iran, then areas in which import of goods, machinery and what message a prospective foreign investor equipments is not subject to the general should get from the ra os of 25% and 35% import/export regulations. The zones may have referred to in Para (d) of Ar cle (2) of FIPPA? been established for different reasons and The ratios referred to in the said Para have nothing objectives. Some of them are established for the to do with the shareholding percentage of foreign purpose of warehousing whereas some, in investors in a single investment case. As formerly addition to warehousing of goods, are designed explained, no restriction with respect to the ceiling for setting up processing and production line. At of foreign participation is imposed in Iranian present the number of Special Economic Zones companies. In fact, these ratios illustrate the reaches to 17. proportion given to the value of goods and services produced by foreign investment in the 15. Is there any difference between investments global economy in each sector and subsector made in Free Trade Industrial Zones, Special respectively, verified at the time of issuance of the Economic Zone and the mainland? foreign investment license (i.e., value of foreign Investment in Free Zones is subject to especial products in GDP). regulations governing such investments. Iranian 11. Is foreign investment permissible in oil and Free Zones at present comprise six areas by the gas upstream activities? name of Gheshm, Kish, Chahbahar, Bandar Anzali, Foreign investment in oil and gas upstream Arwand, and Aras. Taking into consideration the activities within the framework of contractual applicability of Foreign Investment Law to the arrangements is permissible, but Foreign Direct territory of the Islamic Republic of Iran, all foreign Investment (FDI) in such areas is not permitted. investments realized in Free Trade and Industrial Zones may also enjoy the privileges of FIPPA, 12. Is it permissible to use foreign trade marks provided that the relevant formalities for and names in foreign investments? obtaining the investment license have been Application of trade marks and names is followed. permissible in all areas of economic activity within the framework approved by a commission subject 16. What is meant by the terms Iranian Company to Ar cle 138 of the cons tu on with No. and Foreign Company, from the standpoint of 38043/205136 in 05.03.2008. Iranian laws and regulations? According to Iranian Commercial Code, the term 13. Is foreign investment allowed in companies Iranian Company refers to a company quoted in the Stock Exchange Market? incorporated and registered in Iran, even if a There is no restriction for investment in hundred percent of its shares or stocks belong to companies quoted in the Stock Market. Foreign foreign natural or juridical persons. The term investors in these companies are eligible to enjoy Foreign Company refers to a company the protections available under FIPPA, in the same incorporated and registered outside Iran. manner as is available to foreign investment 17. Is it possible for foreign companies to outside the Stock Market. establish legal bases in the form of branches or representative offices in Iran? 14. How do you define Special Economic Zones in Of course yes. Any foreign company, for the Iran and in which areas of the Country these so- purpose of expanding its commercial activities,

43 performing its contractual obligations, carrying in an existing Iranian company and/or entering out marketing activities, etc. may establish a legal into contractual arrangements with Iranian permanent base in the form of branch or recipient entities. representative office in Iran. For establishing a branch or representative office certain procedure 19. What are the features of Industrial Estates should be followed under the Law for Establishing and what facilities are available in those areas? Branches and Representative Offices. For this Industrial Estates are prefabricated Estates purpose the applicants are advised to refer to the designed and constructed by the Industrial Estates General Directorate for Registration of Companies Company of Iran, affiliated to the Ministry of and Industrial Property. Industry, Mines and Trades readily available for investors in all industrial poles throughout the 18. Is the establishment of branch or Country. Even in certain Estates, factories and representative offices considered as foreign industrial workshops are offered for purchase. The investment? important feature of these estates is availability of Establishing a branch or representative office is infrastructural utilities such as water, power, gas, not considered as foreign investment. In fact, telephone and quick access to the main foreign investment can be realized by way of transportation network of the Country. establishing a new Iranian company, participation

Chapter Two: Foreign Investment Promotion and Protection Act (FIPPA

20. What law protects foreign investment in the investors under FIPPA. In other words, Islamic Republic of Iran? investments carried out under any law other than The law protecting foreign investment in Iran is FIPPA shall not be eligible to enjoy such rights. the Foreign Investment Promotion and Protection Act ra fied in 2002 which is hereina er referred to 23. What are those rights and privileges? as FIPPA. The scope of applicability of the FIPPA Fundamental rights recognized under FIPPA in extends to the territory of the Islamic Republic of favor of foreign investors are as follows: Iran under which all foreign investors may invest - The right to transfer profits (dividends) as well as in the Country and enjoy the privileges available capital and gains on capital in foreign exchange. there under. - The right to receive compensation resulting from expropriation (deprivation of ownership) and 21. What is the role of the regula ons governing nationalization of foreign capital. investment in Free Zones? - The right to receive compensation resulting from Although foreign investment in the Free Trade- the passing of laws or Cabinet Decrees causing Industrial Zones is governed by especial prohibition or interruption in the implementation regulations, foreign investors may also invest in of financial contracts of foreign investors. such free zones under Foreign Investment Law - The right to enjoy equitable treatment accorded and take advantage of its protections. to domestic investors. 22. What is meant by the term protection under FIPPA? 24. Are there any other facili es and privileges The term protection refers to a series of certain available to foreign investors? rights and privileges which are extended to Other facilities and privileges contemplated under

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FIPPA and its Implementing Regulations are as 27. How investments by Iranian na onals can be follows: covered under FIPPA? - Convertibility and transferability of the funds Investments by Iranian nationals can enjoy resulting from various investment and transfer of privileges of FIPPA on the condition that their technology agreements. capital has been sourced from foreign origin and, - Convertibility and transferability of the interest further to that; the investor has submitted on financial facilities related to foreign documentary evidence proving their economic investments. and commercial activities outside the Country. - Possibility of submission of investment disputes to international tribunals. 28. Is the validity of the investment license - Recruitment of foreign technicians in affairs limited time wise? related to investment projects. Yes. Upon the notification of investment license, - Export of goods and services without any the foreign investor is required to bring an commitment to reintroduce export proceeds to appropriate portion of his capital into the Country, the Country (i.e., no surrender commitment within a period determined by the investment requirement). board on the basis of the peculiarities of the - Maintenance of foreign exchange earnings from investment project; otherwise the investment exports abroad. license shall be null and void. - Direct access to and possibility of withdrawal of 29. Is it possible to extend the validity me? export proceeds out of Escrow accounts Yes, foreign investor may apply for the extension established in banks outside the Country. of the validity of the investment license, prior to - Inapplicability of price control, distribution as expiration, by way of submission of justifiable well as local content and manufacturing reasons. The investment board will review the requirements. application and determine a new period for importation of capital, upon the approval of the 25. What issues are specified in the investment application for extension. license? 30. Are foreign state-owned companies Many issues such as area of investment, Iranian authorized to invest in Iran in accordance with and foreign shareholders, type and method of FIPPA? investment, volume and percentage of foreign Yes, foreign state-owned companies may invest in investment, the manner for transfer of dividend Iran in accordance with FIPPA, and enjoy privileges and profit gained as well as other terms and available under the law. conditions pertinent to a foreign investment project are to be specified in the investment 31. What are the sectors open to foreign license. investment in Iran under FIPPA? Sectors open to foreign investment in Iran are 26. Who is qualified to invest in the Islamic vastly diversified and include all producing Republic of Iran? activities for the purpose of development in all All foreign natural and juridical persons, areas of industry, mining, agriculture and services international organizations, institutions and including tourism sector. companies as well as Iranian natural and juridical persons are qualified to invest in the Country in accordance with the provisions of FIPPA.

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32. Does FIPPA consider pure commercial 37. How foreign investment can take place in an activities as foreign investment? existing Iranian companies and firms? Indeed, pure commercial activities are not From the standpoint of admission regulations, considered as foreign investment. However, such investments can be covered under FIPPA and should they be complementary to the producing enjoy its privileges upon completion of admission activities in connection with an approved project, procedure and obtaining the investment license, they can be taken into account as foreign on the condition that they bring about value investment. addition.

33. What type of service ac vi es are eligible to 38. In what manners a foreign investor can invest be covered under FIPPA? in an existing Iranian company and become a Foreign investment in service sector including shareholder? tourism is eligible to be covered under FIPPA. There are two ways: 1. Acquiring /purchasing shares of a company 34. Is the legal protec on under FIPPA extended based on agreed terms and conditions. to foreign investments automatically? 2. Subscrip on of the shares resul ng from the No. Extension of legal protection to foreign capital increase of the company by way of investments is not an automatic phenomenon, assigning the first refusal rights of the existing but subject to obtaining the required investment shareholders to the foreign investor. license. 39. Under what legal framework BOT contracts 35. How and under what condi on an are implemented? investment already carried out but not covered For the purpose of conducting BOT contracts under FIPPA can enjoy FIPPA’s coverage? including BOOT, BOO, etc., the foreign investor Investments already carried out but not covered may proceed either by establishing a branch office under FIIPA may, upon application for obtaining in Iran or by way of incorporating an Iranian an investment license and subject to creating company (i.e., Project Company). added value, enjoy the protections available under FIPPA. 40. What is meant by proprietary rights? Proprietary rights are certain rights arising from 36. Is foreign investment permissible in exis ng having ownership over property and assets and/or firms? If yes how? rights assigned to the recipient under a contract. From the standpoint of FIPPA, there is no This right has been recognized in FIPPA and is difference between investment in a Greenfield applicable to a series of rights including right of project - a new company - and investment in an ownership, right of operation and profitability, as existing economic entity. All prospective foreign the case maybe. investors may at any time proceed for investment in a new (Greenfield) project and/or an existing 41. What is meant by assignment of proprietary economic entity. However, admission of foreign rights in BOT contracts? investment in existing firms is subject to creation In BOT contracts assignment would cover the of new added value which may result from ownership right as well as the rights acquired increase in investment, upgrading managerial under the contract which can be assigned to skills, development of exports, and improvement Iranian party of the contract. of technology level in the same entity.

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42. Are foreign investment companies Government and the investor’s respective authorized to open bank accounts outside Iran? government has been accepted in bilateral Foreign investment companies are authorized to treaties. have bank accounts for the purpose of depositing their export earnings. This would facilitate any and 46. How investment disputes may be settled? all payments due to the foreign investors by way Investment disputes may be classified in 3 of having a quick and direct access to export categories, each of which may be settled in a earnings from the export of products and services. different manner:

43. Is there any requirement for reintroducing A· Disputes between local and foreign investors: export earnings to the Country for joint venture This type of dispute may be settled, in the first companies and investee firms? place, through friendly negotiations. In the event No, no commitment for the return of export a settlement is not reached, the dispute may be earnings is required. Export earnings are at free referred to domestic courts, foreign courts and/or disposal of the exporter, to be used at his own international or ad hoc arbitral tribunals. There is discretion. no legal impediment for accepting any of the aforementioned methods as is mutually agreed 44. Can foreign investor insure his investment? between the parties to the disputes. What kind of insurance? Foreign investor may insure his investment B· Settlement of disputes between an investor against non-commercial (political) risks with an and the host government: As contemplated in insurance agency of his respective country. In the Ar cle19 of FIPPA, in the event a dispute between event a payment is made to the investor under the an investor and the Iranian Government is not insurance contract, the insurer in the capacity of settled through negotiations, the investor may the investor’s subrogee may apply for approach through either of the following options: compensation resulting from the rights the a) Referring to domestic courts; investor is originally entitle to claim. b) Referring the dispute to the competent 45. Which authority is competent to se le arbitration tribunal stipulated in the Agreement investment disputes between Iranian and foreign on Reciprocal Promotion and Protection of investors or between a foreign investor and the Investment with the investors` respective Government? government (i.e. Bilateral Investment Treaties: In general, an investment dispute between Iranian BITs). and foreign investors can be referred to domestic or foreign courts or to an international arbitration C· Settlement of disputes between host and based on the (prior) agreement of the two parties. home governments: These types of disputes are However, should the Iranian party to the dispute not usually of the same nature as disputes raised be a government sector or company, referral of between investors. Moreover, they are attributed the dispute to foreign courts or international to the commitments and obligations of the arbitration can be done only upon observance of respective governments’ vis-à-vis in respect of the relevant legal formalities by the Iranian implementation and interpretation of the (government) party. To this effect, referral of contracts. Settlement of such disputes is also disputes to international courts and arbitration included in the bilateral and multilateral based on prior agreement between the Iranian investment agreements.

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47. Is ownership of land by foreign na onals 49. Then how the “ownership of land” in foreign permitted in Iran? investment projects is resolved? Yes. Ownership of land to the extent typically As explained in previous answer, ownership of required for personal use by foreign nationals is land in the name of foreign nationals is not permissible. Recognition of such ownership is permitted. However, in the event the dependent upon a specific permission from the implementation of foreign investment project Ministry of Foreign Affairs. results in establishment of an “Iranian Company”, ownership of land in the name of that company 48. Is it permissible to own land by foreign which bears an Iranian identity would be nationals for the purposes other than personal permissible. use (i.e. industrial, agricultural, services, etc.)? The answer is no. On the overall, the ownership of 50. What is meant by the term “Iranian land for the aforementioned purposes which are Company”? considered to be beyond personal use is not Iranian company is a company established and permitted. registered in Iran in accordance with Iranian Commercial Code, regardless of the identity and nationality of its shareholders or partners.

Chapter Three: Admission Regime

51. Which authority is responsible for admission covered by FIPPA requires a separate license. and protection of foreign investments in the Islamic Republic of Iran? 54. What is the procedure for issuance of a The Organization for Investment Economic and foreign investment license? What documents are Technical Assistance of Iran (OIETAI) is the sole required for the issuance of such a license? government authority which in accordance with The procedure for issuance of an investment FIPPA is legally empowered to admit and extend license is short and simple. Upon submission of legal protections to foreign capital. The license for the official application for foreign investment foreign investment under FIPPA is also released by addressed to OIETAI, the application will be put in OIETAI. Of course, the provincial centers act as a the agenda of the Foreign Investment Board for focal point for the referrals by foreign investment review within 15 working days, and subsequently applicants in the provinces and are coordinating a draft license will be communicated to the foreign places with the mentioned Organization. investor for confirmation. The documentation required includes the filled-in application form 52. Is it obligatory to obtain a license for foreign along with all supplements/annexes, as the case investment? may be, and other documents indicated in the last Yes. It is required for those investments to be page of the application form. covered under FIPPA. Such a license is released when signed by the Minister of Economic Affairs 55. Which services could be provided to foreign and Finance. investors by OIETAI? 53. Does it mean that each single investment The organization can be addressed and consulted under FIPPA requires a specific license? for any and all issues foreign investors come Yes. Foreign investment in any single project across. To this end, the investor is in touch with

48 only one single organization through the Center for Foreign Investment Services, which will result 57. Does the Organiza on provide any specific in time and cost saving for them. services to foreign investors other than consultancy services? 56. What is the objective behind establishment Of course yes. The Organization, besides offering of the Center for Foreign Investment Services? the consultancy services to foreign investors, For the purpose of facilitating and accelerating the provides the following services: attraction of foreign investments into the Country, 1. Provision of informa on related to all laws and the Center for Foreign Investment Services was regulations pertaining to foreign investment. established at the premises of O.I.E.T.A.I., 2. Introducing investment opportuni es in the comprising the representatives of relevant Country. authorities. This center acts as a focal point for the 3. Coordina ng with different authori es with referrals by foreign investment applicants to the respect to applications for foreign investment. relevant Organizations. In order to support, 4. Finding appropriate partners/par es, being facilitate and promote foreign investments in the local or foreign. country’s provinces, the province’s Center for 5. Contribu ng towards se lement of disputes Foreign Investment Services has been established between investors. in the line with the purposes of foreign investment 6. Organizing and arranging mee ngs and/or law, and acts as representatives in the provincial appointments with relevant authorities. level.

Chapter Four: Foreign Capital

58. What are the types of foreign capital? official channels acceptable to the Central Bank of According to FIPPA, there are various types of the Islamic Republic of Iran. foreign capital which, in addition to cash capital, includes all types of non-cash capital comprising of 61. Is it obligatory to convert the imported machinery, equipments, parts, raw material, foreign exchange into Rials? know-how and expertise services. (For more That portion of imported foreign exchange informa on please see Ar cle (2) of the required to be converted into Rials at the Implementing Regulation of FIPPA). discretion of the investor, shall be purchased by the recipient bank at the current rate, and its 59. Are all kinds of foreign exchange acceptable equivalent in Rials shall be deposited in the as cash capital? account of the J.V.C. or the investee firm. In fact, those kinds of foreign exchange which are acceptable to the Central Bank of the Islamic 62. Is it possible for the foreign investor not to Republic of Iran could be registered as cash convert the imported foreign exchange into Rials capital. but use it for foreign purchases and orders related to the investment project? 60. How foreign cash capital is imported into the Yes, as the foreign exchange may be converted Country? into Rials, it is also possible to deposit the same in Foreign cash capital shall have to be imported into the foreign exchange account of the J.V.C. or the the Country through banking system and/or the investee firm to be used, under the supervision of

49 the Organization, for payments related to foreign orders and/or other necessary expenses of the 67. Is there any charge applicable to importa on investment project. Depositing foreign exchange of foreign non-cash (in-kind) capital? without conversion into Rials protects the foreign Except for machinery applicable in manufacturing investor against foreign exchange fluctuations, and mining projects, foreign non-cash capital, the and provides the opportunity to use it at his own same as other goods, is subject to payment of discretion, whenever required. import duties,

63. What is the applicable rate for the conversion 68. What criteria are to be considered for of the foreign exchange imported into the importation of know-how? Country? Technical know-how and specialized services are The rate applicable for the conversion of cash considered as acceptable types of foreign capital, funds imported by the foreign investors is the so should be evaluated and registered then as prevailing rate of the Country’s official monetary foreign capital. However, the opinion of the network or the free (market) rate as relevant Ministry shall be sought before the acknowledged by the Central Bank of Iran. importation of technical know-how.

64. Is it necessary to evaluate the foreign 69. Is it permissible to pay license fee or royalty? imported capital before its registration? Sure. In cases where technical know-how is not Yes. Valuation of capital, whether in cash or kind, considered as part of foreign capital, the relevant is necessary. In both cases, the bank’s conversion sums and/or approved royalty are payable to rate on the date of importation shall be the basis technology supplier. for valuation. 70. What criterion is set for payment of license 65. What formali es are required for importa on fee or royalty to foreign parties? of machineries, equipments, parts and raw In any and all manners of payment, the value of materials (i.e., non-cash capital)? imported raw material shall be the basis for In principal, importation of non-cash capital items calculation of royalty and or license fee. This net related to foreign investment projects are not amount, after deduction of imported materials subject to the formalities of importation of value, shall be paid to who granted the license. In commercial commodities. Non cash items of any other words, according to prevailing policy, type can be imported into the Country upon payment of royalty and license fee is calculated on recommendation by OIETAI based on the the basis of domestic added value. approved list, and the statistical (order) registration with the Ministry of Industry, Mine 71. Is it possible to register patent right and trade and Trade. mark in Iran? According to Patent and Trade Marks Registration 66. Does it mean that importa on of non-cash Law, industrial and intellectual property rights capital is free from local content requirements, such as patent rights, trade marks and names, etc. allocation of foreign exchange and opening letter can be registered and protected in Iran. of credit? That is true. It is not necessary to comply with the 72. Is it necessary to provide the list of non-cash local content requirement, allocation of foreign capital before importation of the same? exchange and opening letter of credit. Yes. Prior to importation of non cash capital, the

50 foreign investor is required to submit to the OIETAI 73. Is a prior review of technical know-how the detailed list of the same comprising technical necessary? specifications, manufacturer(s)’ name, year of Agreements related to specialized services, to be manufacture and price, along with relevant imported in the form of capital or to be paid for in catalogues. Upon confirmation of the list, the said other ways, shall be submitted to OIETAI along non-cash capital can be imported into the Country with the foreign investment application. The in one or more shipments at the discretion of the Organization will then coordinates and consult investor without any other specific formalities. with the relevant Ministry on the necessity of the know-how as well as its value.

Chapter Five: Foreign Exchange Transfers

74. What is meant by the term “Foreign Exchange from the banking system or out of foreign Transfers”? exchange earnings resulted from the export of The term “foreign exchange transfers” refers to products and/or services of the foreign transfer of all sums resulting from the investment project, as the case may be. However, performance of a foreign investment and/or other the mechanism for provision of foreign exchange sums to be transferred in the form of foreign transfers is specified in the investment license. exchange. Such transfers are categorized in two: a. Capital transfers such as dividends, principal 77. Which formali es are required for transfers capital, and capital gain, sums pertaining to related to a foreign investment? compensation for confiscation or expropriation Principally, any and all foreign exchange transfers of foreign capital; shall be made upon formal application of the foreign investor or the joint venture company or b. Other foreign exchange transfers including investee firm on behalf of the foreign investor. All those resulted from patent, technical know- transfers, after deduction of legal dues, are how as well as engineering and technical payable to the foreign investor’s account. assistance agreements, trademarks and name, and similar agreements. 78. In case specific regulations or a government decision prohibits the export of products of the 75. Is there any restric on with regard to the investment project, how the foreign exchange volume of transferable funds? related to transfer of capital and profit is No, there is no legal restriction with respect to the procured? volume of transferable funds, neither annually nor In exceptional cases where export is not so totally. permitted, the foreign investor is authorized to sell his products in domestic market and to purchase, 76. How the foreign exchange required for such from the banking system, the required foreign transfers is procured? exchange for such transfer(s). Obviously, the Foreign exchange required for transfers related to foreign investor may export other authorized foreign investments shall be procured and made goods instead, should he wish to do so. available by way of purchasing foreign exchange

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Chapter Six: Tax & Customs Issues

79. What is the rate of income tax for juridical In case of granting of licenses and other rights in persons in Iran? such agreements, which is considered as the The rate of income tax for juridical persons in Iran income of foreign juridical persons, taxable is 25% of the taxable income (Ar cle 105, Iranian income consist of 20% to 40% of all payments Tax Code). received by them during a tax year and shall be taxed at a rate of 25% (Note 2, Ar cle 105; Para 80. Is an equal rate of tax applicable to all types “b”, Ar cle 107, Direct Taxa on Act). of company including Iranian as well as foreign 84. How the contrac ng business agreements are companies? taxed? The rate of tax for all types of company, whether In case of contracting businesses of foreign Iranian or foreign (branches and representative entities in Iran with regard to all types of work in offices), is 25% that is equally applied. fields of construction, installations, and technical installation including procurement and setting up 81. Are branches and representative offices of of the same or transportation, preparation of foreign companies which are engaged only in design for buildings and installation, topography, marketing and information collection for their supervision and technical calculations, provision parent companies abroad, subject to payment of of training and technical assistance, transfer of income tax too? technology and other services, the taxable income No, branches and representative offices of foreign will be 12% of total annual receipts. (Para “a”, companies and banks which are engaged in Ar cle 107, Direct Taxa on Act). In the event the gathering information or marketing in Iran for relevant employer of the contract is a ministry, a their parent companies, without any transaction government institution, a state company or a right, and receive remuneration from them municipality, then that part of the contract price against their expenditures, shall not be subject to which is used for purchase of supplies and taxa on in respect of such remunera on (Note 2, equipments from domestic or foreign sources Ar cle 107, Direct Taxation Act). shall be exempt from taxation, provided that the amounts relevant to those supplies and 82. How is the income tax of foreign airlines and equipments are included, apart from other items, shipping companies calculated in Iran? in the contract or in its further amendments or The tax of foreign airlines and shipping companies supplements. (Note 2, Ar cle 107, Direct Taxa on for passenger freight cost and the like earned in Act). However, in accordance with Note 5 of Iran, is a fixed rate of 5% of such earnings whether Ar cle 107 of Iranian Tax Code, the taxable income collected in Iran, at the destination, or on the way. of the activities subject matter of Para “a” of (Ar cle 113, Direct Taxa on Act). Ar cle 107 thereof, the contracts which will be concluded from the beginning of the year 2003 83. Shall the income derived from transfer of onwards, shall be audited according to the technology agreements such as technical know- provisions of Ar cle 106, by way examina on of how, engineering and technical services and also statutory books. payments of license fee and royalty be subject to taxation?

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87. What is the rate of tax applicable to transfer 85. How to compute the taxable income in Build, of shares of companies listed in the Stock Operate and Transfer (B.O.T) projects, and what Exchange? is the rate? Each transfer of companies’ shares and priority The taxable income of foreign investors in Build, right of shares shall be taxed at a flat rate of 0.5% Operate and Transfer (B.O.T) contracts in Iran, of the sale value of such shares and priority rights shall be calculated at a fixed rate of 25% after of shares (Note 1, Ar cle 143, Direct Taxa on Act). deduction of acceptable expenditures, by way of examina on of the statutory books (Ar cle 105 88. What is the rate of tax applicable to transfer and 106, Direct Taxa on Act). of shares of other companies? Each transfer of stocks, partnership shares, 86. What is the manner of computa on of salary priority right of stocks and partnership shares shall income tax of foreign employees? be taxed at a flat rate of 4% of face value of the The tax rate of salary income of employees shares and/or partnership shares (Note 2, Ar cle whether Iranian or foreigner, after deduction of 143, Direct Taxa on Act). annual exemp ons provided in Ar cle 84 of Direct Taxa on Act and up to IRR42,000,000 of the 89. What customs du es are there? annual salary income, shall be subject to a rate of The aggregate of custom tax and duties, order 10%. The rest shall be subject to a rate ranging registration fee and other levies on imported from 20% to 35%, in accordance with Ar cle 131of goods is called as customs duties, which is charged the said Act. at a rate of 4% of the customs value of the goods. This sum plus the commercial benefit to be determined by the Council of Ministers are referred to as import duties.

Chapter Seven: Tax and Customs Facilities and Exemptions

A. Tax Facilities and Exemptions 91. What are the tax exemp ons, and in what 90. What is meant by tax exemp on and how manner they can be applied? they are realized? · Tax exemption in industry, mining and Tax exemption means exemption from payment producing sectors: of tax on income derived from industrial, mining 1. 80% of the income derived from producing and and producing activities. Companies in Iran are mining activities of cooperative and private required to withhold the tax on dividend, which is sectors are tax exempted for a term of 4 years as considered as natural entities’ tax, and pay it to from the date of exploitation or extraction the relevant tax office (Ar cle 132, Direct Taxa on (opera on) (Ar cle 132, Direct Taxa on Act). Act). 2. Any part of the declared profit of private and cooperative companies that is used in the same year for development, reconstruction, renovation or completion of existing industrial or mining units and/or for setting up of new industrial or mining

53 units is exempted from 50% of the applicable tax difference between the Special Economic Zones and (Ar cle 138, Direct Taxa on Act). the mainland. In fact, tax treatment is the same in all · Tax exemption in agricultural sector: parts of the Country. The income derived from all activities in the field of agricultural, animal rearing, stock breeding, fish 95. Shall export income enjoy tax exemp on? farming, bee-keeping, poultry, husbandry, hunting Yes, 100% of the income derived from exportation and fishing, sericulture, revival of pastures and of agricultural and industrial finished goods as well forests, horticulture of palm trees, is tax exempted as their conversional and complementary without me limita on (Ar cle 81, Direct Taxa on industries, also 50% of the income earned from Act). exportation of other non-oil goods, are tax exempted (Ar cle 141, Direct Taxa on Act). · Tax exemption in tourism sector: All enterprises for internal and international 96. What is the tax exemp on applicable to tourism obtained exploitation permit from the transit goods? Ministry of Culture and Islamic Guidance shall 100% of the income derived from exporta on of enjoy an annual exemp on with regard to 50% of different goods that have been, or will be, their applicable taxes (Note 3, Ar cle 132, Direct imported to Iran on transit, and are exported Taxation Act). without making any changes in the substance thereof, or doing any works on them, are tax 92. Is there any requirement for enjoying tax exempted (paragraph “b”, Ar cle 141, Direct exemptions? Taxation Act). Yes, industrial and mining enterprises shall enjoy tax exemp ons if located out of a 120-kilometer 97. Do the companies quoted in the Stock radius from the center of Tehran or out of a 50- Exchange enjoy tax exemptions other than those kilometer radius from the center of Isfahan, and applicable to industrial, mining, agricultural and also out of a 30-kilometers radius from the tourism units? administrative centers of provinces and cities with All the companies listed in the Stock Exchange a popula on of more than 300,000. Industrial whose transition of shares is done by stock Estates established within the same 30-kilometers brokers are tax exempted equivalent to 10% of radius from the later province centers and cities their payable tax (Ar cle 143, Direct Taxa on Act). are excep on to this rule (Note 2, Ar cle 132, Direct Taxation Act). B. Custom’s Facilities and Exemptions: 93. Shall the establishment of manufacturing units in less developed areas result in increase of 98. Is customs exemp on applicable to the raw the rate and period of tax exemption? materials imported on transit to be exported Yes, 100% of taxable income of all units located in then in the form of manufactured goods? less developed areas shall be tax exempted for a Yes, the raw materials imported on transit for period of 10 years. (Ar cle 132, Direct Taxa on producing purposes are exempted from customs Act). duties. Any sum paid at the time of importation for any reason, shall be refunded once the said goods 94. In respect of tax exemp ons, is there any are exported. distinction between the units located in Special Economic Zones and those of the mainland? 99. At which price are the imported second hand No, In respect of tax exemptions, there is no machinery and equipments evaluated in customs

54 house? equipments which are imported to the Country All the imported goods are evaluated at new price for production line under FIPPA are to be in customs; only the second hand machinery and evaluated at second hand price.

Chapter Eight: Other Facilities and Exemptions

100. Which facili es are offered by OIETAI for with the reasons for their presence to OIETAI. It is entry visa of foreign investors and experts? worth mentioning that OIETAI is not the only OIETAI facilitates visa formalities of foreign reference for foreign investors to obtain visa, but investors, including short and long term as well as all foreigners, according to the prevailing single and mul entry visas (i.e., 3 year mul entry regulations, can refer to the Missions of the visa with a 3 months residence permit that is Islamic republic of Iran abroad, and apply for visa. renewable for 1 year), by introducing foreign investors, directors, foreign experts and their 101. Are there any facili es available for the immediate family members to the Ministry of issuance of residence and work permits? Foreign Affairs. Foreign investors or joint venture If necessary, OIETAI will provide certain facilities companies can apply for visa by sending the and assistance to foreign investors in this regard relevant specification form of applicants along .

Chapter Nine: Other

102. With which countries has Iran signed the Tajikistan, Zimbabwe, Yemen, Senegal, Morocco, Agreement on the Avoidance of Double Kenya, Iraq, Albania, Cyprus, Belgium, Norway, Taxation? And are they enforceable at present? Slovakia, Ecuador, Slovenia, Montenegro, Czech, Before the Islamic Revolution, Iran had signed the Bosnia and Herzegovina, Cyprus and Macedonia. Agreement on the Avoidance of Double Taxation 3- Names of the countries that their initial with two countries, France and Germany, in 1964. agreements have been finalized: After the Revolution, this number has increased. Vietnam, Ghana and India 1- Names of the countries that signing agreements 4- Names of the countries that their initial with them is in force: South Africa, Armenia, agreements are negotiating and are going to be Uzbekistan, Pakistan, Turkmenistan, Turkey, finalized: Tunisia, China, Sri Lanka, Syria, Kyrgyzstan, Tanzania, Afghanistan, the Philippines, Thailand, Kazakhstan, Georgia, Lebanon, Bahrain, Sudan, Ethiopia, Singapore, Mauritius, Saudi Arabia, Oman, South Korea, Malaysia, Azerbaijan, Algeria, Libya, the United Arabic Emirates and Nigeria. Qatar, Kuwait, Indonesia, Jordan, Germany, 5- Names of the countries that their agreements France, Ukraine, Russia, Belarus, Switzerland, have been exchanged: Austria, Spain, Bulgaria, Poland, Venezuela, North Korea, Uganda, Brunei, Eritrea, Gambia, Romania, Croatia and Serbia. Niger, Namibia, Portugal, Finland, Luxembourg, 2- Names of the countries that agreements were Moldova, Mexico. signed with them and are passing between the two countries parliaments: 103. With which countries has Iran signed the

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Agreement on Reciprocal Promotion and enjoy the guarantee mechanisms of this agency as Protection of Investment? well. Although FIPPA along with bilateral and the final ratification procedure for a number of multilateral investment agreements signed by Iran them. provides sufficient protections against non- Yet 63 agreements on Reciprocal Promo on and commercial risks, membership to MIGA gives a Protection of Investment have been signed and double guarantee. numbers of 7 agreements were ra fied. The men oned agreement with 8 countries is s ll on 106. Which laws and regula ons are necessary the way of nego a on and 47 other countries for potential foreign investors? exchanged texts which have been gradually ready In addition to FIPPA and its Implementing for negotiation. Regulations which protect rights of foreign investors, OIETAI recommends the investors to 104. Has Iran concluded any mul lateral acquire knowledge of the following regulations: investment agreement? · Commercial Code (sections related to joint stock Yes, the Government of the Islamic Republic of companies). Iran has joined the Agreement on Promotion, · Direct Taxation Act. Guarantee and Protection of Investment among · Labor Law (to find out how to employ foreign OIC member countries as well as the agreement services). among ECO member countries. · Law for Registration of Patent and Trade Marks (to know about industrial and intellectual property 105. Has Iran joined the Mul lateral Investment rights). Guarantee Agency (MIGA)? · Export and Import Regulations. Yes, the Islamic Republic of Iran is a member of · Customs Law. MIGA at present, to this end foreign investors can

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9- Registration of Companies

GENERAL

1.1. Definition Of the mentioned listed companies, the The Joint Stock company is defined by the limited liability company and the joint stock law as a company whose capital is divided partnership provide for a limitation of into shares and the liability of whose shareholders' liability to the value of their shareholders is limited to the par value of shares. In the case of the mixed joint stock their shares. As mentioned in the Foreword, partnership, the law provides for both the Joint Stock company may be either a shareholders and unlimited liability public company (Sherkat Sahami Am) or a partners. The principal difference between private company (Sherkat Sahami Khass). the joint stock and the limited liability The main difference between the two is company is that with the latter, the capital that the public company may offer its may not be divided into shares and the shares and debt securities to the public participants may not transfer their interests while the private company may not. See therein without the approval of a majority Annex A for additional differences between of the participants representing three- the public and private companies. fourth (3/4) of the company capital. 1.2. Other Forms of Business Associa on 1.3. General Features In addition to the Joint stock company, the The shareholders of a joint stock company Iranian Commercial Code provides for the participate in the ownership, profit and following types of business association: losses, and distribution of assets in (a) Limited liability company (Sherkat ba liquidation, in proportion to the shares held. Masouliyat Mahdoud) As indicated above, the liability of each (b) General partnership (Sherkat Tazamoni) shareholder is limited to the par value of his (c) Limited partnership (Sherkat Mokhtalet shares and in the absence of fraud or other Gheyr Sahami) deceptive practices, there should be no (d) Mixed joint stock partnership (Sherkat recourse to shareholders for the liabilities Mokhtalet Sahami) of the company. The company has a (e) Proportional liability partnership separate juridical (Sherkat Nesbi) personality by the law and can sue or be (f) Production and consumption cooperative sued in its own name. The shareholders (Sherkat Ta'avoni Towlid va Masraf) possess the usual shareholder rights

57 including, in general, the right to attend multiple voting powers will be honored shareholders meetings, receive financial under the law. The principal differences reports, elect and replace the board of between registered and bearer shares directors, and vote on major decisions of relate to the manner of transfer and tax the company. implica ons. See Sec on 2.6. below. 1.4. Number of Shareholders 1.7. Management The law specifies that a joint stock company Management of a joint stock company is must have a minimum of three made the responsibility of board of shareholders. directors which must be elected by 1.5. Na onality of Shareholders cumulative voting of the shareholders at There are no legal restrictions with respect least once every two years. See Pan IV to the nationality of persons who may form below for additional information concerning joint stock companies. As a matter of policy, the board of directors. however, the Iranian Government generally 1.8. Dissolution and Liquidation requires Iranian shareholder participation in General provisions governing the fields of activity deemed important to the dissolution and liquidation of a joint stock nation's development programs. company are provided in the law and 1.6 Shares companies are authorized to specify in their A Joint Stock company may issue both Articles of Association any particular ordinary and preferred. shares in either provisions they may desire so long as they bearer or registered form. While the law are not inconsistent with the law. Since the does not specifically state what privileges provisions of the law on this subject are may be accorded to preferred shares, it is general in nature, it is advisable, when understood that priorities as to dividends drafting Articles of Association, to include and distribution of assets in liquidation, and procedures for dissolution and liquidation.

CAPITAL

2.1. Share Capital :A minimum capital, at in cash, only 35% need be paid in at the me of forma on, of Rls. 1,000,000 is time of formation and the remainder within required for the private company, and of five years upon the call of the board of Rls. 5,000,000 for the public company. directors or shareholders. In the case of Payment for shares may be either in cash or payments in kind, the full amount of the in kind. If payment is made in kind, the property must be transferred to the value of the property involved must be company at the time of formation. The appraised by an official appraiser of the share capital may be increased at any time Ministry of Justice. In the case of payments by a two-third (2/3) vote taken at an

58 extraordinary general meeting. Decrease in be made without any discrimination. If the capital may also be effected at any time provision for the issue of fractional shares is by a two-third (2/3) vote taken at an made, the par value of each fraction must extraordinary general meeting and there is also be equal. a legal requirement for the reduction of 2.4. Share Cer ficates capital whenever half of the company's Specific requirements as to the form and capital is lost. 2.2. Subscrip ons :Although content of share certificates are provided in only 35% of the company's capital need be the law. They must be uniform, printed, and paid in at the me of forma on, 100% of bear a serial number, and be signed by at the capital must be subscribed. least two authorized persons. Each Notwithstanding the 100% subscrip on certificate must contain the following requirement, a procedure has been information: developed in practice for "authorized but (1) Name and style of the company and unissued stock", enabling the use of such number under which it is registered at the desirable arrangements as employee stock Companies Registration Office. purchase plans. In general, the procedure (2) Registered share capital and paid-up involves the holding of an extraordinary portion general meeting at which the shareholders (3) Type of Shares. approve to implement the increase in such (4) Par value of the shares and paid-up amounts and at such times as the board portion both in words and figures. may determine. (5) Number of shares represented by the 2.3. Par Value certificate. A Par Value, or nominal Value, is required to 2.5. Provisional Share Cer ficates be assigned to the shares of a joint stock The law provides that when share company. For the public company, the law certificates have not been issued, the prescribes a maximum par value of 10,000 company must issue provisional certificates per share. There is no minimum or to the shareholders indicating the number maximum par value fixed for the shares of a of shares and the amount paid up. The law private joint stock company. There is a also provides that until the full par value is requirement applicable to both the public paid on bearer shares, the issuance of and private companies that all shares must bearer certificates is prohibited; however, be of equal par value and this requirement registered certificates may be issued to the is apparently applicable to both ordinary subscribers of such shares before the full and preferred shares. Where both ordinary par value has been paid and in this case the and preferred shares are issued, all provisions of law regarding the transfer of apparently must have the same par value. registered shares will be applicable to such There is also a related requirement that all shares. calls of the unpaid portion of shares must 2.6. Transfer of Shares

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Bearer shares may be transferred by profit). physical delivery while the transfer of 2.8. Dividend registered shares is not complete until the Dividends must be authorized by the transfer is recorded in the share register of shareholders at a general meeting and may the company. At least, in the case of be made only out of "distributed profit' registered shares, restrictions on transfer which is defined as the net profit earned may be written into the Articles of during the year less (i) losses incurred Association. during preceding years, (ii) other optional 2.7. Reserves reserves, plus distributed profit of the A legal reserve to be funded by transfer of preceding years not previously distributed. 5% of the net profit of a joint stock 2.9. Preemp ve Rights company each year until the fund reaches Shareholders have the preemptive right to ten percent (10%) of capital is required. Net subscribe to new shares. This right may be profit is defined as income derived during rescinded, however, by a two third (2/3) the year less the expenses, depreciation vote taken at an extraordinary general and any transfers to reserves (other than meeting. the Legal Reserve of five percent (5%) of net

FORMATION

3.1. Ar cles of Associa on when the company is registered. The constitutional document of a joint stock 3.3 Founders Meeting company is called the Articles of Association A meeting of the subscribing shareholders, which is roughly equivalent to a or founders is required by law for the public combination of the charter and by-laws of a company but not for the private company. corporation formed in other countries. The Even with the private company, however, it subscribing shareholders, or founders must is advisable to hold such a meeting as the approve the Articles of Association and affix simplest means for accomplishing all of the their signatures thereto before the actions required in connection with the company formation may be registered. See company formation. All of the founding Annex B for a checklist of matters- to be shareholders must : covered in the Articles of Association. (a) Approve and sign the Articles of 3.2 Payment of Subscrip ons Association Subscriptions in the required amount must be paid in to a bank account opened in the (b)Confirm the required subscriptions and name of the company before the company payments thereon have been made may be formed. A receipt of the bank is required as one of the documents to be (c) Elect directors and inspectors filed with the Companies Registration Office

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(d) Receive acceptances of directors and Companies Registration Office). inspectors A public company is formed when its Articles of Association has been approved (e) Designate a general circulation by the shareholders at a founders (or newspaper for publication of the company's statutory) meeting and filed with the legal notices. Companies Registration Office together with a minute showing the election of 3.4 First Mee ng of the Board of Directors directors and inspectors and their signed Before a joint stock company may begin acceptances of their positions. The public doing business, the Board of Directors must company's promoters, who must subscribe hold. a meeting to: to at least 20% of the company's capital, (a) Elect a Chairman and a Vice Chairman begin the process of formation by (b) Appoint the Managing Director and submitting to the Companies Registration specify his duties Office in Tehran draft Articles, a draft (c) Approve the form of share certificates prospectus and a declaration which must and designate the company officers to sign state: them (d) Designate the officers authorized to sign (a) Name of the company on behallf of the company In addition, it is advisable in the first (b) Identity and domicile of promoters meeting of the Board of Directors to designate the bank or banks to serve as (c) Objectives of the company depository of the company funds. (d) Capitalization, including separate 3.5 Registra on identification of stock paid in kind and in In forming a private company the following cash. documents are required to be filed with the Companies Registration Office: (e) Number of registered and bearer shares together with their par value and the (a) Draft Articles of Association signed by all number of preferred shares together with a shareholders description of the rights of preferred (b) Statement that the shares have been shareholders. subscribed together with a bank certification that the required amounts (f) Contributions, cash and kind, of the have been paid in promoters (c) A document signed by all shareholders evidencing the election of directors and (g) Principal office, and inspectors (d) Signed acceptances of the directors and (h) Duration inspectors (e) Statement designating the general When the Companies Registration Office is circulation newspaper in which the legal satisfied with the information furnished by notices of the company will be published the promoters, it will permit publication of (f) A declaration (on a form furnished by the the prospectus which must include

61 information and instructions regarding how shares held by them and where interested investors may (9) Names of first board members and subscribe for shares of the company's stock. managing director When the total capital of the company has (10) Managing director's authori es been subscribed and at least 35% has been (11) Persons authorized to sign on behalf of paid in, the promoters are required to allot the company the shares to the subscribing shareholders (12) General circula on newspaper in which and then call the founders (or statutory) legal notices will be published meeting. At this meeting the subscribing (13) Names of the first statutory inspector shareholders are to review the Articles of and alternate inspector. Association, elect the first directors and (14) Manner of liquida on inspectors and designate a newspaper for publication of the company's legal notices. 3.7. Commencement of Legal Existence Upon approval of the Articles by the Although the registration and publication subscribing shareholders, they must be requirements must be met to complete the submitted to the Companies Registration formation process, the legal existence of Office together with the minute of the the company commences on the date the meeting. directors and inspectors accept their positions in writing. 3.6. Publication 3.8. Costs A notice of the company formation is The following charges and fees will be required to be published both in the Official incurred in connection with the formation Gazette and the general circulation of the Company: newspaper designated by the founding (a) Registration fee based on the shareholders. Publication of this notice is capitalization of the company payable to paid for by company and usually contains the Companies Registration Office. the following information: (b) Charges for publication in the Official (1) Name and style Gazette of the notice of registration payable (2) Objects to the Official Gazette at current rates. (3) Loca on of the head office (c) Charges for publication in a general (4) Dura on and date of forma on circulation newspaper at current rates. (5) Na onality (d) Stamp taxes on share certificates. (6) Share capital, par value of shares and type of shares 3.9. Liability of Promoters (7) Paid-up portion of the share capital and The law provides that the promoters of the number of bank receipt or receipts company are jointly liable for all acts and evidencing the payments. functions which they perform in connection (8) Iden ty of founders and number of with formation of the company

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BOARD OF DIRECTORS

4.1. Number the number required for voting at general Although the law prescribes that a public meetings. Each director must place the joint stock company must have a minimum required number of shares in the custody of of five directors, there is no minimum the company for the duration of his term of prescribed for private joint stock office to serve as security against losses companies. However, since the board of a which may result to the company through private company, as well as of a public violations by the directors of their duties. company, is required to elect a Chairman These shares must be registered shares. The and a Vice Chairman, and a board is law provides that failure to comply with the required by law, the board of a private requirements will result in the offending company must consist of at least two director being considered to have resigned directors. from his office. 4.2. Elec on and Removal 4.5. Authority Directors must be elected from among the The law specifically provides the board with shareholders at least once every two years. all necessary authorities for the It is mandatory that the election be by management of the company within the cumulative voting and that it takes place at limits of the company's objectives as stated an ordinary general meeting. Any one or in the Articles of Association. However, the more of the directors are subject to board may not exercise any power which removal by the shareholders. Directors are have been expressly reserved to the also eligible for re-election. Legal entities shareholders acting in general meetings, may be elected as directors. and limitations on the board's authority 4.3. Dura on of Office which will be valid as between the directors The term of office for directors must be and shareholders, but not in respect of third fixed in the Articles of Association but may parties, may be written into the Articles of not be for more than two years. However, if Association. the term expires before successor directors 4.6. Liability are elected, the existing directors continue Directors are not only subject to the to be responsible for the affairs and ordinary rules of fair play in respect of the management of the company until the new company, its shareholders, and third parties directors are elected. dealing with the company, and thus liable 4.4. Security Shares for any violations of these rules, but they Directors are required to possess the are also, individually and jointly, subject to number of shares specified by the Articles criminal prosecution for specified acts and of Association and this may not be less than omissions.

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4.7. Mee ngs 4.11. Managing Director The board is expected to act in meeting at The law requires that at least one person be which a quorum of a majority of the appointed by the board as the managing directors is present. The manner of calling director to manage the daily operations of board meetings including any notice the company. This person may or may not requirement should be specified in the be a member of the board but he may not Articles of Association. In any event, the law also hold the position of chairman of the provides the board chairman and any group board unless the shareholders meet of directors constituting one-third (l /3) of and approve the arrangement by a three- the board with authority to call meetings. fourth (3/4) vote. The scope of the Resolutions will be adopted when passed by managing director's authority should be the favorable votes of a majority of the specified by the board at the time of his directors present at the meeting, unless a appointment and he is then considered to higher vote requirement is specified in the be the company's legal representative with Articles of Association. authority to sign on behalf of the company. Minutes for each meeting must be kept and 4.12. Compensa on signed by a majority of the directors who Directors as such may not be paid by the attended the meeting. The minutes must company except reasonable fees for show the names of the directors who attending meetings, and a "bonus" voted by attended and who were absent, a summary the shareholders out of company profits. of the deliberations and actions taken, and For the private company this bonus is the date of the meeting. limited to 10% of dividends and for the 4.8. Ac ons without Mee ng public company, to 5% of dividends. Actions of the board are valid without a Directors may serve as officers or meeting if approved in writing by all of the employees of the company, however, and directors. be compensated in such capacities. 4.9. Proxies 4.13. Doing Business with the Company Although there is no specific authority in A director.(and the managing director) may the 1969 amendments to the Commercial not enter into an enforceable business Code for director's proxies, such have been transaction with the company unless the recognized in practice. The Code, prior to transaction is approved by the board the amendments provided for proxies with without the interested director participating the caveat that the director remained in the vote, and the matter is reported both responsible for his proxy's acts. to the company inspectors and the 4.10. Alternate Directors shareholders. Even where this is done, if Alternate directors are authorized but are losses result to the company from the not mandatory. transaction, the directors who approved may be held liable. The law specifically

64 provides that loans and guarantees by the concludes transactions in competition with company to directors are void except where the company, and the company suffers a the director is a legal entity. loss of profits as a result, the director will be 4.14. Compe ng with the Company liable to indemnify the company for the If any director (or the managing director) loss.

SHAREHOLDERS MEETINGS

5.1. Types extraordinary meetings. It is expressly Shareholders meetings are called general required to take action on the following meetings and the law provides for three matters: types. The first is the statutory or founders (1) Review and approval of the balance meeting which is mandatory only for the sheet and profit and loss account and other public company. The second is the ordinary financial reports. (annual) meeting which must be held once (2) Review and approval of the directors a year and the third is the extraordinary annual report meeting which is held on call. In addition, (3) Review and approval of the inspectors there are two other species of meetings annual report involving the shareholders. One is a Special (4) Elec on of directors (if their term has meeting' which must be called whenever expired) (5) Elec on of inspector(s) and the rights of holders of preferred shares are alternate inspector(s) to be altered, to enable these shareholders (6) Designa on of general circula on to vote on the intended alteration. The newspaper in which the company's legal other is called an 'extraordinary session of notices will appear. the ordinary general meeting" and may be 5.3. Competence of Extraordinary Meeting called by the board of directors, inspectors, The extraordinary meeting is competent to or holders of 20 percent of the company's deal with any changes in the Articles of shares whenever action is required on a Association or the share capital and matter within the competence of the dissolution of the company. ordinary meeting at times other than when 5.4. Directorate the ordinary meeting is scheduled to be The law provides for management of held. general meetings by a directorate 5.2. Competence of Ordinary Mee ng composed of a chairman, a secretary, and The ordinary meeting is competent to deal two observers. Unless the with all of the affairs of the company except Articles of Association provides otherwise, those which are expressly within the the chairman will be the chairman of the competence of the statutory and board of directors. The secretary need not

65 be a shareholder but the observers must any change in the Articles of Association. be. (4) Winding up of the company and the manner 5.5 No ce of liquidation. Written notice for general meetings must 5.13. Publica on of Minutes be given to the shareholders not less than In addition to the filing and registration 10 days and not more than forty days requirements men oned in Sec on 6.12 above, before the date of the meeting and such notice of action taken by a general meeting (or notice must be published in the general by the board) on the following matters is circulation newspaper designated for the required to be published in the general company's legal notices. The notice must circulation newspaper designated by the state the agenda and the date, hour, and shareholders and in the Official Gazette: place of the meeting. Waiver of these (1) Election of directors or inspectors requirements is author4zed whenever all of (2) Decrease or increase in the capital and any the shareholders attend the meeting. change in the Articles of Association. 5.6. Quorum (3) Winding up of the company and name and The quorum requirement for both the particulars of the liquidators. ordinary and extraordinary meetings is (4) Name and power of the Managing Director more than 50 percent of the shares en tled (5) Designation of the newspaper in which all to vote. If an ordinary meeting fails for lack the legal notices of the company will be of a quorum upon the first call, the published. 5.11. Minutes 5.14. Adjournment Written minutes of all general meetings are A general meeting may be adjourned for a required to be made by the secretary of the period of up to two weeks by the directorate meeting providing a record of the with the approval of the meeting. In such a deliberations and actions taken. The case, no new notice is required and the quorum minutes must be signed by the directorate requirement for the adjourned session will be and a copy thereof must be kept at the the same as for the original session. principal office of the company. 5.15. Minority Shareholders Calls 5.12. Filing and Registra on of Minutes Minority shareholders owning in the aggregate Whenever a general meeting takes action one-fi h (l/5) of the company's shares are on any of the following matters, a copy of entitled to request the board and the inspectors the relevant resolution must be filed with to call a general meeting at any time. If the the Companies Registration Office for board and the inspectors fail to call the registration in a register (book) maintained requested meeting, then the shareholders, by that office: themselves, are entitled to call the meeting. (1) Elec on of directors or inspectors

(2) Approval of the balance sheet (3) Decrease or increase in the capital and

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MISCELANIOUS

6.1. Statutory Inspectors (Auditors) Persian language the journal, ledger, The law requires the election, by the inventory and copy book of merchants. shareholders, of a statutory inspector and These books serve as the basis for alternate inspector once a year at the determining the company's tax liability and ordinary general meeting. The election of failure to keep them strictly in accordance more than one inspector and alternate with the legal requirements may result in inspector is optional. In general, the the tax authorities making their own function of the inspector is to serve as a determination of what the company's tax watchdog over shareholders and third liability should be. parties interests and he may be prosecuted 6.3. Company Name criminally for violation of his duties. Certain The law requires that the words, "Private categories of persons such as criminals, the joint stock company (Sherkat Sahami directors and their relatives, and persons Khass)" appear with the name of a private doing business with the company are company and that these words be displayed disqualified from serving in this post. in a conspicuous way on all letterheads, Among other things, the inspector is publications and notices of the company. As required to submit a report of the ordinary a matter of practice, the Companies general meeting each year. Registration Office requires the use of 6.2. Books of Account Iranian names and will refuse to register a Both the public and private joint stock new company name that is too similar to companies are required to maintain in the the name of a company already registered.

ANNEX A SOME DIFFERENCES BETWEEN PUBLIC AND PRIVATE JIONT STOCK COMPANIES

1. A private company may be formed with a founding members of a private company minimum capital of one million Rials (Rls. must secure subscrip ons to 100 percent of 1.000.000). The public company must start the capital and pay in a minimum of 35 with a minimum capital of five million Rials percent of the cash capital and 100 percent (Rls. 5.000.000). of the non-cash capital. 2. The founding shareholders of a public 3. The board of directors of a public company are required to subscribe at least company must consist of a minimum of five 20 percent of the ini al capital and to pay in directors. A private company may operate at least 35 percent of the subscrip on. The with a board of two directors.

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4. Directors of a private company are not strictly applicable to private companies. permi ed a bonus of 10% of dividends. 7. The public company is limited in the Directors of a public company may be voted maximum nominal value which it may a bonus of only 5% of dividends. assign to each share of stock to Rls. 10.000. 5. When a public company is organized, a The private company is not so limited. founders meeting is required at which a 8. The raising of addi onal capital by a number of formalities must be observed. public company requires the preparation This meeting is not required for the and filing of a prospectus with the founders of private companies, although it Companies Registration Office. A private is desirable to hold such a meeting. company need only submit to the 6. The annual financial reports of public Companies Registration Office a resolution companies must be certified by officially and declaration when raising its capital. recognized accountants. This requirement is

ANNEX B CHECKLIST of Matters which in Most Cases should be Covered in the Articles of Association

1. Name of the company 10. Manner of call of the par value of shares 2. Style of the company and the period over which the balance 3. Dura on of the company should be paid 4. Objectives of the company expressed and 11. Manner of transfer of registered shares defined 12. Manner of conversion of registered 5. Loca on of the head office and branch shares into bearer shares and Vice-Versa offices, if any 13. Manner and condi ons of increasing or 6. Details of the share capital of the decreasing the capital of the company company specifying the amount paid in cash 14. Period and manner of calling general and the amount paid in kind, separately meetings 7. Number of bearer shares and of 15. Regula ons governing the quorum for registered shares and the par value thereof general meetings and the manner of as well as the number of preferred shares, if running such meetings any, particulars and the privileges attached 16. Manner of transac ng business and the thereto number of votes required to give validity to 8. Details of the amount of the shares which the actions taken by general meetings is paid up 9. Those who will sign the share 17. Number of directors, the manner of certificates their election, their term of office, the

68 manner of election of the successors of be deposited with the company such directors who die or resign or become 24. Whether the company shall have one or incapacitated or have been removed from several legal inspectors and the manner of their office or otherwise deprived of their their election and their terms of office office by any legal impediment 25. Whether the company shall have one or 18. Details of the scope of the func ons and several managing directors and their terms authorities of the board of directors of office 19. Time for and the manner of calling the 26. Date of commencement and end of the meetings of the board of directors fiscal year of the company, the time limit 20. Regula ons governing the quorum for for preparing the balance sheet and profit the meetings of board of directors and loss account and the submission 21. The manner of elec on of chairman and thereof to the legal inspectors and to the vice chairman of the board and their term annual general meeting of office 27. Manner of voluntary winding up of the 22. Manner of transac ng business and the company and the proceedings for number of votes required to give validity to liquidating its affairs the actions taken by the board of directors 28. Manner of making altera ons to the 23. Number of directors' security shares to Articles of Association

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Investment Licensing Procedure

Documents Required by the OIETAl for the Isuance Of Foreign Investment Licensing Procedure 1. Application Form 2. provided. 2. Establishment License / Primary 5. A list of machinery, equipments agreement / Preliminary agreement and CKD part which may be of the pertinent Iranian organization imported into the country as a part 3. Official le er of the foreign of the foreign investors capital (if investor to submit to the OIETAl available). 4. The foreign investors background 6. In case that part of the foreign including a brief history of the investor’s share is in the form of company ,the year technical know –how, a draft of the of establishment area of activities contract outlining the conditions of in case of foreign investor is a the transfer of technology. natural person , a photocopy of 7. Any further useful informa on passport and resume will be

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Employment of Foreign Nationals in Iran Foreign nationals are prohibited from General for Employment of Foreign working in Iran unless they receive work Nationals before concluding any contract and employment permits (even if they are that may lead to the employment of foreign supposed to receive wage and salary citizens in Iran. The rules and regulations for outside the Iranian territory). The work acquiring work permit for the foreign permit serves as the employment license nationals are available in the Labor Law of for the foreign nationals in Iran. the Islamic Republic of Iran, ra fied in 1990 The work permit for the employment of (ar cles 120 through 129 and execu ve foreign nationals in Iran is issued by the bylaw of Ar cle 129). Although due to “Department General for Employment of abundance of educated job-seekers in the Foreign Nationals” (also called Department country and for the purpose of reducing for Employment of Expatriates) of the unemployment rate of the educated and Ministry of Cooperatives, Labor and Social skilled job-seekers the Technical Board for Welfare upon a request by Iranian Employment of Foreign Nationals has strict employers. In provincial capitals it is issued rules and regulations (stipulated in Article by the Foreign Citizens Divisions of the 121 of Labor Law) for issuance of work Department General of Cooperatives, Labor permits, the Foreign Investment Promotion and Social Welfare. (The general procedure and Protec on Act (FIPPA), passed in 2002, for admission of foreign investment has has considered promising provisions for been brought separately in the following issuance of work permits for foreign part.) The Iranian employers are obligated investors, managers and experts in relation to seek the permission of the Department with the investments under FIPPA.

Admission of Foreign Investment FIPPA, at the request of the

According to FIPPA Rules and Organization confirming their status as Regulations: investors, in the following manner : By virtue of Ar cle 35 of the Execu ve The Ministry of Foreign Affair is Bylaw of FIPPA:“The relevant executive required, upon receipt of the request of agencies, including but not limited to, the Organization, to communicate to the Ministry of Foreign Affairs, the the Missions of the Islamic Republic of Ministry of Interior, the Ministry of Iran abroad, the authorization for the Labor and Social Affairs [since 2011 and issuance of single entry visa, or multi- after merging of ministries, the Ministry entry visa (for three years) with a three- of Cooperatives, Labor and Social month residence permit on each entry

Welfare] and the for the relevant individuals, depending Disciplinary Forces of the Islamic on the type of visa requested. Republic of Iran (the Police) are required The above mentioned persons who have to proceed with the issuance of visas, obtained entry visa for investment may, residence permits and work permits for after entry into the Country, refer to the foreign investors, directors, experts and Disciplinary Forces of the Islamic their immediate family members in Republic of Iran (the Police) and obtain relation to the investments covered by a three-year residence permit, upon

71 submission of the Organization’s formal In the past, the responsibility of note confirming the coverage of such issuance, extension and renewal of the investments under FIPPA. The Ministry work permits of foreign nationals used of Labor and Social Affairs is obliged to to be carried out in Tehran (at the issue work permit for such individuals Department General for Employment of consequent to the issuance of the Foreign Nationals). For the welfare of residence permit. the applicants, the authority of these Obtaining such three-year residence affairs to certain degree has been permits by foreign investors, as delegated to the Departments General stipulated above, shall exempt them of Cooperatives, Labor and Social from entry and exit visas required for Welfare in the provinces. Therefore, traveling to or from the Country.” employers and foreign nationals can

Issuing Work Permit outside FIPPA refer to the provincial departments Framework general for issuance, extension or renewal of their work permit. In cases when Iranian employers need

technical specialty of foreign experts, Validity Period of Work Permits issuance of visa with a work permit The work permits of foreign nationals is privilege as well as work permit for the issued, extended or renewed for a foreign nationals will be carried out period of one year. upon request by Iranian employer.

Extension of Work Permits According to pertinent rules and Upon expiry of the work permit, if the regulations, no foreign citizen can Iranian employer still needs the personally apply for employment and specialty of expatriates, he can apply for work permit in Iran, unless he/she the extension of the work permit of his registers an enterprise legally. Upon foreign laborer or expert. The inquiry from the Department General application is sent to the Technical for Employment of Foreign Nationals, Board for Employment and upon before concluding any contract with approval the permit is extended for a foreign experts, the Iranian employers period of one year. should deliver the request and required

Renewal of Work Permit documents to the department general for verification. The documents are sent Foreign nationals with valid work for further investigation to the Technical permits whose contracts with employer Board for Employment of Foreign become null and void for any reason, Nationals. The approval or disapproval will be subject to renewal of work of the Board is thereby announced to permit after changing the employer. The the employer through the related renewal of work permit – upon the experts. change in employer or the type of work Delegation of Limited Authority for – will be carried out by the responsible Issuance, Extension and Renewal of divisions of the Ministry of Work Permit of Foreign Nationals to the Cooperatives, Labor and Social Welfare Provincial Departments General of after the approval of the Technical Cooperatives, Labor and Social Welfare:

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Board for Employment of Foreign costs 1,000,000.Rls. Expatriates of some Nationals. countries will be exempted from such

Legal Punishments for Employment of charges upon mutual agreement with Foreign Nationals without Work Permit their respected countries on receiving similar privileges. Employers who hire foreign nationals whose work permits have been expired Unique Advantage for Foreign Investors or have no work permit, or employ Employing Labor Force in Iran them in jobs other than those stipulated Foreign investors employing those in their work permits, or do not notify introduced by the affiliated units of the the Ministry of Cooperatives, Labor and Ministry of Cooperatives, Labor and Social Welfare about cases where the Social Welfare will enjoy growing employment agreement between them discounts or exemption from paying and foreign nationals is terminated, part of the insurance duties in case their shall be sentenced to prison terms or units are newly established, or there cash fines. would be no reduction in their

employment rate the year before (part

Fees At present, the issuance and renewal of of Article 80 of the Law on Fi h Five- Year Development Plan). work permits for foreign nationals costs 1,400,000. Rls and extension of permits

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Refrence: Books:

- Rahimzadeh (1391),Kermanshah province, Textbooks Publishing company of Iran,Tehran

Websites:

http://www.chap.sch.ir/books/1161 http://www.kiec.ir/ http://ksh.mimt.gov.ir/ http://www.kermanshah.maj.ir/_DouranPortal/documents/sarmayeGozari.pdf www.irica.gov.ir/ http://maleki-trading.com/showdetails.aspx?id=37 http://www.ostan-ks.ir/Portal http://www.investiniran.ir

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