Law no. (4) of 2006
Law of Investment in Kurdistan Region – Iraq
Chapter I
General Provisions
Section I
Definitions
Article (1):
The following words and phrases shall have the meanings explained
hereunder:
1. Region: Kurdistan Region – Iraq
2. Government: Government of the Region
3. Council: Supreme Council for Investment
4. President: President of the Supreme Council for Investment
5. Board: Investment Board in the Region
6. Chairman of the Board: Chairman of the Investment Board
7. Project: Any economic activity or investment project set up by a
natural or artificial person on an allocated plot of land, and with
a national or foreign capital to which the provisions of this Law
and relevant regulations and directives apply.
8. Taxes and Duties: These include all types of taxes and duties set
under the applicable legislation.
9. Investor: Natural or artificial person, whether a local or a
foreigner, who invests his funds in the Region in accordance with
the provisions of this Law.
10. Competent Authorities: These include all government authorities
responsible for the industry which the Project is related to.
11. Invested Funds: Value of the funds invested in the Project and
estimated in national or foreign currency.
12. Foreign Capital: Amount of investments, whether in cash, in kind
or in rights and interests, which have a cash value in the Region.
Section II
Areas of Investment
Article (2):
The provisions of this Law shall apply to the Projects approved by
the Board in one of the following sectors:
1. Manufacturing industries, electric power and related services
2. Agriculture, whether crop growing farms or animal farms, forestry
and related services
3. Hotels, tourist and recreational projects, funfairs, and
amusement parks
4. Health and environment
5. Science and technology research, and information technology
6. Modern communication and transport
7. Banks, insurance companies, and other financial institutions
8. Infrastructure projects, including construction, reconstruction
and housing projects, roads and bridges, railways, airports,
irrigation and dams
9. Free zones, modern commercial markets, and relevant advisory
services
10. Education at all levels, within the framework of the educational
policy of the Region
11. Any project in any other industry which the Council agrees that
it is covered by the provisions of this Law.
Section III
Treatment of Foreign Investors
Article (3):
Foreign Investors and Foreign Capitals shall be treated the same way
as national Investors and national Capitals. A foreign Investor
shall be entitled to own all the capital of any project that he sets
up in the Region under this Law.
Section IV
Allocation of Plots of Land
Article (4):
1. The Board shall liaise with the ministries and departments
involved in determining the locations of investment Projects which
will be set up in every governorate under this Law, and shall put a
note of caution on the titles that such locations are used for the
purposes of the Board.
2. The departments concerned shall coordinate with the Board to
specify and allocate the plots of land needed by the Project within
the initial layout inside and outside the cities, either by lease or
by land usufruct, at a promotional price, and in accordance with
regulations to be set by the Board as an exemption from the “Law of
Sale and Lease of Properties of the State”, which is applicable in
the Region.
3. Upon receiving a proposal by the Board, the Council may transfer
the ownership of plots of land that are allocated to strategic
Projects, at a promotional price or free of charge, provided that
the nature and importance of the Project and the public interest
will be taken into consideration when transferring the ownership as
an exemption from the Law of Sale and Lease of Properties of the
State, which is applicable in the Region.
4. A note of caution shall be entered at the relevant Departments of
Land Registry regarding the plots of land allocated to investment
Projects. Such notes of caution shall be lifted only under the
Board’s written consent, after complete fulfillment of the
Investor’s obligations.
5. To ensure achievement of its purposes, the Board may possess,
free of charge, freehold titles over plots of land that are already
property of the State and have a burden of disposal rights, after
charging off such rights by paying fair and appropriate compensation
in accordance with the applicable laws, regulations and directives.
6. An Investor may buy or lease plots of land and real properties
needed to set up, expand, develop and diversify the Project in
accordance with the provisions of this Law, within the surface area
and time scale estimated according to the Project’s objects and
actual needs, without prejudice to the provisions of Paragraph (3)
of this Article.
7. Plots of land needed for investment Projects under this Law shall
be partitioned into surface areas estimated as per the Project’s
objects and actual needs, in accordance with special controls and
regulations set by the Board in exemption from applicable laws and
regulations.
8. Alteration of the Project’s location shall be governed by the
same standards and regulations as those of specifying the Project’s
location for the first time.
9. Competent Authorities shall liaise with the Board to provide
public services such as water supply, electric power, sewage pipes,
public roads and communications etc. within the Project’s precinct.
For this purpose, the necessary funds shall be allocated in the
Budget.
10. In addition to the entitlement of a foreign Investor for the
possession and lease of real properties and productive vehicles
under this Law, he shall be entitled to buy or lease residential
properties and non-productive vehicles needed for his Project, after
obtaining the Board’s approval, and in compliance with controls and
regulations set by the Board for this purpose.
Chapter II
Exemptions and Obligations
Section I
Tax and Customs Exemptions
Article (5):
1. A Project shall be exempt from all non-custom taxes and duties
for 10 years starting from the date of providing services by the
Project, or the date of actual production.
2. Equipment and machinery that are imported for the Project shall
be exempt from taxes, duties and the condition to obtain an Import
Licence, provided that they cross the Region’s borders within two
years from the approval of their lists by the Chairman of the Board,
and that they are used exclusively for the purposes of the Project,
failing which the exemptions will not apply to them and the Investor
will be compelled to pay tax and will be penalised with a fine which
is twice as much as the amount of tax due.
3. Spare parts that are imported for the Project shall be exempt
from taxes and duties, provided that their value does not exceed 15%
of the price of equipment and machinery, and with the prior approval
of their lists and quantities by the Chairman of the Board.
4. Equipment, machines and tools needed to expand, develop or
upgrade/modernise the Project shall be exempt from taxes and duties.
5. Raw materials imported for production shall be exempt from
customs duties for 5 years, provided that the types and quantities
of such materials are specified by the Board, with the priority
given to using the locally available raw materials which are
suitable in quality and quantity for the investment Project.
6. An Investor may, under the provisions of this Law, import all his
Project’s needs, including the equipment and machinery. Such imports
shall be exempt from all customs duties as they cross the Region’s
borders, provided that they are used exclusively for the Project’s
purposes.
Section II
Additional Exemptions
Article (6):
1. In accordance with the public interest of the Region, the Board
may give additional facilities and incentives to investment Projects
licensed under this Law to which either of the following features
applies, and in compliance with controls and regulations set by the
Board for this purpose:
(i) Projects set up in under-developed areas in the Region.
(ii) Joint Ventures set up by national and foreign Investors.
2. Depending on the nature of Service Projects which are set up
under the provisions of this Law, and in particular Projects of
hotels, hospitals, tourist resorts, universities and schools, the
Board may offer additional exemptions from charges and duties on
their purchases of furniture and supplies for upgrading and
modernization once every 3 years, provided that these should enter
into the Region and be used solely for the Project within one year
from the date of approval of the purchase lists and quantities by
the Chairman of the Board.
Section III
Legal Guarantees
Article (7):
1. An Investor may obtain insurance cover for his investment Project
from any foreign or national insurance company that he sees fit,
such that all aspects of operations that he carries out will be
insured.
2. An Investor may employ local and foreign staff needed for the
Project, with the priority given to recruiting local manpower in
accordance with the laws and regulations applicable in the Region.
3. A foreign Investor shall be entitled to transfer the profits and
interests of his capital abroad, in accordance with the provisions
of this Law.
4. The Project’s non-Iraqi members of staff, and their agents
outside the Region, shall be entitled to transfer their dues and
wages abroad in accordance with the applicable laws.
5. A foreign Investor shall be entitled to send his capital back
abroad upon winding up or disposal of the Project, without prejudice
to applicable laws and regulations regarding taxes and customs.
6. An Investor may transfer his investment totally or partly to
another foreign Investor or to a national Investor, or may assign
the Project to his partner with the approval of the Board. The new
Investor then replaces the previous Investor with regard to rights
and obligations arising from the Project.
7. An Investor may, for his Project which is licensed under this
Law, open bank accounts in national currency, in foreign currency,
or in both, with banks located inside or outside the Region.
8. Without prejudice to applicable laws regarding the boards of
directors of joint-stock companies, the Projects registered under
this Law shall be deemed as private sector Projects, regardless of
the legal form and nature of their shareholding funds.
9. An Investor may under this Law maintain confidentiality of
technical and economic know-how of the Project, and may uphold the
investment initiatives in accordance with the provisions of laws,
regulations and directives applicable in the Region. Any person will
be punished by law if he discloses any information in his possession
by virtue of his post, or information related with the investment
initiative and with technical, economic or financial aspects of the
Project.
Section IV
Investor’s Obligations
Article (8):
An Investor shall comply with the following:
1. To specify the area of his investment regarding the Projects
implemented by him, and to reveal his financial statements/balance
sheets and the contracts that he implemented.
2. To inform the Board about the completion of the Project, and when
it starts in providing services or in actual production.
3. To provide the facilities needed by the Board’s personnel
enabling them to collect and acquire the necessary information about
various aspects of the Project, for the purposes of the Board.
4. To keep special records of the Project’s imported materials which
are exempt from customs duties under the provisions of this Law.
5. To safeguard the environment, maintain public health and safety,
and comply with standardization and quality control systems, in
accordance with international standards.
6. To offer training and qualification to the Project’s local
members of staff.
Section V
Legal Procedures upon Investor’s Contravention
Article (9):
1. Upon the Investor’s contravention of the provisions of this Law,
or contravention of any clause in the contract between the Investor
and the Competent Authorities, the Board shall send a notice to the
contravener requesting immediate halt of the activity causing the
contravention and giving him an appropriate period of time,
determined by the Board and commensurate with the nature of the
contravention, to remove the contravention and its effects.
2. If the Investor carries on without removing the contravention and
its effects as per the provisions of paragraph (1) above, the plot
of land shall be recovered from him, and the Board shall take
possession of the installations (if any) built on it by the Investor
in due demolish value in accordance with the law. The new Investor,
to whom the plot of land will be allocated to complete the Project
under this Law, will be responsible for paying the demolish value,
and the contravener shall be responsible for any damage arising from
his failure in carrying out his obligations.
3. If the Investor grants, without the Board’s approval, a full or
partial sublease of the plot of land allocated for his Project, or
if the Investor, without the Board’s approval, exploits the plot of
land for purposes other than those for which it was allocated, the
Board shall recover from him the plot of land or the part thereof
subleased or exploited for the improper purposes, and the Investor
shall pay twice the amount for the period of the land sublease or
its exploitation for improper purposes. This amount shall be
collected in accordance with the Law of Government Debt Collection
applicable in the Region. In the event of recovery of the whole plot
of land, the contravening Investor will be treated in accordance
with the provisions of paragraph (2) above with regard to the
installations built on it at the time of recovery.
Chapter III
Investment Hierarchy
Section I
Investment Board, its Structure and Tasks
Article (10):
1. A board shall be set up under the name of “Investment Board of
Kurdistan Region”. It shall have a corporate status and enjoy
financial and administrative independence. It can take all the legal
procedures necessary for the purposes of carrying out the provisions
of this Law.
2. The Board shall have a Chairman who has the rank of a Minister.
He shall enjoy the rights and powers of a Minister. He shall be
responsible for running the Board’s operations and supervising and
controlling its activities and everything related to the Board’s
tasks and affairs. The following departments shall be associated
with him:
(i) Department of Research and Information
(ii) Department of Promotion, Assessment and Licensing of Projects
(iii) Department of Legal Administrative and Financial Affairs
(iv) Department of Industrial Cities and Zones
3. The Board shall be located in Erbil, the Capital of the Region.
It may open branches in the governorates of Kurdistan Region such
that each branch will be run by an employee who has the rank of a
Director General.
4. The Board may set up, merge or cancel Divisions and Sub-divisions
whenever necessary.
5. The structure of the Board’s Departments and Branches, and their
tasks and powers, shall be specified in a bylaw set by the Board and
endorsed by the Council.
6. The Board shall set up the suitable environment for investments
so as to achieve economic development of the Region. The Board shall
lay down the investment strategies, plans and policies and shall
present them to the Council for approval. Moreover the Board shall
coordinate activities of its Branches in the Region’s governorates.
Article (11):
The Board’s Chairman and any of its Directors General should satisfy
the following:
1. He should have at least a university degree related to his post.
2. He should have at least a 7-year experience of work in his field
of specialism.
Article (12):
For the purposes of this Law, the resolutions passed by the Council
regarding the investment Projects shall be binding to all relevant
Ministries, Agencies and Departments in the Region.
Article (13):
The Chairman of the Board may make contracts with natural or
artificial persons, inside or outside the Region, to perform the
tasks and duties assigned to them in order to fulfill the purposes
of the Board. Their rights and obligations shall be specified by the
Chairman of the Board.
Section II
Supreme Council for Investment
Article (14):
1. The Supreme Council for Investment in the Region shall consist of
a President who is the Region’s Prime Minister, a Vice President who
is the Region’s Deputy Prime Minister, and the other Council’s
members who are the Minister of Finance, Minister of Economy,
Minister of Municipalities, Minister of Planning, Minister of
Agriculture, Minister of Industry and the Chairman of the Investment
Board.
2. (i) The President of the Council may call any other Minister to
join in the meetings of the Council regarding any Project which is
related to his Ministry.
(ii) The President of the Council may call representatives of the
private sector involved in the Project.
(iii) The Council shall set its own bylaw specifying how it holds
its meetings and how it passes its resolutions.
3. The Council shall exercise the following powers:
(i) Setting up the investment policies and strategies proposed by
the Board within the framework of the general policy of the Region.
(ii) Approval of the Board’s plans and programs of activity within
the framework of the general plan for the Region.
(iii) Discussion of the regular reports submitted by the Chairman of
the Board regarding the Board’s progress and matters related to the
investment circumstances in the Region, and taking the necessary
measures on that regard.
(iv) Discussion of the Board’s financial position (Balance Sheet),
and approval of its annual draft budget.
(v) Approval of the contract of loans and credit facilities given to
the Board with the guarantee of the Government, or from banks or
special finance institutions in accordance with the set rules and
regulations, provided that their purposes are solely to finance the
Board’s activities within its scope of work.
(vi) Setting up a system of monitoring, following up and assessing
the performance of foreign investments, in order to identify and
overcome any obstacles or hurdles.
(vii) Approval of the bylaw of the Board.
Section III
Budget of the Board
Article (15):
The Board shall have a budget included in the general budget of the
Government of the Region.
Chapter IV
Licensing and Arbitration
Section I
Procedures of Project Licensing
Article (16):
1. In order to benefit from the exemptions and privileges mentioned
in this Law, an Investor should obtain a Licence issued by the Board
for setting up the Project.
2. The Board shall give the Licence for setting up the Project
pursuant to an application submitted by the Investor in accordance
with the conditions set by the Board. The Board will have to decide
on the application within 30 days from the date of fulfillment of
the technical, legal and economic conditions and requirements, in
accordance with the provisions of this Law, and without prejudice to
the standards and controls set by the Board.
3. The Board shall consult Competent Authorities on the advantages
of issuing the Licence, and such authorities will have to give their
viewpoint for the acceptance, rejection or amendment request, within
thirty days from the date of the Board’s referral of the application
to them. Failure to reply shall be considered as an acceptance, and
in the event of rejection, the decision will have to be justified.
4. When an application is rejected, the applicant may raise an
objection to the President of the Council within 15 days from the
date of notification of the rejection decision. The President of the
Council will have to decide on the objection within 30 days, and his
decision on this matter shall be conclusive.
Section II
Arbitration
Article (17):
Investment disputes shall be settled in accordance with the contract
concluded between both parties, and if there is no clause in the
contract on this regard, the disputes shall be settled amicably
between both parties. If they fail to reach an amicable settlement,
they may refer the matter to arbitration whose regulations are
stated in the laws applicable in the Region, or in accordance with
the rules of dispute settlement mentioned in any of the mutual or
international conventions of which Iraq is a member.
Section III
Final Provisions
Article (18):
1. The Prime Minister’s Decree (Sulaimani Administration) no. 89 of
2004 regarding the promotion of investment in Kurdistan Region is
hereby nullified. The Investment Promotion Board and its structure
under Article 16 of the aforementioned Decree shall be dissolved,
and its rights, obligations, and all its movable and immovable
properties shall revert to the Investment Board formed under the
provisions of this Law.
2. All investment Projects licensed by the Investment Promotion
Board formed under the nullified Decree mentioned in paragraph (1)
above, and the investment projects licensed by the Erbil
Administration in accordance with applicable laws, shall be
considered as legal investment Projects, and shall continue to enjoy
the advantages and incentives granted to them.
3. All other Projects that are being studed and assessed, and on
which no final decision has been made by the dissolved Board, shall
be referred as investment Projects to the Investment Board formed
under the provisions of this Law, and the Competent Authorities
within the Board shall carry on with the procedures taken by the
dissolved Board.
Article (19):
An Investor shall not be allowed to own plots of land that contain
oil, gas, or any expensive or heavy mineral resources.
Article (20):
An Investor who implements joint-stock investment Projects shall
offer the necessary security to protect the funds of the
shareholders. The Board shall take the insurance and banking
measures necessary to guarantee their rights.
Article (21):
The Board's accounts shall be subject to auditing by the Board of
Supreme Audit.
Article (22):
The cases for which there are no provisions in this Law shall be
governed by the general rules mentioned in other relevant laws,
provided that their provisions do not contradict the provisions of
this law. If there is any contradiction, the provisions of this Law
shall apply.
Article (23):
The President of the Council shall issue the necessary instructions
to facilitate the implementation of this Law.
Article (24):
The Council of Ministers and the Competent Authorities shall
implement the provisions of this Law.
Article (25):
This Law shall take effect as of the date of its issuance, and it
will be published in the official gazette "Kurdistan Gazette."
(Signed)
Masoud Barzani
President of Kurdistan Region - Iraq
Issued in Hewler on --/07/2006
Necessitating Reasons
This Law has been issued in order to create a climate for promoting
investment in the Iraqi Kurdistan Region, to remove any legal
obstacles, to allow the investment of national and foreign capitals
jointly or separately in investment projects in a manner that
contributes effectively to the economic development process, to
offer promotional incentives, facilities and tax exemptions to
invested capitals, and to establish an investment Board involved in
organising various aspects of investment activities in the Region.
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