Investment Incentives for Expansions of Existing Project
On 18 February 2020, the Egyptian Prime Minister issued Decree no. 6/2020 (the “Decree”) to grant expansions of existing projects in Egypt the same incentives as the newly established projects under the Egyptian Investment Law no. 71/2017 (the “Investment Law”).
In order to enjoy the same incentives, the expansion of an existing project will have to fulfill the following conditions:
- The expansion should be in one of these sectors specified under the Investment Law and its Executive Regulations: manufacturing, agriculture, trade, education, health, transportation, tourism, housing, construction, sports, electricity, energy, natural resources, water, telecommunication and technology.
- The Expansion shall take place after the enforcement of this Decree, i.e., after 8 March 2020.
- The expansion shall include adding new assets to the existing project which results in increasing its production capacity.
- The expansion shall have its separate accounts and financial statements.
It is noted that the incentives given to investment projects under the Investment Law are divided into three types, (1) general, (2) special, and (3) additional.
The general incentives: includes mainly, among others, applying a unified flat customs duty rate of 2% on all machines and equipment needed for the project.
The special incentives: offers a tax reduction system at a rate of 50% of the investment cost of the project in geographical locations that are in most need for development (underdeveloped locations); the law named these locations as Zone A. The tax deduction will be at a rate of 30% in other remaining geographical locations other than Zone A for projects on the condition that they work on a one of the targeted sectors specified by the law; the law named these locations as Zone B. In all cases, the tax reduction amount shall not exceed 80% of the paid-up capital of the project up until the date of operation.
Additional incentives: includes (i) allowing the project to have its own customs gates for its imports and exports, (ii) allocating free land for specific strategic projects, (iii) having the government to share part of the cost of attaching utilities to the land allocated to the project as well as part of the cost of the technical training of the employees, and (iv) refunding half the price of the land allocated to the industrial project in case it succeeded in starting production within two years from having the land allocated.
For more information about the incentives and guarantees for investment project under the Investment Law Cick here