In an aim to revitalize and enhance the investment landscape, the Egyptian government is constantly seeking to undertake and implement new changes to attract both foreign and domestic investments. This strive for change has been signalled by the recent amendments to investment law No.72 of 2017 (“Investment Law”), which anticipated to impact the investment scene and commercial market in general. On the 25^th of July 2023, the law no. 160 of 2023 amending specific provisions in the Investment Law has been issued (the “Amendments”).

We tackle in this article the core changes that occurred to the Investments Law which mainly focus on amending the private incentives granted under articles 1, 9, 11(1), 12(2), 13, 14(1), 17, 20, 34, and 40(2) & (3) of the Investments Law. The Amendments are summarised as follows:

Eligibility for the Investment Law’ General Incentives:

The Amendments expand the scope of eligibility to the general incentives stated under the Investment Law to be applied on all investment projects falling under the application of the Investment Law, save for projects established under in a free zone, regardless of their establishment date whether before or after the implementation of its provisions.

Reduction of investment hurdles

The incentives provided under the Amendments include, inter alia, the following:

• The Amendment provides for a significant alteration being a 50% deduction from the investment costs within Sector (A).
• Under the amended Article 12, the maximum period for founding entities to carry out investment projects has been increased from 3 years to 9 years which constitutes significant change, that would allow for a more lenient system and comprehensive long-term projects.
• The Amendments provide for an exemption up to 50% of the usufruct of project land’s consumption utility bills for a maximum period of ten (10) years starting from the date of operation, based on the competent minister’s proposal.
• Further, upon a proposal by the Competent Minister, the Cabinet of Ministers may pass a decree to introduce new incentive related to the exemption from costs in an amount that should not surpass 50% of the cost of facilities or any other services related to the infrastructure construction. This would be conducted in accordance with the conditions and terms issued and determined by the Cabinet of Ministers.
• Moreover, the Amendments allow for the possibility of paying cash incentive varying between 35% and 55% of the income tax paid by an industrial establishment for its project or expansion(s) that has been funded through a minimum of 50% of foreign currency funds injected from abroad provided that the project or its expansion(s) starts operating within a period of 6 years from the date of entry into force of the Amendments. In the same vein, this period may be extended for another period of 6 years upon a decision from the Cabinet of Ministers and a joint proposal of the competent and designated ministers of ministries of industry and finance, which shall not exceed 10 years.

Service focused free zones

Increasing the number of free zones in the country and its licensing scope is one of the direct sources to attract more foreign investments in the country. The Amendments introduces significant changes to the permitted activities/licenses in the free zone regime by allowing for licensing projects in the fields of oil processing, fertilizer industries, iron and steel, natural gas processing, liquidation, and transport, and the energy intensive industries, may be established. To obtain these licenses, prior approval from the Supreme Council for Energy should be obtained. Notable exceptions encompass projects related to alcoholic beverages, alcoholic substances, weapons, explosives, and other projects linked to national security to be established within the free zone regime. 

Other changes

Further, it has been provided under the Amendment that as an exception, the ingress of the materials, waste, and scraps resulting from the activities of the projects operating within the free zones into the country is permitted whenever such ingress is for the purpose of disposal or recycling thereof, by the safe methods and means prescribed in accordance with the Environment Law no. 4 of 1994 at the expense of the concerned party as well as the provisions of the Waste Management Law no.202 of 2020.

Conclusion

The impact of the Amendments is yet to be seen. However, in the recent context where the country stands, it is anticipated that the Amendments would provide more protection and encouragement for foreign investors in the country and more flow in the investment projects in different sectors. The Amendments reflect the Government’s consideration of the environment’s protection standards, a clear path towards an increase in the direct foreign investments in the country with the frame worked incentives, procedures and measures.

Authors:  Hegui Taha, Partner, Maha El Meihy, Legal Director and Rana Moustafa, Associate.

For further information, please contact Alex Saleh (alex.saleh@glaco.com) and Hegui Taha (hegui.taha@glaco.com).