Egypt’s New Investment Laws
By: Lamia Khalil and Yasser Madkour
- One of the incentives offered is trimming the sales tax on machinery and equipment necessary for production to 5% from as high as 10%. This tax will be returned to the investor when presenting his first tax return.
- Customs duties on imported equipment and machinery necessary for the establishments of a project under Law 8/1997 are set at 2% instead of 5%.
- Fees for non-pre-defined destination goods entering free zones are cancelled.
- Preventing double taxation
2. Non-tax incentives to labor-intensive projects and to investments in remote area and projects addressing logistics, energy, agriculture, and transportation
- Granting investors payment facilities in relation to the price of the power required to operate a project,
- Subsidizing employees’ training programmers,
- Allocating government land at reduced prices, and refunding the expenses paid by the owners of the project to infrastructure facilities after the operation of the project.
- Allowing a project to establish its own customs ports.
3. Infringements by the Management
The new investments law provides for that in such cases where crimes are committed in the name /on behalf of the company, the manager responsible for the actual management of the company shall not be penalized except in such cases where (1) it has been proven he had knowledge of the crime (2) he intended to commit it in order to achieve a personal or third party’s interest.
In such cases where the said manager’s responsibility has not been proven pursuant to the provisions of the preceding paragraph, the company shall be penalized by a fine not less than 4 times and not more than 10 times the fine provided for such a crime.
A judgment may be rendered suspending the license for a period not less than one year. In case of recurrence, a judgment may be rendered cancelling the company’s license or winding up the company as the case may be.
4. Disposition of land
The flexibility in connection with the mechanisms of land allocation to investors. Thus, it allows land sale to investors while payment of the price by the investor could be postponed until the actual operation of the project takes place. Alternatively, an investor could be licensed the right of usufruct of land for a period of 30 renewable years. An investor could, instead, be allowed to lease, lease to own, or even choose to submit the land as in-kind shares in a project.
5. The one stop shop system
Allowing investors to deal with a single window operated by GAFI
The General Authority for Investment (GAFI) act as a one- stop-shop from which investors, in certain sectors, can get all licenses and approvals needed to establish and run their business which obligates a Coordination between the different authorities for the success of the one-stop-system.
This “one-stop shop” system is limited to specific industries that are to be determined through a presidential decree
6. Facilitated exit procedures
The investors can exit the market without restrictions. Upon receiving the liquidation request, the competent authorities shall notify the investor with all its pending obligations within a maximum period of 120 working days. The Lapse of the said 120 days without a reply shall be considered an automatic release of liability for the investor
7. Exclusions from the bids and tender laws
A selection between investors qualified to obtain a license for a project shall be conducted on a free- competition and transparency basis without abiding by the Egyptian Bids and Tenders Law no. 89/1998. The procedures and criteria of selection shall be decided in the executive regulations
8. Alternative forums for investor state dispute
Encourage amicable settlement of investment disputes with the government by the creation of three court forums:
- The complaint committee: – Reviews challenges of GAFI decisions submitted by the investor
- The committee of resolution of investment dispute. : – Established by the cabinet to examine disputes arising between investors and governmental authorities
- The committee for settlement of investment contract dispute: -(the ministerial committee) That should decide upon disputes between investors and governmental authorities
– The decisions of the said committees shall be binding to administrative bodies, without prejudice to the investors’ right to recourse to litigation or arbitration.
The ministerial committee is formed from a selection of senior state officials, ministers and representatives of sovereign entities. The Prime Minister and ministers of the economic group, the minister of international cooperation, the minister of justice, as well as representatives of the Egyptian armed forces and the administrative supervision authority lead the committee.
The committee will attempt to reach an amicable settlement between the parties of those agreements in a manner that achieves economic equilibrium between the parties, on the basis of applicable laws and the preservation of public funds.
The Decree has granted the committee certain important new powers to resolve disputes on investment contracts, provided that the parties to those contracts consent to the settlement. These powers include the rescheduling of financial dues, the correction of the procedures taken to execute the relevant contract, as well as extending maturities, durations and deadlines stipulated in the contract. In fulfilling its purpose, the committee will hold sessions with the conflicting parties to discuss the subject of the dispute and the options acceptable to the parties, and will also consult technical experts specialized in the relevant matters at dispute.
The particular strength of the committee is its power to suggest amendments to the administrative contracts, thus providing the parties with the opportunity to avoid potential disputes and make acceptable amendments.