Industry-Specific Reforms > COVID-19 Crisis

  • Factories in free zones are facing increasing financial burdens.  

Industry-Specific Reforms > COVID-19 Crisis

  • Exempt all free-zone factories from paying rent for six months.
  • Ensure transparency in setting and applying tolling rates.

Industry-Specific Reforms > COVID-19 Crisis

  • The General Authority for Investment and Free Zones (GAFI) issued a decision deferring rent payments.

Industry-Specific Reforms > COVID-19 Crisis

  • Free zones are struggling due to the ceasing of exportation as a result of the COVID-19 pandemic.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > COVID-19 Crisis

  • Allow free zone enterprises to sell 50% of their production on the domestic market; currently, they are authorized to sell 20% of their production domestically. 

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > COVID-19 Crisis

  • FEI’s recommendation was approved.

Responsible Entities

Date 6/30/2020

Industry-Specific Reforms > General Reforms

  • Reconsider the security screening process required for foreign investors as it consumes an inordinate amount of time (up to seven months). A 30-day advance notification requirement should suffice—a no response during these 30 days is to constitute an approval.

Responsible Entities

Date 3/21/2019

Industry-Specific Reforms > General Reforms

  • Do not impose a real estate tax in free zones, and consider exempting factories from such tax: In May 2018, the General Assembly of the Legal Opinion and Legislation Departments of the State Council issued a legal opinion confirming that business enterprises located in free zones are exempt from the taxes prescribed in Real Estate Tax Law No. 196 of 2008. This exemption is to take effect from the date on which the Investment Law No. 72 of 2017 entered into force. Article 41 of the Investment Law stipulated that free zone business enterprises shall not be subject to the provisions of the applicable laws on taxes and duties in Egypt, which includes the real estate tax.  Accordingly, it is not legally possible to require these enterprises to pay real estate tax starting June 6, 2017, the day the Investment Law entered into force. Compliance with the legal opinion of the State Council, and establishing a mechanism to ensure its implementation is yet to be seen. 

Industry-Specific Reforms > General Reforms

  • Ensure that free zones and other investment zones are treated equally, particularly with regards to accessing incentives.  Free zones employ local workers and utilize local inputs, thus, enterprises operating in the free zones should be able to access the incentives offered through the Export Development Fund, along with other relevant incentives.

Industry-Specific Reforms > Customs Procedures

  • The Egyptian Customs Authority has requested from some of the industrial and commercial multinational investing and operating enterprises in Egypt to pay the differences from the customs and other fees paid on raw materials and production inputs that are imported to manufacture its products in Egypt and the finished imported products in order to sell them in the local market on the basis that these payments and paid revenues is part of the value of customs equipment. Hence, the customs and other fees should be paid for it,, even though that the larger portion of the established contracts in that regard with the main company HQ which states that the payments and revenues that is paid to it are payments correlated to the production and utilization of the trademark about the sold products in Egypt and it has nothing to do with the raw materials or production equipment imported through the foreign enterprise in Egypt; there are no payments given to the main enterprise, thus, these payments are not included in the category of the value of customs’ products.
  • The value base for customs products value for commercial enterprises included payments for finished products that are imported from trade agreement states which are exempt from customs and the requests included the payments for products manufactured in the enterprises’ factories in Egypt (not established in the free zones).
  •  Assuming that enterprises accept the application on the raw materials, the bases used by the Egyptian customs were flawed as they included local cost elements such as workers’ wages, and local raw materials
  • These requests are issued to companies retroactively for a period of five years after the companies announce the results of their businesses, distribute the profits, and pay the taxes due for those years which causes companies to bear additional burdens that were not previously taken into account, and of all this, it leads to an increase in the cost of production in Egypt compared to other countries which affects the competitiveness of the Egyptian product. Taking into account the ease of the business climate in those countries, also, some of the foreign companies’ operation in Egypt were under administrative seizure and its bank balances got frozen, which led the companies to resort to the judiciary to lift the seizure which in turn reflected an undesirable image of the business climate in Egypt.
     

Industry-Specific Reforms > Customs Procedures

  • Not adding those amounts paid from royalties and licenses for the use of technological right included in the cost elements upon which the customs value for raw materials and imported production inputs are added/calculated to, according to the Egyptian Customs Law and its Executive regulation as well as the international Agreement on Value for Custom Products.