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INVESTMENT REGIMES IN EGYPT

Inland investment is governed by the Investment Incentives and Guarantees Law No. 72 of 2017 and Companies Law No. 159 of 1981 and their executive regulations. The General Authority for Investment (GAFI) acts as the official regulator for all incorporations and licenses governed by both legislations.​ Some projects require prior approval from relevant ministries in addition to GAFI. Such projects include investments in the Sinai Peninsula, all military product manufacturing and related industries, and those involving tobacco and tobacco products.

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2. Free Zones

Free Zones are one of the distinguished investment pattern​s where you can establish, set up and start your own project under the umbrella of this system according to the provisions Investment Law No. 72 of 2017and its executive regulations. This system is applied by General Authority for Investment and Free zones (GAFI). A free zone is a part of the state land that exists within its political boundaries and subjected to its administrative authority. The treatment aspects that are related to goods movement, either in and out, in relation to customs, import, monetary system and other aspects of dealing differs from the procedures applied inside the country with regard to the similar transactions.

In Egypt, there exist Alexandria Public Free ZoneNasr City Public Free ZonePort Said Public Free ZoneSuez Public Free ZoneIsmailia Public Free ZoneDamietta Public Free ZoneMedia Public Free ZoneShebin El- Kom Public Free ZoneQeft Public Free Zone and Port Said East Port Public Free Zone.

3. Investment Zones

Subject to a decree issued by the Prime Minister, investment zones specialized in various investment fields may be established, including logistic, agricultural, and industrial zones. The decision incorporating the zone shall state the location and coordinates of the zone, the nature of activities to be practiced therein, the term for completing the procedures required for the establishment of the zone, and any general conditions related to conducting such activities.

Currently, there are (13) investment zones specialized in various fields and distributed among (7) Egyptian governorates.

4. Special Economic Zones

SEZONE is the first economic zone with a special nature to be established in Egypt by the law No. 83 of 2002. The SEZONE will develop an international recognition and reputation for being a competitive business location that provides Egyptian and foreign investors with top-class infrastructure, market access, and streamlined administrative procedures.

The development of SEZONE is intended to provide an attractive environment for medium and light industries as well as logistics services, thus enhancing economic activity in the region and creating new employment opportunities.

Location: SEZONE is located in the Suez Governorate in the Sokhna area and adjacent to the Sokhna Port near the southern entrance to the Suez Canal. The land area earmarked for the SEZONE 1st phase is approximately 20.4 km2.

5. Technological Zones

Upon a proposal by the GAFI’s Board of Directors and a request of the Minister of Communications and Information Technology, the Prime Minister may license the establishment of Technological Zones in the field of communications and information technology, including industrial activities, design and development of electronics, data centers, outsourcing activities, software development, technological education, and other associated or complementing activities.

6. Investment Industrial Zones

Qualifying Industrial Zones in Egypt are located in the Greater Cairo Zone, the Alexandria Zone, the Suez Canal Zone, the Central Delta region and Upper Egypt. These five regions cover multiple districts and governorates including:

  1. Greater Cairo Zone: Giza, Shoubra El Kheima, Nasr City, Tenth of Ramadan City, Fifteenth of May City, Badr City , Sixth of October City, El Obour City , Kalioub City and the industrial area in Gesr El Suez.
  2. Alexandria Zone: Borg El Arab and Dakahleyya governorate.
  3. Suez Canal Zone: Port Said, Ismailia and Suez.
  4. Central Delta region: Gharbeyya, Monofeya, and Damietta governorates.
  5. Upper Egypt: Minya and Beni Suef governorates.

As of February 2017, there were 961 registered QIZ companies, out of which the vast majority 765 companies (79.6%) produce textiles and clothing items. Of these, 196 produce ready-made garments. As the U.S. tariffs on textile and apparel goods are relatively high, production of these goods in QIZs is particularly attractive. In addition, 70 companies (7.3%) operate in the processed agricultural products sector. Alexandria has the highest concentration of companies, hosting 235 companies (24.5%), while Tenth of Ramadan has the next highest concentration with 166 companies.

 

 

 

 

 

 

 

 

FREE ZONES REGIME

The general purpose of the Free Zones projects is to help increase the exports. Free Zones are located within the national territory but are considered outside the customs boundaries. The commodities exported abroad by Free Zone projects or imported for the purposes of carrying out their activities, are not subject to the rules governing import and export, or to the customs procedures related to exports and imports. Such commodities are not subject to customs duties, value-added tax, or other taxes and duties.

With the exception of passenger vehicles, all types of tools, supplies, machinery and all means of transportation necessary for exercising the activity licensed for all projects existing within the Free Zone, are exempted from customs duties, VAT, and other taxes and duties, even if the nature and requisite for carrying out such activity requires their temporary exit from the Free Zone to the Country and return thereafter.

Importation from the Free Zones into the Country is subject to the general rules applicable to importation from abroad.

These Projects shall submit their financial statements accredited by a certified accountant to the Ministries of Finance and Investment.

There are two forms of Free Zones in Egypt, which are the Public Free Zones and the Private Free Zones:

1. Public Free Zones

The Board of Directors of the Public Free Zone shall issue final approval on establishing projects within the Zone, or within the Private Free Zone located in its geographic domain. The Chairman of the Board of Directors of the Zone shall issue licenses to these projects to conduct their activities. The board should clarify its reasons in case of refusing to issue a license.

The allocation of real-estate properties and lands required for conducting the projects operating under the Public Free Zones’ Regime shall be subject to the usufruct system. Lands in the Public Free Zones are offered for usufruct in return for:

  1. $3.5 per meter square annually for industrial projects.
  2. $7.0 per meter square annually for other projects (storage & services).

Projects established in Public Free Zones, and the profits distributed by them, are not subject to the provisions of the applicable laws on taxes and duties in Egypt. However, such projects are subject to the following treatment:

1- A fee of two percent (2%) of the commodity value upon ingress (CIF) for the storage -projects and a fee of one percent (1%) of the commodity value upon egress (FOB) for manufacturing and assembly projects. Goods in transit for trade, which have a determined destination, shall be exempted from this duty.

2- A fee of one percent (1%) of the total revenues realized by the projects whose main activity does not require the ingress or egress of goods, based on the financial statements accredited by a certified accountant.

In Egypt, there are Alexandria Public Free ZoneNasr City Public Free ZonePort Said Public Free ZoneSuez Public Free ZoneIsmailia Public Free ZoneDamietta Public Free ZoneMedia Public Free ZoneShebin El- Kom Public Free ZoneQeft Public Free Zone and Port Said East Port Public Free Zone.

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2. Private Free Zone

For establishing a Private Free zone company, the following conditions must be fulfilled:

  1. There is no suitable location for the project inside the Public Free Zones.
  2. The project shall take the form of a joint stock company (JSC) or a limited liability company (LLC);
  3. The minimum capital shall be USD 10,000,000;
  4. Investment costs shall be USD 20,000,000;
  5. The minimum area may not be less than 20,000 square meter;
  6. The minimum employees may not be less than 500 workers;
  7. Export percentage shall be 80%;
  8. The company should at least use 40% local elements;
  9. Compliance with the conditions of industrial security, civil defense and fire defense;
  10. A new company or entity is established within three years from the date the regulation came into force;
  11. The company or establishment maintains regular accounts.

Projects established in Private Free Zones, and the profits distributed by them, are not subject to the provisions of the applicable laws on taxes and duties in Egypt. However, such projects are subject to the following treatment:

1- A fee of two percent (2%) of the commodity value upon ingress (CIF) for the storage -projects and a fee of one percent (1%) of the commodity value upon egress (FOB) for manufacturing and assembly projects. Goods in transit for trade, which have a determined destination, shall be exempted from this duty.

2- A fee of one percent (1%) of the total revenues realized by the projects whose main activity does not require the ingress or egress of goods, based on the financial statements accredited by a certified accountant.

In all cases, projects established within the Public and Private Free Zones shall pay annual fees to GAFI for the services rendered thereby, such fees amount to half in a thousand (0.5 per 1000) of the issued capital regarding industrial and assembly projects, one in a thousand (1 per 1000) of the issued capital regarding storage and services projects, at a maximum of EGP one hundred thousand (EGP 100,000). Such fees are to be paid in free convertible currency.

Projects operating under the Free Zones regime may convert to the Inland Investment regime provided:

  1. The project carried out its activities according to the Free Zones regime for one year at least.
  2. The project carries out its activities after conversion outside the boundaries of the Free Zone, if it was carrying out its activities in a Public Free Zone.
  3. All the dues of GAFI and other governmental authorities are duly paid.