Introduction
During the year 2022, there were vast changes in the laws, and new laws were enacted to facilitate business in Egypt. In this article, we shall keep our clients on track with highlights of the new laws enacted in Egypt or amendments to current laws that affect different businesses.
A- Amendments to Value Added Tax Law
On January 26th, 2022, an amendment was published in the Official Gazette to the Value Added Tax Law No. 67 of Year 2016 by Law No. 3 of Year 2022, where the goods and services exported by projects operating within the Special Economic Zones are now subject to VAT at 0%. Furthermore, special imports of goods and services to Economic Zones for the purpose of conducting licensed activities will be subject to 0% VAT. The above rate is applicable to all imported goods and services, whether imported from abroad or from the local market, except for passenger cars.
The new amendments suspended the payment of the VAT due on machinery and equipment, whether imported or purchased from the local market for industrial purposes, for a period of one year from the date of their customs release or purchase from the local market, and this period may be extended by a maximum of an additional one year. Such suspensions are not applicable to service-provider companies. In the event that it is proven to the Egyptian Tax Authority that such machinery and equipment were used in industrial production within such a period, they shall be exempt from VAT. If the mentioned period ended without using the machinery and equipment in industrial production, the VAT and the additional tax would become due from the date of purchase or custom release until the payment date.
B- Fintech Law
The Fintech Law was enacted and published in the Official Gazette on February 8, 2022, under Law No. 5 of Year 2022, concerning the organization and development of the use of technology in non-bank financial activities.
The law aims to enhance the use of the Financial Supervisory Authority (FRA) over entities that engage in non-banking financial activities with modern and innovative technology, with the aim of facilitating the performance of its supervisory role over the entities subject to it with regard to compliance with standards of transparency and governance.
According to Fintech Law, startups can apply for a short-term fintech startup license that is valid for up to two years. The law grants the FRA regulatory jurisdiction over the fintech industry, including the authority to issue licenses and certificates for fintech and services. The FRA is also entrusted with promoting financial inclusion through the use of fintech technology, which the statute defines as expanding the use of banking and non-banking financial services.
C- Hotels and Tourism Establishments Law
The Hotels and Tourism Establishments Law was enacted and published in the Official Gazette on March 6, 2022, under Law No. 8 of Year 2022, which cancels and replaces old Law No. 1 of Year 1973 concerning establishments of hotels and tourism and Law No. 1 of Year 1992 concerning tourism souvenir shops.
As per the law, it defines hotels broadly to include any premises that are intended for the accommodation of Egyptian and non-Egyptian guests, including: “hotels, motels, tourist villages, floating hotels, boutique hotels, eco-friendly accommodations, safari camps, camps, branded residency units, and accommodation units.” In addition, it defines tourism establishments to include any premises that are intended for receiving Egyptians and non-Egyptians for the purpose of serving food and drinks, including: “restaurants, boat restaurants, takeaway restaurants, food trucks, cafeterias, tourism means of transportation, land trips, Nile River and sea cruises, night clubs, souvenir shops, diving and safari centers, gyms and spas existing inside hotels.”
The law stipulated that any hotel or tourism establishment from among the above lists is required to obtain a license from the Ministry of Tourism (MOT) as the regulator body and shall satisfy general specifications, including the required firefighting system, the environmental and health requirements, as well as the occupational safety and health measures.
Every hotel or tourism establishment that gets a preliminary approval will pay an inspection fee that will range from 500 EGP (around USD 21) to EGP 100,000 (around USD 4,050). The fees for the final license approval range from EGP 100,000 (around USD 4,050) to EGP 1 million (around USD 40,410).
In addition, any individual who is working on the management of a hotel or the supervision of a hotel or a tourism establishment must have a special license from the Ministry of Tourism (MOT) against a fee that ranges from EGP 300 (around USD 13) to EGP 20,000 (around USD 810).
D- Golden License for Investment Projects
According to Article 20 of the Investment Law enacted by Law No. 72 of Year 2017 and Articles (42) and (43) of its Executive Regulations, the “Golden License” is a comprehensive approval on the establishment, operation, and management of a project, including the building licenses of such a project and the allocation of the real property required therefor. It may be granted to companies upon a decree of the Cabinet.
The Golden Licenses may be granted to:
- Companies that are incorporated to set up strategic or national projects that contributes to the achievement of sustainable development in accordance with the state’s economic development plan.
- Companies that are incorporated to set up a partnership between the private sector and the state, the public sector, or the public business sector in the activities of public utilities and infrastructure, new and renewable energy, roads and transportation, ports, telecommunications, and information technology.
Cabinet Decree No. 56 of Year 2022 was issued to set out the terms and conditions for classifying any investment project as strategic or national in the application of the provisions of Article (20) of Investment Law, among which an investment project must satisfy one or more of the following criteria, including but not limited to:
- Contribute to increasing exports by exporting at least fifty percent (50%) of its products per year, provided such exportation starts within a maximum of three (3) years of the start of the business.
- The source of finance shall be foreign money transferred from abroad via one of the Egyptian banks.
- It shall aim to reduce imports, increase industrial domestication, and deepen local components in its products, provided that the percentage of local components in its products, including raw materials and production requirements [inputs], is at least fifty percent (50%), and that this percentage is calculated by subtracting the value of imported components from product cost.
Areas and activities granted comprehensive approval:
Electricity and renewable energy sectors; petroleum and mineral wealth sectors; transportation sectors Industry; Communications and Information Technology; Housing, Utilities, and Urban Communities; Tourism; Youth and Sports; Environment; Agriculture; Military Production; and Health.
E- Amendments to Capital Market Law
On March 14th, 2022, an amendment was published in the Official Gazette to the Capital Market Law No. 95 of Year 1992 by Law No. 13 of Year 2022, which added new articles and paragraphs to the law. The new amendments obligate the entities whose securities are listed on the EGX to allow the use of electronic systems that allow shareholders to attend the meetings of the General Assembly and establish procedures, as well as vote on them remotely, in accordance with the conditions, controls, and procedures issued by the Financial Regulatory Authority’s (FRA) Board of Directors.
Furthermore, the law allows a securitization company to issue negotiable bonds, the proceeds of which are paid to finance general and private legal persons after approval from the authorities involved with the aforementioned company, in exchange for the future cash flow these persons may receive. The future cash flow means the flow expected to fall into the transferor’s liability as usual, and this cash flow shall be:
- issued in favor of natural or private legal persons
- unrestricted or conditional, and
- free of any current or future obligations or rights to a third party
