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THE EGYPTIAN INVESTMENT LAW
THE EGYPTIAN INVESTMENT LAW
THE EGYPTIAN INVESTMENT LAW* INVESTMENT BENEFITS
The current Law No. 8 of 1997 on Investment Guarantees and Incentives Law (the “Investment Law”) offer incentives for Egyptians and foreigners for investment in certain fields of activities including interalia the following:
· Reclamation and/or cultivation of barren and desert lands.· Animal, poultry and fish production.· Industry and mining.· Equipping and developing specific industrial areas. · Hotels, Motels, Hotel flats, Tourist Villages and Touristic Transport.· Refrigerated transport of goods in refrigerators for storage of agricultural products, industrial products and food stuffs, containers stations and grain silos.· Air transport and the services directly connected therewith.· Overseas maritime transport.· Oil services, assisting digging and exploration operations, and transport and delivery of gas.· Housing projects, the units of which are wholly leased empty for non-administrative housing purposes.· The infrastructure comprising drinking water, drainage, electricity, roads and communications, multi stores garages under the BOT system whether over or under land and waiting car meters.· Hospitals and medical and treatment centers which offer 10% of their capacity free of charge.· Financial leasing.· Guaranteeing subscription in securities.· Risk capital.· Production of computer software and systems.· Projects funded by the Social Fund for Development.· Development of new Urban Communities.· Design of programs and production of electronic components.· Formation and management of technology areas.· Credit classification of establishments and provision of information about them in the stock markets.· Purchase and liquidation of debts of small and medium size establishments.· Management and touristic marketing of hotels and motels and hotel apartments and touristic villages.· Building and management of Nile River docks.· Formation, management, operation and maintenance of Collective river transport means, inside and between cities and new urban communities.· Management of execution of industrial and services projects.· Collection of garbage and residuals of productive and services activities and their treatment. Moreover, the Investment Law allows the Council of Ministers to add other fields to those mentioned herein above. The Investment Law protects Egyptians as well as foreign persons, companies and establishments against nationalization and confiscation.
There are no price controls on the products of companies and establishments subject to this Law or on their profits. Those companies and establishments have the right to own building lands and built real estates which are necessary for exercising their activities and expanding them, whatever is the nationality or place of residence of its partners, shareholders, or the percentage of their participation.
Joint stock companies established under this Law are not exempted from the obligation to distribute 10% of their profits to their employees. Furthermore, their boards of directors may be totally composed of foreigners. The tax exemptions provided in the above-mentioned Law include exemption from the tax on revenues of Commercial and Industrial Activity of individuals, or the tax on profits of corporations and on their future expansions as the case may be, for a period of five years starting from the first financial year subsequent to the start of production or exercise of the activity. This exemption shall be for a period of ten years with respect to companies and establishments set up in the new industrial zones, the new urban communities and in the remote areas determined by a decision of the Prime Minister. In addition, profits of companies and establishments exercising their activities outside the Old Nile Valley, and the partners' shares therein shall be exempted from the tax on Revenues of Commercial and Industrial Activity or the Tax on Profits of Corporations as the case may be, for a period of Twenty Years, starting from the first financial year subsequent to the start of production or exercise of the activity. A decision of the Cabinet of Ministers determines the areas to which this provision shall apply. A percentage of the paid up capital equivalent to the Central Bank of Egypt's lending and discount rate for the accounting year, shall also be exempted from the tax on profits corporations, provided that the company is a joint stock company and its stocks are registered in one of the stock exchanges. Moreover, yields of bonds and finance share warrants, and other similar securities issued by the joint stock companies shall be exempted from the tax on revenues of movable capitals, provided they are offered for public subscription and are registered in one of the stock exchanges. The Investment Law on Investment Guarantees and Incentives also provides for subjection of all imported machines equipment and instruments that are necessary for the projects to a reduced customs tax of 5%. Finally, this Law provides that settling the investment disputes in connection with implementation of its provisions may be carried out in the manner agreed upon with the investor, and agreement may be reached between the concerned parties on settling these disputes within the context of the Conventions in force between the Arab Republic of Egypt and the country of the investor, or within the context of the Agreement on Settlement of Disputes which Arise in Respect of Investments, between the Countries and the Nationals of the other countries, which the Arab Republic of Egypt adhered to by virtue of Law No. 90 of the year 1971 (i.e. the Washington Convention of March 18, 1965 creating ICSID), according to the conditions, terms and in the cases where these agreements apply, or according to the provisions of the Egyptian Law on Arbitration in Civil and Commercial Matters promulgated by Law No. 27 of the year 1994 as amended. Agreement may also be reached on settling the afore-mentioned disputes by arbitration before the Cairo Regional Center for International Commercial Arbitration.
The Law of the Economic Zones OF special nature
The Law of the Economic Zones of Special Nature (the “Economic Zones Law”) was promulgated by Law No. 83 of 2002. The economic zones areas and the authorities that manage them are established by a Presidential Decree. The aim of each Authority is to encourage investments –in the economic zone under its responsibility- for the establishment of cultivation, industrial and services projects that are able to compete with comparable ones abroad. Each economic zone has a special customs and taxes administration system that is established by the board of directors of the economic zone with the approval of the Minister of Finance. The Economic Zones Law provides for the possibility of terminating the employment contracts of the employees in the economic zones, according to terms easier than those prevailing under the Egyptian Labor Law, as well as for the possibility of establishment of a special system for the social insurance of those employees. The income tax in the economic zones is 10% of the net income except for the income derived from the salaries of those working in them, which is 5%. The profits derived from bonds and from loans to establishments in the economic zones are exempt from taxes, and no sales taxes or duties or other direct or indirect taxes may be imposed in them. The machines, raw materials, spare parts, components …etc that are necessary for the authorized activities in the economic zones may be imported without permits, and are exempt form the customs taxes, the sales taxes and from all other taxes and duties. The products of those establishments may be exported without permits, and are subject to the customs taxes, the sales taxes and other taxes and duties only on the imported components of those parts when they enter the local Egyptian market. Furthermore, the establishments operating in economic zones may not be subject to nationalization, nor may they be subject to sequestration, freeze of assets or to confiscation except by a judicial judgment, and those establishments are entitled to decide on the prices of their products and services without governmental interference. IMPORT AND EXPORT
Only Egyptian nationals and fully Egyptian owned and managed companies may engage in importation into Egypt for trade on condition of registration in the Register of Importers.
Nevertheless, the Investment Law provides that all companies and establishments subject to this Law may import by themselves or via third parties what they need for their establishment, expansion or operation, of production necessities, materials, machines, equipment, spare parts, and means of transport which are suitable to the nature of their activities, without need for recording in the Register of Importers. Registration in the Register of Exporters is needed for engagement in export from Egypt. There are no restrictions imposed on foreigners or local entities wholly or partly owned by foreigners with regard to export of products from Egypt.
Companies and establishments subject to the Investment Law have the right to export their products by themselves or through middlemen without a license and without need for their registration in the Register of Exporters.
THE EGYPTIAN INVESTMENT LAWBy Dr. Tarek F. RiadHarvard Law School LL.M. (1982), S.J.D. (1985)
Managing Partner of Kosheri, Rashed & Riad
Professor of Law & Deputy Director of Center René-Jean DupuyFor Law and Development Special legal counsel to the speaker ofThe Egyptian People's Assembly E-mail: email@example.com@firstname.lastname@example.org Web site : www.krr-law.com