Archive

In our newsletter, you will find the latest news and comments on legal and trade-related developments in various areas of Iranian commercial and financial law and practice.

Contents

Foreign Investors Free to Use their Names for Corporations in Iran Refinance for Import of Certain Finished Products Banned  The Bill for Subsidy Targeting Ready for President’s Implementation Iranian Government Bans Purchase of Certain Foreign Goods Implementation of Increased Rice Tariff Extended

2 February 2010

Foreign Investors Free to Use their Names for Corporations in Iran

Nourlaw.com (2 February 2010) -- In a shift intended to attract more foreign investment, the Iranian government has softened its stance with respect to restrictions imposed on using foreign names for corporations formed by foreigners in Iran. According to the Law Banning Usage of Alien Names, Titles and Phrases approved on 4 December 1996 restrictions had been foreseen for those wanting to use foreign names and wordings in commercial and production activities. Now, the Iranian Council of Ministers has decreed in its decision No.H 42200T/213296 dated 29/10/1388 (19 January 2010) that: ”Firms producing goods under special trade names in other countries, are allowed when investing in Iran, to use the name of the foreign company and the said special trade name (brand) when they register the company making the investment and offer the goods produced in Iran with observation of other related laws and regulations, and they shall have neither limitations nor differences with similar domestic cases in promoting such goods”. The said decree shall be used as the Note of the By-law of the Law Banning Usage of Alien Names, Titles and Phrases.

27 January 2010

Refinance for Import of Certain Finished Products Banned

Nourlaw.com (27 January 2010) -- In yet another measure aimed at the protection of domestic manufacturing and exerting greater control over foreign exchange resources, the Iranian government by virtue of Decree Number K4385T/207903 dated 12/10/1388 (2 January 2010) has banned the import of certain foreign goods through refinance facilities. The goods affected are finished foreign products which are also manufactured in Iran. Iranian commercial banks have been involved in payment of short term foreign exchange facilities in the form of refinance credit lines utilizing the resources of their foreign branches and foreign banks. In this particular method of refinance, the foreign seller receives the price of the goods by submitting the related documents to the respective bank and the Iranian buyer pays the price in instalments to the bank. According to Bank Saderat Iran, since the profit rate of this facility for the consumer is lower than that of Iranian Rial facilities, it can be of significant help to importers in reducing the cost price of goods while assisting manufacturers in the import of raw materials, spare parts and machinery for production lines. As well as commercial importers for import and purchase of consuming goods, are the users of refinance. The ceiling levels for utilization of refinance credit lines facilities by real and legal persons are advised by the Central Bank of the Islamic Republic of Iran. The maximum period of utilization of short term facilities is one year after negotiation of the relevant documents. At present, the minimum amount of the LCs issued for refinance credit lines is USD 100,000 or its equivalent in other currencies. At least 10% of the Rial equivalent of the principal and interest of the refinance LC is obtained from the applicant when the LC is opened. The cost of the refinance facility fee is 1.25% - 2% above the International LIBOR rate, depending on the time limit and is to be paid by the applicant at the time of repayment of the amount of the negotiated documents. Other fees related to opening the LC, the negotiations involved plus management fees are paid by the applicant in conformity with the contract between the bank and the financer, based on current regulations and considerations related to credit risk and provision of services.

20 January 2010

The Bill for Subsidy Targeting Ready for President’s Implementation

Nourlaw.com (20 January 2010) -- The controversial government bill for subsidy targeting previously sent to the legislature for approval, was finally sanctioned on 15 Dey 1388 (5 January 2010). After a series of modifications it was notified to President Mahmoud Ahmadinejad for implementation. The bill aims at decreasing and ultimately eliminating the huge amount of subsidies paid nationwide. The highlights of the legislation are: According to Article 1 of the Bill, the government shall be obliged to gradually rectify the price of energy carriers (fuel) until the end of the m Fifth Five Year Economic, Social and Cultural Development Plan which has been recently submitted by the government to the parliament for debate and approval. The said article stipulates that the domestic sale price of petrol, gasoil, mazut, kerosene, LPG and other oil derivatives, with due consideration given to the quality of the carriers and the costs borne (including transport, distribution and legal levies) shall incrementally change until it would not be less than 90% of the Persian Gulf fob price of the product. The article adds that the average domestic price of natural gas must be graduated so that by the end of the Fifth Plan it is equal to at least 75% of the export price of natural gas after deduction of transfer costs, taxes and levies. The article adds that for promoting investment, the average price of the natural gas feed of industrial, refinery and petrochemical units shall be at most 65% of the export basket price of the origin of Persian Gulf gas (without the transfer cost) for a period of 10 years after approval of this law. In another part of the article it is stated that the average domestic sale price of electricity should be determined so that by the end of the Fifth Plan it is equal to its actual cost price. Note One of the article states that with respect to the price of electricity and natural gas, the government is authorized to implement preferential prices taking into consideration the geographic regions, type, amount and time of consumption. By virtue of Article 3 of the Bill, the average water price for different consumption levels shall be determined, with due consideration given to the quality and manner of exploitation in the country and shall be so graduated that by the end of the Fifth Plan it equals the real cost price. As stated in Note 2 of the article, setting preferential and scheduled prices for different types of water consumption according to geographical regions, type and quantity of consumption shall be permitted. In accordance with Article 4, the government is obliged to implement the subsidies targeted with respect to wheat, rice, edible oil, milk, sugar, postal services, air and rail (passenger) services in a regular manner until the end of the Fifth Plan. Article 5 binds the government to provide flour and bread subsidies to consumers who apply for them in a convenient fashion at the amount foreseen in the annual budget bills. Article 7 permits the government to spend 50% of the net proceeds accruing from the implementation of the Law in the form of a cash and non–cash subsidy payable to the head of all families while taking into account the ceiling of the earnings of the family, expansion and funding social security schemes, medical services, improving the health of the society, and providing medical treatment for the chronically ill, providing assistance for housing costs, strengthening the structure of existing houses, improving employment, social aid etc. As foreseen in Article 8 of the law, the government is bound to expend 30% of the net proceeds accruing from the implementation of the law. This shall be in the form of contributions, subsidies for payment of interest on financial facilities and loans for optimization of energy consumption in industrial, services and housing units and encouraging economization on consumption. It shall also include improvement of the technological structure of production units for increasing optimized use of power and water and compensation of a part of the losses sustained by companies providing water and sewage disposal, electricity, natural gas and oil products. Municipalities and townships accruing losses through implementation of the bill shall be compensated as well. Expansion and improvement of public transport, protection of the producers in the agriculture and industry sectors, protection of industrial bread, protection of expansion of non-oil exports, development of electronic communication services for reduction of unnecessary trips are also foreseen. As stipulated in Article 11, the cash and non-cash assistance allowed for in this bill shall be exempt from payment of statutory taxes, and according to Article 15, for implementation of the bill an entity shall be established as a duly authorized governmental company under the name Targeting Subsidies Organization. Article 16 permits the government as from the next Iranian year of 1389 (21 March 2010-20 March 2011) to increase the salary tax exemption of workers and employees, foreseen in Article 84 of the Direct Taxation Act, to not more than double within five years, in addition to the yearly increase of the exemption.

13 January 2010

Iranian Government Bans Purchase of Certain Foreign Goods

Nourlaw.com (13 January 2010) -- In a new measure intended to protect domestic products, the Iranian Government by virtue of decree Number K43680 T/193567, dated 1/10/1388 (22 December 2009) has prohibited the purchase of a significant list of foreign goods by executive government agencies. The catalogue of proscribed goods includes 121 items, among them solar water heaters, elevators, conference microphones, iphones, edible phosphoric acid, blank cds and dvds, buses, minibuses, vans, trucks and bicycles. Also listed are textiles, shoes, safes, refrigerators, washing machines, electronic calculators, gas, water and electricity meters, pumps for hydro air coolers, sugar, soap, audio and video door opening devices, powdered milk for infants, computers LCD monitors. fungicides, newsprint paper, packaging industries, lamps, factories for producing livestock feed and poultry food, vacuum cleaners, cosmetics and hygienic products. According to the decree, a work group consisting of the ministries of industries and mines, commerce, oil, defense, health, agriculture and National Code Center is preparing an additional list of prohibited import goods.

13 January 2010

Implementation of Increased Rice Tariff Extended

Nourlaw.com (13 January 2010) -- Iranian Customs in its circular letter number 287/73/3103/103/237571/237906 dated 21 Dey 1388 has declared that by virtue of the Council of Ministers ruling on the increased tariff of imported rice, the higher duty shall be extended to the end of the current Iranian year (19 March 2010). Earlier, in a measure to quell the growing discontent of domestic rice producers, the government upped the import tariff on rice in September 2009. According to the declaration of the Ministry of Commerce as of 22 Shahrivar 1388 (13 September 2009) to 1 Dey 1388 (22 December 2009), the Commercial Benefit Tax (CBT) was increased from 21% to 41% of the CIF (cost insurance freight) value of rice imported under the Harmonised customs codes 10061000, 10062000, and 10063000. In light of the higher rice tariff, importers must also pay 4% for entry dues and 3% for VAT which when added to the increased CBT, would be nearly 50% of the CIF value of the imported rice. In the last few months, reports have circulated alleging the contamination of imported rice, especially from India and petitions were made by local farmers in support for consumption of domestically-produced rice.