New Investment Law
This year Egypt has promulgated a landmark Investment Law that will enhance the investment environment, and expand the economic growth. The New Investment Law, compliments Egypt’s other economic reforms that have been recently adopted, inter alia, the liberalization of the foreign exchange system, and the VAT system.
The main distinctive features of the New Investment Law no. 72 of the year 2017 [Law], would be summarized as follows:
First: Investment Guarantees:
i. Granting a residence permit for foreign investors during the term of their Investment Projects in Egypt [Article 3/4];
ii. Investment Projects may not be nationalized [Article 4/1];
iii. The funds of the Investment Project may not be expropriated except for public benefit, and in return for fair compensation; paid in advance and equivalent to fair economic value on the day preceding the issue of the expropriation decision. Besides, the Investor shall be entitled to transfer the amounts of the paid compensation with no restrictions. [Article 4/2]
iv. None of the Egyptian Authorities is entitled to suspend or terminate any license and/or to withdraw the properties granted to any Investor, unless the concerned Authority has fulfilled the following pre-conditions: (i) serving a notice to the Investor setting forth the alleged breaches and/or violations; (ii) granting a reasonable time to the Investor to remedy the breaches and/or violations; and (iii) taking the opinion of GAFI, prior to the issuance of the suspension or termination [Article 5];
v. The Investor is entitled to establish and expand the Investment Project, finance it from abroad in foreign currency, without any restrictions. The Investor shall further be entitled to own, manage, use, dispose of the Investment Project and to maintain its profits, and to transfer it abroad and to liquidate the Investment Project and transfer the revenue of the liquidation abroad without any restrictions [Article 6/1];
vi. The State allows the availability of all the cash transfers related to the foreign investment, in a free and prompt manner, to its territory and abroad. The State further allows the transfer of the local currency into foreign currencies [Article 6/2];
vii. In case of liquidation, the competent Authorities shall be committed to notify GAFI and the Company under liquidation of its obligations within a maximum period of 120 days [Article 6/3];
viii. The Investment Projects subject to the Law shall have the right to import, by themselves or via Third Parties, whatever they need for their establishment, expansion, operation or production, from the raw materials, machines, replacements, spare parts and means of transport relatable to the Project without need for recording in the register of importers. All that, with no need for the registration into the Importation Register and without prejudice to the applicable laws and regulations for importation [Article 7/1];
ix. The Investment Projects shall have the right to export without being licensed, and with no need of registration into the Exportation Register. Provided always that, the Investment Projects, which import or export, shall notify GAFI of quarterly report about the quantities and imported or exported materials, as the case may be [Article 7/2]; and
x. The Investment Project may employ foreign employees within 10% of the total number of the employees, and this percentage may increase to 20% in case of inability to find qualified national labor. Foreign Employees are entitled to transfer all or part of their financial dues abroad. Strategic projects of special importance may be excepted from the percentages referred to subject of observing the training of national labor [Article 8].
Second: General Incentives:
i. The Investment Projects will be exempted, for five (5) years, from Stamp Duty Tax, and notarization fee imposed on Articles of Incorporation and Facility Agreements, Mortgage Documents and Plot of Lands Purchase Agreements [Article 10/1];
ii. The Investment Projects will be benefited from the application of a unified Custom Duty at the rate of 2% of the value of the imported item(s) which are necessary for the incorporation of the Investment Projects [Article 10/2]; and
iii. The Investment Projects of industrial nature will be exempted from the custom duty upon the importation of moulds, models and any tools of similar nature for the purpose of temporary using in industrial projects in Egypt, and then to export it abroad [Article 10].
Third: Corporate Social Responsibility:
The Investor is legally entitled to allocate up to 10% of its net income annual profits for the Corporate Social Responsibility in the following fields: environment protection and enhancement, health, social, cultural services, vocational education, research funding, awareness campaign in agreement with one of the universities or scientific institutions, and scientific training and research [Article 15].
Fourth: Investors Service Center:
Investors Service Center will be established to facilitate and simplify the investment procedures [Article 21].
Fifth: Accreditation Offices:
Accreditation Offices have been established to review and inspect the necessary approvals, licenses and permits required for the establishment, operation and the expansion of the Investment Project, upon the request of the Investor.
Accreditation Offices will issue, at their responsibility, a validation certificate valid for one “1” year. This certificate will be acceptable to the competent authority and administrative entities [Article 22].
Sixth: Investment Dispute Resolution:
i. Challenges Committee: Such Committee(s) will be established to investigate grievances from any decisions issued from GAFI or the competent authorities concerned with issuing approvals, licenses and permits [Article 83].
Grievances shall be submitted to the Committee within 15 working days; calculated as of the day of notification or having knowledge of the decision [Article 84].
ii. Ministerial Committee for the Settlement of Disputes: Ministerial Committee for the Settlement of Disputes arising from the investment contracts to which the State or other governmental authorities is a party thereof.
iii. Arbitration and Meditation Center: A new meditation and arbitration center "the Egyptian Center for Arbitration and Meditation", will be established to solve the investment disputes [Article 91].
N.B. The Law has stipulated further for Special Incentives, Additional Incentives, E-Incorporation System, Systems of Investment in the Investment Zones, the Technological Zones and Free Zones, and other provisions. The Executive Regulations will define and clear up further the above-referenced newly provisions.