Highlights of Egypt’s New Investment Law

Jun 1, 2017 - 4 min read

Egypt’s parliament has passed a new investment law designed to promote sustainable growth and complement other structural economic reforms that have been implemented, such as liberalization of the foreign exchange system, adoption of a comprehensive value added tax (VAT) systems, and gradual reduction of energy subsidies.

President Sisi ratified the law on June 1, which will replace a previous investment law enacted in 1997. Key features of the new law include the following:
Incorporation of companies: A new electronic system to incorporate companies will be created. There are plans for the system to also facilitate the transfer of shares and enable capital increases and decreases.

Investment registration: Egypt’s General Authority on Investments (GAI) will establish a system for issuing investor certificates that contain information on investment projects and the incentives granted to each company. The measure will reduce interactions between investment-related authorities and streamline administrative procedures.

Shorter administrative procedures: GAI must make decisions on incorporating new companies within one business day. GAI ratification of board and general assembly resolutions must be completed within 15 days.

Fair and equitable treatment of investors: The new law provides for fair and equitable treatment of foreign and domestic investors. However, the prime minister may grant favorable treatment to investors from a specific country if that country, in turn, grants favorable treatment to Egyptian investors.

Investor visas: Foreign investors may be granted residence permits for the term of their investment projects in Egypt.

Protection of licenses: No Egyptian authority can suspend, restrict or withdraw licenses granted to an investor unless the investor has violated Egyptian law or the conditions under which the license was granted. Egyptian legislators may issue more specific guidelines and standards specifying how and when licenses can be suspended or withdrawn.

Repatriation of profits: The new law guarantees the right of companies to repatriate profits and receive foreign financing, without restrictions.

Accelerated liquidation of companies: The liquidation process will be accelerated by requiring authorities to issue a written notice outlining all liabilities on the company no later than 120 days from the date it submits a liquidation request.

Direct imports and favorable customs regime: Foreign investors can import raw materials, equipment and spare parts for an investment project without having to register such imports with the Importers Registry. Equipment and parts will be subject to a flat rate customs duty of two percent. If the investment project involves infrastructure, the flat rate customs duty will also apply to equipment and parts required for the ongoing operation of the project.

Investment tax regimes: The law provides tax incentives for investments in two geographic areas.

Zone A:
• Consists of Upper Egypt and areas which are most in need of economic development.
• Investment projects will benefit from an investment cost deduction of 40 percent, with a maximum of 80 percent of paid capital. Investments in will also benefit from a tax deduction for seven or more years.

Zone B:
• Comprises the rest of Egypt, including the Suez Canal Economic Zone.
• Investment projects will benefit from a deduction of 30 percent of the investment cost.

Eligible investments: Incentives provided under the new law are available to both foreign and domestic investors that incorporate within three years of the enactment of the law, or which were established less than 30 months before the new law is enacted and which have not conducted any investment in Egypt before the new law comes into force. Investments in these business sectors are eligible for incentives:

• Agriculture
• Construction
• Education
• Electricity
• Energy
• Healthcare
• Housing
• Industrial
• Natural resources
• Technology
• Telecommunications
• Tourism
• Trade
• Transportation
• Water

Social responsibility: Investors can allocate up to 10 percent of the net profits generated with the investment for social projects by contributing to projects in [1] environmental protection; [2] healthcare, social or cultural services or programs; [3] technical education support; [4] the financing of researches or studies aimed at developing or improving university or scientific research institution, and [5] scientific research and training.

Foreign employees: As is the case under law, expatriates cannot make up more than 20 percent of a company’s workforce.

Free zones: Egypt’s existing free zones are less favored under the new law in an effort to increase tax revenues. Investments in free zones will be eligible only if the project exports its goods, thereby increasing foreign currency inflows. The new law restricts projects in the following sectors:

• Alcoholic beverages
• High-energy consumption industries
• Natural gas liquefaction
• Petroleum production
• Steel manufacturing

Private free zones: The law introduces “private free zones,” which are private projects that enjoy the benefits of a free zone. These projects are required to export their production and will be subject to a two percent levy on revenues.

Technology Zones: To encourage development of the technology and IT sector in Egypt, the new law provides a framework for establishing technology zones. The zones may be established by the Minister of Communications & Information Technology to promote manufacturing and development of electronics, programming and technology-related education.