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Executive Regulations of the Invest

Executive Regulations of the Investment Law Are Issued
On July 6, 2015 the Executive Regulations for the Investment Law were issued in accordance with Prime Minister's Decree No. 1820 of 2015.[1] The current Investment Law No. 8 of 1997 was initially issued on that year and amended several times since then. Prior to the Sharm El Sheikh economic conference last March, a major amendment to the Law was issued (Presidential Decree No. 17 of 2015) and was reviewed in the April 2015 edition of Egypt Legal Update, and again in the June 2015 edition. Following are the main provision of the new Executive Regulations.
Fields of Investment
The new Investment Law specified fields of investment which are subject to it and benefit from its provisions. This is in accordance with the same philosophy in investment legislation adopted since the 1970s. However, whereas previous investment laws determined specific fields and activities in order to grant them tax and custom exceptions, this exceptional treatment ended with the issuance of the Income Tax Law No. 91 of 2005. Accordingly when the new Investment law specified investment fields, it did not grant them tax and custom benefits and hence attempted to give them other non-tax privileges as stated below. In this context, the Executive Regulations repeated the investment fields mentioned in the Investment Law issued last March while adding specific details and provisions thereto. The investment fields are:
  • land reclamation and agriculture and animal and fish production;
  • industry and development of indusial zones;
  • tourism;
  • transport;
  • petroleum services, hospitals and medical centers, urban development, and garbage collection;
  • infrastructure;
  • certain financial activities;
  • software, computers and technological zones;
  • housing;
  • projects funded by the Social Fund; and
  • marketing and promotion of Investment.
The above fields were stated previously in the Investment Law; however the details and sub categories were detailed in the new Executive Regulations over eleven pages.
 Benefits
Companies will continue to be established at the Investment Authority one stop shop, which has been active since 2005. However, the new Executive Regulations explain in detail how to establish a company whose capital is denominated in foreign currency.
As previously stated, the determination of certain investment fields would have no value if the Law and Regulations did not grant companies active in those fields specific benefits and privileges to attract investors. Since the Investment Law –since 2005- no longer grants tax or custom exemptions, it relied on other benefits: (1) establishment and licensing, (2) the continuation of the previous tax exemptions, (3) non tax benefits, and (4) allocation of investment land. Establishment and Licensing With respect to the establishment of investment companies, there is not much new here as these companies will continue to be established at the Investment Authority one stop shop, which has been active since 2005. However, the new Executive Regulations explain in detail how to establish a company whose capital is denominated in foreign currency. What is new in the amended Law is that it tries to facilitate the issuance of all licenses and permits from the same Investment Authority one stop shop. In order to do this, the new Executive Regulations provide the following three steps:
  1. The Investment Authority shall prepare and issue a “Sectoral Guide” for each of the investment fields stated in the Law which shall include the documents required to obtain the license, the procedures, the preceding permits, the fees, the general conditions and the time required to obtain the license.
  1. The investor shall consult the sectoral guide relevant to his/her activity, fill an application for investment including the required land and utilities, attach to the applications all needed documents and statements and pay the fees, all in accordance with the sectoral guide.
  1. The Investment Authority – on behalf of the investors- shall deal with all government agencies and submit the documents and pay the fees pertaining to each thereof and follow up until the issuance of the final permit. The Authority may issue a temporary license to the investor during that process which allows him/her to start operation while awaiting the final permit.
The Automatic Tax Exemption  The new Investment Law did not provide tax or custom benefits; hence the regulations do not state anything new in this regard. The Regulations only state that companies which have already been granted tax benefits that are still valid, will complete the terms of those benefits without change. On the other hand, the new Law has granted the Investment Authority the right to request from the Prime Minister the cancellation of a company’s exemption if it violates the condition, procedures, or rules pertaining to such exemption. Non-Tax Benefits The new Investment Law grants investors non-tax benefits and privileges. It is worth noting that these are not granted to all investment activity, but rather only to those which fulfill one of the following conditions: (1) labor intensive projects where the number of Egyptian workers is not less than 250, or where the cost of creation of each labor opportunity does not exceed 250 thousand pounds, or where the total direct labor cost exceeds 35% of total operating cost, (2) projects with a local components of no less than 50%, (3) logistical services, (4) internal trade development projects, (5) electricity production, transport, and distribution services, (6) land reclamation and agriculture projects, (7) land, marine, and railway transport projects, (8) projects established in upper Egypt, Sinai, Matrouh, and Nubia, provided they are within the national economic plan and within the Investment Fields subject to the Investment Law only. Non-tax benefits granted to these projects are: (1) establishing a dedicated custom point, (2) purchase of power at a reduced cost, (3) recovering part of the cost of utilities introduced by the projects, (4) recovering part of the labor training cost, (5) recovering part of the social insurance cost and (6) obtaining land for Investment. The project, however does not obtain those benefits except after it has started its operation. Land Allocation Since the issuance of the new Investment Law last March, one of its declared objectives was the resolution of the difficulty of allocation of land to investors. In this regard the new Executive Regulations determine the following rules and procedures: (1) the various government agencies possession of land that is available for investment will inform the Investment Authority of such availability so that the Authority may allocate the same, together with the conditions and prices of disposal, (2) the lands will then be allocated and distributed to investors in accordance with the Investment Law without being bound by the Government Procurement Law (the Bids and Tenders Law), (3) if there is competition between more than one investor over a plot of land then it shall be allocated by a draw, (4) the Government agency may participate in the investment project by offering the land as in-kind contribution, and (5) The valuation of the land is undertaken by one of four specific agencies mentioned in the Regulations.
Conclusion
The Executive Regulations in general do not bring about new rules; they explain, clarify and provide details for provisions on the Law. This applies to The Investment Law Executive Regulations. Whereas the Investment Law attempts to provide radical solutions to investors’ pressing problems, primarily land allocation and licenses, this noble objective will require in application a high degree of transparency and cooperation between the Government agencies, as well as commitment to the agreements with the investors.   [1] Prime Minister's Decree No. 1820/2015 enacting the Executive Regulation for the Investment Law, Official Gazette, Issue No. 27 (bis) (a), 6 July 2015.
On July 6, 2015 the Executive Regulations for the Investment Law were issued in accordance with Prime Minister's Decree No. 1820 of 2015.[1] The current Investment Law No. 8 of 1997 was initially issued on that year and amended several times since then. Prior to the Sharm El Sheikh economic conference last March, a major amendment to the Law was issued (Presidential Decree No. 17 of 2015) and was reviewed in the April 2015 edition of Egypt Legal Update, and again in the June 2015 edition. Following are the main provision of the new Executive Regulations.
Fields of Investment
The new Investment Law specified fields of investment which are subject to it and benefit from its provisions. This is in accordance with the same philosophy in investment legislation adopted since the 1970s. However, whereas previous investment laws determined specific fields and activities in order to grant them tax and custom exceptions, this exceptional treatment ended with the issuance of the Income Tax Law No. 91 of 2005. Accordingly when the new Investment law specified investment fields, it did not grant them tax and custom benefits and hence attempted to give them other non-tax privileges as stated below. In this context, the Executive Regulations repeated the investment fields mentioned in the Investment Law issued last March while adding specific details and provisions thereto. The investment fields are:
  • land reclamation and agriculture and animal and fish production;
  • industry and development of indusial zones;
  • tourism;
  • transport;
  • petroleum services, hospitals and medical centers, urban development, and garbage collection;
  • infrastructure;
  • certain financial activities;
  • software, computers and technological zones;
  • housing;
  • projects funded by the Social Fund; and
  • marketing and promotion of Investment.
The above fields were stated previously in the Investment Law; however the details and sub categories were detailed in the new Executive Regulations over eleven pages.
 Benefits
Companies will continue to be established at the Investment Authority one stop shop, which has been active since 2005. However, the new Executive Regulations explain in detail how to establish a company whose capital is denominated in foreign currency.
As previously stated, the determination of certain investment fields would have no value if the Law and Regulations did not grant companies active in those fields specific benefits and privileges to attract investors. Since the Investment Law –since 2005- no longer grants tax or custom exemptions, it relied on other benefits: (1) establishment and licensing, (2) the continuation of the previous tax exemptions, (3) non tax benefits, and (4) allocation of investment land. Establishment and Licensing With respect to the establishment of investment companies, there is not much new here as these companies will continue to be established at the Investment Authority one stop shop, which has been active since 2005. However, the new Executive Regulations explain in detail how to establish a company whose capital is denominated in foreign currency. What is new in the amended Law is that it tries to facilitate the issuance of all licenses and permits from the same Investment Authority one stop shop. In order to do this, the new Executive Regulations provide the following three steps:
  1. The Investment Authority shall prepare and issue a “Sectoral Guide” for each of the investment fields stated in the Law which shall include the documents required to obtain the license, the procedures, the preceding permits, the fees, the general conditions and the time required to obtain the license.
  1. The investor shall consult the sectoral guide relevant to his/her activity, fill an application for investment including the required land and utilities, attach to the applications all needed documents and statements and pay the fees, all in accordance with the sectoral guide.
  1. The Investment Authority – on behalf of the investors- shall deal with all government agencies and submit the documents and pay the fees pertaining to each thereof and follow up until the issuance of the final permit. The Authority may issue a temporary license to the investor during that process which allows him/her to start operation while awaiting the final permit.
The Automatic Tax Exemption  The new Investment Law did not provide tax or custom benefits; hence the regulations do not state anything new in this regard. The Regulations only state that companies which have already been granted tax benefits that are still valid, will complete the terms of those benefits without change. On the other hand, the new Law has granted the Investment Authority the right to request from the Prime Minister the cancellation of a company’s exemption if it violates the condition, procedures, or rules pertaining to such exemption. Non-Tax Benefits The new Investment Law grants investors non-tax benefits and privileges. It is worth noting that these are not granted to all investment activity, but rather only to those which fulfill one of the following conditions: (1) labor intensive projects where the number of Egyptian workers is not less than 250, or where the cost of creation of each labor opportunity does not exceed 250 thousand pounds, or where the total direct labor cost exceeds 35% of total operating cost, (2) projects with a local components of no less than 50%, (3) logistical services, (4) internal trade development projects, (5) electricity production, transport, and distribution services, (6) land reclamation and agriculture projects, (7) land, marine, and railway transport projects, (8) projects established in upper Egypt, Sinai, Matrouh, and Nubia, provided they are within the national economic plan and within the Investment Fields subject to the Investment Law only. Non-tax benefits granted to these projects are: (1) establishing a dedicated custom point, (2) purchase of power at a reduced cost, (3) recovering part of the cost of utilities introduced by the projects, (4) recovering part of the labor training cost, (5) recovering part of the social insurance cost and (6) obtaining land for Investment. The project, however does not obtain those benefits except after it has started its operation. Land Allocation Since the issuance of the new Investment Law last March, one of its declared objectives was the resolution of the difficulty of allocation of land to investors. In this regard the new Executive Regulations determine the following rules and procedures: (1) the various government agencies possession of land that is available for investment will inform the Investment Authority of such availability so that the Authority may allocate the same, together with the conditions and prices of disposal, (2) the lands will then be allocated and distributed to investors in accordance with the Investment Law without being bound by the Government Procurement Law (the Bids and Tenders Law), (3) if there is competition between more than one investor over a plot of land then it shall be allocated by a draw, (4) the Government agency may participate in the investment project by offering the land as in-kind contribution, and (5) The valuation of the land is undertaken by one of four specific agencies mentioned in the Regulations.
Conclusion
The Executive Regulations in general do not bring about new rules; they explain, clarify and provide details for provisions on the Law. This applies to The Investment Law Executive Regulations. Whereas the Investment Law attempts to provide radical solutions to investors’ pressing problems, primarily land allocation and licenses, this noble objective will require in application a high degree of transparency and cooperation between the Government agencies, as well as commitment to the agreements with the investors.   [1] Prime Minister's Decree No. 1820/2015 enacting the Executive Regulation for the Investment Law, Official Gazette, Issue No. 27 (bis) (a), 6 July 2015.