The Law No 8/1997 "on Investments' Guarantees and Incentives". Book-1

Book-1

The legislative Roots of the Law No. 8 /1997, amended by law no. 162/2001 Promulgating Law On Investment Guarantees and Incentives[1]

 In the name of the People;

The President of the Republic;

 The People's Assembly passes the following Law and it is enacted by us(2).

Article1:The provisions of the attached Law on Investment Guarantees and Incentives shall come into force .

Article2: Subject to provisions of article 18 of the attached law, the provisions of this law shall not derogate the fiscal privileges and exemptions as well as other guarantees and incentives prescribed for the companies and establishments existing at the time the law comes into force, these companies and establishments shall maintain such privileges, exemptions, guarantees and incentives until their respective periods terminates in accordance with legislations and agreements derived therefrom.

Article3: The administrative body implementing the provisions of the attached law shall replace the General Authority of Investment Board of Directors, and the Head of its Executive Agency, a presidential decree shall be issued determining this administrative authority, indicating its powers as well as regulating its work, and setting the regulations related to personnel systems therein without being restricted by governmental systems.

pending issuance of this decree, the General Authority of Investment shall be considered the competent administrative authority under the provisions of the attached law, and the rules regulating personnel affairs in this authority shall remain enforced.

(1) Official Journal - issue no. 19 bis Dated 11/5/ 1997 .

(2) El Wakayee Elmassreya issue no. 176 bis dated 9/8/1997 .

Article4: Without prejudice to the provisions of the preceding article; Investment law no. 230/1989 shall be repealed except the third clause of article 20 of the aforementioned law Similary; articles 5 and 5 Bis of law no. 1/1973 on Hotel and Touristic Establishments, articles 21, 24 and 25 of Law No. 59 of the year 1979 concerning New Urban Communities, and article 30 of Law No. 95/1995 on Financing Lease, as well as all other provisions contradicting the provisions of the attached Law, shall similarly be repealed.

Article5: The Prime Minister shall issue the executive regulations of the attached law within three months from the date it comes into force and pending issuance of these regulation, the regulations and decrees at the date this law comes into force shall continue to apply where they do not contradict its provisions .

Article6:This law shall be published in the Official Journal and shall come into force in the next day of its published . This law shall be sealed by the State's Stamp, and come into force as one of its laws .

Issued at the presidency of the Republic on 14th of Ramadan 1418 corresponding to 11th may, 1997 .

Hosny Moubarak

The Law No 8/1997 amended by law 162/2000 respect to Promulgating the Law on Investments' Guarantees and Incentives

 Part -1

General Provisions

Article 1: The provisions of this law shall apply to all companies and establishments, whatever the legal system they are subject to be established following date of its enforcement, in order to exercise their activities in any of the following fields :

-   Reclamation and cultivation of fallow and desert lands or either.

-   Animal, poultry and fish production .

-   Industry and Mining .

-   Hotels, Motels, Boarding House, TouristVillage and Tourist Travel.

-   Transport of goods in cooling vans, Cold Stores preservation the agricultural products, Industrial products, food stuffs, Container station and Grain Silos .

-   Air transportation and the services and directly related

-   Overseas Maritime Transport.

-   Oil Services for digging and exploration operations, Transport and delivery of gas .

-   Housing projects, the units of which are leased wholly empty for non administrative housing purposes .

-   The infrastructure comprising drinking water, drainage water, electricity, roads and communications .

-   Hospitals and Medical Treatment Centers which offer 10% of their capacity free of charge .

-   Financing lease.

-   Guaranteeing subscription to securities .

-   Risk Capital.

-   Production of computer software and systems . -Projects financed by the Social Fund for Development. The Cabinet may add any other fields the country may need The Executive Regulation of this law shall determine the conditions limits of the above mentioned field .

Article2: Enjoying the investment Guarantees and incentives including taxes exemptions by companies and establishments of multiple purposes and activities shall be restricted to their activities concerning fields determined in the preceding article and other fields added by the Cabinet.

Article3:The provisions of this law shall not derogate any of fiscal privileges or exemptions, or other better guarantees and incentives prescribed in other legislations or agreements.

Article4:The competent administrative authority shall be concerned with verifying the articles of partnership and articles of association data of the articles of partnership and the articles of association indicate the names of the contracting parties, the legal form of the cowl its name, the subject of its activities, the company's period, its capital and percentages of partnership by egyptian and non-egyptian parties methods of subscription thereto, and the partners' obligations and equity. The primary contracts and the articles of association of Joint stock companies, partnership limited by shares, and limited liability companies shall be drawn up according to the models and forms to be issued by a decree from the Prime Minister, the partners' signatures to the articles of partnership of companies whatever their legal form shall be legalized against legislation fees amount to one fourth per cent of the paid up capital, with a ceiling of five hundred egyptian pounds, or their equivalent in foreign currencies as the case may be, whether such legislation is made in egypt or with the egyptian authorities abroad, a decree of the competent administrative quarter shall be issued licensing the foundation of companies to be established according to the provisions of this law and shall enjoy its privileges, and they shall have juridical personality as of the date of recording them in the commercial register, the articles of association and the articles of partnership shall be published according to the rules and procedures to be determined b executive regulation of this law. The foregoing provisions shall apply to every amendment introduce in the articles of association of company (1).

' Refer to Dr. Abd El Fattah Mourad "Encyclopedia of investment.

Article5:The administrative authority, determined by the Executive regulation of this law, shall appropriate the lands owned by the state or public juridical individuals necessary for the companies, establishments and shall conclude their respective contracts on behalf of the concerned authorities.

These authorities shall provide the said quarter with all maps and data pertaining the lands available therewith for that purpose, according to the conditions and rules of concluding the contracts related thereto. This Quarter shall obtain from the concerned authorities, on behalf of the owners of companies and establishments, all licences required for its establishment, management, and operation .

Article6: The request for bringing the criminal action in connection with the crimes prescribed in article no. 124 of customs law as promulgated by law No. 66 / 1963, and article No. 191 of the law on income taxes as promulgated by Law No. 157/1981, as well as article no. 45 of the law on general sales tax as promulgated by law No. II/ 1991 and also article no. 9 of law No. 38/1994 concerning the regulation of dealing in foreign currencies shall be submitted after consulting the view of the competent administrative quarter, if the person accused of committing the crime adjuncted to one of the companies or establishments subject to the provisions of this law. The competent administrative authority shall issue its view, in this respect, within fifteen days from the date of receiving the letter consulting its view, otherwise the request may be submitted for lodging the case.

Article7: Settling the investment litigations which related to the implementation of the provisions of this law may be performed in the manner to be agreed upon with the investor. Agreement may be reached between the concerned parties on settling these disputes within the context of the conventions in force between the Arab Republic of Egypt and the country of the investor, or within the context of the agreement on settlement of litigations which arise in respect of investments, as signed between the countries and the nationals of the other countries, and which was joined by the Arab Republic of Egypt by virtue of law No. 90/1971, according to the conditions and terms of, and in the cases to which these agreements apply, or according to the provisions of the law on arbitration in civil and commercial matters as promulgated by law No.27/1994, Agreement may also be reached on settling the aforementioned disputes and litigations by means of arbitration at Cairo Regional Center For International Commercial Arbitration.

Part-II

Investment Guarantees

 Article8:The companies and establishments shall nether be nationalized nor confiscated.

Article9: Sequestration shall not be imposed administratively on the companies and establishments nor shall their property and funds be distrained, seized, retained in protective custody, frozen, or confiscated.

Article10:No Administrative authority interfere in pricing the companies' and establishments' products or in determining their profits .

Article11: No administrative authority shall cancel or stop the licence granted for using the realties of which the usufructuary right is licence to the company or the establishment wholly of partially, except in cases of infringing the licence conditions . The decree stopping or quashing the licence shall be issued by the Prime Minister upon the proposal of the competent administrative authority'.

The concerned party shall have the right to contest such decree before the administrative court within thirty days for text the date of notifying it to him or the date he acknowledges thereof. ArticIel2:The companies and establishments shall have the right to possess and own building lands and building realties as necessary for exercising their activities and expanding them, whatever the nationality or domicile of the partners, or the percentage of their partnership .

Article13:Without prejudice to the provisions of laws, regulations and decrees re-organizing import activities, the companies and establishments shall have the right to import by themselves or via parties whatever they need for their establishment, expansion or operation, involving production inputs and requisites, materials, machinery, equipment, replacement and spare parts, and means of transport as suitable to the nature of their activities, without need for recording in the Importers' Register . The companies and establishments shall have the right as well to export their products by themselves or through middlemen without being licensed therefore and without need for recording themselves in the Exporters' Register.

Articlel3: Without prejudice to the provisions of laws, regulations and decrees re-organizing import activities, the companies and establishments shall have the right to import by themselves or via parties whatever they need for their establishment, expansion or operation, comprising production inputs and requisites, materials, machinery, equipment, replacement and spare parts, and means of transport as suitable to the nature of their activities, without need for recording in the Register of Importers .

The companies and establishments shall have the right as well to export their products by themselves or through middlemen without being licensed therefore and without need for recording themselves in the Register of Exporters .

Articlel4: The Joint Stock Companies, Partnership Limited by Shares or Limited Liability Companies whose activities are restricted to the scopes referred to in article (1) of this law, shall not be governed by the provisions of article 17,18,19 and 41 as well as the first and fourth clauses of article 77, and article 83,92 and 93 of the Law On Joint Stock, Partnership Limited by Shares and Limited Liability Companies as promulgated by Law No. 159/1981(1). The foundation shares and stocks may be circulated/negotiated during the first two financial years of the company with the approval of the Prime Minister or his mandatory.

The competent administrative authority shall substitute the companies administration in applying the provisions of Law No. 159 /1981, as referred to above, and its executive regulation, with regard to the foregoing companies. The Joint Stock Companies shall not be subject to and governed by the provisions of Law No. 73 /1973 on specifying the conditions and procedures of electing the workers' representatives on the board of public sector units, the joint stock companies , and the private societies and establishments, the company's Articles of Association shall indicate the mode of workers' participation in the administration thereof as detremined by the executive regulation of this law.

Articlel5: The Joint Stock Companies shall be excepted from applying the provisions of Law No. 113/1985 concerning appointment in positions of the joint stock companies and public establishments . They shall also be excepted from applying article 24 of Labour Law as promulgated by Law No. 137/1981.

Part -III

Investment Incentives

 Chapter -1 Tax Exemptions

Articlel6: The Companies' and establishments' profits and the partners' shares in these profits shall be exempted from tax on the revenues of commercial and industrial activities, or the tax on stock companies profits, as the case may be, for a period of five years starting from the first financial year subsequent to beginning of the production or exercising the activity . The exemption will continue for a period of ten years with respect to the companies and establishment set up within the new industrial zones and the new urban communities as well as the remote areas for which a decree determining them shall be issued by the Prime Minister. The same applies to new projects financed by the Social Fund for Development.

Articlel7: Profits of companies and establishments exercising their activities outside the old valley, and the partners shares therein, whether the establishment is outside that old valley or transferred therefrom, shall be exempted from the tax revenues of commercial and industrial activities or the tax on stock companies' profits, as the case may be, for a period of twenty years, starting from the first financial year subsequent to beginning of the production or the exercising of activity . A decree of the cabinet shall be issued determining the areas to which this provision shall apply .

Articlel8: Companies, establishments and projects financed by the Social Fund for Development existing at the time the present law comes into force which exercise their activity in the fields referred to in article (1) of this Law shall complete the periods of exemption as prescribed in the two previous articles, in case the exemption periods prescribed for them have not been completed at that date.

Articlel9: In applying the provisions of the previous articles, the first year of the exemption shall include the period from the date of beginning the production or exercising the activity, as the case maybe, up to the end of the financial year following it

The company or the establishment shall notify the competent administrative authority of the date of beginning the production or exercising the activity within one month from that date.

Article20: (1) The Articles of partnership of the companies and establishments, the loan and mortgage contracts connected with their works shall be exempted from the stamp tax and the notarization and legalization fees, for a period of the five years from the date of recording in the commercial registered, it has done before the daling with this law. The contracts of registration of lands which are necessary for establishing the companies and establishments shall also be exempted from the aforementioned tax and fees.

Article21: An amount equivalent to a percentage of the paid up capital, to be determined at the central bank of Egypt lending and discount rates for the year of treatment, shall be exempted from the tax on stock companies' profits, providing the company is a joint stock company and its stocks are registered with one of the stock exchanges.

Article22: Yields of bonds and financing shares warrants, and incomes of the other similar securities portfolios as issued by the joint stock companies shall be exempted from the tax on revenues of movable capitals. Provided that they shall be floated for public subscription and shall be registered with one of the stock exchanges.

Article23:The provisions of article (4) of the law regulating customs exemptions promulgated by law No. 186/1986 regarding the collection of a customs tax at a unified rate of 5% of the value, shall apply to the companies and establishments for all machines, equipments, and instruments imported thereby as necessary for their establishment.

Article23 (Bis):(2) The expansions which approved by administrative authority shall be exempted from tax prescribed in the article 16 of this law for five years, the exemptions prescribed in the two articles 20,23 of that law shall apply on thes expansions. The expansions means exceeding in the capital used to added new assets to increasing the production power to project.

The executive regulation shall determined the types of assets, the rules

and standards which shall use to calculate this exceeding.

(1) This article superseded by virtue of law no. 13/2002 Bis (A) Official
Journal dated 14/5/2002.

(2) The article 23 (Bis) added by virtue of law no. 162/2000, Official
Journal issued no.24 Bis ,dated onl 8/6/2000

Article24: Profits resulting from the merger, division or change of the companies' legal form shall be exempted from taxes, and duties that are payable on the merger, division or change of the legal form.

Article25:The merging, merged companies, establishments, the companies and establishments which are divided, or whose legal form is changed shall enjoy exemptions prescribed thereof the merger, division, or change of their legal foam until their relevant exemption periods expire. The merger, division or the change of the legal form shall not result in any new fiscal exemptions.

Article26: The result of evaluating the real/ in-kind portions forming the foundation of joint stock, partnership limited by shares, or limited liability companies, or entering in their capital increase, shall be exempted from the tax on revenues of commercial and industrial activity, or the tax on stock companies' profits as the case may be .

Article27: The executive statutes of this Law shall determine the conditions, rules and procedures connected with enjoying tax exemptions automatically and without depending on an administrative approval, providing the exemption shall be cancelled in case of violating these conditions and rules. A decree of the Prime Minister shall be issued concerning the cancellation of the exemption, upon the proposal of the competent administrative quarter. The concerned party may contest this decree before the administrative court, within thirty days from the date such decree is announced thereto, or he learns of it.

Chapter- 2

Appropriation of Lands

Article28: A decree of the Cabinet may be issued, upon the proposal of the competent minister appropriating state-owned lands or lands owned by public juridical persons, to the companies and establishments set up in defined areas, in the fields determined in article (1) of this law, free of charge, and in accordance with the procedures prescribed in the executive regulation of this law.

Chapter - 3

Free Zones

 Article29: A Free Zone which covers a whole city shall be established by virtue of a law.

Public free zones shall be established by virtue of a decree of the Cabinet upon the proposal of the competent administrative authority for the establishment of projects that are licensed whatever their legal form .

A decree of the competent administrative authority many be issued concerning the establishment of private free zones, each confined to a single project, if the nature thereof necessitates so doing. The competent administrative authority may approve changing one of the projects which are set up in the country into a private free zone, in the light of the controls to be determined in the executive regulation of this law .

A decree issued for the establishment of the free zone shall involves an indication of its site and limits . The public free zone shall be managed by a board of directors to be formed and its chairman to be appointed by a decree of the competent administrative authority.

The board of directors shall be concerned with implementing the provisions of this law, its executive regulation, and the decisions to be issued by the aforesaid authority.

Article30: The competent administrative authority shall set the policy to be followed by the free zones. It shall have the power to issue whatever decisions it considered necessary for realizing the purpose for which these zones are set up, and in particular the following:

A- Setting the systems and regulations necessary for managing the Free Zones .

B- Setting the conditions for. granting the licences and for occupying the lands and realties, the rules on entry and exit of goods, the provisions on recording them , the charges collected for occupying the places they are deposited in and examining the documents as well as for the verification thereof, and the system concerning control on and guarding these zones, beside collecting the dues payable to the State .

Article31: The Board of the public free zone shall be concerned with licencing the establishment of projects, licencing the project to exercise the activity shall be granted by virtue of a decree to be issued by the board chairman of the zone . The licence shall involves an indication of the purposes for which it is granted, its validity period, and the amount of financial guarantee payable by the licence. The licence shall not be assigned wholly or partially except with the approval of the authority issuing it. refusing to grant the licence or disapproving its assignment shall be issued with a justified decision. The concerned party may complain against such refusal/disapproval to the competent administrative authority according to the rules and procedures prescribed in the executive regulation of this law. The licencee shall not enjoy the exemptions or privileges prescribed in this law except within the limits of the purposes indicated in the licence.

Article32: Subject to provisions prescribed in the laws and regulations on preventing dealing in and circulating certain goods or materials, goods which are exported abroad by the free zone projects or imported to exercise their activity shall not be subject to the rules on imports and exports, nor the customs procedures for exports and imports. Nor shall these goods be subject to the customs taxes, the general sales tax and other taxes and duties, all articles equipment, machines, and means of transport which ,are necessary for exercising the activity licenced for the projects inside the free zones shall be exempted from customs taxes, the general sales tax and other taxes and duties, with the exception of passenger cars. The executive regulation of this law shall determine the procedures for goods transport and insurance there of eginning to unload them until their arrival at the free zones, and vice versa. The competent administrative authority shall have the power to allow the entry of local and foreign goods, materials, replacement and spare parts, and all raw substances as owned by the project or by third parties. from inside the country to the free zone temporarily for repairing them or for carrying out industrial processes on them then returning them inside the country, without such goods and materials being subject to import rules which are applicable thereto as indicated in the executive regulation of this law. the customs tax shall be collected on the repair value according to the provisions of customs law. The provisions of article 33 of this law shall apply to the industrial processes .

Article33: Import into the country from the free zones shall be in accordance with the general rules on import from abroad, and customs taxes shall be payable on goods which are imported from the free zone to the local market as though they were imported from abroad. With regard to the products imported from the free zones projects and comprising local components as well as other foreign components, the customs tax basis in their respect shall be the value of the foreign components at the prices ruling as the time of their exit from the free zone into the country provided that the customs tax due on the foreign components shall not exceed the tax payable on the final product imported from abroad. The foreign components are represented in the imported foreign parts and materials according to their condition at their entry into the free zone . without reckoning the operating costs in this zone. The free zone, with regard to the freight, shall be considered the country of origin concerning me products manufactured in it.

Article34: The customs director for the free zone shall notify the chief of the free zone of any cases of unaccounted shortage or surplus in the goods manifested in the bills of loding, whether in the number of packages or their contents or packed or loose goods if consinedto the free zone, by resolution of the authority's board of directors responsibility for the cases specified in the preceding clause and percentages of allowances shall be regulated.

Article35: Projects which are established in the free zones and the profits as distributed by them shall not be subject to the provisions of taxs and duties laws rulings apllying in Egypt. However, these projects shall be subject to an annual duty of 1% (one percent) of the value of commodities on their entry, for storage projects, and of the value of commodities on their exit, for manufacturing and assembly projects. Transit goods trade of which the destination is determined shall be exempted from this duty. Projects of which the main activity requires no entry or exit of goods shall be subject to an annual duty of 1 % ( one percent) of the total revenues realized thereby based on the accounts as approved by a certified accountant. In all cases, the projects shall pay services' charges as determined in the executive regulation of that law.

Article36: Companies exercising their activities in the public free zones shall not be subject to the provisions prescribed in law no. 73/1973 and law no. 159/1981.

Article37: Maritime transport projects which are established in the free zones shall be exempted from the conditions concerning the nationality of the ship owner and of those working on it, as prescribed in the maritime trade code, and law no. 84/1949 concerning the registration of merchant ships . Ships which are owned by these projects shall be exempted from the provisions of law no. 12/1964 concerning the establishment of the Egyptian General Organization for Maritime Transport. ArticIe38:The Licence shall cover the buildings, machines an; equipments with insurance against all accidents risks. He shall also remove them, at his own cost, within the period determined by the Board of Directors of the Zone, in accordance with the rules to be set by the competent a hninistrative authority. Article39: Entering or residing in the free zones shall be in accordance with the conditions and terms to be determined by the executive regulation of that law.

Article40: The provisions of law no. 173/1958 stipulating the obtainment of a work permit before taking up a job with foreign quarters, and law no. 231/1996 concering certain provisions regulating the work of egyptians with foreign quarters shall not apply to egyptian workers of the projects set up in the free zones

Article41: No person shall exercise a trade or a profession in the Public Free Zone, for his own account permanently except after obtaining a permit thereof from the Board Chairman of the Free Zone according to the terms and conditions to be determined in the Executive regulation of this law and after settling the fees as shall be determined in these statutes and which shall not exceed five hundred pounds a year.

Article42: The labour contract signed with the workers in the tree zones shall be drawn up in quadruplicate of which one copy shall be handed to each one of the two parties, a third copy shall be deposited with the Free Zone Management, and the fourth with the Labour Office in the Free Zone. If the contract is drawn up in a foreign Language, an Arabic translation thereof shall be attached to each of these two copies.

Article43: Projects set up in the Public Free Zones shall not be subject to the provisions of Law No. 113 /1958, and to article 24 as well as Chapter 5 of Part-Ill of the Labour Law. The Board of Directors of the Competent Administrative Quarter shall set up the rules regulating personnel affairs in such projects .

Article44: The provisions of the Social Insurance Law, as promulgated by law no. 79/1975 shall apply to the Egyptian workers employed with projects exercising their activities in the Free Zones.

Article45: Whoever violates the provisions of article 41 of this Law shall be liable to punishment with a fine of not less than two thousand pounds and not exceeding Five Thousand Pounds

No criminal action shall be brought concerning these crimes except upon a written request from the competent administrative quarter.

A composition may be carried out by the said Quarter with the violator during examination of the action, in return for payment of an amount equivalent to the minimum limit of the fine amount, the composition shall result in ending the criminal action.

Article46: The Provisions of Articles (8),(9),(10),(11) and (20) of this law shall apply to investment in the free zones(2)

[1]The third clause of the article 20 in the law 220/1989 provides that The personnel shall the right to participate in the profits of the joint stock companies which earned before dealing with that law and subject to its provisions and which shall distribute in accordance with the rules determined by the General Assembly of each company on the basis of the Board of directors' proposal provided that not less than 10% from the profit and not exceeding the annual wages of the personnel in the company.

N.B. The aforementioned third clause repealed by virtue of law no. 2/1992. Official Journal no. 3 dated 16/1/1992 .