1. Introduction

Finally, after almost two (2) years of delay since the Egypt Economic Development Conference that was held in Sharm El Sheikh on March 13, 2015 (“EEDC”), the Egyptian House of Representatives (the “Parliament”) has just passed a new Investment Law on May 7, 2017 (the “New Investment Law”) as a part of the ongoing efforts aiming at bringing back more Foreign Direct Investments (“FDI”) to the country.

According to the latest ranking published by the Financial Times, Egypt is one of the top five (5) global FDI inflows behind the first four (4) countries, namely India, China, Indonesia and the United States respectively.

Upon the issuance of the New Investment Law by the President in the upcoming days, it will replace the existing Investment Law No. 8 of 1997 that was amended by the President during the EEDC, which previous amendment was a misreading of what investors really need in Egypt in my personal opinion.

2. What are the key guarantees and incentives provided under the New Investment Law?

The New Investment Law provides a number of key guarantees and incentives including, inter alia, the following: (the “Incentives”) − Fair and equitable treatment to both foreign and Egyptian investors; however, the Prime Minister will be having the right, subject to the principle of reciprocity, to grant favorable treatment to foreign investors (Article 3);

− Granting a residence permit to foreign investors throughout the term of their investment projects in Egypt (Article 3);

− None of the Egyptian Authorities will be having the right to suspend or terminate any license and/or allocation of properties granted to any investor without satisfying the following conditions (Article 5):

  1. serving a notice to the said investor outlining the relevant breaches and/or violations; made thereby;
  2. granting a reasonable time to the said investor to legitimize the breaches and/or violations above; and
  3. taking an opinion from the General Authority for Free Zones and Investment (“GAFI”) before issuing of the said suspension or termination.

− The right to repatriate profits and/or receive international finance without any restrictions (Article 6);

− Accelerating the liquidation process by requiring receipt of a written notice from the competent authorities outlining all liabilities on the company that is under liquidation by no later than one hundred and twenty (120) days from the date of submitting the relevant liquidation request (Article 6);

− The right to directly import raw materials, equipment, spare parts and/or transportation means as necessary for investment project without requiring the registration with the Importers Registry (Article 6);

− Exemption from stamp duty and notarization fee imposed on Articles of Incorporation, Facilities and Loans Agreements, Security Documents and/or Plot of Lands Purchase Agreements for five (5) years starting from the date of registration with the Commercial Registry (Article 10);

− Application of a unified custom duty at a flat rate of only 2% of the value of any equipment, machinery and devices that are necessary for establishment of investment projects (Article 10);

− Application of a unified custom duty at a flat rate of only 2% of the value of any equipment, machinery and devices that are necessary for establishment or continue any infrastructure projects (Article 10);

− Exemption from the custom duty that is imposed on importation of mould or any similar tools for the purpose of temporary using same in Egypt for industrial projects (Article 10);

− Tax reduction for seven (7) years starting from the date of starting investment projects in Egypt at the following rates, subject to the issuance of the Executive Regulation of the New Investment Law, (Article 11):

  1. 70% of the investment costs for the investment projects that will be established in the geographic locations most in need of development as to be specified by the Central Agency For Public Mobilization & Statistics (“CAPMS”) as per the distribution of investment activities in accordance with the Executive Regulation that will be issued for the New Investment Law;
  2. 50% of the investment costs for the investment projects that will be established in the geographic locations in need of development, other than the locations stated in Item (i) above, as to be specified by CAPMS as per the distribution of investment activities in accordance with the Executive Regulation that will be issued for the New Investment Law;
  3. 30% of the investment costs for investment projects in all over the country with any of the following:

* projects with extensive manpower;

* Micro and Small Enterprises;

* projects producing or depending on new and renewal energy;

* national and strategic or tourism projects as to be specified by the Supreme Investment Council in Egypt;

* electricity production and distribution projects as to be specified by the Prime Minister;

* project exporting its production outside the Egyptian territory;

* automotive production and its supporting projects;

* wooden, furniture, printing, packing and petrochemical projects;

* production of antibiotics, pharmaceutical, cancer drugs or beauty treats;

* production of leather;

* foods and agricultural production as well as management of agricultural waste; and

* engineering rtnd mineral production.

− The Prime Minister may grant any of the following additional incentives (Article 11):

  1. establishment of a special customs gates for imports and exports related to an investment project;
  2. bearing the cost of connecting utilities to the investment project by the State upon the operation of such project;
  3. bearing the personnel technical training costs by the State;
  4. refund of 50% of the value of any plot of land that is allocated to industrial projects providing that the operation thereof shall take place within two (2) years starting from the date of handing over the said; and
  5. allocation of plots of lands for free of charges for strategic business activities.

− Allocation of the properties that are required for establishing any investment projects (Article 35):

3. Who can benefit from the Incentives?

The Incentives are available to both foreign and Egyptian investors providing that a number of conditions shall be satisfied including, inter alia, the following (Articles 1, 3 and 12): − Incorporation of a new company in Egypt (“NewCo”) with an exception to the companies that were established not more than thirty (30) months before the issuance date of the New Investment Law and have not yet start any investment in Egypt;

− The NewCo shall be incorporated by no later than three (3) years from the date of enforcement of the Executive Regulation of the New Investment Law, unless extended for another term by virtue of a decree from the Prime Minister;

− having clear and regular books providing that if the NewCo will carry out investment activities in different zones, then the NewCo shall have separate clear and regular books for each of the said zone;

− The NewCo and/or its shareholders shall not (i) use any asset(s) of any company existing as of the date of the New Investment Law, or (ii) liquidate any company during the term specified in the second item above for the purpose of establishing the NewCo; and

− investment in industry, agricultural, trading, education, healthcare, transportation, tourism, housing, construction, electricity, energy, natural resources, water, telecommunications and technology (the “Investment Sectors”).

4. Social Responsibility

For the first time in Egypt, the New Investment Law explicitly allows investors to allocate up to 10% of the net profits thereof to social development systems by contributing to any of the following fields (Article 15): − taking necessary measures for environment protection;

− provision of healthcare, social or cultural services or programmes or any other development areas; − technical education support or financing of researches or studies aiming at developing or improving production in collaboration with any university or scientific researches institution; and

− scientific research and training.

Investors will also be having the right to deduct the aggregate amount of the allocated percentage as a part of the deductible expenses for the purpose of calculating income tax purpose (Article 15).

5. Foreign Employees

Subject to the stratification of specific criteria, the New Investment Law allows investors to use foreign employees up to 20% of the total number of the investment project’s personnel (Article 8).

6. Available Investment Systems

The New Investment Law provides three (3) types of investment systems that can be summarized as follows: A. Internal Investment System:

The Internal Investment System provides the possibility of investing in any area, other than the Investment and Free Zones, whereby the relevant investment projects shall be made in full compliance with the provisions of all applicable laws without having any special treatments other than stated in the New Investment Law (Article 18).

However, the New Investment Law created a new mechanism called “Certification Offices” that can be engaged by investors for the purpose of reviewing the documents that are required for obtaining any approvals, licenses and authorizations necessary for any investment projects in order to make sure that the said investment projects have the required technical and financial capacity as required under Egyptian laws (Article 21). The said Certification Offices can, at their sole responsibility, issue a certification confirming the satisfaction status of the required terms and conditions for any approvals, licenses and/or authorizations that are necessary for investment projects, which certification shall be valid for one (1) year (Article 21). Upon the issuance of the said certifications, the Certification Offices will be required to send a copy thereof to the competent authorities, which authorities are required to provide their comments on the said certifications by no later than ten (10) business days from the date of receipt of such certification, otherwise the relevant requested approval, licenses and/or authorization shall be deemed acceptable by law and the said competent authorities will be required to issue same (Article 21). B. Investment Zones System:

Investment Zones can be established by virtue of a Decree from the Prime Minister covering any of the Investment Sectors (Article 27) without having the limitations that are applied to Free Zones (Article 32). Each Investment Zone shall be managed by a Board of Directors who shall be having the sole jurisdiction manage the said Investment Zone including, inter alia, granting a sole approval for establishing investment projects therein, which approval shall be sufficient for dealing with all governmental entities in Egypt (Articles 28 and 30). C. Free Zones System

Free Zones can be established in a form of Public or Private Free Zones by virtue of a Decree from the Prime Minister mainly for the exportation purpose, which Free Zones can be established in all Investment Sectors except for: (Article 32) – oil, fertilizers and steal production;

– transportation, liquidation or production of natural gas;

– Heavy Energy Usage Industries as specified by the Supreme Energy Council;

– alcohol and wine productions; and

– weapons, ordnance and explosive production as well as any other products related to the National Security. Each Free Zone shall be managed by a Board of Directors who shall be having the sole jurisdiction manage the said Investment Zone including, inter alia, granting a sole approval for establishing investment projects therein, which approval shall be sufficient for dealing with all governmental entities in Egypt (Articles 31 and 32).

All products imported or exported by the investment projects inside any of the Free Zones, with some exceptions, shall not be subject to (i) the importation and exportation regulations applied outside the Free Zones, and/or (i) custom duty or any other tax including, inter alia, VAT (Article 37).

The investment projects that are established under the Free Zone System shall not be subject to any taxes imposed on distribution of dividends (Article 39). However, these investment projects are only required to pay, inter alia, the following:

2% of the aggregate value of the imported products (CIF) for storage projects noting that transit goods are exempted from the said fee;

1% of the aggregate value of the exported products (FOB) for production projects;

1% of the aggregate income for any investment project that is not involved in importation or exportation;

An annual fee at the rate of 0.001% of the investment project’s issued capital capped at EGP 100,000 (one hundred thousand Egyptian Pounds) as per the criteria to be determined by virtue of the Executive Regulation of the New Investment Law.