LAW NO. 160 OF THE YEAR 2023 REPORT

Preamble

Law no. 160 of the year 2023, “The Law” comes as an amendment to the very effective and robust set of rules, regulations and provisions set forth by Law no. 72 of the year 2017 “Investment Law”, and as such, it sheds the light on some needed amendments specifically in the fast, rapidly changing pace of the economy and its respective impact on projects and investments alike.

Hence, this report aims to dive deeper into the scope of amendments, impact on the investment scheme and correlation with other amendments for related laws

Overview

It comes as no surprise that investment is one of the most important and critically acclaimed sectors in the country, a strong need to a legal reformulation was realized in 2017 with the promulgation the Investment Law, further consolidating Law 159 of the year 1981, offering a dozen of tax and procedures facilitations, expedited and simplified licensing procedures, and a centralization for all the required services that the institution shall need throughout its lifecycle.

Furthermore, a specific law issued particularly for small, infinitely small, and medium enterprises was promulgated in 2020 by the number 152 “MSME Law” in order to structure a full legal framework with even simpler procedures and minimum tax impositions to ensure the full incentivization for projects of such calibers.

The legislator has also emphasized greatly the importance of data protection, ensuring the portrayal of a full compliance and risks profile throughout the issuance and implementation of Law no. 151 of the year 2020 “Data Protection Law”.

Thus, it is same to assume that – at least from a legislative perspective- there is a strong legal codification covering and regulating all the main aspects required by both the prominent and preliminary companies throughout their day to day and long-term operations alike.

Altered Provisions

The Law has amended a total of 10 articles, adding a revamped definition along with special condition precedents for “Private Incentives” alongside the already implemented “General Incentives” and “Additional Incentives” which were originally introduced in Investment Law and can be implicitly defined as follows:

General Incentives

“Incentives related to fees normally payable upon initiation of a project, for instance the registration fees of the allocated project land, or those related to specific procedures done throughout the year such as the stamp duty tax and notary public fees on registration of the constitutional documents of the investment company or a unified reduced flat customs duty rate.”

Private Incentives

“An investment-oriented incentive or discount off the original expenditures/costs that is granted to some specific projects with variable discount rates based on their category sector.”

Additional Incentives

“Incentives prescribed by law and applicable upon projects or companies of certain nature and under specific conditions and prerequisites.”

Accordingly, there are 2 main sectors for Private Incentives which are sectors A and B respectively, with discount rates varying from 30 to 55 percent depending on the selected project and its specific nature, along with the fulfillment for any special conditions set forth by the Investment Law.

Hence, the Law has amended the definition and conditions for the outlined Private Incentives in the following articles of the Investment Law:

First: The Law extended the period during which the investment project is required be established in order to benefit from the “Special Incentives” for three years to be until October 2026, instead of October 2023

Second: According to Article 11 of the Investment Law, the Special Incentives include a tax reduction from net taxable earnings equal to 50% of the investment cost of starting a project in Geographical Zone A (underdeveloped areas in Egypt). The incentive will be computed based on the project’s investment cost (the incentive shall not exceed 80% of the project’s paid-up capital until the start of its operation, and the deduction shall not continue for more than seven (7) years from the date of operation).

Third: A tax deduction equivalent to 30% of the investment cost of a project established in Zone B (all areas in Egypt except Zone A) is applicable for projects operating in specific sectors such as labor-intensive projects with 500 or more employees, SMEs, renewable energy projects, strategic projects identified by the Supreme Investment Council, tourism projects designated by the Supreme Investment Council, electricity projects specified by the Supreme Investment Council, projects engaged in exporting goods outside of Egypt, wood, furniture, printing, packaging and chemical industries, and vehicle/car and related industry projects.

Fourth: The Law has vastly expanded the beneficiation of the General Incentives scheme, further making them available for all investment projects, regardless of their date of establishment (i.e., whether the project was already established before the application date of Investment Law or thereafter), and also regardless of the legal investment system they are subject to (i.e., this includes projects established according to Investment Law No. 230 of 1989, Investment Guarantees and Incentives Law No. 8 of 1997 or previous Foreign and Arab Investment Law No.43 of 1974).

Fifth: The law has also added some certain Additional Incentives in the form of exemption from the fees of using project’s allocated land for a maximum of 10 years from the operation date (after presenting the matter to the Minister), exemption from the costs of the infrastructure, and the public utilities of up to 50% of such cost (by virtue of a decision from the Prime Minister),and for the government to bear a percentage not exceeding (50%) of the project’s consumption of the public utilities for a period not exceeding ten (10) years.

Sixth: The investment map has been comprehensively updated with essential data and information to facilitate the assessment of quality and the investment framework. This includes insights into property nature, pricing, target market dimensions, safeguards, and related aspects.

Seventh: The Supreme Council for Licensing Energy has extended authorization for the establishment of industries such as fertilizers, iron and steel, and energy-intensive sectors within the free zone projects framework. Notable exceptions encompass liquor and alcohol industries, explosives, and other sectors linked to national security.

Eighth: The Law states that strategic and national projects as well as PPP projects in infrastructure, renewable energy, transportation, roads, or ports can be established and operated by virtue of a single license (“Golden License”) to be issued by virtue of a decision from the Prime Minister.

In addition, the Law has also added Article no. 11 B, further outlining additional incentives as detailed in its context:

“Without prejudice to the incentives, perks and exemptions prescribed in this chapter/article, the investment projects carrying out one of the industrial activities – outlined by this article and its respective expansions detailed in Article 12 of this Law – shall be granted a fiscal investment incentive not less than 35% and not more than 55% of the total tax amount imposed on the income induced from practicing the activity or its respective expansions, the incentive shall be settled/granted by the Ministry of Finance within 45 days from the date of the elapse of the prescribed period for filing the tax return, or a delay percentage/rate shall be applied on the ministry dependent on the credit and deduction price announced by the Central Bank of Egypt,

The incentive provided for in this article shall be required to adopt the draft, or, as the case may be, expanding its financing until the commencement of the activity, on foreign exchange from abroad in proportion At least (50%) of its funds, and that the activity commences within six years from the date of the article’s operation. This period may be extended to a maximum of six years by decision of the Council of Ministers, on the basis of a joint offer by the competent Minister, the Minister for Industry Affairs, and the Minister of Finance.

The Council of Ministers shall, on the basis of a joint presentation by the competent Minister, the Minister for Industry Affairs, and the Minister of Finance, issue a decision containing industries and regions enjoying the incentive provided for in this article, and extend the incentive to each of them to no later than ten years, as well as conditions, rules, categories of incentive and mechanisms for disbursement.”

Correlation with other laws

The Law has added lots of amendments and refinements to an already robust set of initiatives such as the “General Incentives”, “Private Incentives” and “Additional Incentives”, it also has paved the path for a multitude of various natured projects to apply for a unified license, exemplified in the recognizable “Golden License” platform ratified by the Investment Law, hence the Investment law correlates with many laws such as:

Correlation with Law no. 202 of the year 2020, primarily to prohibit the importation of hazardous waste from foreign sources stemming from projects within Free Zones into the country.
Correlation with Law no. 4 for the year 1994, by adjusting and setting certain methods to disposing and treating hazardous waste.
Correlation with Law no. 159 of the year 1981, by stipulation of the issuance of a Prime Minister’s decree to benefit any company regardless of its legal form or applicable law.
Correlation with Laws no. 133 of the year 2010 and 67 for the year 2010, without prejudicing to it allowing the issuance of free zone projects related to certain fields such as the petroleum refinery upon obtaining the approval from the Egyptian Supreme Council of Energy.

Notes and Opinion

Overall, the Law comes as a very welcomed amendment into incentivizing new investors of pouring investments and initiating projects into the land, by facilitating the otherwise convoluted complexities of the required licensing, mitigating, and limiting the imposed taxation scheme, and expediting the timeframe required to get things moving.

In addition to being able to benefit from residential packages or even citizenship granting plans if a certain number of investments/fiscal amounts are fulfilled in the form of projects, real estate, or even public depository, making the country an incredibly attractive and appealing destination for conducting almost any sort of project regardless of its nature.

However, the Law is not immaculate, and thus it has some shortcomings up its sleeve, for instance, the Law does not explicitly define the 3 investment schemes in full detail instead it gives examples of what each scheme has to offer.

Another flaw is the fact that the law does not clearly specify the requirements or conditions required for the issuance of a PM decision regarding the reaping of the 50% discount applicable in sector A for instance.

The Investment Law has had several amendments to it thereafter, notably the issuance of Law no. 2 for the year 2024 pertaining to the incentives of green hydrogen and its derivatives and also the Council of Minister’s Decrees no. 77 for the year 2023 and 1 for the year 2024, respectively.

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