Overview

On 6 December, the General Authority for Investment and Free Zones (the “GAFI”) announced the official launch of the Cash Investment Incentive Guide (the “Guide”)  pursuant to Article 11 bis of Law No. 72 of 2017 (the “Investment Law”), marking a significant step in Egypt’s ongoing efforts to promote industrial development, localise production, and enhance the competitiveness of Egyptian industry. This initiative represents a significant shift in attracting industrial investments, as it moves the incentive from a traditional tax exemption to a direct cash benefit, paid to the investor after the tax has been settled. The Guide also introduces a mechanism to protect the investor by allowing the request for preliminary approval valid for three (3) years, thus providing legislative stability in the event of any subsequent amendment to the rules, provided the project commences its activity within the grace period.

Legal Basis and Policy Framework

As part of the government’s broader industrial strategy, Law No. 160 of 2023 amended the Investment Law by introducing Article 11 bis, which establishes a direct cash incentive for qualifying industrial investment projects. This incentive is offered in addition to other incentives available under Egyptian law.

To implement this reform, the Cabinet issued decree no. 77 of 2023 (the “Decree”), which sets out the criteria, categories, procedures, and monitoring mechanisms governing the incentive. Notably, the Decree authorises the issuance of preliminary approvals valid for three (3) years, providing investors with greater certainty throughout the implementation phase of their projects.

This Guide, as outlined and summarised below, is a means by the GAFI to provide information transparently, enhancing the investor’s confidence and understanding of Egypt’s investment environment, and supporting the assessment of eligibility for the incentive to enable informed decisions before submitting an application.

Key Features of the Cash Incentive

• Direct cash payment is made after the payment of taxes.
• Incentive levels are tied to the volume of foreign direct investment injected into the project.
• The foreign investment component must constitute at least 50% (fifty per cent) of the project’s capital.
• To qualify, industrial products listed in the Cabinet’s annex must represent at least 50% (fifty per cent) of annual turnover.
• The incentive is positioned as a major tool for foreign direct investment attraction in the industrial sector.
• Commencement of industrial activity: entitlement to the incentive is tied to the date on which actual industrial activity begins, rather than the date of the company’s incorporation or the issuance of its commercial register.

This decision identifies the starting point based on clear criteria, such as the occurrence of the first production or sales operation, the start of actual operations, issuance of the industrial registration, and official operation records issued by the competent authority.

Incentive Calculation

The incentive is calculated as follows: 35%/45%/55% x (*) the tax paid on the industrial project’s activity.

Eligibility

As noted, the Decree is limited to industrial projects producing a specified industrial good, with the targeted product types precisely identified. The Decree applies to both newly established industrial projects being set up for the first time, as well as expansion projects within existing factories, provided that all other technical requirements are met.

Eligibility Qualifications for a Project

• The project must commence its activity within six (6) years from the effective date of Article 11 bis, which is July 2025.
• The project must be established in one of the Sector A zones specified under Article 11 of the Investment Law, or in remote areas designated by a decision of the Council of Ministers, or in the new urban communities, industrial zones, investment zones, or technology zones.
• The project must rely, up to the date of commencing its activity, on foreign currency transferred from abroad to finance at least 50% (fifty per cent) of its capital, in accordance with the definition of “funds” under the Investment Law. Foreign currency transfers from abroad include:
  • foreign currency transferred through a bank registered with the Central Bank of Egypt (the “CBE”), used for establishing or constructing the project;
  • foreign currency transferred through a bank registered with the CBE, used for subscribing to the capital of the project in Egypt;
  • Egyptian currency paid, subject to the approval of the relevant authorities, in settlement of obligations due in free foreign currency, provided that it is used in establishing or expanding the project;
  • machinery, equipment, raw materials, production inputs, and transportation means imported from abroad for the purposes of establishing or constructing the project; the valuation of such invested assets must follow the rules and procedures set out under Egyptian Accounting Standards; and
  • profits that are eligible for repatriation abroad under Article 6 of the Investment Law, if reinvested in establishing or constructing the project.

Duration of Eligibility and Operational Continuity

The incentive’s eligibility period may extend up to seven (7) years, provided that the project continues operating the industrial activity specified in the decision and meets the following conditions:

• compliance with all tax and financial regulations;
• maintaining the required percentage of foreign financing; and
• demonstrating that the industrial activity continues to represent more than 50% (fifty per cent) of the project’s total turnover.

Establishment of the Incentive Committee

Mandate of the Committee

• reviewing and processing applications;
• requesting additional documents if needed; and
• issuing eligibility certificates.

After paying the tax and submitting the tax return, the project must submit an annual request for disbursement of the incentive to the competent technical committee.

If approved, the Ministry of Finance (the “MoF”) is obligated to disburse the incentive amount within forty-five (45) days from the end of the tax return filing deadline.

If the MoF delays the payment beyond this period, the investor becomes entitled to a delay compensation.

Steps for the Issuance of the Certificate of Incentive Eligibility

1. Submitting the application using the approved form, attached to the Guide.
2. The Committee reviews the application within a period not exceeding forty-five (45) days from the date of submission, and may request any additional information from the investor.
3. The Committee issues its recommendation regarding eligibility or non-eligibility and submits it to the CEO of the GAFI for approval within seven (7) working days of completing the review.
4. The investor is notified of the decision within seven (7) days of the CEO’s approval, whether the application is accepted or rejected.
5. If approved, the GAFI issues a Certificate of Incentive Eligibility, including the project details and the end date of the eligibility period (which is seven (7) consecutive years). The GAFI must notify the MoF of the issued certificate within seven (7) days of issuance.

The aforementioned steps should be submitted by email on [email protected].

A list of documents required for submission is attached to the Guide.

The Guide further elaborates and states the industries that can enjoy the incentive as well as their customs tariffs categories, such as metal, chemical, engineering, medical and pharmaceutical, textile, and mining industries.

Moreover, the Guide issues a list of Q&As to provide further clarifications and any additional information to the investors to further understand their scope.

The Guide is now publicly available and can be accessed through the link provided by GAFI: Link here.

What This Means for Investors

Industrial investors, particularly those with substantial foreign capital contributions, may now benefit from a significant direct cash incentive designed to improve project economics and reduce post-tax costs.

Unclarified Scope of Eligibility for Existing Investments and Acquisitions

While the Guide confirms that the incentive applies to newly established industrial projects as well as expansions of existing factories, provided all technical conditions are met, an important question remains unaddressed: whether the incentive also extends to acquisitions of existing industrial projects by foreign investors, or to capital increases injected into already operating companies without undertaking a physical expansion.

The current legal framework does not expressly clarify whether an investor who acquires an existing project, or who injects new foreign capital into an operating entity, would qualify for the cash incentive in the absence of a qualifying expansion that results in new industrial activity. Given that eligibility is tied to the financing of the project “up to the date of commencing its activity,” the applicability of the incentive to acquisition-only transactions remains uncertain.

The contributors to this article are Mohamed Abdelgawad, Partner and Head of General Corporate, Commercial, and Regulatory; Farida Tawfik, Associate; and Sara ElZayat, Junior Associate.