On 25 July 2023, Law No. 160 of 2023 was issued, introducing significant changes (the “Amendment”) to Law No. 72 of 2017, issuing the Investment Law (the “Investment Law”).
The Amendment, which entered into force the following day, on 26 July 2023, primarily concerns the general investment incentives and adds special incentives that investment projects could benefit from. Furthermore, the Amendment tackles the single authorization (the “Golden License”) provided by Article 20 of the Investment Law as well as the Free Zones System (“FZS”).
The Amendment to General and Special Investment Incentives
i. The Amendment provides that all investment projects subject to the Investment Law provisions are entitled to the general incentives provided within its provisions, regardless of their legal status and whether they were incorporated before or after the Investment Law came into force, except for the projects established under Free Zones System.
ii. The Amendment specifies Zone A as the area accredited by The National Economic and Social Development Plan, which can benefit from a special investment incentive consisting of a 50% (fifty per cent) discount on the investment costs on the net taxable profits of eligible companies.
iii. The Amendment modifies the requirements to be met by the investment projects to benefit from the special incentives. While the previous article required that the company or facility must be incorporated within a period of 3 (three) years from the date of entry into force of the Investment Law Executive Regulations’ (“ER”), the Amendment allows the Prime Minister (“PM”) to extend such period for a period(s) not exceeding 9 (nine) years.
iv. Additional incentives are added to the list of incentives provided in Article 13 of the Investment Law, which includes the following:
v. In addition to the above,the Amendment has introduced a new incentive. The Amendment authorizes the PM to issue a decree to determine some industrial activities as well as specific geographical areas that will benefit from a cash investment incentive ranging from 35% (thirty-five per cent) up to 55% (fifty-five per cent) of the paid tax per the tax return on income resulting from undertaking the activity in the investment project, or the expansions thereof, as applicable. In this respect, projects that will undertake the industrial activities (yet to be determined under a Cabinet decree) shall fulfil the following conditions to benefit from the said incentive:
The Amendment in Connection with the Golden License
The Amendment expands the scope of projects that are eligible to obtain the Golden License provided in Article 20 of the Law by stating that the incorporated companies can obtain such license regardless of their legal status, as well as those to be incorporated to implement new investment projects in case such projects contribute to achieving development in specific sectors and following certain criteria to be determined by PM decree.
GAFI’s Authorities per the New Amendment
The Amendment grants new powers to GAFI to monitor the companies’ compliance with the requirements of establishing and operating the investment project per the applicable laws and regulations.
In case of any violations, the following specific procedures shall follow: (i) notice, (ii) a grace period to rectify the violation, (iii) the project/activity suspension for a period not exceeding 1 (one) year, and (iv) cancellation of the Golden License granted to the company.
Free Zones System Implications
The Amendment reduces the list of prohibited projects that cannot be established under the FZS. These projects include only the following sectors:
Therefore, upon authorization of the Supreme Council of Energy, the Amendment now allows the projects in the following sectors to be engaged under FZS:
It should be noted that these projects were previously banned from being established under FZS.
It is also worth mentioning that the Amendment allows the entry of substances and waste resulting from the FZS projects activities inside the country for their disposal or recycling. However, such entry must be at the expense of the concerned person and per the provisions of The Waste Management Regulation Law No. 202 of 2020.