Tax-free car import approved

Gamal Essam El-Din , Tuesday 18 Oct 2022

Parliament passed two new landmark bills supporting local vehicle manufacturing while allowing Egyptian expats to import tax-free cars under certain conditions, reports Gamal Essam El-Din

Tax-free car import approved
photo: Reuters


The House of Representatives, the lower house of parliament, on Tuesday approved two government-drafted bills, one of which allows Egyptian expats to import cars for personal use without paying customs, fees or taxes, including the value-added tax (VAT) and the schedule tax.

The approval came after the House’s Budget Committee was mobilised on Monday to discuss and pass the bill in a one-hour meeting.

The bill will be referred to the president to be ratified and published in the official gazette before going into effect.

According to a report prepared by the House’s Budget Committee, the 10-article bill reflects the state’s commitment to providing facilities and incentives to Egyptian expatriates in return for helping the state raise its national reserves of foreign exchange. “This bill comes amid tough economic conditions and a severe global financial crisis triggered by the eight-month war in Ukraine to make it easier for expats to import cars while helping the state shore up its US dollar reserves amid an ongoing foreign exchange (FX) market shortage crisis at the same time,” the report said.

Article 1 of the bill states that Egyptians who have valid (permanent or temporary) residence in a foreign country and have a valid bank account three months ahead of the bill going into effect will be able to import a car for personal use from abroad. The bill, however, stipulates that the car should be a 2022 model if the importer is the first owner and should be no more than three years old if the importer is the second, third, or fourth owner.

The bill also states that expats who qualify to import cars will be granted a four-month full exemption from custom duties, taxes, and dues with the stipulation that they deposit a FX amount of money equal to the value of custom and tax exemptions with an Egyptian bank in favour of the Finance Ministry. The deposit will be left for five years, after which the importer will be able to refund it in Egyptian pounds and at the USD-EGP exchange rate at the time and without interest.

Head of the House’s Budget Committee Fakhri Al-Fiqi indicated that once the bill is passed and ratified by the president, the Finance Ministry will publish within two weeks the executive regulations, including lists of car models and the amount of FX deposits required for each to import.

Al-Fiqi said the bill comes at a time most Egyptians find it difficult, if not impossible, to buy a car on the local market. “The jitters of the war in Ukraine have hit all world countries, including Egypt, making it hard to import many essential goods, including cars and other vehicles and also forcing local vehicle manufacturers and assemblers to stop sales due to the difficulty of finding hard currency to import parts,” Al-Fiqi said.

Al-Fiqi also explained that the bill allows car owners to pay their vehicle import fees, including customs, taxes (including the VAT and the schedule taxes) directly to the Finance Ministry in the form of a foreign exchange bank deposit when they import the new car.  

Egypt’s foreign currency reserves fell to record lows this year, reaching $33.14 billion at the end of July, down from $40.5 billion in February at the start of the war in Ukraine.

Finance Minister Mohamed Maait expected in a TV interview on Saturday that the bill could raise as much as $2.5 billion during the initiative, expected to be effective for a few months. “Egypt expects that more than 500,000 cars will be imported into the country by expats who have for long called upon the government to take such an initiative,” Maait said.

The Budget Committee’s Deputy Chairman Yasser Omar said the bill could even raise $5 billion in revenues over the next four months. “This revenue in addition to the loan expected to be offered by the IMF will help a lot in absorbing the shock of the current severe global financial crisis triggered by the war in Ukraine,” Omar said.

According to official figures, the number of Egyptians living abroad is estimated at 14 million and in FY 2021-22 they sent a record $31.9 billion to the homeland. “The new bill could open the door for them to contribute more FX to the country’s reserves in such hard economic times,” Omar said.

Meanwhile, another government-drafted bill on vehicle manufacturing received final approval from MPs on Tuesday.

The bill aims to establish the Supreme Council for Vehicle Manufacturing and set up a fund to provide financing for an environmentally friendly vehicle-assembly industry in Egypt.

A report prepared by the House’s Industry Committee said the new 13-article legislation serves the state’s strategy of turning Egypt into a regional hub for the production and export of electric vehicles (EV), targeting the markets of Africa and the Arab world in particular.

The legislation could also attract foreign investments to the vehicle-manufacturing industry, as this represents the central nerve of modern economies, the report said.

The legislation will also serve the government’s policy of seeking to protect the environment by expanding the use of environmentally friendly clean electric power and reducing transport vehicles with fuel emissions harmful to nature and human health, the report said.

The minister of environment and the Environmental Affairs Authority will set out the criterion upon which vehicles are considered harmful to the environment.

MP Mohamed Al-Sallab, deputy chairman of the House’s Industry Committee, said the draft bill also serves the policy of privatisation in terms of granting incentives and facilities to investors to tap the EV assembly industry.

The proceeds of the fund for financing an EV industry will be used to support the state’s policy of switching to green and clean means of transport and doubling spending on the research and technology institutes capable of creating a competitive EV industry, Al-Sallab said.

Al-Sallab said the value of the vehicle-manufacturing industry in Egypt is estimated at $4 billion. If Egypt is to become a regional hub for the EV industry, this could go up to $100 billion, he said.

But the legislation was rejected by the leftist Tagammu Party.

Atef Al-Meghawri, leader of the parliamentary group of Tagammu, said the legislation setting up the Supreme Council for Vehicle Manufacturing and a fund for financing an EV industry would cost a lot of money.

“This is not the right time to set up such a council and fund it as the country is reeling from a global economic crisis that should force the government to turn to adopting austerity measures rather than spending money to set up councils,” Al-Meghawri said.

The council will be involved in drafting the general policies, plans, and strategies necessary for developing Egypt’s local vehicle-manufacturing industry, says Article 2 of the legislation, adding that “the council will also take charge of finalising the necessary legislative and administrative framework for this industry, eliminating obstacles and finding solutions to problems facing the auto industry in Egypt, and exchanging expertise and agreements with countries and institutions well-known for their pioneering role and rich experience in the field of vehicle manufacturing.”

The bill also states that a fund to manage financing will be set up, with its headquarters located in Greater Cairo and with branches and offices across Egypt. “To achieve its objectives, the fund will embark on offering a package of incentives and facilities to investors plus spending on the innovation necessary to create a competitive, local, environmentally friendly vehicle-manufacturing industry in Egypt,” Article 4 says.

*A version of this article appears in print in the 20 October, 2022 edition of Al-Ahram Weekly.

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