At a glance:
Investment Law no. 72 of 2017
After two years of negotiation and deliberation, the long-awaited Executive Regulations pertaining to the Investment Law became official. The new Investment Law no. 72 of 2017 was published on May 31, 2017 and came into effect. Unlike its predecessor, Law no. 8 for 1997, the new law focused on removing obstacles that face investors and granted the latter additional benefits and incentives.
The new Investment Law is now in effect and applies to all foreign and local investment endeavors in Egypt that fall within one of the sectors stipulated in the law; manufacturing, agriculture, trade, education, health, transportation, tourism, housing, construction, sports, electricity, energy, natural resources, water, telecommunication and technology.
Why is the new Investment Law significant?
There is no doubt that inaugurating a new investment law that governs foreign direct, indirect and local investment is a significant stepping stone for government and nation; the question remains, how does this new law benefit investors?
The long awaited Law no. 72 of 2017 offers new and additional Investment Guarantees to all prospective investors, including:
– Fair and equitable treatment to both foreign and Egyptian investors. Foreign Investors will be granted required permits for the duration of their investment project.
– No restrictions on money transfers; allowing free flow of corporate funds to and from Egypt.
– Investment is protected against nationalization.
– Seizure of money is only allowed by virtue of a court judgment, except for tax and social insurance contribution dues.
– The right to repatriate profits outside Egypt and receive foreign funds to finance the project without restriction.
– Facilitating liquidation procedures.
– Streaming Import procedures.
In addition to the aforementioned guarantees, which to many, might seem as a given for investment purposes. It is safe to say, that these guarantees have been sought after in light of the recent years following the Arab Spring and the implications thereof. That is to say, the efforts exerted by the Minister of Investment as well as the General Authority for Investment (GAFI) may perhaps be the catalyst to put Egypt back in the Economic Map.
In addition to the afore mentioned Investment Guarantees offered to investors in light of the recent reforms. The new law granted numerous and beneficial incentives to investors. To what extent may an Investor benefit from such incentives; this will depend on a case by case analysis taking into consideration sector and geographical areas.
Aspiring to utilize Egypt’s land in a manner that would be both efficient and to mutually benefit to all parties involved, the new law offers a Special Incentive in the form of a Tax Reduction Scheme to be applied on new investment projects.
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 (May 31, 2017). In applying Article 11, the law has created what is referred to as a New Investment Map, that divides Egypt into “Investment Zones”. As such and as a result, the Tax reduction incentive will vary depending on which area will be used for Investment purposes.
There are certain requirements and restrictions imposed with regards to who may benefit from the Tax Reduction, these include:
- That the Investment Project be established within 3 years from the date issuance of the law.
- Not to use the assets of any existing company or liquidate an existing company for the purpose of establishing a new company to benefit from the tax reduction system.
- Keeping regular and accurate books.
Provided that prospective investors adhere to aforementioned criteria pertaining to their investment, the following is the tax incentive as set forth in Article 11:
1- 50% of the investment cost of setting up a project in geographical locations that are in most need for development (underdeveloped locations). The Law named these locations as Zone A. The executive regulations shall clarify which investment sectors in Zone A can benefit from this 50% tax rebate rate.
2- 30% of the investment cost of a project that is set-up in other remaining geographical “ Zone B”, for the following sectors:
– Labor-intensive projects.
– SMEs
– Renewable energy projects.
– Strategic projects as specified by the Supreme Investment Council.
– Tourism projects as specified by the Supreme Investment Council.
– Electricity projects specified by the Supreme Investment Council.
– Projects exporting their products outside Egypt.
– Wood, furniture and printing. packaging and chemical industries.
– Antibiotic
– Cancer treatment
– Cosmetics.
– Food and agricultural products.
– Engineering, mineral, textile and leather projects.
In addition to the aforementioned industries, the Law has granted the competent authority to include additional sectors to be part of the law and its respective incentives.
For assistance and/or additional information on how the new Investment Law and it’s respective incentive and guarantees may be of benefit you or your business,
kindly contact our team at [email protected]