Noncash Capital under FIPPA
B) Machinery and equipment
- According to section (b) of article (1) of FIPPA, a type of Noncash Capital that may be brought by a foreign investor into the country is machinery and equipment.
- In some industries of Iran, the public sector provides specific terms and conditions for foreign investment, that include the terms for purchasing, operating, and using special machines and equipment that are made by certain manufacturers specified in “Vendor List”.
- Machinery and equipment that are fully assembled and imported in CBU for domestic sales will not be subject to this law.
C) Tools and spares, CKD parts and raw, addable and auxiliary materials
- Tools and spares CKD parts and raw, addable and auxiliary materials; are other capital items which are referred to in clause (3-1) of article (1) of FIPPA.
- It seems, the reason for the separation of machinery and equipment from tools and spare parts is difference in custom duties.
- A regulation of Customs Affairs of Iran states: “The Islamic Republic of Iran Customs Office is required to appraise second hand machinery and equipment concerning Foreign Investments on the basis of their second hand price” (Note 2 Article 21 of the by-law)
- While all the goods that are imported shall be assessed as new products in Customs Administration, only machineries and equipment which are used in production lines and imported into the country would be assessed at their real price (would be assessed as second hand products).
- However, the items mentioned in this section “C” of FIPPA, i.e. Tools and spares, CKD parts and raw, addable and auxiliary materials, Customs Administration is not bound by such obligation and these items could only be imported as new products.
D) Patent rights, technical know-how, trade marks and names, and specialized services
“Intellectual Property Rights”
- Patent, Trade Name, Trade Mark and Technical Knowledge are examples of Commercial and Industrial Intellectual Property Rights. “Specialized services” are those technical, engineering and managerial services which are provided by the foreign investor during implementation of a project.
- According to “Inventions, Industrial designs and Trade Marks Registration Act” (ratified 29/October/2007), an invention is supported subject to three conditions: 1) novelty or being new; 2) being creative 3) capability of industrial use.
- Discoveries, scientific theories, mathematical methods, art works, plans and rules or methods of doing business and other mental and social activities, human and animals diagnosis methods, genetic resources and their genetic constituent parts and their biological production process are not supportable inventions according to Iranian law.
- A foreign investor can register his/her invention by using the international registration system because Iran has acceded to two international documents i.e. Paris Convention for the Protection of Industrial Property and Patent Cooperation Treaty.
- According to “Inventions, Industrial designs and Trade Marks Registration Act”, Trade Mark is a visible mark that differentiates products or services, Legal persons and individuals from each other. According to Iran’s Law, supportable trade mark, is a visual sign.
- Therefore, audible, fragrant or touchable signs are not supportable unless they can be seen through drawing or letters or numbers.
- In order to use a trade mark as investment in a project or company in Iran, a foreign investor can either register his/her trade mark in Iran or use international trade marks registration and support system according to Paris Convention or Madrid Agreement and its protocol.
- Based on what has been said, a trade name can be known as a name or title by which a business entity (whether belongs to a legal person or an individual) carries out its commercial activities. This trade name can be a part of the business entity’s trade mark or it may be independent.
- According to “Inventions, Industrial designs and Trade Marks Registration Act”, trade names, whether registered or not, are protected from all forms of misuse by third parties.
- According to Iran’s regulations and the practical proceedings of projects in Iran, Technical Knowledge as a type of trade secret is a set of information which is:
- confidential, it means that the public do not know about it and it is difficult to be accessed;
- essential, which means it is important and useful for the production line of a foreign invested project;
- specified, which means it is well and comprehensively described, in a way that we would be able to determine its confidentiality and essentiality;
- restrained, which means Technical Knowledge is sometimes appeared in a privative way, so it is an information about things that doesn’t work well or is not suitable for a particular activity or it is measures which must not be taken.
- Specialized Services that are brought into a project after conclusion of a foreign investment contract, can also be used in a tender or at feasibility studies of a project before signing any contract. These kinds of services, have a wide scope and include Technical Services and Engineering Services.
- Similar to Technical Knowledge, method of providing “Specialized Services” are usually determined by an annex to the contract or they become one of the annexes of the contract under the title “Contract for Special
- and Technical Services”.
E) Transferable dividends of foreign investors
- The purpose of above paragraph is the profit which a foreign investor has achieved following an investment in a project in Iran. He/She can invest it (the profit) in his initial project or in new ones and such investment capital will be considered as a foreign capital.
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F) Other permissible items approved by the Council of Ministers
The above paragraph of FIPPA means the enumerated items as capital are limitative in this article and if a foreign investor intends to import a property as capital into Iran which is not specified in paragraph (a) to (e), it must be authorized by the cabinet.The purpose of above paragraph is the profit which a foreign investor has achieved following an investment in a project in Iran. He/She can invest it (the profit) in his initial project or in new ones and such investment capital will be considered as a foreign capital.