A. Incentives for Free Zone Investments

Egypt provides incentives for investment under its free zone investment system. Free zone projects are considered offshore areas for Egyptian tax purposes. To be eligible, a company must export at least 50% of its total production. The following outlines the main benefits:

Reduced corporate income tax or exemption depending on the nature and term of the investment/project;
Stamp tax exemption on contract of incorporation and establishment and financing contracts;
Guaranteed protection from nationalization or confiscation of company assets; and
Integrated customs services.

Effective 26 July 2023, the scope of industries eligible for free zone establishment is expanded to include oil processing, fertilizer industries, iron and steel, natural gas processing, liquefaction and transport, and energy-intensive industries. Earlier, these industries were prohibited from setting up their projects within the free zones.

B. Special Incentives for Investment Projects

On 25 July 2023, the Egyptian Parliament published Law No.160 to expand Investment Law No. 72 on special incentives for investment projects. The amended law provides that all investment projects can enjoy the general incentives provided for in the Investment Law, regardless of the legal system or framework to which a project is subject, including investment projects established prior to the application of the Investment Law.

Other special incentives provided by the amended law are as follows:

Cash Incentive Program

A special cash incentive program wherein the investor is eligible for a refund ranging from 35% to 55% of the corporate income tax due on the income generated from the business operations. The special incentive is applicable to investment projects that are incorporated within a maximum period of 3 years (extendable for up to 9 years by Cabinet decision) from 29 October 2017.

The following conditions apply:

At least 50% of the industrial project must be financed by foreign currency sourced from abroad; and
The project must commence operations within 6 years (extendable for up to 12 years) following the enforcement date of the amended law.

The refund is a non-taxable income for the investor and must be granted by the Ministry of Finance within 45 days following the tax return filing deadline, failing which, the investor is entitled to a late payment fee.

Additional Incentives

Further, the amended law introduced the following exemptions as additional incentives, subject to certain conditions:

An exemption of up to 50% of the expenses incurred in implementing required infrastructure and utilities for a maximum period of 10 years; and
An exemption of up to 50% of the project's utility consumption bill for a maximum period of 10 years, based on the parameters determined by a decision of the Supreme Council.

Capital Gains Tax Incentive

Law No. 30 of 2023 introduced the following incentives for capital gains arising from the disposal of shares that are acquired through initial public offerings on the Egyptian Stock Exchange:

50% of the capital gains are exempt from tax if the shares are offered between 15 June 2023 and 15 June 2025;
25% of the capital gains are exempt from tax if the shares are offered after 15 June 2025; and
25% of the capital gains are exempt from tax if additional tranches are offered after 15 June 2023.

Furthermore, additional cost capped up to 0.5% of both selling and buying transactions is allowed as a deductible cost, thus reducing the capital gains subject to tax.

Tax Incentives for Small and Medium Enterprises and Start-Ups

On 11 January 2021, the Egyptian tax authorities announced tax incentives for small and medium sized entities (SMEs) including a simplified lump sum tax, and an exemption from stamp duty and notarization fees under the Law for Medium, Small and Micro Enterprises (SME Act).

The lump sum tax is as follows:

Annual Turnover	Lump sum Tax
Less than EGP 250,000	EGP 1,000
From EGP 250,000 to EGP 500,000	EGP 2,500
From EGP 500,000 to EGP 1 million	EGP 5,000
From EGP 1 million to EGP 2 million	0.5% of annual turnover
From EGP 2 million to EGP 3 million	0.75% of annual turnover
From EGP 3 million to EGP 10 million	1% of annual turnover

On 10 November 2023, the Egyptian tax authorities announced that the simplified lump sum tax as per the SME Act applies to start-up entities. Start-up companies whose annual turnover does not exceed EGP 10 million can also benefit from simplified tax administration procedures as per the SME Act, including quicker disposal of tax examination within a period of 90 days in cases such as liquidation or cessation of business.

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