Egypt is currently undertaking a major evolution and transition in its investment, business and commercial laws. In this article we will undertake to give an overview of such changes while providing some details of certain laws that we believe are important in taking the decision to invest and / or do business in Egypt.
THE LEGAL FRAME WORK FOR INVESTING IN EGYPT.
The current Law No. 8 of 1997 on Investment Guarantees and Incentives Law as amended1 (the "Investment Law") still offers certain incentives for Egyptians and foreigners for investment in certain fields of activities including interalia the following:
- Reclamation and/or cultivation of barren and desert lands.
- Animal, poultry and fish production.
- Industry and mining.
- Equipping and developing specific industrial areas.
- Hotels, Motels, Hotel flats, Tourist Villages and Touristic Transport.
- Refrigerated transport of goods in refrigerators for storage of agricultural products, industrial products and food stuffs, containers stations and grain silos.
- Air transport and the services directly connected therewith.
- Overseas maritime transport.
- Oil services, assisting digging and exploration operations, and transport and delivery of gas.
- Housing projects, the units of which are wholly leased empty for non-administrative housing purposes.
- The infrastructure comprising drinking water, drainage, electricity, roads and communications, multi stores garages under the BOT system whether over or under land and waiting car meters.
- Hospitals and medical and treatment centers which offer 10% of their capacity free of charge.
- Financial leasing.
- Guaranteeing subscription in securities.
- Risk capital.
- Production of computer software and systems.
- Projects funded by the Social Fund for Development.
- Development of new Urban Communities.
- Design of programs and production of electronic components.
- Formation and management of technology areas.
- Credit classification of establishments and provision of information about them in the stock markets.
- Purchase and liquidation of debts of small and medium size establishments.
- Management and touristic marketing of hotels and motels and hotel apartments and touristic villages.
- Building and management of Nile River docks.
- Formation, management, operation and maintenance of Collective river transport means, inside and between cities and new urban communities.
- Management of execution of industrial and services projects.
- Collection of garbage and residuals of productive and services activities and their treatment.
Moreover, the Investment Law allows the Council of Ministers to add other fields to those mentioned herein above.
The Investment Law protects Egyptians as well as foreign persons, companies and establishments against nationalization and confiscation.
There are no price controls on the products of companies and establishments subject to this Law or on their profits. Those companies and establishments have the right to own building lands and built real estates which are necessary for exercising their activities and expanding them, whatever is the nationality or place of residence of its partners, shareholders, or the percentage of their participation.
Joint stock companies established under this Law are not exempted from the obligation to distribute 10% of their profits to their employees. Furthermore, their boards of directors may be totally composed of foreigners.
All corporate tax exemptions that were provided in the Investment Law have been abolished following the promulgation of the new Income Tax Law no 91 of 2005 which reduced in general the corporate tax rates from 40% to 20%. Accordingly all new companies established under the Investment Law after the promulgation of the new Income Tax Law No 91 for 2005 are subject to a uniform tax rate of 20% currently the same rate that is applicable to normal companies established under the companies Law No 159 for 1981 as amended.
The Investment Law still provides for subjection of all imported machines equipment and instruments that are necessary for the projects to a reduced customs tax of 5%.
Finally, this Law provides that settling the investment disputes in connection with implementation of its provisions may be carried out in the manner agreed upon with the investor, and agreement may be reached between the concerned parties on settling these disputes within the context of the Conventions in force between the Arab Republic of Egypt and the country of the investor, or within the context of the Agreement on Settlement of Disputes which arises in respect of Investments, between the Countries and the Nationals of the other Countries, which the Arab Republic of Egypt adhered to by virtue of Law No. 90 of the year 1971 (i.e. the Washington Convention of March 18, 1965 creating ICSID), according to the conditions, terms and in the cases where these agreements apply, or according to the provisions of the Egyptian Law on Arbitration in Civil and Commercial Matters promulgated by Law No. 27 of the year 1994 as amended.
Agreement may also be reached on settling the afore-mentioned disputes by arbitration before the Cairo Regional Center for International Commercial Arbitration.Click here to read the article in full.
1 The Investment law has been amended by law no. 91 for 2005.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.