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:: SPECIAL ECONOMIC ZONES

In an attempt to boost exports and attract foreign direct investment, the Government is creating new private economic zones that would enjoy considerable autonomy and operate away from bureaucracy. Law No 83 of 2002 establishes special economic zones (SEZ) in non-urban areas for the purpose of setting up industrial, agricultural and services projects. Each SEZ will be self-governing through an independent authority that will be established by presidential decree and the head of the authority will be a presidential appointment.

The authority will report directly to the Prime Minister and its 17-member board will include 9 members representing various ministries, one representing the governorate and six members from the private sector (legal & financial experts, development company and investors). Decisions will be made by majority vote. The board will possess the powers of a cabinet of ministers and will issue all licenses and set its own customs and tax regulations, import and export rules as well as civil and social matters. However, the authority customs and tax systems will require Ministry of Finance approval and the registration and notarization systems will need approval from the Ministry of Justice.

The authority will take possession of the land and all state assets within its zone. It will establish solely or jointly with third parties, a main development company which will be responsible for building the infrastructure.

Investment incentives include a more flexible labor code that permits multiple contracts and allows the employer to terminate the contract against compensation. The authority will decide on the ratio of Egyptian to foreign workers for each specific project. Imports of capital goods, raw materials and spare parts are exempt from custom duties, sales tax and stamp duties but all duties will be paid on the imported components of products exported to Egypt and sold locally.

Projects established within SEZ will be subject to corporate profit tax of 10%. Income of individuals is subject to a 10% tax and tax on real estate revenue is 10%. Salary tax is a flat 5%. The law protects against nationalization or sequestration of funds and prohibits mandatory pricing. There is no condition on the percentage of output to be exported but the law is hoped to boost exports by making Egyptian products more competitive on international markets. SEZ-based exporters would qualify for Egyptian certificates of origin usable under international trade agreements.

Four zones will be designated as SEZ in Toshka, the Gulf of Suez, East Port Said and Damietta .

 

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