Free zones in Egypt are considered a special
investment system governed by the provisions of Investment Law No. 72 of 2017 and its Executive Regulations, which enforcement is overseen by the General Authority for Investment and Free Zones (GAFI)
What is a Free Zone?
A free zone is part of the State's territory, located within its borders, which falls under the rule of the state administration. Free zones are governed by special provisions on taxation, customs and finance.
Authorized Activities in Free Zones All types of investment activities are allowed to be exercised inside free zones in accordance with the policy set by GAFI, mainly export-oriented industries, with the exception of the following:
- Weapons, ammunition, explosives and any industry relating to national security.
- Wine and alcoholic beverages.
- Fertilizers.
- Manufacturing of iron and steel.
- Petroleum refining.
- Liquefaction, manufacture and transport of natural gas
- Energy-intensive industries.
Advantages, Guarantees, and Exemptions Granted to Projects
Advantages
- Free transfer of invested capital and profits abroad.
- Freedom to select the field of investment and the legal form of projects.
- ֺFree pricing of products and profit margin.
- There are no minimum or maximum limits for invested capital (for public free zone projects only).
- No restrictions with regards to the nationality of the capital's owner, where a foreign investor can be the sole owner of the capital or can have any share in the investment (excluding projects set up in Sinai).
- The ability to operate for others in order to maximize exploitation of the project's potential (in accordance with the rules adopted by GAFI in this regard)
- Providing foreign investors with residency facilities.
- Granting foreign workers residence permits as requested by the project.
Guarantees
- Legal action may not be initiated against projects operating in free zones until GAFI is first consulted. ֺ
- Projects and establishments may not be nationalized or confiscated. ֺ
- No sequestration may take place over projects according to administrative decisions, nor may their funds be seized, frozen or confiscated by any other means except through judicial proceedings.
- Exemptions ֺ
- All capital assets and production requirements for carrying out the project activities (excluding passenger cars) are exempt from custom duties, sales taxes and any other taxes throughout the project period, even if the nature of the activity necessitates its temporary presence outside the free zone.
- The project's exports and imports are exempt from custom duties and taxes, whether sales taxes or other taxes or fees applicable within the country.
- The project and its profits are not subject to any taxation or customs laws or legislations applicable in the country throughout the project period. ֺ
- Project imports and exports are not be subject to customs procedures or regular importation rules applicable in the country. ֺ
- Project supplies from the local market are exempt from VAT. ֺ
- Goods in transit, with a fixed destination, are exempt from the payment of any fees imposed on goods in transit according to the following conditions: −The project falls under the custom office's jurisdiction. −The final destination of the goods is determined in the bill of lading and the invoice.
- Local components of goods produced by free zone projects are exempt from custom duties in case of sale in the local market (inside the country).
Private Free Zones
A unique establishment/system that represents only one independent project or more than one project exercising similar activities, as required (based on nature of the activities). It is imperative to be located outside the public free zone vicinity, due to the
economics of the project, and the nature of its activities, which renders it essential to be located in specific places to benefit from the advantages offered by this site, in terms of proximity to raw material sources, production requirements, export markets or required labor, for integration with nearby projects, or due to proximity to a particular port or road.
The private free zone site may be owned or rented by the investor.
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Public Free Zones
There are currently 9 public free zones across Egypt, well equipped with the necessary facilities and infrastructure for the operation and execution of projects (roads - electricity - sewerage stations - water networks - telecommunications), in addition to an integrated customs unit, a police station for ports’ security maintenance, and a security unit in each zone, operating 24 hours a day.
The locations of free zones were selected to be situated in main cities with distinctive locations, sufficient labor and other facilities and capabilities that support both the zone itself and nearby maritime ports and airports.
Investment areas are allocated based on an annual rent system where the rate is determined per square meter, depending on the type of activity of the project (US$ 5 for industrial activities – US$ 10 for service and storage activities).
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