The new investment law no. 72 of 2017 is ratified and officially published on the 31st of May 2017 (the \u201cInvestment Law\u201d). The law comes into effect the next day and it cancels and replaces the Investment Guarantees and Incentives Law no. 8 for 1997 (\u201cLaw 8\/1997\u201d). The aim of the law is generally to attract new investments to Egypt through offering further incentives and guarantees, removing obstacles and streamlining the procedure.<\/p>\n
The Investment Law kept most of the amendments introduced to Law 8\/1997 in 2015, in addition to consolidating many of the investment rules that were scattered under different laws and regulations. The amendments of 2015 offered new non-tax incentives and investment protection guarantees, added new rules for state-land allocation, set new out-of-courts forums to amicably settle investor-state disputes, and authorized the General Authority for Investment and Free Zones (GAFI<\/abbr>) to act as a one-stop-shop for all investment related licensing procedures.<\/p>\n GAFI<\/abbr> continues, as introduced by 2015 amendments, to be the only competent authority to allocate state-owned land for investment and promote it through its one-stop shop which shall include representatives from the landowners in the process. <\/p>\n The Investment Law introduces a new tax reduction system for investment in certain geographical areas as well as investment in specific sectors. Only new companies established after the issuance of the law can benefit from this tax credit system.<\/p>\n The law allows again the establishment of privately-owned free zones after being banned by virtue of the 2015 amendments. Other types of investment systems under Law 8\/1997 are kept under the new law, namely, the internal investment system, investment Zones, technology Zones, and public free Zones.<\/p>\n A whole chapter is added to address the corporate social responsibilities of investors.<\/p>\n The efficient application of the Law depends to a great extent on the executive regulations to be issued and the implementation plan to be put in place. The Law provides that the Cabinet will be the one to issue the executive regulations within 90 days from the date of the new Investment Law, i.e., before 31 August 2017. <\/p>\n This note will focus on the new rules introduced by the Investment Law.<\/p>\n <\/a><\/p>\n The Law applies on all local and foreign investment projects in Egypt. Investment projects are defined as those working in one of these sectors: manufacturing, agriculture, trade, education, health, transportation, tourism, housing, construction, sports, electricity, energy, natural resources, water, telecommunication and technology.<\/p>\n The Minister of Investment can add other sectors in light of the economic development plan of the Government<\/p>\n <\/a><\/p>\n A new chapter is added to list the principles governing both, the investor and the government in relation to investment in Egypt. Among these principles are the following:<\/p>\n Another principle is added to confirm the Government\u2019s right to preserve national security and public interests. A broad statement that can raise controversies in the future as its application in terms of investment and what would constitute \u2018national security\u2019 or \u2018public interest\u2019.<\/p>\n <\/a><\/p>\n The law assured the following guarantees to all types of investments in Egypt:<\/p>\n Expats can be employed up to 10% of the total number of employees, this percentage can be increased to 20% if local employees do not have the required qualifications. Expats have the right to repatriate all their money outside Egypt. An exemption can be obtained from these percentages for strategic projects.<\/p>\n <\/a><\/p>\n Incentives given to investment projects are divided into three types, (1) general, (2) special, and (3) additional.<\/p>\n All investment projects, except free zone projects, shall enjoy the following incentives:<\/p>\n Article 11 of the Law provides for a new tax reduction system for a period of 3 years for projects established after the issuance of the Law. The reduction will be from the net taxable profits subject to the following rates:<\/p>\n The reduction amount shall not in all cases exceed 80% of the paid-up capital of the project up until the date of operation.<\/p>\n Benefiting from this new tax deduction system is subject to the following conditions:<\/p>\n The following additional incentives can be granted to investment projects listed under Article 11 of the law by a decision from the Cabinet:<\/p>\n A certificate will be issued by GAFI<\/abbr> for those projects benefiting from the special and the additional incentives.<\/p>\n <\/a><\/p>\n A new chapter is added for CSR. An investment project can allocate up to 10% of its net income profit to participate in one of the following fields, to be deductible from its annual corporate tax:<\/p>\n <\/a><\/p>\n One of the chronicle challenges facing the investment sector in Egypt is the licensing process. The new Investment Law introduced two new alternative facilitated routes an investor can take to obtain required licenses and approvals. This is either through (1) applying directly to the Investors Service Center at GAFI<\/abbr>, or (2) Using one of the private Accreditation Offices.<\/p>\n Under the new Law, GAFI<\/abbr> is given the authority to work as a one-stop-shop from where an investor can obtain all licenses and approvals required to set up and operate a project. A special unit at GAFI<\/abbr> shall be established to facilitate and simplify the licensing process, it is the Investors Services Center (the \u201cCenter\u201d). The Center will be competent with establishing companies, ratifying minutes of its board and shareholders meetings, capital increase\/reductions, liquidation and all other company-related matter.<\/p>\n The Center is empowered to issue all kinds of licenses required to set up and operate a project, including allocation of state-owned land. This will be done through the representatives of the competent authorities that will be delegated with full-authorities to work at the Center.<\/p>\n In a trial to accelerate the process and cutting down bureaucracy, the Law mandated the Center to verify licensing applications submitted by investors and give feedback on its completeness and compliance within two days, the application will be considered as complete and no further requirements can be required for the applicant. The Law however does not provide for a specific time cap during which the Center must issue its final approval or license. This is contrary to applying through Accreditation Offices as we will see below.<\/p>\n Strategic projects and PPP project in infrastructure, renewable energy, transportation or ports can be established and operated by virtue of a single license to be issued by the Cabinet. <\/p>\n Accreditation Offices are authorized by GAFI<\/abbr> and shall be engaged by investors to review and confirm the completeness of their applications to obtain licenses required to set up, operate or expand a project.<\/p>\n Accreditation Offices will issue, at their responsibility, a certificate confirming that the investor financially and technically complies will all terms and conditions required by the law and that the documents of its application are accurate and complete. <\/p>\n The investor will submit this certificate to competent authorities which can object on the application within a maximum period of 10 days or otherwise the application will be considered complete and accepted. Competent authorities are required to issue their final decision on the application within a maximum of 60 days; non-reply within this period will be considered an approval and GAFI<\/abbr> shall issue the required license accordingly.<\/p>\nIndex<\/h4>\n
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Scope of Application<\/h2>\n
Principles Governing Investment in Egypt<\/h2>\n
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Investment Guarantees<\/h2>\n
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Investment Incentives<\/h2>\n
General Incentives<\/h4>\n
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Special Incentives<\/h4>\n
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Additional Incentives<\/h4>\n
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Corporate Social Responsibility<\/h2>\n
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Facilitating and Streamlining Licensing Procedures<\/h2>\n
Investors Service Center at GAFI<\/abbr><\/h4>\n
Accreditation Offices<\/h4>\n