KOSHERI, RASHED & RIAD

LEGAL CONSULTANTS & ATTORNEYS AT LAW

16, Maamal El Sokkar St., Garden City, Cairo 11451, Egypt

TELEPHONE: + (20 2} 7954795 (10 lines}, 7959228, 7952096
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Website: http://www.krr-law.com

Materials for the

Lectures
On

BUSINESS LAW
By Prof. Dr. Tarek
Riad

Harvard Law School L.L.M. (1982}, S.J.D.

(1985} Admitted to Practice in front of
The New York and Egyptian Supreme
Courts Professor of Private International
Law and Deputy Director of the Center
Rene - Jean Dupuy for Law and
Development

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 ACKNOWLEDGMENT

Prof. Dr. Tarek Riad acknowledges

the valuable assistance of Dr. Hatem
Gabr and Mrs. Khadiga Brada in
preparation of this material

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 Section
One

Notes on Egyptian Investment

Law

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 Section One

Notes on Investment Law

The new investment law no. 72 of 2017 is ratified and officially

published on the 31st of May 2017 (the Investment Law). The law
comes into effect the next day and it cancels and replaces the Investment
Guarantees and Incentives Law no. 8 for 1997 (Law 8/1997). The aim
of the law is generally to attract new investments to Egypt through
offering further incentives and guarantees, removing obstacles and
streamlining the procedure.

We will concentrate on business law, I will try to give you an overview

of different laws that regulate the business environment in Egypt.

Furthermore, we will give you in details the different legal

structures for establishing companies in Egypt.

In Egypt there are about 22,000 rules that regulate activities.

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 Part two
(I) The activities, capital and procedures for establishing a
company under the Investment Law:-
The Law applies on all local and foreign investment projects in Egypt.
Two conditions are required to invest under the Law no. 72 for 2017:
1) The minimum capital required for investing under said law shall be
1000000 L.E.
2) Investment projects shall be one of those working in the following
sectors:
Manufacturing
Agriculture
Trade
Education
Health
Transportation
Tourism
Housing
Construction
Sports
Electricity
Energy
Natural resources
Water
Telecommunication and Technology.
The Minister of Investment can add other sectors in light of the economic
development plan of the Government.
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II Facilitating and Streamlining Licensing Procedures
One of the chronicle challenges facing the investment sector in Egypt is
the licensing process. The new Investment Law introduced two new
alternative facilitated routes an investor can take to obtain required licenses
and approvals. This is either through (1) applying directly to the Investors
Service Center at GAFI, or (2) Using one of the private Accreditation
Offices.

1) Investors Service Center at GAFI

Under the new Law, GAFI is given the authority to work as a one-stop-
shop from where an investor can obtain all licenses and approvals required
to set up and operate a project. A special unit at GAFI shall be established
to facilitate and simplify the licensing process, it is the Investors Services
Center (the Center). The Center will be competent with establishing
companies, ratifying minutes of its board and shareholders meetings,
capital increase/reductions, liquidation and all other company-related
matter.
The Center is empowered to issue all kinds of licenses required to set up
and operate a project, including allocation of state-owned land. This will
be done through the representatives of the competent authorities that will
be delegated with full-authorities to work at the Center.
In a trial to accelerate the process and cutting down bureaucracy, the Law
mandated the Center to verify licensing applications submitted by investors
and give feedback on its completeness and compliance within two days,
the application will be considered as complete and no further requirements
can be required for the applicant. The Law however does not provide for a
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specific time cap during which the Center must issue its final approval or
license. This is contrary to applying through Accreditation Offices as we
will see below.
Strategic projects and PPP project in infrastructure, renewable energy,
transportation or ports can be established and operated by virtue of a single
license to be issued by the Cabinet.
2) Accreditation Offices
Accreditation Offices are authorized by GAFI and shall be engaged by
investors to review and confirm the completeness of their applications to
obtain licenses required to set up, operate or expand a project.
Accreditation Offices will issue, at their responsibility, a certificate
confirming that the investor financially and technically complies will all
terms and conditions required by the law and that the documents of its
application are accurate and complete.
The investor will submit this certificate to competent authorities which can
object on the application within a maximum period of 10 days or otherwise
the application will be considered complete and accepted. Competent
authorities are required to issue their final decision on the application
within a maximum of 60 days; non-reply within this period will be
considered an approval and GAFI shall issue the required license
accordingly

Part Three
(I)The incentives of establishing a project under Egyptian
Investment law no 72 for the year 2017

Investment Incentives

Incentives given to investment projects are divided into three types, (1)
general, (2) special, and (3) additional.
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A) General Incentives
All investment projects, except free zone projects, shall enjoy the following
incentives:
1. Registration of the constitutional documents of a company, loan
agreements and pledge contracts are exempted from stamp duty tax
and notary public fees for a period of 5 years from the date of
registering the company.
2. Exemption from the registration fees of the land of the project.
3. Application of a unified flat customs duty rate of 2% on all machines
and equipment needed for establishing the investment project.

B) Special Incentives
Article 11 of the Law provides for a new tax reduction system for a period
of 3 years for projects established after the issuance of the Law. The
reduction will be from the net taxable profits subject to the following rates:
1. 50% of the investment cost of setting up a project in geographical
locations that are in most need for development (underdeveloped
locations) as will be specified by the Central Agency for Public
Mobilization and Statistics (CAPMS). The Law named these
locations as Zone A. The executive regulations shall clarify which
investment sectors in Zone A can benefit from this 50% tax rebate
rate.
2. 30% of the investment cost of a project that is set-up in other
remaining geographical locations other than Zone A, which the Law
named as Zone B, and is working in one of the following sectors:
o Labor-intensive projects.
o SMEs
o Renewable energy projects.
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 o Strategic projects as specified by the Supreme Investment
Council.
o Tourism projects as specified by the Supreme Investment
Council.
o Electricity projects specified by the Supreme Investment
Council.
o Projects exporting their products outside Egypt.
o Vehicle and related feeders industry projects.
o Wood, furniture, printing, packaging and chemical industries.
o Antibiotic, cancer treatment and cosmetics.
o Food and agricultural products as well as agricultural waste
projects.
o Engineering, mineral, textile and leather projects.
The reduction amount shall not in all cases exceed 80% of the paid-up
capital of the project up until the date of operation.
Benefiting from this new tax deduction system is subject to the following
conditions:
1. Establishing a new company after the effective date of the Law and
during a period up to 3 years from the date that the Executive
Regulations of this Law enter into force.
2. Not to use the assets of any existing company or liquidate an existing
company for the purpose of establishing a new company to benefit
from the tax reduction system.
3. Keeping regular and accurate books.
C) Additional Incentives
The following additional incentives can be granted to investment projects
listed under Article 11 of the law by a decision from the Cabinet:
Allowing the project to have its own customs gates for its imports
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and exports.
 Government to share part of the cost of attaching utilities to the land
allocated to the project.
Government to share part of the cost of the technical training of the
employees.
Refunding half the price of the land allocated to the industrial project
in case it succeeded in starting production within two years from
having the land allocated.
Allocating free land for specific strategic projects.
A certificate will be issued by GAFI for those projects benefiting from the
special and the additional incentives.
II) Corporate Social Responsibility
A new chapter is added for CSR. An investment project can allocate up to
10% of its net income profit to participate in one of the following fields, to
be deductible from its annual corporate tax:
1. Environment protection and enhancement.
2. Health, social, cultural services or any other development areas.
3. Vocational education, research funding, awareness campaign in
collaboration with universities or scientific institutions aiming at
developing and enhancing production.
4. Scientific training and research.
III) Return of Privately-Owned Free Zones
Privately-owned free zone projects are allowed again after its cancellation
by virtue of the 2015 amendments. Projects in free zones are not subject to
applicable tax and customs laws in Egypt. They are rather be subject to the
following fees:
1) Projects in Public Free Zones
A fee of 2% of the value of goods imported by storage projects on
CIF basis, and 1% of the goods exported by manufacturing and
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assembling projects on FOB basis.
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 A fee of 1% of the total revenue of projects that do not export or
import products.
2) Projects in Privately -Owned Free Zones
A fee of 1% of the total revenue achieved from exporting its products
outside Egypt for manufacturing and assembling projects, and 2% in
case of exporting these products inside Egypt.
A fee of 2% of the total revenue of projects working in projects other
than manufacturing and assembling. Projects in both, public free
zones and private free zones shall pay an annual service fee
to GAFI equivalent to 0.001% of its share capital with a maximum
of EGP 100,000.
IV) Establishing a new Arbitration and Mediation center
The Law provided for the establishment of a new arbitration and mediation
center under the name of the Egyptian Center for Arbitration and
Mediation. The center is said to be an independent entity having its
headquarter in Cairo.
An investor can choose to settle its dispute with other investors or with the
Government before this center and according to its arbitration or mediation
rules. The center will be managed by a board of five (5) directors with
required expertise and qualifications who will be appointed by the Prime
Minister. The board members will be appointed for five years and they may
not be dismissed throughout their tenure for any reason except for health
inability.
The board will be responsible for issuing the articles of association of the
center as well as its arbitration and mediation rules.
For a period of three years after the effective date of this Law, the
Government will provide the center with needed fund.

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