Investment Incentives and Free Zones under Egypt's Investment Law

Executive summary

• The special incentive under Investment Law No. 72 of 2017 (Article 11) deducts 50% (sector A) or 30% (sector B) of investment cost from taxable net profit, capped at 80% of paid-up capital and seven years; industrial projects designated by the Cabinet can receive a cash incentive of 35%–55% of tax paid (Article 11 bis, added by Law 160 of 2023).
• The window to incorporate a new company that claims the Article 11 incentive is still open until 28 October 2026 and closes on that date (Cabinet Decision No. 1 of 2024).
• The single approval ("golden licence", Article 20) is a Cabinet decision, effective on its own, to establish, operate and manage the project, with no further procedure needed.
• Free zone projects fall outside Egypt's tax and fee laws and pay instead a fee of 1%–2%, depending on zone type and activity; liquor, arms, and liberal-profession and consultancy projects are barred there.

General incentives

The general incentives apply to every project under the law, whether established before or after it took effect, except projects in the free zones (Article 9). Incorporation contracts, and credit-facility and mortgage contracts linked to the company's business, are exempt from stamp duty and notarisation and registration fees for five years from commercial registration; land registration contracts needed to establish the company are exempt as well. Machinery and equipment needed for establishment carry a unified customs duty of 2% of value (Article 10, applying Article 4 of Customs Exemptions Law 186 of 1986).

Special incentives: a percentage of investment cost

Article 11 grants projects established after the law took effect, in line with the investment map, a deduction from taxable net profit:

In all cases the incentive may not exceed 80% of paid-up capital at the start of activity, and the deduction period may not exceed seven years from that date. The company must be newly incorporated within three years of the executive regulations taking effect, which the Cabinet may extend "for further periods not exceeding nine years in aggregate" (Article 12). Cabinet Decision No. 1 of 2024 extended it for a second period: the window is still open until 28 October 2026 and closes on that date. Since Law 141 of 2019, expansions of existing projects may also receive the Article 11 and 13 incentives, with separate accounts and income statements and only for the added output (Cabinet Decision No. 6 of 2020).

Article 11 bis grants a cash incentive of 35%–55% of the tax paid with the return, for industrial activities designated by Cabinet decision, which also sets each one's incentive period of up to ten years. It requires at least 50% of financing up to the start of activity to be foreign currency from abroad, and activity to start within six years of the article taking effect, extendable by up to six years. The Ministry of Finance must pay it within 45 days of the return deadline or owe late-payment compensation, and it is not taxable income.

Additional incentives

By Cabinet decision, projects covered by Articles 11 and 11 bis may also receive additional incentives (Article 13, as replaced by Law 160 of 2023): dedicated customs outlets; the state bearing utility-connection costs in whole or in part after operation starts, and part of technical-training costs; a refund of half the industrial land's value if production starts within two years of handover; free land for some strategic activities; and exemption from the land usufruct fee for up to ten years. The project may also be exempted from up to 50% of its contribution to infrastructure and public-utility costs, and the Treasury may bear up to 50% of its charge for basic utilities for up to ten years.

The single approval ("golden licence")

Article 20, as replaced by Law 160 of 2023, lets the Cabinet grant companies, existing or being formed, for new investment projects or strategic or national projects in the fields and under the criteria it sets, or for private-sector partnerships with the state in utilities, infrastructure, renewable energy, roads or ports, "a single approval to establish, operate and manage the project, including building permits and allocating the property it needs," effective on its own; it may also carry one or more of the law's incentives. Under Cabinet Decision No. 56 of 2022, a project is strategic or national if it meets two or more of eight criteria, among them exporting at least 50% of output a year, financing in foreign currency transferred from abroad, or a local component of at least 50%, and falls within one of the fields the decision lists. The application goes to the Authority with proof of solvency, a feasibility study by a licensed expert firm and a timetable; the minister then puts it to the Cabinet (Article 42 of the regulations, as replaced in 2024).

The free zone system

General free zones are established by Cabinet decision, and their projects exist mainly to export outside the country (Article 33); each private free zone is limited to one or more projects in similar activities. Liquor and alcohol, and arms, ammunition, explosives and anything tied to national security, may not be licensed in free zones. Petroleum manufacturing; fertiliser, iron and steel industries; natural gas processing, liquefaction and transport; and energy-intensive industries, all barred under the original text, may now be licensed with the approval of the Supreme Energy Council (Article 34, as replaced by Law 160 of 2023). Projects practising liberal professions or consultancy are barred in all cases; a person practising a profession or trade for their own account permanently in a general free zone needs a permit from the zone's chairman and an annual fee of up to EGP 5,000, failing which a fine of EGP 5,000–20,000 applies (Article 46).

"Projects inside free zones, and the profits they distribute, are not subject to the tax and fee laws in force in Egypt" (Article 41). General free zone projects pay 2% of the CIF value of goods on entry for storage, 1% of their FOB value on exit for manufacturing and assembly, and 1% of total revenue where the main activity does not involve bringing goods in or out; transit trade with a set destination is exempt. In private free zones, manufacturing and assembly projects pay 1% of total revenue when goods are exported abroad and 2% when goods enter the country, and other projects pay 2% of total revenue. Both types also pay the Authority an annual service charge of up to one per thousand of capital, capped at EGP 100,000. Their imports from abroad and exports abroad for their activity are outside customs duty, VAT and other taxes, and so are the machinery and means of transport the activity needs, except passenger cars (Article 39).

What this requires

• Fix the project's sector (A or B) and sub-activity before incorporation, since the deduction rate depends on them.
• Incorporate a new company that will claim the Article 11 incentive no later than 28 October 2026.
• Keep separate accounts for each geographic zone and for any expansion claiming the incentive.
• Confirm that no physical assets of a company existing when the law took effect were used, and no such company was liquidated, to set up the project; otherwise the incentive is forfeited and the company must pay all tax dues.
• Weigh a golden-licence application, for a project that meets the Decision 56 of 2022 criteria, against the ordinary licensing route.
• Before listing shares on the stock exchange, note that the listing incentive in Law 151 of 2026 cannot be combined with any tax incentive under another law.
• Compare the free zone substitute fee with the ordinary tax burden before choosing between the two regimes.

The firm's Corporate Legal Department evaluates the incentives available to a project, prepares single-approval and special-incentive applications, and tracks their deadlines.

Mahmoud Nassef — Chartered Accountant (Egyptian Register), Founder Partner

Member, Egyptian Society of Accountants & Auditors
Member, Egyptian Tax Society
Member, Egyptian Society for Public Finance and Taxation

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Disclaimer: This bulletin is prepared for general information on the legislation in force at the date of its publication. It does not constitute a professional opinion or tax or legal advice on any particular matter, and it should not be relied upon in place of advice based on an examination of the circumstances of each case. Nassef & Partners International accepts no responsibility for any action taken, or refrained from, in reliance on its contents. The positions stated remain subject to subsequent legislation and decisions.