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Investment Guarantees Foreign Investments

Investment Guarantees

1.1 Equal and Fair Treatment for Foreign Investment

Under the New Investment Law No. 72 of 2017, all investments are now explicitly guaranteed fair and just treatment without discrimination. Moreover, foreign investors may receive preferential treatment, upon Cabinet’s approval, if the investor’s country gives Egyptian investors similar preferential treatment.

1.2 No Expropriation of Investment-Projects

Investments may not be subject to arbitrary, abusive or discriminatory decisions or procedures. Investment projects may not be administratively attached, sequestrated or frozen, except by a final court order or judgment.

Projects may not be nationalized and title to their assets may not be expropriated, except for the public good and against fair economic value payable in advance without any delay, and transferable without restrictions.

1.3 Residence of Foreign Investors in Egypt

Foreign investors are now guaranteed residency in Egypt throughout the life of the investment project.

1.4 Hiring Foreign Employees

Foreigners may now constitute up to 20% of the labor force in the project and this percentage may increase in strategic projects.

1.5 Import and Export

Investment projects may import directly or through third parties their machinery, equipment, raw materials and production requirements without need to be registered in the Importers Register; and may export their products without need to be registered in the Exporters Register.

1.6 No Arbitrary Revocation of Licenses

Governmental and regulatory authorities may not revoke the investment projects license or suspend it, and may not cancel the land allocation, except after giving notice to the investor of the breach, hearing his views and giving him adequate time to remedy the breach. Moreover, no such decision may be taken without the prior opinion of GAFI. Further, the investor retains the right to appeal such decision before the GAFI Appeals Committee and then the courts, if necessary.

1.7 Conversion and Repatriation of Profits

Investors are entitled to own, operate, expand and finance their projects in foreign currency transferred from outside Egypt through registered banks without restrictions.

Similarly, the Government shall permit foreign investors to freely dispose of their assets, liquidate their projects, convert proceeds in local currency into foreign currency through registered banks and repatriate their profits, sale proceeds and/or their capital, in foreign currency, without restrictions or delays.

for more info about investment check: INVESTMENT REGIMES IN EGYPT

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INVESTMENT REGIMES IN EGYPT

investment

1. Inland Investment

Inland investment is governed by the Investment Incentives and Guarantees Law No. 72 of 2017 and Companies Law No. 159 of 1981 and their executive regulations. The General Authority for Investment (GAFI) acts as the official regulator for all incorporations and licenses governed by both legislations.​ Some projects require prior approval from relevant ministries in addition to GAFI. Such projects include investments in the Sinai Peninsula, all military product manufacturing and related industries, and those involving tobacco and tobacco products.

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2. Free Zones

Free Zones are one of the distinguished investment patterns where you can establish, set up and start your own project under the umbrella of this system according to the provisions Investment Law No. 72 of 2017and its executive regulations. This system is applied by General Authority for Investment and Free zones (GAFI). A free zone is a part of the state land that exists within its political boundaries and subjected to its administrative authority. The treatment aspects that are related to goods movement, either in and out, in relation to customs, import, monetary system and other aspects of dealing differs from the procedures applied inside the country with regard to the similar transactions.

In Egypt, there exist Alexandria Public Free Zone, Nasr City Public Free Zone, Port Said Public Free Zone, Suez Public Free Zone, Ismailia Public Free Zone, Damietta Public Free Zone, Media Public Free Zone, Shebin El- Kom Public Free Zone, Qeft Public Free Zone and Port Said East Port Public Free Zone.

3. Investment Zones

Subject to a decree issued by the Prime Minister, investment zones specialized in various investment fields may be established, including logistic, agricultural, and industrial zones. The decision incorporating the zone shall state the location and coordinates of the zone, the nature of activities to be practiced therein, the term for completing the procedures required for the establishment of the zone, and any general conditions related to conducting such activities.

Currently, there are (13) investment zones specialized in various fields and distributed among (7) Egyptian governorates.

4. Special Economic Zones

SEZONE is the first economic zone with a special nature to be established in Egypt by the law No. 83 of 2002. The SEZONE will develop an international recognition and reputation for being a competitive business location that provides Egyptian and foreign investors with top-class infrastructure, market access, and streamlined administrative procedures.

The development of SEZONE is intended to provide an attractive environment for medium and light industries as well as logistics services, thus enhancing economic activity in the region and creating new employment opportunities.

Location: SEZONE is located in the Suez Governorate in the Sokhna area and adjacent to the Sokhna Port near the southern entrance to the Suez Canal. The land area earmarked for the SEZONE 1st phase is approximately 20.4 km2.

5. Technological Zones

Upon a proposal by the GAFI’s Board of Directors and a request of the Minister of Communications and Information Technology, the Prime Minister may license the establishment of Technological Zones in the field of communications and information technology, including industrial activities, design and development of electronics, data centers, outsourcing activities, software development, technological education, and other associated or complementing activities.

6. Investment Industrial Zones

Qualifying Industrial Zones in Egypt are located in the Greater Cairo Zone, the Alexandria Zone, the Suez Canal Zone, the Central Delta region and Upper Egypt. These five regions cover multiple districts and governorates including:

  1. Greater Cairo Zone: Giza, Shoubra El Kheima, Nasr City, Tenth of Ramadan City, Fifteenth of May City, Badr City , Sixth of October City, El Obour City , Kalioub City and the industrial area in Gesr El Suez.
  2. Alexandria Zone: Borg El Arab and Dakahleyya governorate.
  3. Suez Canal Zone: Port Said, Ismailia and Suez.
  4. Central Delta region: Gharbeyya, Monofeya, and Damietta governorates.
  5. Upper Egypt: Minya and Beni Suef governorates.

As of February 2017, there were 961 registered QIZ companies, out of which the vast majority 765 companies (79.6%) produce textiles and clothing items. Of these, 196 produce ready-made garments. As the U.S. tariffs on textile and apparel goods are relatively high, production of these goods in QIZs is particularly attractive. In addition, 70 companies (7.3%) operate in the processed agricultural products sector. Alexandria has the highest concentration of companies, hosting 235 companies (24.5%), while Tenth of Ramadan has the next highest concentration with 166 companies.

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FREE ZONES REGIME

General Authority for investment and free zones

The general purpose of the Free Zones projects is to help increase the exports. Free Zones are located within the national territory but are considered outside the customs boundaries. The commodities exported abroad by Free Zone projects or imported for the purposes of carrying out their activities, are not subject to the rules governing import and export, or to the customs procedures related to exports and imports. Such commodities are not subject to customs duties, value-added tax, or other taxes and duties.

With the exception of passenger vehicles, all types of tools, supplies, machinery and all means of transportation necessary for exercising the activity licensed for all projects existing within the Free Zone, are exempted from customs duties, VAT, and other taxes and duties, even if the nature and requisite for carrying out such activity requires their temporary exit from the Free Zone to the Country and return thereafter.

Importation from the Free Zones into the Country is subject to the general rules applicable to importation from abroad.

These Projects shall submit their financial statements accredited by a certified accountant to the Ministries of Finance and Investment.

There are two forms of Free Zones in Egypt, which are the Public Free Zones and the Private Free Zones:

1. Public Free Zones

The Board of Directors of the Public Free Zone shall issue final approval on establishing projects within the Zone, or within the Private Free Zone located in its geographic domain. The Chairman of the Board of Directors of the Zone shall issue licenses to these projects to conduct their activities. The board should clarify its reasons in case of refusing to issue a license.

The allocation of real-estate properties and lands required for conducting the projects operating under the Public Free Zones’ Regime shall be subject to the usufruct system. Lands in the Public Free Zones are offered for usufruct in return for:

  1. $3.5 per meter square annually for industrial projects.
  2. $7.0 per meter square annually for other projects (storage & services).

Projects established in Public Free Zones, and the profits distributed by them, are not subject to the provisions of the applicable laws on taxes and duties in Egypt. However, such projects are subject to the following treatment:

1- A fee of two percent (2%) of the commodity value upon ingress (CIF) for the storage -projects and a fee of one percent (1%) of the commodity value upon egress (FOB) for manufacturing and assembly projects. Goods in transit for trade, which have a determined destination, shall be exempted from this duty.

2- A fee of one percent (1%) of the total revenues realized by the projects whose main activity does not require the ingress or egress of goods, based on the financial statements accredited by a certified accountant.

In Egypt, there are Alexandria Public Free Zone, Nasr City Public Free Zone, Port Said Public Free Zone, Suez Public Free Zone, Ismailia Public Free Zone, Damietta Public Free Zone, Media Public Free Zone, Shebin El- Kom Public Free Zone, Qeft Public Free Zone and Port Said East Port Public Free Zone.

2. Private Free Zone

For establishing a Private Free zone company, the following conditions must be fulfilled:

  1. There is no suitable location for the project inside the Public Free Zones.
  2. The project shall take the form of a joint stock company (JSC) or a limited liability company (LLC);
  3. The minimum capital shall be USD 10,000,000;
  4. Investment costs shall be USD 20,000,000;
  5. The minimum area may not be less than 20,000 square meter;
  6. The minimum employees may not be less than 500 workers;
  7. Export percentage shall be 80%;
  8. The company should at least use 40% local elements;
  9. Compliance with the conditions of industrial security, civil defense and fire defense;
  10. A new company or entity is established within three years from the date the regulation came into force;
  11. The company or establishment maintains regular accounts.

Projects established in Private Free Zones, and the profits distributed by them, are not subject to the provisions of the applicable laws on taxes and duties in Egypt. However, such projects are subject to the following treatment:

1- A fee of two percent (2%) of the commodity value upon ingress (CIF) for the storage -projects and a fee of one percent (1%) of the commodity value upon egress (FOB) for manufacturing and assembly projects. Goods in transit for trade, which have a determined destination, shall be exempted from this duty.

2- A fee of one percent (1%) of the total revenues realized by the projects whose main activity does not require the ingress or egress of goods, based on the financial statements accredited by a certified accountant.

In all cases, projects established within the Public and Private Free Zones shall pay annual fees to GAFI for the services rendered thereby, such fees amount to half in a thousand (0.5 per 1000) of the issued capital regarding industrial and assembly projects, one in a thousand (1 per 1000) of the issued capital regarding storage and services projects, at a maximum of EGP one hundred thousand (EGP 100,000). Such fees are to be paid in free convertible currency.

Projects operating under the Free Zones regime may convert to the Inland Investment regime provided:

  1. The project carried out its activities according to the Free Zones regime for one year at least.
  2. The project carries out its activities after conversion outside the boundaries of the Free Zone, if it was carrying out its activities in a Public Free Zone.
  3. All the dues of GAFI and other governmental authorities are duly paid.
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GAFI: (General Authority for Investment and Free Zones)

GAFIG General Authority for Investment and Free Zones

GAFI is an Egyptian governmental organization that aims and works on presenting Egypt as a center for business and investment; GAFI it sponsors programs that promote foreign and domestic investment, in addition to supporting the investors in the context of a business-friendly environment and policies that brace investment.

The Authority’s activity is based on five main axes:

  1.  Promoting to attract foreign investment and stimulate domestic investment.
  2. Developing the investment services and creating a business environment.
  3. Managing public and private free zones, supervising investment companies and developing investment areas.
  4. Supporting small and medium enterprises and developing entrepreneurship
  5. Establishment of institutional development that supports investment

 Types of Companies;

According to Egyptian Companies Law No. 159

Companies in Egypt are divided to three forms. (One-Person Company, Partnerships, and Investment Companies)

  1. One-Person Company (OPC): Is a legal entity owned by one person -whether natural or juristic­- who obtains all of its profits; and is responsible for all the entity’s liabilities as well, this means that in case the company fails to pay its debts, he is obligated to pay for them  from his personal money.
  2. Partnership: is usually based on mutual trust between its partners, in which the personality of the partner is the main consideration. Forms of partnerships are (General Partnerships and Limited Partnerships)
  3. General Partnerships: A general partnership is a company that is incorporated by two or more partners, who are jointly responsible with all their personal funds for the debts of the company. The general partnership name consists of the name of one of the partners as well as the phrase “and partners”. Each and every partner in a general partnership is considered a trader even if he did not acquire this character before general partnership incorporation.
  4. Limited Partnerships: A limited partnership is a company that is held between two kinds of partners (Solidarity Partner and Dormant partner), while the solidarity partner is the one to hold its management and consequently is liable for the company’s debts from his own money, the later is not. A dormant partner is excluded from the management, but he enjoys limited liability equivalent to the value of his shares quota.
  • Investment Company: Unlike The Partnerships, partners of an Investment Company have a limited liability equivalent to the amount of their quota and they get to keep their own money detached from the company. Their personal funds are not a guarantee for any of the company’s debts. Example of Investment Companies are (Joint Stock Companies, Limited Liability Companies, and Partnership Limited by Shares)
  • Joint Stock Companies (SAE): A Joint Stock Company is an Investment Company with a minimum capital of EGP 1,000,000 and at least three founding shareholders having its capital divided into shares of equal value on them, additionally, any of the shareholders is liable for the company’s debts within the amount of his quota only. Also, the company shall have a trade name derived from the purpose of its establishment; this may include the name or the title of one or more of its founders.
  • Limited Liability Companies (LLC): A limited liability company is a company with the capital of which is composed of quotas owned by 2-50 partners. The form of entity usually chosen by foreign investors is the LLC, as its structure is equivalent to France (SARL), Germany (GmbH) or a UK Limited Company (Ltd).
  • Partnership Limited by Shares: Partnership limited by shares is a company whose capital is composed of one or more quotas owned by two Solidarity Partners with unlimited liability, as well as a number of shareholders that shouldn’t be less than three -as prescribed by law- with a limited liability to their quota of shares.
GAFI Case study

By knowing which type you’re seeking to form, let us tell you about the required documents and procedures towards establishing your company?

GAFI required Documents: (For OPCs and Partnerships):

  • A copy from the power of attorney from the owner of the facility/ the founders or partners of the company in the event that it was established by an Agent (must be clear and valid)
  • the power of attorney must stipulate “establishment of companies“.
  • Copy of the IDs of the owner of the OPC/the founders or partners; (must be clear and valid)
  • Egyptian national ID number
  • Passport for the foreigner (valid residence is required)
  • Copy of the agent’s ID (must be clear and valid)
  • Egyptian national ID number
  • Passport for the foreigner (valid residence is required)
  • Security inquiry form in case the company’s owner is a foreigner
  • A copy of the membership ID of a lawyer who is registered to the Bar Association so he ratifies the contract in front of the Bar Association. (a primary lawyer at least is a must, with his membership ID valid to date)
  • The approval of the competent authority if any of the company’s purposes requires obtaining special approval in accordance with the provisions of the applicable laws (prior approval).
  • In the event of an in-kind share upon incorporation, it is permissible to submit a report from expert people as stated by the law and this is according to the nature of each share
  • In case that the company is established to operate in the free zones under the Investment Law No. 72 of 2017, the prerequisite documents are required in addition to the approval of the authority is met before incorporation and approval is issued by the board of directors of the free zone in which the project is to be established.

Required Documents (For Investment Companies):

  • No-confusion certificate for the Company’s name; accredited by the commercial registry.
  • Bank certificate
  • Power of Attorney (originals to be seen)
  • Copies of IDs (clear and valid) for the founders or partners;
  • Original and official extract from the accountant’s and auditors’ record; stating the company’s auditor’s entitlement to audit and approval of the funds companies ’budgets, and a copy or approval of acceptance of appointment is provided; in the event that he has submitted this certificate in advance to the authority.
  • A copy of the membership ID of a lawyer who is registered to the Bar Association so he ratifies the contract in front of the Bar Association. (a primary lawyer at least is a must, with his membership ID valid to date)
  • Security inquiry forms for any foreign founders or partners.
  • A document that specifies the name and address of the company’s legal advisor; providing that his registration degree cannot be less than an appeal lawyer.
  • Copies of the IDs of the representatives (must be clear and valid)
  • Egyptian national ID number
  • Passport for the foreigner (valid residence is required)
  • The approval of the competent authority if any of the company’s purposes requires obtaining special approval in accordance with the provisions of the applicable laws (prior approval).
  • In the event of an in-kind share upon incorporation:
  • Joint Stock Companies/Partnership Limited by Shares: The original report of the committee formed by GAFI shall be submitted evaluating the in-kind share
  • Limited Liability Companies: It is permissible to submit a report from expert people as stated by the law and this is according to the nature of each share
  • In case that the company is established to operate in the free zones under the Investment Law No. 72 of 2017, the prerequisite documents are required in addition to:
  • In the case of a public free zone: the approval of the authority is met before incorporation and approval is issued by the board of directors of the free zone in which the project is to be established.
  • In the case of a private free zone (for a joint stock company/limited liability company): an approval of the CM must be obtained before incorporation.

Regarding the procedures of establishment, there are two roads to hit;

Investor Services Center:

  • At first, you choose the service you want and get the waiting number for it, and get the documents reviewed on the ground floor.
  • After that, go to the incorporation lawyer for the preparation of the company’s contract, and then head to the first floor to pay the incorporation fees (this could be in cash or with your credit card).
  •  At last, you sign the contract documentation, and receive your company’s documents.

Through the electronic portal:

  • Sign up and create your account and your own workspace on www.gafi.gov.eg, then choose the service and provide the required documents, for the authority to review them.
  • Pay the required fees using credit cards, and then sign the documents electronically.
  • Then all your company documents will be sent to you on your account on the online portal.

You can read also:

Announcement of partnership

Branches and Representative Offices

Agencies and Distribution and franchise Contracts

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Announcement of partnership

As part of its efforts to expand its reach as a leading international law firm in the field of international legal counsel and legal counsel, ELezaby International Law and Legal Consultants recently signed a partnership agreement with Del Canto Chambers, a leading law firm in the fields of corporate taxation, arbitration and other fields. . Del Canto Chambers covers the UK and other European countries and has offices in London, Madrid and Qatar.

Under the terms of the agreement, ELezaby International Law and Legal Consultancy Office has expanded its scope of operations to include Europe, Egypt, the Gulf and North Africa, as well as joint cooperation between the two offices.

Dr. Waleed Ahmed ELezaby, Chairman of ELezaby International Law and Legal Consultants, said: “The signing of the partnership agreement with the international law firm, Del Canto Chambers, will enable ELezaby Law Office to benefit from the high level international scientific and practical expertise enjoyed by team members. As well as expanding the geographical reach of our legal services and also serving our clients in Egypt, the Gulf and North Africa if their business needs to provide legal services in Europe. “

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