MP logo Meyer-Reumann & Partners
German Legal Expertise in the Middle East since 1981

New Investment Law in Egypt

Tarek Jairwdeh

Author: Tarek Jairwdeh
Senior Lawyer.

Hany Kenawi

Author: Hany Kenawi
Senior Lawyer.

Guiding Principle
In the continuous efforts of the Egyptian Government to get the country out of the spiral of its huge difficulties, Egypt’s House of Representatives approved on May 7, 2017 a new investment law that grants investors a number of incentives, as a part of the ongoing efforts aiming at bringing back more Foreign Direct Investments to the country.

The new law came as a part of the radical reform that the Government is imposing, including floating the national currency, reducing subsidies to all of the services and the products, reaching to canceling it at all within a period of few years and increasing the fees of all the governmental services. The Government’s aim with this reform, which faces a lot of domestic resentment, is to reduce the budget deficit by cutting its expenses through reducing the subsidies and at the same to increasing its income through increase of fees and opening the doors to foreign investment.

A. Status of Egypt after the 2011 Uprising

While the 2011 uprising in Egypt has succeeded in achieving its target by removing the former president Hosni Mubarak from power, it caused a lot of unrest in the country as well. This has been exacerbated by the occurrence of several terrorist attacks as a result for the rapid political changes. This has led to a nearly complete cessation of tourism and caused several local industries to cease operation.

B. Facing the Difficulties

As the new administration took control, it started a reform that caused lot of domestic resentment. The main features of that reform are:

  1. Floating the national currency, where it lost dramatically a large proportion of its value causing a large increase of most of the products and services in the country.
  2. The Government also continued by reducing subsidies to all of the services and products it used to provide from several decades.
  3. Finally, the Government started increasing the fees of all the services it provides.

The Government justified its policy by pointing out that this is the only solution to get the country back on track.

As the status in the country became more stable, the Egyptian Government started investing in building huge national projects all over the country.

This included the expansion of Suez Canal, the most important source of income for the country currently, establishing the economic zone for the canal, extending the roads network in the country and building new cities including a new capital.

The Egyptian Government is aiming from its large spending in national projects, to attract foreign investment that commensurate with the value of these projects. The final target is to overcome the current difficulties in the shortest possible time.

C. The Key Guarantees and Incentives Provided Under the New Investment Law

The new investment law includes some of new incentives, such as a fifty (50) percent tax discount on investments made in underdeveloped areas and government support for the cost of connecting utilities to new projects. More specifically it includes the following:

  1. Limiting the right to suspend or terminate any license and/or allocation of properties granted to any investor subject to satisfying the following conditions:
    1. serving a notice to the said investor outlining the relevant breaches and/or violations; made thereby;
    2. granting a reasonable time to the said investor to legitimize the breaches and/or violations above; and
    3. taking an opinion from the General Authority for Free Zones and Investment before issuing of the said suspension or termination.
  2. Granting a residence permit to foreign investors throughout the term of their investment projects in Egypt;
  3. Accelerating the liquidation process by requiring receipt of a written notice from the competent authorities outlining all liabilities on the company that is under liquidation by no later than one hundred and twenty (120) days from the date of submitting the relevant liquidation request;
  4. Exemption from the custom duty that is imposed on importation of mould or any similar tools for the purpose of temporary using same in Egypt for industrial projects;
  5. The right to directly import raw materials, equipment, spare parts and/or transportation means as necessary for investment project without requiring the registration with the Importers Registry;
  6. The right to repatriate profits and/or receive international finance without any restrictions;
  7. Exemption from stamp duty and notarization fee imposed on Articles of Incorporation, Facilities and Loans Agreements, Security Documents and/or Plot of Lands Purchase Agreements for five (5) years starting from the date of registration with the Commercial Registry;
  8. Application of a unified custom duty at a flat rate of only two (2) percent of the value of any equipment, machinery and devices that are necessary for establishment of investment projects;
  9. Tax reduction for seven (7) years starting from the date of starting investment projects in Egypt at the following rates, subject to the issuance of the Executive Regulation of the New Investment Law.

D. Social Responsibility

For the first time in Egypt, the New Investment Law explicitly allows investors to allocate up to ten (10) percent of the net profits thereof to social development systems by contributing to any of the following fields;

  1. Provision of healthcare, social or cultural services or programs or any other development areas; technical education support or financing of researches or studies aiming at developing or improving production in collaboration with any university or scientific researches institution; and
  2. scientific research and training.

Investors will also be having the right to deduct the aggregate amount of the allocated percentage as a part of the deductible expenses for the purpose of calculating income tax purpose.

E. Foreign Employees

Investment projects may employ up twenty (20) percent foreign employees (calculated based on the total number of employees) if there are insufficient local employees with the necessary qualifications. Foreign employees will be permitted to repatriate their income outside of Egypt.

F. Additional Activities

The Law extends the range of objects available for the incorporation of a company to include the following additional activities:

  1. The production and manufacture of agricultural production input
  2. education,
  3. waste recycling
  4. river and coastline transport, storage and logistic services
  5. youth and sports projects.

The Law also abolishes the requirement for hospitals and medical centers to provide ten (10) percent of their service at no cost as a condition to their enjoying the incentives and guarantees provided pursuant to the Law. In addition, the Law seeks to implement various changes to the administrative structure of the investment sector in Egypt.

G. Changes to the Incorporation of Companies

A new electronic incorporation system will be introduced by the General Authority for Investment. Other related public authorities will be required to streamline their procedures and connect their databases to that of the General Authority for Investment. Under this system, a company will be able to be incorporated and registered electronically.

The shares of companies incorporated under the Law shall be centrally deposited. The General Authority for Investment is to develop procedures to facilitate capital increases and decreases.

H. Other Procedures

The Law sets out deadlines for the completion of tasks by the General Authority for Investment. For example, ratification of board and general assembly resolutions must be completed within fifteen days. Decisions on requests for incorporation of new companies must be made within one business day. The Law provides two methods to assist investors in starting and continuing to do business in a timely and efficient manner. These methods are the ‘authorization offices’ and the ‘investment windows’.

An investor who wishes to assess if the investor qualifies for certain projects may approach the ‘authorization offices’ which shall review all permits and authorizations obtained by the investor to determine whether the investor has all necessary documents to proceed with the proposed project.

Investors may submit requests (e.g. requesting the issuance of approvals) which they would otherwise have had to address to other authorities to ‘investment windows.’ These investment windows replace the ‘one-stop-shops’ introduced by the current Investment Law, which were cumbersome to implement, due to the lack of sufficient qualified personnel and the bureaucratic complications.

For free subscription send us your contact details to