Foreign Investment Law ,

The Government of the Republic of Somaliland:

  • Endeavouring to avail itself of the economic resources and potentialities available in its country and to mobilize and utilize them in the best possible manner.
  • Anxious to provide a favourable climate for foreign investments so that optimum utilization could be made of its economic resources.
  • In keeping with the objectives of the Agreement of the Promotion, Protection and Guarantee of Investments among Member States of the Organization of the Islamic Conference…

Has enacted the following law on the Promotion, Protection and Guarantee of the Foreign Investments in its country.

Chapter One

Article 1

The following terms which are used in this law shall have the meanings assigned to each one of them for the purpose of this law unless the context indicates a different meaning:

1. The agreement

The agreement signed by the Foreign Investment Board of the

Government of the Republic of Somaliland and the contracting

Foreign Investor.

2. Contracting Parties

The Foreign Investment Board of the Republic of Somaliland and the Foreign Investors signatories to agreements with the Board and in respect of which these agreements have become effective.

3. Host State

The Republic of Somaliland in which the invested capital is present lawfully and permits the investor to employ his capital therein.

4. Capital

All assets (including everything that can be evaluated in monetary terms) owned by a foreign contracting party to the agreement with the Board whether a natural person or a corporate body and is present in the territories of the Republic of Somaliland whether these were transferred to or earned in it, and whether these be movable, immovable, in cash, in kind, tangible as well as everything pertaining to these capitals and investments by way of rights or claims and include the net profits occurring from such assets and the undivided shares and intangible rights.

5. Investment

The capital employed in the permissible fields in the Republic of Somaliland by the foreign contracting party with the board with a view to achieving a profitable return in accordance with this law.

6. Investor

Any foreign contracting party with the Board whether a natural person or a legal personality in his own country who owns. the capital and invests it in the Republic of Somaliland. The nationality of the investor shall be determined as follows:-

a. Natural person

Any individual enjoying the nationality of his own foreign country in accordance with the provisions of the nationality law in force therein.

b. Legal Personality

Any entity established in accordance with the law in the country of the contracting party and is recognized there by the law under which its legal personality is established.

7. Investment Returns

The sums yielded by the investment or derived therefrom for a specified period which shall include, without limitation, the profits, dividends, licences, fees, royalties, leases, services and all the increases achieved on the capital assets and the utilization of the intangible property rights.

8. The Board:

“The Board” is the Foreign Investment Board established at the Ministry of Commerce and Industry. It is the supreme decision-making authority over all matters concerning foreign investment in the Republic of Somaliland.

9. The Office

The “Office” is the Foreign, Investment Promotion Office established at the Ministry of Commerce and Industry to assist the “Board” in the performance of its administrative and promotional functions.

Chapter Two

Article 2

Under this law a foreign investor is any foreign juridical or physical person.

Article 3

Foreign investment can be made in any of the following forms:

1. Convertible currency specified by the Central Bank of Somaliland

2. Machinery; equipment ; spare parts installations; and current production inputs; whose importation is permitted under the prevailing import legislation.

3. Patent rights, trade marks, and licenses duly registered in Somaliland, provided they are necessary for the activities to be passed under the approved investment.

4. The amount of foreign currency spent on studies and technical documentation, prepared in connection with the approved investment.

5. Profit reinvested, originating from foreign investment approved in accordance with this law.

The said investment shall be made for the purpose of the establishment or the expansion of an enterprise incorporated and registered in Somaliland

Article 4

Priority shall be given to foreign investment in those areas where it.

1. Puts to productive use Somaliland’s human and natural resources

2. Introduces innovative technology suited to the country’s conditions.

3. Generates new earnings or savings of foreign exchange, through exports, resource-based import substitution or service activities.

4. Contributes to regionally balanced socio-economic development, this refers especially to foreign investment in, or closely related to:

a) Agriculture

b) Livestock

c) Fishing

d) Mineral resources

e) Industrial activities using significant amounts of inputs produced, by afore-mentioned sectors.

f) Tourism, provided the investment harmonizes with the prevailing social, economic and infrastructural condition.

g) Any other investment, in production and service activities, suited to support and stimulate, in a significant degree, the development of the afore-mentioned sectors.

Article 5

1. The foreign investment Board, here after referred as “ The Board”, has the supreme, decision making authority over all matters concerning foreign investment in Somaliland. It is established at the Ministry of Commerce & Industry where it shall convene at least twice a month.


2.1.The Director General of the Ministry of National Planning.

2.2. The Director General of the Ministry of Foreign Affairs.

2.3. The Director General of Ministry of Finance

2.4. The Director General of Ministry of Commerce and Industry

2.5 The Director General of Ministry of Health and Labour

2.6 The Director General of Central Bank of Somaliland

2.7. The Chairman of the Chamber of Commerce, Industry and Agriculture

Chairman of the Board is the Director General of the Ministry of Commerce and Industry.

Article 6

The functions of the Board shall be the following:

1. To approve proposed foreign investment in accordance with the policy guidelines laid down in Article 4 and the provisions concerning quorum and vote, as per Article 7.

2. To approve the registration of foreign investment and to sign an agreement with the foreign investor in accordance with the provisions of this law

3. To review the registration of foreign investment made under previous foreign investment laws from the more favourable provisions, as per Article 25 of this law.

4. To determine the value of foreign investment made as per Article 3, paragraph 2,3 and 4 of this law.

5. To ensure compliance with the provisions of Article 14 concerning the contracting of debt from domestic sources.

6. To facilitate the granting of visas to foreign personnel to be employed by enterprises registered under this law.

7. To perform any other function concerning foreign investment in conformity with this law.

Article 7

Six members of the Board, including the Chairman, shall constitute a quorum, decisions will be taken by simple majority vote.

Article 8

The Foreign Investment Promotion Office, here after referred to as “The Office”, is the administrative and promotional offices to assist the Board in performing its functions. The duties of the office shall be the following:

1. To implement the decisions taken by the Board.

2. To propose the administrative and regulatory procedures required for the implementation of the law.

3. To provide information and advice to the foreign investor on matters such as application and registration procedures under this law, taxation, foreign exchange terms, economic legislation, foreign trade terms, investment opportunities. Institutional frame work, local sources of debt financing partner search.

4. To assist the foreign investor in meeting the application requirements related to foreign investment.

5. To assist approved foreign investment at the setting up stages, with guidance and advice concerning official institutions and channels, and related administrative procedures,

6. To formulated proposals concerning foreign investment policy and improvement of investment conditions.

7. To promote and attract new foreign investment, in collaboration with other institutions evolved in this field.

8. To perform any ether duty related to foreign investment, arranged to it by the Board.

Article 9

The application by the foreign investor shall be made by completing the form” Application form for Approval and Registration” available at the office located in the Ministry of Commerce and Industry, and mailing it, by a registered letter, to the Foreign Investment Board.

Article 10

1.Within Sixty days from the date of the receipt of duly completed investment application, the Board shall notify the applicant, by registered mail, of its decision. At the applicant’s option, this notification may be collected by his representative directly from the Office, against issue of a delivery receipt.

2. In case a modification of an application is required the Board shall notify the applicant, to this effect, by registered letter, At the applicant’s option, this notification may be collected by this representative directly from the office, against issue of a delivery receipt.

3. The Board shall notify, through the office, the approval of a foreign investment by issuing a “ Certificate of Foreign Investment in an approved enterprise”. Such approval shall be construed by the foreign investor as being eligible for registration under this law.

4. The “ Certificate of Foreign Investment in an approved enterprise” shall be valid for the period of 18 months as of date of issue. During said period, the applicant shall have effected the transfer of assets to Somaliland listed in article 3, paragraph 1,2,3 and 4. In case this period is extended. The Board may grant, at the applicant’s request, an additional period, or ask for a new application.

5. Additional investment to be made as per article 3, paragraph 1,2,3 and 4, in an enterprise object of a foreign investment already duly registered, shall require application and approval as per Article 9, and paragraphs 1,2,3 and 4 of this article.

Article 11

1. The Board shall proceed with the registration of an approved investment as soon as the foreign investor has effected the transfer of assets, to Somaliland, listed in Article 3 paragraph 1,2,3 and 4, in accordance with the terms and conditions contained in the “Certificate of Foreign Investment in an approved Enterprise”. To this effect, the Board shall issue to the foreign investor, a “Certificate of Foreign Investment Registered”.

2. In the case of a transfer , to Somaliland, of assets listed under paragraph 2,3 and 4, of article 3, the Board shall proceed with said registration as soon as it is satisfied that the value assigned, by the Foreign investor, to the assets transferred, represents fair market value. The Board may ask the foreign investor to produce sufficient documentary evidence to demonstrate the fair market value of the assets a per paragraph 2, of Article 3. This value shall be determined in accordance with the prevailing import legislation.

3. The foreign investment shall be registered in convertible currency as specified by the Central Bank of Somaliland.

Chapter Three

Article 12

1. All enterprise object of foreign investment shall receive as favourable treatment as domestic enterprise.

2. The property of foreign investment duly registered under this law shall not be subject to expropriation measures, except in the only case where public interest cannot be satisfied by measures other than expropriation.

3. In the case of such expropriation, prompt compensation shall be paid. Said compensation shall reflect the fair market value of the assets as freely transferable.

Article 13

Foreign investment shall be eligible for incentives and facilities, in accordance with the legislation in fore ruling on such incentives and facilities.

1. Foreign Investment is exempted from payment of tax on profit for a period of three years from commencing operations. In addition, after the expiry of the initial tax holiday period, foreign investors shall be entitled to a 50% reduction of the tax due for the profit reinvested.

2. Imported machinery, equipment, installations and any other outfits as well as raw materials, supplies and components imported for production purposes are exempted from import custom duties.

Article 14

1. Any enterprise subject to a duly registered foreign investment may contract dept from Institutional domestic financial sources up to the limit established by the Central Bank of Somaliland, in consultation with Boar. Sources shall be used strictly for the carrying out of the activities specified in the “Certificate of Foreign Investment Registered” The Board shall be authorized to verify the due application of proceeds.

Article 15

1. The Board shall ensure that the immigration authorities facilitate the granting of the entry permits and residence visas to foreign personnel employed by an enterprise registered under this law, and to their families.

2. The Board shall also ensure that said personnel and their families be granted access, for reasons of work, to any part of Somaliland.

3. Said personnel may freely transfer abroad up to fifty percent of their salaries, wages, gratuities and allowances paid in Somaliland by the enterprise employing them.

4. Any enterprise registered under this law shall employ qualified Somaliland national whenever they are available. Foreign investment shall seek to make a significant contribution towards the transfer of technology and managerial know how, and the upgrading of professional skills available in Somaliland.

Article 16

1. “Profit” shall be understood as the “net income” less income taxes payable, as applicable, in accordance with the prevailing legislation.

2.Profit organisation from duly registered foreign investment may be invested in the same enterprise, object of the investment, or in another enterprise in accordance with the provisions of this law.

3. When such profit is to be reinvested , the Board, shall be notified to this effect by registered mail or directly against issue of delivery receipt.

4.The Board shall proceed to register profit reinvested in the convertible currency specified in the “Certificate of foreign investment registered” The amount shall be determined in accordance with the prevailing laws and regulations governing foreign exchange.

5. To this effect, The Board shall issue a “ Certificate of Reinvestment”.

6. Subsequent rights to transfer profit and repatriate investment, as well as other benefits under this law, shall be determined on the basis of the original investment registered plus profit reinvested.

7. In case of reinvesting profit in an enterprise other than the enterprise object of a duly registered foreign investment, the provisions of article 9 and 10 of this law shall apply.

Article 17

1. profit organising form a duly registered foreign investment, as per paragraph 1 of Article 11, may be freely transferred abroad.

2. In case that only part of such profit is transferred abroad in one year, the foreign investor may transfer the remaining portion in any one of the following years.

Article 18

1. Duly registered foreign investment, defined as the original investment, plus profit reinvested, shall be freely transferable abroad after three years from the date of the registration of the original investment, as specified in the “Certificate of Foreign Investment Registered.

2. The Board may reduce the said period, taking into consideration the priorities under the policy guidelines as per Article 4, of this law.

3. The transfer abroad shall be effected in the original currency specified in the “Certificate of Foreign Investment Registered. “The funds destined for transfer shall originate from the liquidation of assets or the transfer or capital stock of the enterprise, object of the foreign investment, to other juridical or physical persons. The foreign investor is free to transfer abroad the physical assets, that were the object of the investment, in the event this alternative is opted for.

4.In case were the amount realised from the liquidation or sale of capital stock exceeds the amount of the original investment plus reinvested profit registered, the foreign investor shall be free to transfer abroad, in the freely convertible currency exchange conducted and warranted by the Bank of Somaliland, the difference, in accordance with the prevailing tax legislation and foreign exchange regulations.

Chapter Four

Article 19

1. Disputes in respect of the implantation of this laws shall be settled.

a) in a manner to be agreed upon with the investor, or in the absence of such agreement.

b) within the frame work of the agreements in force between the Somaliland Republic and the investor’s home country.

In the absence of agreements, disputes shall be settled through arbitration, An arbitration board shall be established, comprising one member on behalf of each disputing party and a third member acting as a chairman, to be jointly named by the said two members. Failing agreement of the monition of the third member, the chairman shall be appointed, at the request of either party, by the president of the supreme court of Somaliland.

The Arbitration Board shall lay down its rules of procedures unrestricted by the rules contained in the civil and commercial code of procedures, save for the rules which relate to the basic guarantees and principles of litigation.

The Board shall see to it that the disputes be expediently resolved.

Awards shall be rendered by majority vote, and shall be final and binding on both parties and enforceable as any other final judgement. The Arbitration board shall decide who shall bear the arbitration costs.

Article 20

1. Alienation of foreign investment shall be effected either through liquidation of assets or through the transfer of capital stock of the enterprise, object of such investment, to juridical or physical person.

2.In the event of alienation of a foreign investment to a resident Somaliland juridical or physical person, the transfer shall case enjoy the benefit derived from the status of a foreign investor.

3. Any alienation is subject to prior notification, to the Board by both the transfer or and the transferred, such notification shall be accompanied by appropriate supporting documentation.

4. The alienation of foreign investment to the other foreign investors shall not require approval, as per paragraph 3 of the Article.

Article 21

1. Existing foreign investment in Somaliland, duly registered under current or previous laws concerning foreign investment, shall continue to enjoy the rights and obligations conferred to it by said laws.

2. Such foreign investment shall be benefited, at foreign investor’s option, by the provisions of this law, provided the registration requirements and other provisions of the previous laws have been complied with, and satisfactory documentary evidence is produced, to this effect, by the foreign investor. In such case, the foreign investor may apply to the Board for registration under this law within 180 days as of date of its promulgation.

Article 22

Bank notaries public and public entities involved with foreign investment shall notify the Board of the particulars of any important pertinent acts and transactions within thirty days from the date of completing such acts or transactions. This refers, among others, to acts or transactions concerning incorporation, contracting of dept from institutional domestic financial sources, transfer of profit and repatriation of investment.

Article 23

The provisions of this law shall not apply to foreign investment in mineral research and mining activities, including those related to the petroleum Industry and nuclear power. Such investment shall be subject to the mining code and the mining regulations, and of agreements reached, hereunder, between the Government of Somaliland and the interested party.

Article 24

Failure to comply with the provisions of this law, on the part of the foreign investor, shall result in the for feature of benefits provided hereunder.

Article 25

No provisions of this law shall preclude the enjoyment, by the foreign investor, of benefits under more favourable provisions which might be subsequently promulgated.

Article 26

The president of the Somaliland Republic, on the proposal of the Board, and having heard the Minister of Commerce and Industry and the council of Ministers, may issue regulations for the proper implementation of this law.

Article 27

This law shall come into force following its signature by H.E. President of the Republic of Somaliland.

Mohamed Ibrahim Egal

President. 1995