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The most important incentives and advantages of investing in Egypt
The Egyptian legislator in the Investment Act has drawn up a special chapter of Title II which sets out the advantages of investing in Egypt for the incentives it has established for an investment project by means of articles (9-14). The regulations on these incentives also set out the implementing regulations in chapter III of Part Two in articles (2 to 13). The legislator divided the advantages of investment in Egypt into three types: public and private incentives and then additional incentives. We will examine these types of incentives and advantages of investment in Egypt:
First: General incentives and advantages of investment in Egypt:-
General incentives for an investment project are those enjoyed by all investment projects as a general rule, except for projects established in the free zone system, where they enjoy incentives and a special regime, article (9) of the Act. Following this general rule, the legislator has defined the incentives and benefits of investment in Egypt under article 10 of the Act, to which we shall refer respectively:
- Exemption from decipherment tax, authentication fees and month for contracts of incorporation of companies, enterprises, credit facility contracts and foreclosures associated with their business for a period of five years from the date on which they are registered with the commercial register (1/10 of the Act).
- One of the most important advantages of investment in Egypt is the exemption from the above-mentioned tax and fees of land registration contracts for the establishment of companies and enterprises (2/10 of the Act).
- Companies and enterprises subject to the Investment Act shall be subject to the provision of the article (4) of the Act Regulating Customs Exemptions promulgated by Act No. 86 on the collection of a customs tax in a uniform category (2%) of value, for all equipment, equipment and equipment imported by an investment project necessary for the establishment of companies and enterprises subject to the Investment Act (3/10 of the Act).
- The legislature has decided that the above-mentioned unified category (2%) shall apply to all machinery, equipment and equipment required for the construction or completion of public facilities and companies subject to the law and engaged in public utility projects (4/10).
- One of the advantages of investing in investment projects of an industrial nature subject to the Investment Act is the duty-free import of templates, cylinders and other inputs of a similar nature for use during a temporary period in the manufacture of their products and their re-export abroad, without prejudice to the provisional release provisions of the Customs Act No. 66 of 1963 (5/10).
- Release and repatriation shall be under the terms of the documents of arrival, but the documents of entry and return shall be recorded in records prepared for this purpose by the Authority in coordination with the Ministry of Finance (6/10).
Second: Among the advantages of investing in Egypt “special incentives”:
Under articles 10 and 11 of the Investment Act, the legislator establishes the characteristics of investment in Egypt, particularly for investment projects subject to its provisions. Article 10 specifies the types and nature of such incentives, and article 11 sets forth the conditions for investment projects to enjoy such special incentives. We will point to both on independence.
Types and nature of special incentives for investment in Egypt:
Special incentives, which are granted to investment projects that arise after the introduction of the Investment Act No. 72 of 2017, mean the date after 31 May 2017 of the promulgation of the Investment Act.
Such projects must be in accordance with the investment chart provided in articles 17.20 of the Investment Systems Section.
It is clear from the first paragraph of article 11 that they are financial incentives to be deducted from the net taxable profits, stating that: “Investment projects established after the introduction of this Act shall be granted an investment incentive against net taxable profits as follows.”
(A) 50% of the sector’s investment costs:
This sector includes the geographical areas most in need of development in accordance with the investment chart provided for in articles (17- 20) of the Investment Act, as mentioned above.
In addition to this geographical area, the legislature requires this exemption to be made on the basis of data and statistics issued by the Central Bureau of Mobilization and Statistics and in accordance with the distribution of investment activities, as indicated in the implementing regulations of the Act.
In this regard, the implementing regulations of the Act, in chapter III of Part II thereof, specify the geographical areas of sectors (a, b) in the application of article 11 of the Act (article 10, paragraph 1).
According to these controls for the enjoyment of a discount of 50% of production costs, the project must be established after the introduction of the Investment Act No. 72 of 2017 and must be carried out within the limits of the investment chart, in addition to data and statistics from specific organs of the Central Bureau of Public Mobilization and Statistics in accordance with their investment activities, as indicated in the implementing regulations.
The Egyptian legislature has taken some steps to give these incentives to investment projects. These are special benefits for these projects, in addition to the public incentives it has already established.
(b) 30% of the sector’s investment costs:
This sector refers to the rest of the Arab Republic of Egypt, according to the distribution of investment activities, for the projects specified in the same article 1, paragraph 1, as mentioned above:-
- Medium and small enterprises.
- Projects that rely on or produce new and renewable energy.
- Service and strategic projects are defined by a decision of the Supreme Council.
- Tourism projects designated by decision of the Supreme Council
- Projects for the production and distribution of electricity, defined by a decision of the Prime Minister of the Council of Ministers on the joint offer of the Minister for Electricity, the Minister for Electricity and the Minister of Finance.
- Projects whose production is exported outside the geographical territory of the Arab Republic of Egypt.
- The automotive industry and its nutritious industries.
- Wood, furniture, printing, packaging and chemical industries.
- The antibiotic industry, oncology drugs and cosmetics.
- Food industries, agricultural crops and recycling of agricultural waste.
- Engineering, metallurgical, textile and leather industries.
The second to fifth paragraphs of the article (11) of the Investment Act referred to certain controls to enjoy the special incentives referred to in paragraph 1 of the same article to which we will refer.
-Controls governing the enjoyment of special incentives from investment features in Egypt:
- The investment incentive does not exceed 80% of the capital paid up to the date of the activity in accordance with the provisions of the Income Tax Act.
- The period of deduction shall not exceed seven years from the date of commencement of the activity.
- The Prime Minister shall issue a decision on the basis of a joint offer by the relevant Minister, the Minister of Finance and the Minister concerned to determine the distribution of the subsectors of investment activities in sectors (a) and (b) referred to in paragraph 1 of the same article (11).
- The implementing regulations of the Act spell out the concept of investment cost and the geographical scope of sectors (a) and (b) and the conditions and controls for the granting of special incentives and include the subsidiary investment activities contained in the decision of the President of the Council of Ministers as soon as it is issued.
- The implementing regulation on sector (b) is set out in chapter II, chapter III, and article 10, which sets out all projects in the rest of the Republic.
- Although the above-mentioned article 11 echoes most of the cases of increased development in most areas, sectors and industries, in addition to the clarification provided in article X of the implementing regulations, the legislator fears that other needs and new technological areas will emerge, adding the last paragraph of the article. (11) New activities may be added to enjoy the special benefits and incentives by decision of the Supreme Council.
-The conditions for the enjoyment of the special incentives and benefits of investment in Egypt provided for in article 11 of the Act are those of investment in Egypt:
The legislator has established specific conditions for the investment project to enjoy the special incentives mentioned in article 12.
These conditions are:
- The establishment of a new company or enterprise to establish the investment project.
- The company or enterprise shall be established within a maximum of three years from the date of operation of the implementing regulations of the Act. By decision of the Council of Ministers and on the offer of the competent minister, this period may be extended for one time.
“This requirement is logical and in keeping with the principles and objectives of the Investment Act. The Egyptian legislator hopes not only to invest in Egypt but also to make this investment and enjoy its benefits as soon as possible so that the country will need to develop in all areas as soon as it tries to race against time and make up for decades without achieving it. The granting of special benefits was also intended to speed up the start-up and operation of investment projects.“
- The company or enterprise maintains regular accounts.
“The legislator added to this requirement that in cases where a company or enterprise has business in more than one region, it is entitled to enjoy and benefit from the ratios established for each region, provided that each region has separate accounts.”
- None of the shareholders, associates or owners of enterprises has provided, contributed to or been used in the establishment, establishment or establishment of an incentive investment project, any of the assets of the company or enterprise in existence at the time of operation of the provisions of Investment Act 72 of 2017, or has liquidated that company or enterprise within the period specified in the clause. (2) Of the same article (12), namely the establishment of an investment project within a maximum of three years from the date of entry into force of the implementing regulations of the Act, for the purpose of establishing a new investment project with the special incentives referred to.
In violation of this requirement, the legislator has established that the above-mentioned incentive has been lost and that the company or enterprise is obliged to pay the special incentives and all tax benefits.
This requirement actually eliminates any manipulation by the investor and acts that give rise to incentives for those who are not entitled to them to the detriment of the country’s economy.
Third: Additional incentives for investment in Egypt:
In accordance with the provisions of chapter II, sections II, Article 13, 14 of the Investment Act, the project grants additional incentives, which the legislator calls “additional incentives.”
The concept of additional incentives is that an investment project has the right to enjoy incentives other than those mentioned above in both public and private incentives. In addition to pre-project incentives, the legislator has permitted additional incentives by decision of the Council of Ministers to the same projects listed in article 11 of the Act, described earlier under the heading “special incentives.”
One of Egypt’s additional investment features:-
According to article 13 of the Act, an additional incentive is the following:
- To allow the establishment or administration of special customs outlets for the exports of the investment project in agreement with the Minister of Finance.
- The State shall bear the value of what it costs the investor to deliver the facilities to the property allocated to the investment project or part thereof after the project has actually been operational.
- Part of the cost of technical training for employees is borne by the State.
- Refund half the value of land allocated to industrial projects in case production begins within two years of the land being delivered.
- Allocation of land free of charge for certain strategic activities in accordance with legally prescribed controls.
Additional non-tax incentives are a feature of investment in Egypt:
One of the advantages of enjoyment in Egypt added in the second paragraph of the same article is that:
- “It shall also be issued by decision of the Council of Ministers upon the offer of the competent Minister to introduce other non-tax incentives whenever the need arises.”
- The last paragraph of the same article (13) determined that the implementing regulations set out the rules, controls and conditions for the granting of additional incentives established in the article.
- In this regard, the terms and regulations for granting investment projects the additional incentives referred to in chapter III, section II (12), of the Regulations.
- It is clear from the wording of article 13 of the above-mentioned Act that it has expanded in scope and types of additional incentives to the general benefits it receives, particularly for the restitution of half or part of the property allocated to the project, where it is sufficient simply to grant it at low prices, which will increase in value in turn over time and become a substantial asset when it is liquidated or abandoned.
- However, it is mitigating that the legislator requires the effective operation of the project before agreeing to assume the value of part of the property by assessing the success of the project and the financial or productive returns it produces in order to assess the necessity for the State to assume part of the value of the property.