GAFI’s Guide on the Committees for

On 15 May 2019, the General Authority for Investment and Free Zones (“GAFI”) published its Decision No. 525 of 2019 on its website, issuing a guide on the formation and operation of GAFI committees that are tasked with determining business commencement dates and/or implementation statuses (“committees”).[1] The guide clarifies the legal foundations of these committees and delineates the procedures related to their formation, tasks, and fees in addition to detailing the general processes of determining business commencement dates as well as sector-specific ones. The Decision goes into effect on the day of its publication in the Investment Gazette.

Background

The guide outlines the legal foundation for the working of the aforementioned committees which find their origin in the Executive Regulations of the Investment Law (the “ER”).[2] Determining when a business actually starts its activity has multiple legal implications, as highlighted in the guide. The most important of these is determining whether or not the company becomes eligible for some of the special and additional incentives provided under the Investment Law (the “Law”). These include deductions from net taxable income (to be applied within seven years from the business commencement date), reimbursement of part or all of the costs of introducing utilities to the lands allocated to investment projects, reimbursement of half of the land value to manufacturing projects (in case production began within two years of land delivery), in addition to various GAFI services such as issuing a residency recommendation for foreign partners, issuing work permits for foreigners, and issuing import and export certificates. For investment projects to be eligible for the special incentives provided under the Law, a new company must have been established to undertake the investment project within three years from the date of the ER’s coming into effect in October 2017.[3] In addition, projects could be eligible for additional incentives provided that they have commenced operations and obtained a certificate to that effect from GAFI, as well as satisfied other conditions that are detailed in the Law and its ER. In this respect, Article (13) of the ER provides that companies and facilities must notify GAFI of the date of their business commencement (i.e., the date they began production/operation or undertook their activities) within 90 days of commencement. GAFI then undertakes the determination of the business commencement date, which it does through one or more committees that it forms for that purpose.

General Process of Determining Business Commencement Dates and Implementation Statuses

Companies and facilities must submit, within 90 days of business commencement, a declaration of commencement and an application requesting the formation of a commencement committee at GAFI. A set of required documents must be submitted, and this includes copies of the company’s incorporation decision, contract, commercial register, tax card, and VAT certificate in addition to a list of on-site machinery and equipment, a report on monthly employment, the company’s first two budgets approved by an auditor, and a statement of the investment costs approved by a registered auditor, among other documents. The guide also specifies fees to be paid for the formation and work of the committees, and these are based on the geographical location of the committees throughout the country. The committees are then formed. Commencement committees – those specifically tasked with determining business commencement dates – comprise four members, one of whom is a representative from the relevant technical authority (as per the activity). On the other hand, implementation status committees – specifically tasked with determining the company’s/facility’s seriousness in undertaking its GAFI-approved activities – are one member less, comprising three members unless it is deemed necessary to include a representative from the relevant authorities (as per the activity). Upon their formation, the committees undertake the necessary field inspections and examination of original documents to determine the date on which the company or facility began business and/or to determine its status with regards to implementation.[4] Finally, as per the ER and the guide, the commencement committee prepares a report with the results of its inspections and examinations, stating the rationale followed in determining the actual business commencement date and the value of the investment costs. The report is then submitted to the Investment Services Centre at GAFI’s headquarters for review and approval. The approved report is considered final and the company/facility and competent authorities are to be notified of its results, with companies/facilities having the right to petition against it at GAFI’s Petitions Committee. Following the approval of the report, two certificates of commencement of business are issued. It is worth noting that as per the guide, this entire process up until the issuance of the certificates is to occur within a time span of 15 working days from the date of the committee’s formation.

Other Procedures: Sector-Specific Regulations and Applications for Investment Law Benefits

Along with the procedures related to the determination of business commencement dates and implementation statuses in general, the guide provides the procedures that are specific to certain sectors – namely real estate investment, tourism, the health sector, multiple-passenger transport, and land reclamation and cultivation – and the prerequisites that must be met in each before any activity could be considered as commencement of business and thus its ability to enjoy the benefits and exemptions previously mentioned. As for these benefits and exemptions, the guide maintains that companies and facilities that have not been established under the Law could nevertheless enjoy the general benefits and incentives provided for in it, if they undertake one of the investment activities listed in the Law and defined in the ER. In such a case, an application must be submitted, requesting the formation of a committee to look into the company’s right to enjoy these benefits. This is to be accompanied by the documents related to business commencement or implementation status, along with other documents, as the committee simultaneously determines the business commencement date and not just the right to the benefits.   [1] GAFI Decision No. 525/2019 issuing the guide on the committees for determining business commencement dates and implementation statuses, available through this link (in Arabic). [2] Prime Ministerial Decree No. 2310/2017 enacting the Executive Regulations of Law No. 72/2017 on Investment, Official Gazette, Issue No. 43 (bis) (a), 28 October 2017. [3] This is in accordance with Article (12) of the Law. [4] In terms of determining the implementation status, the committees could reach one of three results: (1) the company/facility took serious procedures towards undertaking its authorized activities; (2) the company/facility is serious about undertaking its authorized activities; or (3) the company/facility is not serious about undertaking its authorized activities.