Albania

4. Industrial Policies

The Albanian Investment Development Agency (AIDA; www.aida.gov.al) is the best source to find incentives offered across a variety of sectors. Aside from the incentives listed below, individual parties may negotiate additional incentives directly with AIDA, the Ministry of Finance and Economy, or other ministries, depending on the sector.

To boost investments in strategic sectors, the GoA approved a Law on Strategic Investments in May 2015 that outlines the criteria, rules, and procedures that state authorities employ when approving a strategic investment. The GoA has extended the deadline to apply to qualify as a strategic investment to December 2023. A strategic investment is defined as an investment of public interest based on several criteria, including the size of the investment, implementation time, productivity and value added, creation of jobs, sectoral economic priorities, and regional and local economic development. The law does not discriminate between foreign and domestic investors.

The following sectors are defined as strategic sectors: mining and energy, transport, electronic communication infrastructure, urban waste industry, tourism, agriculture (large farms) and fishing, economic zones, and development priority areas. Investments in strategic sectors may obtain assisted procedure and special procedure, based on the level of investment, which varies from EUR one million to EUR 100 million, depending on the sector and other criteria stipulated in the law.

In the assisted procedure, public administration agencies coordinate, assist, and supervise the entire administrative process for investment approval and makes state-owned property needed for the investment available to the investor. Under the special procedure, the investor also enjoys state support for the expropriation of private property and the ratification of the contract by parliament.

The law and bylaws that entered into force on January 1, 2016, established the Strategic Investments Committee (SIC), a commission in charge of approving strategic investments. The Committee is headed by the prime minister and members include ministers covering the respective strategic sectors, the state advocate, and relevant ministers whose portfolios are affected by the strategic investment. AIDA serves as the Secretariat of SIC and oversees providing administrative support to investors. The SIC grants the status of assisted procedure and special procedure for strategic investments and investors based on the size of investments and other criteria defined in the law.

Major Incentives Albania Offers:

Energy and Mining, Transport, Electronic Communication Infrastructure, and Urban Waste Industry:  Investments greater than EUR 30 million enjoy the status of assisted procedure, while investments of EUR 50 million or more enjoy special procedure status.

The government offers power purchasing agreements (PPA) for 15 years for electricity produced from hydroelectric plants with an installed capacity of less than 15 megawatts. The government also offers feed-in-premium tariff for solar installations with installed capacity of less than two megawatts and for wind installation of less than three megawatts. Exemption from custom duties and VAT is available for the manufacturing or the mounting of solar panel systems for hot water production.

Certain machinery and equipment imported for the construction of hydropower plants are VAT exempt. The government supports the construction of small wind and photovoltaic parks with an installed capacity of less than three megawatts and two megawatts, respectively, by offering feed-in-premium tariffs for 15 years. The Energy Regulatory Authority (ERE;  http://www.ere.gov.al/  ) conducts an annual review of the feed-in-premium tariffs for wind and photovoltaic parks. The ERE also conducts an annual review of the feed-in-tariffs for small hydroelectric plants with an installed capacity of less than 15 megawatts. Imports of machinery and equipment for investments of greater than EUR 400,000 for small wind and solar parks with an installed capacity of less than three megawatts and two megawatts, respectively, enjoy a VAT exemption. Imports of hot water solar panels for household and industrial use are also VAT exempt.

Tourism and Agritourism:  Investments of five million euro or more enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure. In 2018, the GoA introduced new incentives to promote the tourism sector. International hotel brands that invest at least USD 8 million for a four-star hotel and USD 15 million for a five-star hotel are exempt from property taxes for 10 years, pay no profit taxes, and pay a VAT of 6 percent for any service on their hotels or resorts. For all other hotels and resorts, the GoA reduced the VAT on accommodation from 20 percent to 6 percent. Profit taxes for agritourism ventures were reduced to 5 percent from 15 percent previously, while VAT for accommodation is now 6 percent, down from 20 percent. Five star hotels and agritourism facilities are exempt from the tax on impact on infrastructure while both four and five start hotels are exempt from tax on buildings.

Agriculture (Large Agricultural Farms) and Fishing:  Investments greater than EUR three million that create at least 50 new jobs enjoy the status of assisted procedure, while investments greater than EUR 50 million enjoy the status of special procedure. In addition, the GoA offers a wide range of incentives and subsidies for investments in the agriculture sector. The funds are a direct contribution from the state budget and the EU Instrument of Pre-Accession for Rural Development Fund (IPARD.) IPARD funds allocated for the period 2018-2020 totaled EUR 71 million. The program is managed by the Agricultural and Rural Development Agency (  http://azhbr.gov.al/  ). Agricultural inputs, agricultural machinery, and veterinary services are exempt from VAT. The government offers other subsidies to agricultural farms and wholesale trade companies that export agricultural products.

Some incentives offered in the agriculture sector include: Zero VAT for agricultural machineries and for 27 fishing industry items including ships, nets, electronic equipment, refrigerators, ship engines, etc. Zero tariff for the registration and compulsory vaccination of livestock. Zero tax for the purchase of diesel from fishing vessels (0 excise, 0 fuel tax, 0 carbon tax.) A reduction of profit tax up to 5 percent for Agricultural Cooperative Societies and 10 percent VAT for supply of agricultural inputs including chemical fertilizers, pesticides, seeds, and seedlings. In addition, those investing in agriculture sector can rent agriculture land from 10 to 99 years.

Development Priority Areas:  Investments greater than EUR one million that create at least 150 new jobs enjoy the status of assisted procedure. Investments greater than EUR 10 million that create at least 600 new jobs enjoy the status of special procedure.

Foreign Tax Credit: Albania applies foreign tax credit rights even in cases where no double taxation treaty exists with the country in which the tax is paid. If a double taxation treaty is in force, double taxation is avoided either through an exemption or by granting tax credits up to the amount of the applicable Albanian corporate income tax rate (currently 15 percent).

In 2019, the GoA reduced the dividend tax from 15 percent to 8 percent.

Corporate Income Tax Exemption:  Film studios and cinematographic productions, licensed and funded by the National Cinematographic Center, are exempt from corporate income tax.

Loss Carry Forward for Corporate Income Tax Purposes:  Fiscal losses can be carried forward for three consecutive years (the first losses are used first). However, the losses may not be carried forward if more than 50 percent of direct or indirect ownership of the share capital or voting rights of the taxpayer is transferred (changed) during the tax year.

Lease of Public Property:  The GoA can lease public property of more than 500 square meters or grant a concession for the symbolic price of one euro if the properties will be used for manufacturing activities with an investment exceeding EUR 10 million, or for inward processing activities. The GoA can also lease public property or grant a concession for the symbolic price of one euro for investments of more than EUR two million for activities that address certain social and economic issues, as well as activities related to sports, culture, tourism, and cultural heritage. Criteria and terms are decided on an individual basis by the Council of Ministers.

Incentives for the Manufacturing Sector and ICT:  The GoA reduced the profit tax from 15 percent to 5 percent for software development companies and the automotive industry. Manufacturing activities are exempt from 20 percent VAT on imports of machinery and equipment. The government offers a one-euro symbolic rent for government-owned property (land and buildings) for investments exceeding USD 2.7 million that create a minimum of 50 jobs. No VAT is charged for products processed for re-exports. Employers are exempt from paying social security tax for one year for all new employees. The GoA pays the first four months of salaries for new employees and offers various financing incentives for job training.

The manufacturing sector obtains VAT refunds immediately in the case of zero risk exporters, within 30 days if the taxpayer is an exporter, and within 60 days in the case of other taxpayers.

Apparel and footwear producers are exempt from 20 percent VAT on raw materials if the finished product is exported. In 2011, the GoA also removed customs tariffs for imported apparel and raw materials in the textile and shoe industries (e.g., leather used for clothes, cotton, viscose, velvet, sewing accessories, and similar items).

Technological and Development Areas (TEDA):  The Law on Economic Development Areas provides fiscal and administrative incentives for companies that invest in this sector and for firms that establish a presence in these areas. Major incentives include: Developers and users benefit from a 50 percent deduction of profit tax for five years, exemption from the infrastructure impact tax, and exemption from real estate tax for five years. A full list of incentives can be found at:   TEDA (aida.gov.al)  

Albania has no functional duty-free import zones or free trade zones, although legislation exists for their creation. The May 2015 amendments to the Law on the Establishment and Operation of Technological and Development Areas (TEDAs) created the legal framework to establish TEDAs, defining the incentives for developers investing in the development of these zones and companies operating within the zones.

The Albanian government has granted the status of the Technological and Development Areas to TEDA Spitalle (49.1 ha), Koplik (61 ha) and Kashar (35 ha) (Tirana) but none has been developed to date.

There are no performance requirements for foreign investors or minimum requirements for domestic content in goods or technology. Investment incentives are equally available to foreign and domestic investors. Investments in certain sectors require a license or authorization and procedures are similar for foreign and domestic investors.

Visa, residence, and work permit requirements are straightforward and generally do not pose an undue burden on potential investors.

The government approved a new Law on Foreigners in June 2021, which partially aligns the domestic legislation, including that on migration, with the EU Directives. The new law introduces a single application procedure for permits. For investors there is a special permit called “Unique Investor Permit.” Foreign investors are issued a 2-year unique investor permit if they invest in Albania and meet certain criteria, including a quota ratio of one to five of foreign and Albanian workers. In addition, same ratio should be preserved in the Board of Directors and other leading and supervisory structures of the company. Salaries of the Albanian workers should match the average of last year for equivalent positions. The permit can be renewed for an additional three years and after that the investor is eligible to receive a permanent permit provided that they fulfil the criteria outlined above and prove that the company is properly registered, has paid taxes and is not incurring losses. The U.S. citizens when applying for the first time receives a five-year permit. Foreign investors can obtain the single permit by the immigration authorities following the initial approval for employment from the National Agency for Employment and Skills ( https://www.akpa.gov.al/https://www.akpa.gov.al/  .) U.S. citizens along with EU, Western Balkans, and Schengen-country citizens are exempt from this requirement. In addition, U.S., EU, and Kosovo citizens when applying for residency permit for the first time, have a term of 5 years. The new law also introduced the National Electronic Register for Foreigners (NERF), which is a state database on foreigners, who enter or intend to enter Albania, with purpose of staying, transiting, working, or studying in Albania. NERF will register data on foreign nationals, who have an entry visa, stay, or transit in the Republic of Albania, have a temporary or permanent residence permit, and have a have a unique permit (residence and employment) in Albania.

The Council of Ministers approved an annual quota of foreign workers following a needs assessment by sector and profession. However, work permits for staff that occupy key positions, among other categories, can be issued outside the annual quota.

Albanian legislation regulating the functioning of the National Agency of Information (AKSHI) requires that every company contracted by the government to develop a computer system provide the source code and all related technical documents of the system. In addition, every government system and its data must be hosted at the government datacenter maintained by AKSHI.

There are no legal restrictions to transferring business-related data abroad, except for a few cases that need prior consent. There are more stringent requirements for personal data. Albania has comprehensive legislation for the protection of personal data: the Law on the Protection of Personal Data, including by-laws, as well as the 1981 Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data, and the Additional Protocol to the Convention regarding Supervisory Authorities and Trans-border Flows of Personal Data, ratified by Albania in 2004. The authority in charge of the protection of personal data is the Information and Data Protection Commissioner https://www.idp.al/?lang=en   .

Based on Albanian legislation, international transfers of personal data in countries deemed to have an adequate level of protection are not restricted. However, companies must notify the Commissioner in advance of any processing of personal data and any intention to transfer data to third countries. This applies to companies in foreign jurisdictions that operate in Albania using any means located within the country. To transfer data to third countries that do not have an adequate protection level, companies need prior authorization from the Commissioner. There are exemptions to this policy for certain data categories defined by the Commissioner as well as when certain conditions are met. Countries with an adequate protection level include EU member states, European Economic Area countries, members of the 1981 Convention and related protocol, and all countries approved by the European Commission.

Many foreign companies operating in Albania that process sensitive data opt to keep their data in Albania.

Algeria

4. Industrial Policies

While the government previously required 51 percent Algerian ownership of all investments, the 2020 budget law restricted this requirement to the energy, mining, defense, transportation infrastructure, and pharmaceuticals manufacturing sectors, and the 2021 budget law extended the requirement to importers of goods for resale in Algeria.

Any incentive offered by the Algerian government is generally available to any company, though there are multiple tiers of “common, additional, and exceptional” incentives under the 2016 investments law (www.joradp.dz/FTP/jo-francais/2016/F2016046.pdf). “Common” incentives available to all investors include exemption from customs duties for all imported production inputs, exemption from value-added tax (VAT) for all imported goods and services that enter directly into the implementation of the investment project, a 90 percent reduction of tenancy fees during construction, and a 10-year exemption on real estate taxes. Investors also benefit from a three-year exemption on corporate and professional activity taxes and a 50 percent reduction for three years on tenancy fees after construction is completed. Additional incentives are available for investments made outside of Algeria’s coastal regions, to include the reduction of tenancy fees to a symbolic one dinar (USD .01) per square meter of land for 10 years in the High Plateau region and 15 years in the south of Algeria, plus a 50 percent reduction thereafter. The law also charges the state to cover, in part or in full, the necessary infrastructure works for the realization of the investment. “Exceptional” incentives apply for investments “of special interest to the national economy,” including the extension of the common tax incentives to 10 years. The sectors of “special interest” have not yet been publicly specified. An investment must receive the approval of the National Investments Council in order to qualify for the exceptional incentives. There are no specific investment incentives for investors from underrepresented groups.

Regulations passed in a March 2017 executive decree exclude approximately 150 economic activities from eligibility for the incentives (www.joradp.dz/FTP/jo-francais/2017/F2017016.pdf). The list of excluded investments is concentrated on the services sector but also includes manufacturing for some products. All investments in sales, whether retail or wholesale, and imports business are ineligible.

The 2016 investments law also provided state guarantees for the transfer of incoming investment capital and outgoing profits. Pre-existing incentives established by other laws and regulations also include favorable loan rates well below inflation from public banks for qualified investments.

The government does not issue guarantees for private investments, or jointly financed foreign direct investment projects. In practice, however, the government is disinclined to allow companies that employ significant numbers of Algerians – whether private or public – to fail and may take on fiscal responsibilities to ensure continued employment for workers. President Tebboune’s administration also indicated more flexibility in considering alternative financing methods for future projects, which might include joint financing. The government does not offer specific incentives for clean energy investments, although the government announced in February 2022 that companies bidding on solar energy tenders would not be subject to the 51/49 investment rule.

Algeria does not have any foreign trade zones or free ports.

The Algerian government does not officially mandate local employment, but companies usually must provide extensive justification to various levels of the government as to why an expatriate worker is needed. Any person or legal entity employing a foreign citizen is required to notify the Ministry of Labor. Some businesses have reported instances of the government pressuring foreign companies operating in Algeria, particularly in the hydrocarbons sector, to limit the number of expatriate middle and senior managers so that Algerians can be hired for these positions. Contacts at multinational companies have alleged this pressure is applied via visa applications for expatriate workers, or via specific restrictions applicable to expatriate employees that are not applicable to Algerian employees. U.S. companies in the hydrocarbons industry have reported that, when granted, expatriate work permits are usually valid for no longer than six months and are delivered up to three months late, requiring firms to apply perpetually for renewals. Government-imposed restrictions on routine international travel since March 2020 in response to COVID-19 initially caused difficulties for foreign companies attempting to rotate their expatriate staff into and out of Algeria, though the situation has improved since June 2021.

In 2017, the Algerian government began instituting forced localization in the auto sector. New regulations governing the sector issued in September 2020 would require companies producing or assembling cars in the country to achieve a local integration rate of at least 30 percent within the first year of operation, rising to 50 percent by the company’s fifth year of operation, however, the regulations remain under government review and have not gone into effect. Since 2014, the government has required car dealers to invest in industrial or “semi-industrial” activities as a condition for doing business in Algeria. Dealers seeking to import new vehicles must obtain an import license from the Ministry of Commerce. Since January 2017, the Ministry has not issued any licenses, and the process of assigning new import quotas to qualified importers under the new 2020 specifications are on hold pending review by the government. As the Algerian government further restricts imports, localization requirements are expected to broaden to other manufacturing industries over the next several years. For example, specifications released in 2020 governing consumer appliance manufacturing mandate local content thresholds, and a tender launched in December 2021 for 1000MWs of solar projects mandated local content thresholds.

Information technology providers are not required to turn over source codes or encryption keys, but all hardware and software imported to Algeria must be approved by the Agency for Regulation of Post and Electronic Communications (ARPCE), under the Ministry of Post and Telecommunications. In practice, the Algerian government requires public sector entities to store data on servers within the country.

Andorra

4. Industrial Policies

Andorra has been known for its favorable tax regime, which investors have used to promote products such as tobacco, alcohol, jewelry, cosmetics, and dairy. In recent years, Andorra has reached agreements with neighboring countries to limit and regulate duty-free sales with a view towards promoting economic integration, though smuggling continues to be an issue. Andorra is a member of the European Customs Union and therefore has no tariffs on EU-manufactured goods.

Andorra is actively seeking to attract foreign investment and to become a center for entrepreneurs, talent, innovation, and knowledge. For example, Grifols, a large Spanish pharmaceutical multinational, announced that they will establish a new immunology research hub in Andorra.

Andorra Business provides grants for small and medium-sized companies to foster competitiveness and facilitate their internationalization. The ActuaTech Foundation was created in 2015, in collaboration with the Media Lab of the Massachusetts Institute of Technology (MIT), with the aim of employing Andorra’s unique economy as a “living lab” to promote innovation at the country level. Andorra, thanks to its size, recent liberalizing legislation, relative affluence, and its eight million visitors per year, offers ideal conditions to test this technology (https://ari.ad/en).

The United States Embassy and Consulate in Spain launched the Academy for Women Entrepreneurs (AWE) in April 2022 aimed at fostering women entrepreneurship in Andorra ( https://www.andorrabusiness.com/programa-awe/).

In May 2021, three of the country´s research and innovation entities merged to become a single public body: Andorra Research + Innovation, integrated by the Andorran Studies Institute, Andorra´s Sustainability Observatory, and Actua Innovation. This public entity seeks to generate knowledge, provide solutions for sustainable development, and contribute to the diversification of the Andorran economy.

Although not a full member of the European Union (EU), Andorra, as a member of the European Customs Union, is subject to all EU free trade regulations and arrangements regarding industrial products. Moreover, the EU allows duty free importations of products acquired by visitors in Andorra in the framework of the franchises covered in the Customs Union Agreement (1990). Concerning agriculture, the EU allows duty free importation of products originating in Andorra. No free trade zones exist in the country.

All employees wishing to work in Andorra must have work permits issued by annual quotas established by the Andorran government.

Both domestic and foreign private entities have the right to establish and own business enterprises. While foreigners may now own 100 percent of a trading enterprise or a holding company, the Government must approve the establishment of any private enterprise. For a foreign resident, the process for obtaining permissions takes up to one month and is automatically approved if there are no objections. An application can be rejected if the proposal is found to negatively impact the environment, the public order, or the general interests of the principality. As soon as the foreign investor receives authorization to invest in the country, national laws are applicable just like any other national investor.

Andorra does not follow a “forced localization” policy.

Angola

4. Industrial Policies

The Private Investment Law (PIL) of 2021 included amendments allowing for negotiation of tax incentives between state and potential investors. The PIL also eliminated the investment value and the value required to qualify for incentives in foreign and local investments, previously set at USD 1,000,000 and USD 500,000 respectively. It also eliminates the requirement for foreign investors to establish a partnership with an Angolan entity with at least a 35 percent stake in the capital structure of investments in the electricity and water, tourism, transport and logistics, construction, media, telecommunications, and IT sectors. Investors can determine their own capital structure in those sectors under the current law.

Angola does not yet have a legislation which offers incentives to green investment.

The PIL restructures the country into three economic development zones (zones A through C) determined by political and socio-economic factors, up from two as per the 2015 investment law. For Zone A, investors have a three-year moratorium on taxes reduced between 25- 50 percent of the tax levied on the distribution of profits and dividends. For Zone B, it is between three to six years with a 50 to 60 percent tax reduction, and for Zone C between six to eight years with a tax reduction between 60-70 percent of the tax levied on distribution of profits and dividends.

The Free Trade Zones Law (FTZL) passed October 12, 2020. The FTZL establishes benefits to be offered to investors by the Angolan Government in exchange for meeting specific monetary, job creation, or other investment requirements on a per contract basis. Investors are granted use of the Free Zone for 25 years and can receive industrial tax and VAT benefits, customs rights, as well as land and capital benefits for investing in a Free Zone. Investments made in Free Zones must consider environmental protection interests.

Investors are allowed to carry out industrial activities, agriculture, technology activities, as well as commercial and service activities. It is possible to carry out other activities which are not specified by the FTZL, provided that such activities target an international market and relevant authorities authorize the activities. Industrial activities should use Angolan raw materials and be focused on exports).

The GRA follows “forced localization” in the oil and gas sector where foreign investors in the sector must use domestic goods and tertiary services as stipulated in decree 271/20 of October 20, 2020. The Local Content Law covers all companies providing goods and services to oil sector, as well as the oil companies themselves. Commercial relations for the oil and gas sector continue to be divided into an “Exclusivity Regime”, “Preference Regime”, and a “Competitive Regime. Under the Exclusivity Regime, oil and gas companies must contract wholly owned Angolan commercial companies. Under the Preference Regime, the contracted company must be incorporated in Angola, and under the Competitive Regime, there is contractual freedom in sourcing the company. The specific goods and services falling under the Exclusivity and Preference regimes must be listed by the National Oil, Gas and Biofuels Agency (ANPG) – the national concessionaire – annually. In addition, all companies operating in any segment of the petroleum-sector value chain are required to present an Annual Local Content Plan to the ANPG.

Local content regulations offer guidelines that are only loosely enforced, and companies lack clarity on how to satisfy the Angolan government’s requirements. While the lack of enforcement may make it easier for foreign companies to comply with local content regulations, the lack of specificity challenges their business planning. For example, it is difficult for companies to compare their competitive position against each other when competing for lucrative concessions and licenses from the government, as local content is sometimes considered during competition for government tenders. Legal guidance to get the guarantees for investors under the PIL is strongly encouraged.

Regulations around data storage, management, and encryption are still at nascent stages. The Institute for Communications of Angola (INACOM) oversees and regulates data in liaison with the Ministry of Telecommunications. The President of Angola passed Decree No. 214/16 on October 10, 2016, establishing the organizational framework of the data protection authority. The Ministry of Telecommunications and Information Technology (‘MTTI’) announced, on October 9, 2019, that the National Database Protection Agency (APD) had become operational. The APD issued the first license to a private credit agency in February and collaborates with other governments and private sector entities to train Angolan public officials on data protection.

Antigua and Barbuda

4. Industrial Policies

The Government of Antigua and Barbuda granted certain concessions specified in the Investment Authority Act Amended 2019. These concessions provide exemption or reduction on various taxes and fees, including corporate income tax, withholding tax, stamp duty on land transfers, and import duties on vehicles and construction materials. The length and/or scale of concession is based on company and investment size. These incentives cover capital investment in agriculture, fisheries, agribusiness, business process outsourcing, energy, health and wellness, manufacturing, creative, financial services, information and communications technology, and tourism sectors. Investors must apply to the ABIA to take advantage of these incentives. Investments in healthcare, tourism, infrastructure development, renewable energy, education, and other projects considered important for economic development may receive incentives and/or concessions determined by the ABIA and Cabinet of Antigua and Barbuda if they are over $55.6 million (150.26 million Eastern Caribbean dollars) in size.

The Government of Antigua and Barbuda has been proactively pursuing public-private partnerships through the National Asset Management Company (NAMCO). NAMCO is a wholly owned government entity that holds the government’s stake in joint ventures and manages the investment proceeds that accrue.

The government established the Antigua and Barbuda Free Trade and Processing Zone (Free Zone) in 1994. A commission, acting as a private enterprise, administers the Free Zone. The Free Zone is part of a government initiative to diversify the economy. The commission is mandated to attract investment in priority areas.

As a member of the WTO, Antigua and Barbuda is party to the Agreement to the Trade Related Investment Measures. While there are no formal performance requirements, the government encourages investments that will create jobs and increase exports and foreign exchange earnings. There are no requirements for participation either by nationals or by the government in foreign investment projects. There is no requirement that enterprises must purchase a fixed percentage of goods or technology from local sources, but the government encourages local sourcing. Foreign investors receive the same treatment as citizens. There are no requirements for foreign information technology providers to turn over source code and/or provide access to surveillance (for example, backdoors into hardware and software or keys for encryption).

Argentina

4. Industrial Policies

Government incentives do not make any distinction between foreign and domestic investors.

The Argentine government offers a number of investment promotion programs at the federal, provincial, and municipal levels to attract investment to specific economic sectors such as capital assets and infrastructure, innovation and technological development, and energy, with no discrimination between national or foreign-owned enterprises. Some of the investment promotion programs require investments within a specific region or locality, industry, or economic activity. Some programs offer refunds on Value-Added Tax (VAT) or other tax incentives for local production of capital goods. The Investment and International Trade Promotion Agency provides cost-free assessment and information to investors to facilitate operations in the country. Argentina’s investment promotion programs and regimes can be found at: https://www.inversionycomercio.org.ar/es/inversores , https://www.investargentina.org.ar/, and https://www.argentina.gob.ar/produccion .

The National Fund for the Development of Micro, Small, and Medium Enterprises provides low- cost credit to small and medium-sized enterprises for investment projects, labor, capital, and energy efficiency improvement with no distinction between national or foreign-owned enterprises. More information can be found at: https://www.argentina.gob.ar/produccion/financiamiento 

The Ministry of Productive Development supports employment training programs that are frequently free to the participants and do not differentiate based on nationality.

Argentina has two types of tax-exempt trading areas: Free Trade Zones (FTZ), which are located throughout the country, and the more comprehensive Special Customs Area (SCA), which covers all of Tierra del Fuego Province and is scheduled to expire at the end of 2023.

Argentine law defines a FTZ as a territory outside the “general customs area” (GCA, i.e., the rest of Argentina) where neither the inflows nor outflows of exported final merchandise are subject to tariffs, non-tariff barriers, or other taxes on goods. Goods produced within a FTZ generally cannot be shipped to the GCA unless they are capital goods not produced in the rest of the country. The labor, sanitary, ecological, safety, criminal, and financial regulations within FTZs are the same as those that prevail in the GCA. Foreign firms receive national treatment in FTZs.

Merchandise shipped from the GCA to a FTZ may receive export incentive benefits, if applicable, only after the goods are exported from the FTZ to a third country destination. Merchandise shipped from the GCA to a FTZ and later exported to another country is not exempt from export taxes. Any value added in a FTZ or re-export from a FTZ is exempt from export taxes. For more information on FTZ in Argentina see: http://www.afip.gob.ar/zonasFrancas/ .

Products manufactured in the SCA may enter the GCA free from taxes or tariffs. In addition, the government may enact special regulations that exempt products shipped through the SCA (but not manufactured therein) from all forms of taxation except excise taxes. The SCA program provides benefits for established companies that meet specific production and employment objectives.

The Argentine national government does not have local employment mandates, nor does it apply such schemes to senior management or boards of directors. However, certain provincial governments do require employers to hire a certain percentage of their workforce from the provincial population. There are no excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees. Under Argentine law, conditions to invest are equal for national and foreign investors. As of March 2018, citizens of MERCOSUR countries can obtain legal residence within five months and at little cost, which grants permission to work. Argentina suspended its method for expediting this process in early 2018.

Argentina has local content requirements for specific sectors. Requirements are applicable to domestic and foreign investors equally. Argentine law establishes a national preference for local industry for most government procurement if the domestic supplier’s tender is no more than five to seven percent higher than the foreign tender. The amount by which the domestic bid may exceed a foreign bid depends on the size of the domestic company making the bid. In May 2018, Argentina issued Law 27,437, giving additional priority to Argentine small and medium-sized enterprises and, separately, requiring that foreign companies that win a tender must subcontract domestic companies to cover 20 percent of the value of the work. The preference applies to procurement by all government agencies, public utilities, and concessionaires.  There is similar legislation at the sub-national (provincial) level.

In November 2016, the government passed a public-private partnership (PPP) law (27,328) that regulates public-private contracts. The law lowered regulatory barriers to foreign investment in public infrastructure projects with the aim of attracting more foreign direct investment. Several projects under the PPP initiative have been canceled or put on hold due to an ongoing investigation on corruption in public works projects during the last administration. The PPP law contains a “Buy Argentina” clause that mandates at least 33 percent local content for every public project.

Argentina is not a signatory to the WTO Agreement on Government Procurement (GPA), but it became an observer to the GPA in February 1997.

In July 2016, the Ministry of Production and Labor and the Ministry of Energy and Mining issued Joint Resolutions 123 and 313, which allow companies to obtain tax benefits on purchases of solar or wind energy equipment for use in investment projects that incorporate at least 60 percent local content in their electromechanical installations.  In cases where local supply is insufficient to reach the 60 percent threshold, the threshold can be reduced to 30 percent.  The resolutions also provide tax exemptions for imports of capital and intermediate goods that are not locally produced for use in the investment projects.

In 2016, Argentina passed law 27,263, implemented by Resolution 599-E/2016, which provides tax credits to automotive manufacturers for the purchase of locally produced automotive parts and accessories incorporated into specific types of vehicles. The tax credits range from 4 percent to 15 percent of the value of the purchased parts.  The list of vehicle types included in the regime can be found here: http://servicios.infoleg.gob.ar/infolegInternet/anexos/260000-264999/263955/norma.htm . In 2018, Argentina issued Resolution 28/2018, simplifying the procedure for obtaining the tax credits. The resolution also establishes that if the national content drops below the minimum required by the resolution because of relative price changes due to exchange rate fluctuations, automotive manufacturers will not be considered non-compliant with the regime. However, the resolution sets forth that tax benefits will be suspended for the quarter when the drop was registered.

The Media Law, enacted in 2009 and amended in 2015, requires companies to produce advertising and publicity materials locally or to include 60 percent local content. The Media Law also establishes a 70 percent local production content requirement for companies with radio licenses. Additionally, the Media Law requires that 50 percent of the news and 30 percent of the music that is broadcast on the radio be of Argentine origin. In the case of private television operators, at least 60 percent of broadcast content must be of Argentine origin. Of that 60 percent, 30 percent must be local news and 10 to 30 percent must be local independent content.

Argentina establishes percentages of local content in the production process for manufacturers of mobile and cellular radio communication equipment operating in Tierra del Fuego province.  Resolution 66/2018 maintains the local content requirement for products such as technical manuals, packaging, and labeling. The percentage of local content required ranges from 10 percent to 100 percent depending on the process or item. In cases where local supply is insufficient to meet local content requirements, companies may apply for an exemption that is subject to review every six months. A detailed description of local content percentage requirements can be found at: http://servicios.infoleg.gob.ar/infolegInternet/verNorma.do;jsessionid=0CA1B74C2D7EC353E66F1CC6CFD8B41D?id=255494 .

There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption, nor does the government prevent companies from freely transmitting customer or other business-related data outside the country’s territory.

Argentina does not have forced localization of content in technology or requirements of data storage in country.

There is no discrimination between domestic and foreign investors in investment incentives. There are no performance requirements. A complete guide of incentives for investors in Argentina can be found at: https://www.inversionycomercio.org.ar/es/inversores .

Armenia

4. Industrial Policies

Armenia offers incentives for exporters (e.g., no export duty, VAT refund on goods and services exported) and foreign investors (e.g., income tax holidays, the ability to carry forward losses indefinitely, VAT deferral, and exemptions from customs duties for investment projects). Starting in 2018, the Armenian government began exempting imports of capital investment-related goods from VAT payments at the border. In 2015, the Armenian government began exempting from customs duties investment-related imports of equipment and raw materials from non-EAEU member countries. VAT and customs duties exemptions are implemented by government decisions made on a case-by-case basis. Also, in accordance with the Law on Foreign Investment, several ad hoc incentives may be negotiated on a case-by-case basis for investments that are targeted at certain sectors of the economy or are of strategic interest. As part of its response to COVID-19, the government launched several economic response and social support measures in 2020, some of them, including several support programs in the agriculture sector, are still active in 2022.  In May 2022, the government had initiated changes in energy regulations to allow multiple usage points for solar panel installations. The Law on Licensing was amended in 2021 to simplify the licensing requirements for foreign companies to engage in 13 types of business activities in Armenia, including security/encashment and postal services, railroad and taxi services, urban development and engineering, and technical supervision of construction.

In 2011, Armenia adopted a Law on Free Economic Zones (FEZ), amended in 2018, and developed several key regulations to attract foreign investments into FEZs: exemptions from VAT, profit tax, customs duties, and property tax. The Alliance FEZ was opened in 2013 to focus on high-tech industries, including information and communication technologies, electronics, pharmaceuticals and biotechnology, architecture and engineering, industrial design, and alternative energy. In 2014, the government expanded operations in the Alliance FEZ to include industrial production. In 2015, the Meridian FEZ, focused on jewelry production, watchmaking, and diamond cutting, opened in Yerevan. The Meghri FEZ, located on Armenia’s border with Iran, opened in 2017. A new FEZ, located in Hrazdan, opened in late 2018 and is focused on the high-tech and information technology sectors. Armenia has signaled an interest in developing logistics hubs, including one in Gyumri, to facilitate goods trade.

There are no performance requirements for investment in terms of mandating local employment. The processes for obtaining visas, residence, or work permits are straightforward. There are no government-imposed conditions on permission to invest.

Armenia does not follow any policy that would force foreign investors to use domestic content in goods and technology. There are no requirements for foreign information technology providers to turn over source code or provide keys for encryption. There are no requirements to store data within the country.

Australia

4. Industrial Policies

The Commonwealth Government and state and territory governments provide a range of measures to assist investors with setting up and running a business and undertaking investment. Types of assistance available vary by location, industry, and the nature of the business activity. Austrade provides coordinated government assistance to attracting FDI and is intended to serve as the national point-of-contact for investment inquiries. State and territory governments similarly offer a suite of financial and non-financial incentives.

The Commonwealth Government also provides incentives for companies engaging in research and development (R&D) and delivers a tax offset for expenditure on eligible R&D activities undertaken during the year. R&D activities conducted overseas are also eligible under certain circumstances, and the program is jointly administered by government’s AusIndustry program and the Australian Taxation Office (ATO). The Australian Government typically does not offer guarantees on, or jointly finance projects with, foreign investors.

The Australian government announced a new USD 1.1 billion Modern Manufacturing Strategy in 2020 in response to the COVID-19 pandemic. The Strategy is primarily grants-based and provides funding to businesses to commercialize ideas and scale-up production in six target industries: resources technology and critical minerals processing; food and beverage; medical products; clean energy; defense; and space industry. Further details of the Strategy can be found on the Department of Industry, Science, Energy and Resources’ website:

https://www.industry.gov.au/data-and-publications/make-it-happen-the-australian-governments-modern-manufacturing-strategy/our-modern-manufacturing-strategy 

The Australian government provides a range of incentives for business investments in clean energy technologies, administered by the Clean Energy Regulator within the Department of Industry, Science, Energy and Resources and funded through the Emission Reduction Fund. Details on the Fund and how to apply are available on the Department’s website via the following link: https://www.industry.gov.au/policies-and-initiatives/emissions-reduction-fund . The government also encourages voluntary investment in emission reduction, including through certifying carbon reductions resulting from business investments as part of the Climate Active initiative: https://www.industry.gov.au/regulations-and-standards/climate-active.

Australia does not have any free trade zones or free ports.

As a general rule, foreign firms establishing themselves in Australia are not subject to local employment or forced localization requirements, performance requirements and incentives, including to senior management and board of directors. Proprietary companies must have at least one director resident in Australia, while public companies are required to have a minimum of two resident directors. See Section 12 below for further information on rules pertaining to the hiring of foreign labor.

Under the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2015, telecommunications service providers are required to: retain and secure, for two years, telecommunications data (not including content); protect retained data through encryption; and prevent unauthorized interference and access. The Bill limits the range of agencies allowed to access telecommunications data and stored communications, and establishes a “journalist information warrants regime.” Australia’s Personally Controlled Electronic Health Records Act prohibits the transfer of health data out of Australia in some situations.

Australia has a strong framework for the protection of intellectual property (IP), including software source code. Foreign providers are not required to provide source code to the government in exchange for operating in Australia. In February 2021, the Australian parliament passed the Treasury Laws Amendment (News Media and Digital Platforms Mandatory Bargaining Code) Bill 2021, which among other things requires designated digital platforms to notify media companies of significant changes to their algorithms with at least 14-days’ notice of such changes. However, technology companies are not required to provide source code for algorithms, or any other such IP, to the government for any purpose.

Companies are generally not restricted in terms of how they store or transmit data within their operations. The exception to this is the Personally Controlled Electronic Health Records Act (2012) which does require that certain personal health information is stored in Australia. The Privacy Act (1988) and associated legislation place restrictions on the communication of personal information between and within entities. The requirements placed on international companies, and the transmission of data outside of Australia, are not treated differently under this legislation. The Australian Attorney-General’s Department is the responsible agency for most legislation relating to data and storage requirements.

Austria

4. Industrial Policies

Financial incentives and business subsidies provided by Austrian federal, state, and local governments to promote investments are equally available to domestic and foreign investors and include tax incentives, preferential loans, loan guarantees, and grants. Most incentives are targeted to investments that meet specified criteria, including job-creation and promotion of education, use of cutting-edge technology, improving regional infrastructure, strengthening SMEs, promoting research and development, supporting environmental protection, increasing renewable energy production, and promoting startups. Under these conditions, the EU ban on state aid would not apply.

Austria’s Wirtschaftsservice (AWS) is the governmental institution that provides most federal government financial incentives for businesses. Information on targeted investment incentives is available at https://www.aws.at/en/. More detailed information on investment incentives and promotion in English language is also available on the ABA website (see chapter 1) at http://investinaustria.at/en/.

The AWS also focuses on promoting investments, particularly for small and medium-sized companies (SMEs), providing guarantees of up to EUR 25 million (USD 29.5 million) over 5 to 10 years for investments in Austria. Companies can also profit from growing their already existing investments, resulting in a 10 to 15 percent additional grant for this expansion.

Various government agencies in Austria offer incentives for research and development (R&D) activities, including grants of up to 14 percent of investors’ total research expenditures. The incentives are also available for foreign-owned enterprises. The agencies providing incentives include: The Austrian Research Promotion Agency (FFG) (https://www.ffg.at/en); the Austrian Science Fund (FWF), which is the country’s central body for the promotion of basic research (https://www.fwf.ac.at/en/); and AWS (above).

Austria’s 2022 tax reform, as of January 2023, foresees a new 10-15 percent (eco-) investment tax allowance for purchasing new commodities or business assets that have a life span of at least four years and/or have an ecological impact on the business of the company (which the government will further define by ordinance before this aspect of the tax reform enters into force).

In 2022, Austria plans to fund investments in the life sciences sector with up to EUR 29 million (USD 34 million), particularly for production of pharmaceuticals such as penicillin.

A law to expand the production of renewable energy provides for investment subsidies and subsidies to sell renewable energy on the market for investors installing new wind, solar, biomass, and hydropower plants, which entered into force in February 2022. The subsidies are subject to installed capacities and environmental conditions.

Not applicable

If investors want to employ foreign workers from outside the EU in Austria, they need to apply for a work permit with the immigration authority in one of the Austrian provinces. The Austrian Labor Service (AMS) then certifies whether there is no comparable person in the pool of registered unemployed persons in Austria, which is a prerequisite for employing non-EU workers. This does not apply to senior management positions, researchers, highly qualified personnel, and a limited set of other categories.

Austria offers several non-immigrant business visa classifications, including intra-company transfers/rotational workers, and employees on temporary duty. Recruitment of long-term, overseas specialists or those with managerial duties is governed by a points-based immigration scheme to attract skilled workers and specialists in individual sectors (points are available for qualification, education, age, and language skills). This Red-White-Red card (RWR) model allows firms to react flexibly to rising demand for talent in different occupations. It is available to highly qualified individuals, qualified specialists/craftsmen in certain understaffed professions (qualified labor and registered nurse jobs), and key personnel/professionals. Applicants must have an offer of employment to apply for the RWR. Highly qualified individuals holding U.S. citizenship may apply locally in Austria or opt to find a potential employer from abroad and have the company apply in Austria on their behalf.

Austrian immigration law requires those applying for residency permits in some categories to take German language courses and exams. There is a specific visa category under the RWR model for independent key specialists and founders of start-up enterprises to support Austria’s push to expand its innovation economy.

A less bureaucratic alternative is the EU Blue Card, which entitles applicants to a fixed-term residency of 24 months, and employment is tied to a specific employer. However, there is a threshold of a gross annual income of at least one and a half times the average gross annual income for full-time employees (in 2021: at least EUR 66,563 (USD 78,544); annual salary plus special payments).

While there is no requirement for foreign IT providers to turn over source code and/or provide access to encryption, EU and Austrian data protection stipulations apply. The EU General Data Protection Regulation (GDPR) as adopted by Austria in 2018, places restrictions on companies’ ability to store and use customer data. It also requires specific user consent for companies to send out promotional materials (previously, implied consent was sufficient). Transmission of customer or business-related data is therefore subject to EU GDPR regulations. Austria’s Data Protection Authority is in charge of enforcing all GDPR-related matters, which include GDPR rules on data storage.

In January 2022, the Austrian Data Protection Authority ruled that the website netdoktor.at violated EU GDPR rules for its use of Google Analytics. The Data Protection Authority found that using Google Analytics violated the GDPR in two key ways: 1) the transfer of personalized data to third countries that do not have stricter than or equal data protection rights as the EU is not allowed under the EU GDPR; and 2) users do not have the opportunity to willfully consent to the transfer. The data privacy organization noyb, which brought the case forward, filed over 100 similar cases across the EU. Similar rulings across EU countries are expected to follow over the course of the year.

The Austrian government may impose performance requirements when foreign investors seek financial or other assistance from the government, although there are no performance requirements to apply for tax incentives. There is no requirement that Austrian nationals hold shares in foreign investments or for technology transfer, and no requirement for foreign investors to use domestic content in the production of goods or technology.

Azerbaijan

4. Industrial Policies

Since early 2016, the government has introduced tax and investment incentives for entrepreneurs and legal entities in non-oil export sectors as part of the overall economic reform and economic diversification efforts.  These measures include certain partial, temporary exemptions from corporate and property taxes; favorable tax treatment for manufacturing facilities and imports of manufacturing equipment; and subsidies for certain exports.  Investment certificate holders are exempt from paying 50 percent of the assessed income tax, 100 percent of the land tax, and 100 percent of customs duties on imported machinery, equipment, and devices.  Certificates are issued for seven years to projects in priority non-oil sectors.

The Law of Azerbaijan “On the Use of Renewable Energy Sources in the Production of Electricity”, was signed into law by the President and published on July 14, 2021, together with a Presidential Decree on the implementation of the Renewable Energy Law. The Renewable Energy Law addresses guaranteed tariffs, foreign investment and other support mechanisms, such as scientific research and the promotion of active consumers. The law prescribes two methods for selecting investors for the generation of electricity using renewable energy sources (RES): auctions and direct negotiations.

 

If the selection of an investor is conducted in the form of an auction, the winner of the auction shall be the lowest bidder in relation to the purchase price for electricity subject to guaranteed offtake. The Ministry of Energy is the authorized body to organize RES auctions. In addition, the government is considering other incentives for investors in RES projects in Azerbaijan, including guaranteed offtake, guaranteed connection, priority in transmission and distribution and long-term land leases.

A government decree established the Alat Free Economic Zone (AFEZ) next to the Port of Alat, located approximately 50 miles south of Baku in March 2016.  President Aliyev signed legislation setting forth the incentives and regulations governing the AFEZ in June 2018.  The law exempts all businesses in the AFEZ from taxes and customs; charges the AFEZ’s administration with setting up its own employment, migration, dispute resolution, and arbitration regulations; provides protections from nationalization; and guarantees the free flow of funds in and out of the free trade area.  While the legal framework is in place and initial construction has begun, the AFEZ is not yet fully operational.

The Ministry of Digital Development and Transport has discussed plans to create other special economic zones, including a petrochemical complex and regional innovation zones to boost telecommunications sector development.  Currently, legal entities and individuals involved in entrepreneurial activities in one of five state-designated industrial or technological parks are exempt from income tax, property tax, land tax, and VAT on imported machinery and equipment until 2023.

The Azerbaijani government does not mandate local employment, although some Production Sharing Agreements (PSAs) in the oil sector include localization provisions.  While performance requirements are not generally imposed on new investments, the government is seeking to increase the number of value-added services and processes performed in Azerbaijan.  American companies have reported that government-connected companies often pressure current or potential partners to establish joint ventures, initiate local production of certain components, facilitate technology transfer, or otherwise invest in Azerbaijan in order to maintain or expand cooperation.

Azerbaijan does not have any data localization requirements.

Bahrain

4. Industrial Policies

The GOB offers a variety of incentives to attract FDI. The Bahrain EDB, the Bahrain Logistics Zone (BLZ), Bahrain Development Bank (BDB), Bahrain International Investment Park (BIIP), U.S. Trade Zone (USTZ), and labor market fund Tamkeen offer incentives to encourage FDI. Some examples of incentives include assistance in registering and opening business operations, financial grants, exemption from import duties on raw materials and equipment, and duty-free access to other GCC markets for products manufactured in Bahrain.

Khalifa bin Salman Port, Bahrain’s primary commercial seaport, provides a free transit zone to facilitate the duty-free import of equipment and machinery. The GOB has developed two main industrial zones, one to the north of Sitra and the other in Hidd. The Hidd location, known as BIIP, is adjacent to a logistics zone, known as BLZ. Foreign-owned firms have the same investment opportunities in these zones as Bahraini companies.

MoICT operates BIIP, a 2.5 million square-meter, tax-free zone located minutes from Bahrain’s main Khalifa bin Salman port. Many U.S. companies operate out of this park. BIIP is most suited to manufacturing and services companies interested in exporting from Bahrain. The park offers manufacturing companies the ability to ship their products duty free to countries in the Greater Arab Free Trade Area. BIIP has space available for potential investors, including some plots of vacant land designated for new construction, and some warehouse facilities for rental. BIIP offers several incentives for international companies, including: competitive land-lease rental rates starting at $2.66 sqm/year; competitive utility costs; 100 percent foreign ownership; corporate and income tax exemptions; duty-free access to the GCC and U.S. markets; 5 percent customs duty exemption on raw materials, plant machinery, and spare parts imported for manufacturing; grants for funding, machinery, training, and employment; and a five year exemption from hiring Bahraini nationals.

BLZ is a boutique logistics park. Regulated and managed by the Ports and Maritime Affairs at the Ministry of Transportation and Telecommunications, BLZ offers local and international companies a base from which to operate in a customs-bonded area to export products and services to the northern Gulf and GCC markets. The park accommodates logistics companies engaged in:

  • Third-party logistics (3PL) and freight forwarding services.
  • General and specialized storage and distribution activities for re-export purposes.
  • Value-added logistics services such as component assembly, packing and packaging, labeling, testing and repair, mixing, weighing and filling, and other light manufacturing activities.

BLZ offers several incentives for international companies, including: competitive land-lease rental rates starting at $11 sqm/year; 100 percent foreign ownership; corporate and income tax exemptions; 12-month grace period on utility payments for water, sewage, electricity, and telecommunication services.

A 1999 law requires investors in industrial or industry-related zones to launch a project within one year from the date of receiving the land, and development must conform to the specifications, terms, and drawings submitted with the application. Changes are not permitted without approval from MoICT.

In February 2021, MoICT inaugurated the USTZ to attract U.S. companies to build, own, and operate full turnkey industrial manufacturing, logistics, and distribution facilities in a unified commercial zone that will facilitate streamlined access to the wider GCC market. MoICT expects the USTZ to include many of the same land lease discounts, customs exemptions, and other incentivized features as the BIIP and BLZ.

Companies in Bahrain are obliged to comply with so-called “Bahrainization” employment targets, under which the Labour Market Regulatory Authority (LMRA) mandates that a certain percentage of each company’s employees are Bahraini nationals. Companies may contact LMRA to determine the “Bahrainization” rate, which differs based on sector, or use a calculator to determine the rate: http://lmra.bh/portal/en/page/show/193 . The applicable Bahrainization rate is mandatory across a company’s corporate structure. Per Cabinet Resolution Number 27 of 2016, LMRA announced that companies unable to comply with the rates would only be eligible to apply for new work permits and sponsorship transfers by paying an additional annual fee of BD 250 ($663) per non-Bahraini worker. LMRA may apply fines to companies that do not comply with “Bahrainization” requirements.

The GOB introduced the National Employment Program initiative in 2019 to enhance Bahraini nationals’ employment through trainings and qualification programs. The program, in its two versions, worked on replacing expat employment with Bahraini nationals in several occupations, mainly, in the health, education, and telecommunication sectors.

The GOB issued Law No. 1 in March 2019 amending Article 14 of the Private Health Establishments Law, which gives priority to recruiting qualified Bahraini physicians, technicians, and nursing staff in private health establishments.

There is no excessively onerous visa, residence, work permit, or similar requirement inhibiting the mobility of foreign investors or their employees in Bahrain. Americans and citizens of many other countries can obtain a two-week visa with relative ease upon arrival in Bahrain or online. Bahrain also offers American citizens a five-year, multiple-entry visa, if required.

Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses; no product localization is enforced, and foreign investors are not obliged to use domestic content in goods or technology. There are no government-imposed conditions on permission to invest, including tariff and non-tariff barriers, on American investments.

There are no special performance requirements imposed on foreign investors. The U.S.-Bahrain BIT forbids mandated performance requirements as a condition for the establishment, acquisition, expansion, management, conduct, or operation of a covered investment. Foreign and Bahraini-owned companies must meet the same requirements and comply with the same environmental, safety, health, and labor requirements. Officials at the Ministry of Labor and Social Development, LMRA, and MoICT supervise companies operating in Bahrain on a non-discriminatory basis.

The CBB regulates financial institutions and foreign exchange offices. Foreign and locally owned companies must comply with the same rules, policies, and regulations.

There are no requirements for foreign IT providers to turn over source code and/or to provide access to surveillance.

Bahrain enacted Law No. 30 of 2018 with respect to Personal Data Protection on July 12, 2018. The nationwide Data Protection Law, which went into force on August 1, 2019, promotes the efficient and secure processing of big data for commercial use and provides guidelines for the effective transfer of data across borders.

Bangladesh

4. Industrial Policies

Current regulations permit a tax holiday for designated “thrust” (strategic) sectors and infrastructure projects established between July 1, 2019 and June 30, 2024. The thrust sectors enjoy tax exemptions graduated from 90 percent to 20 percent over a period of five to ten years depending on the zone where the business is established. Industries set up in Export Processing Zones (EPZs) and Special Economic Zones (SEZs) are also eligible for tax holidays. Details of fiscal and non-fiscal incentives are available on the following websites:

BIDA: http://bida.gov.bd/?page_id=146 

BEPZA: https://www.bepza.gov.bd/content/incentives-facilities 

BEZA: https://www.beza.gov.bd/investing-in-zones/incentive-package/ 

Strategic sectors eligible for tax exemptions include: certain pharmaceuticals, automobile manufacturing, contraceptives, rubber latex, chemicals or dyes, certain electronics, bicycles, fertilizer, biotechnology, commercial boilers, certain brickmaking technologies, compressors, computer hardware, home appliances, insecticides, pesticides, petrochemicals, fruit and vegetable processing, textile machinery, tissue grafting, tire manufacturing industries, agricultural machineries, furniture, leather and leather goods, cell phones, plastic recycling, and toy manufacturing.

Eligible physical infrastructure projects are allowed tax exemptions graduated from 90 percent to 20 percent over a period of 10 years. Physical infrastructure projects eligible for exemptions include deep seaports, elevated expressways, road overpasses, toll roads and bridges, EPZs, gas pipelines, information technology parks, industrial waste and water treatment facilities, liquefied natural gas (LNG) terminals, electricity transmission, rapid transit projects, renewable energy projects, and ports.

Independent non-coal fired power plants (IPPs) commencing production after January 1, 2015 are granted a 100 percent tax exemption for five years, a 50 percent exemption for years six to eight, and a 25 percent exemption for years nine to 10. For new coal-fired IPPs commencing production before June 30, 2023 (provided operators contracted with the government before June 30, 2020), the tax exemption rate is 100 percent for the first 15 years of operations. For power projects, import duties are waived for imports of capital machinery and spare parts.

The valued-added tax (VAT) rate on exports is zero. For companies exporting only, duties are waived on imports of capital machinery and spare parts. For companies primarily exporting (80 percent of production and above), an import duty rate of 1 percent is charged for imports of capital machinery and spare parts identified and listed in notifications to relevant regulators. Import duties are also waived for EPZ industries and other export-oriented industries for imports of raw materials consumed in production.

The GOB provides special incentives to encourage non-resident Bangladeshis to invest in the country. Incentives include the ability to buy newly issued shares and debentures in Bangladeshi companies. Further, non-resident Bangladeshis can maintain foreign currency deposits in Non-resident Foreign Currency Deposit (NFCD) accounts.

In the past several years, U.S. companies have experienced difficulties securing the investment incentives initially offered by Bangladesh. Several companies have reported instances where infrastructure guarantees (ranging from electricity to gas connections) are not fully delivered or tax exemptions are delayed, either temporarily or indefinitely. These challenges are not specific to U.S. or foreign companies and reflect broader challenges in the business environment.

Bangladesh government does not provide any specific incentives for businesses owned by women.

In 2020, the Government of Bangladesh established that all power generation companies will enjoy full tax exemption with the exception of coal-based generation. This incentive will be available to all power generation companies who start operation before December 31, 2022. The government is seeking to increase use of renewable energy and has offered incentives such as tax breaks for net-metered solar rooftop installation.

Under the Bangladesh Export Processing Zones Authority Act of 1980, the government established the first EPZ in Chattogram in 1983. Additional EPZs now operate in Dhaka (Savar), Mongla, Ishwardi, Cumilla, Uttara, Karnaphuli (Chattogram), and Adamjee (Dhaka). Korean investors are also operating a separate and private EPZ in Chattogram.

Joint ventures, wholly foreign-owned investments, and wholly Bangladeshi-owned companies are all permitted to operate and enjoy equal treatment in the EPZs.

In 2010, Bangladesh enacted the Special Economic Zone Act allowing for the creation of privately owned SEZs to produce for export and domestic markets. The SEZs provide special fiscal and non-fiscal incentives to domestic and foreign investors in designated underdeveloped areas throughout Bangladesh.

Barbados

4. Industrial Policies

In 2019, Barbados repealed its Fiscal Incentives Act, bringing the country into conformity with its obligations under the WTO and the Agreement on Subsidies and Countervailing Measures. Manufacturers may still benefit from some concessions. Further information is available from Invest Barbados.

The Small Business Development Act (1999) defines a small business as having no more than 25 employees. Small businesses must be registered under the Companies Act, which applies to domestic and foreign-owned micro- and small enterprises. Small businesses are not eligible for incentives under the Tourism Development Act, the Special Development Areas Act, or the Shipping Incentives Act.

Enterprises generating export profits (other than from exports within CARICOM) may receive an export allowance expressed as a rebate of corporate tax on those profits. The maximum rebate of 93 percent applies if more than 81 percent of an enterprise’s profits result from extra-regional exports. The export development allowance permits a company to deduct from taxable income an additional 50 percent of what the company spends in developing export markets outside CARICOM.

Initial allowances or investment allowances of up to 40 percent on capital expenditure are available for businesses making capital expenditures on machinery and plants or on an industrial building or structure. The government also allows annual depreciation allowances on such expenditures.

In the tourism sector, the government’s market development allowance permits a company to deduct an additional 50 percent of what it spends to encourage tourists to visit Barbados. Under the Tourism Development Act of 2002, businesses and individuals that invest in the tourism sector can write off capital expenditures and 150 percent of interest. These entities are also exempt from import duties and environmental levies on furniture, fixtures and equipment, building materials, supplies, and equity financing. The act expands the definition of the tourist sector beyond accommodation to include restaurants, tourist recreational facilities, and tourism-related services. The act encourages the development of attractions that emphasize the country’s natural, historic, and cultural heritage, and encourages construction of properties in non-coastal areas.

Barbados has harmonized the legislative and tax frameworks for domestic and international companies in the international business sector. Companies conducting international business operate with a tax rate from 1 to 5.5 percent. Companies exporting 100 percent of their services or products can apply for a foreign currency permit. All corporate entities are taxed on a sliding scale:

Taxable Income USD Rate %
Up to 500,000 5.50
Above 500,000 to 10 million 3.00
Above 10 million to 15 million 2.50
Above 15 million 1.00

There are no withholdings taxes on dividends, interest, royalties, or management fees paid to non-residents.

The Government of Barbados offers various incentives to business owners engaged in the renewable energy and energy efficiency sectors. A pamphlet outlining these incentives is available  on the Invest Barbados website.

There are currently no foreign trade zones or free ports in Barbados. In 2021, the government announced plans to establish a Barbados Free Economic Zone to help attract foreign direct investment.

Foreign investors must finance their investments from external sources or from income that the investment generates. When a foreign investment generates significant employment or other tangible benefits for Barbados, the authorities may allow the company to borrow locally for working capital. Invest Barbados may provide a training grant to qualifying manufacturing and information and communication technology enterprises during the initial operating period.

Except in the case of its medicinal cannabis and renewable energy industries, Barbados does not require that its citizens own shares of a foreign investor’s enterprise. Some restrictions may apply to share transfers. The Companies Act does not permit bearer shares. Foreign investors do not need to establish facilities in any specific location, although there are some zoning restrictions on residential and commercial construction for environmental reasons. There is no requirement that enterprises must purchase a fixed percentage of goods from local sources. Investors, particularly within the hospitality industry, are encouraged to use local products whenever possible.

Barbados labor and immigration laws stipulate that non-nationals seeking to work in Barbados must apply for work permits, including for all managerial and technical staff. Nationals from CARICOM member states are exempt from this requirement. The work permit is specific to the job and employer and the permit may be granted for a period of up to five years. Short-term permits of up to six months are also available. To grant a work permit, the government requires that the expatriate must bring to the job special skills or knowledge not readily available in Barbados. While work permits are generally granted to senior management, the government may restrict the number of permits approved depending on the number of people employed by the local company. There are no restrictions regarding foreign directors of boards. More information is available at  http://www.immigration.gov.bb/pages/WorkPermit.aspx .

There are no requirements for foreign information technology providers to turn over source codes and/or provide access to surveillance.

The Barbados Data Protection Act (BDPA) became law in 2021. The BDPA created a data protection authority under a Data Protection Commissioner responsible for the general administration of the act. The BDPA prohibits the transfer of personal data out of Barbados unless the destination country or territory ensures an adequate level of protection for the rights and freedoms of data subjects vis-à-vis the processing of their personal data. Violations under the BDPA are subject to fines ranging from $5,000 to $250,000 (10,000 to 500,000 Barbados dollars) and allow for criminal convictions resulting in prison sentences ranging from two months to three years.

As a member of the WTO, Barbados is party to the Agreement to the Trade Related Investment Measures.

Belarus

4. Industrial Policies

According to the GOB’s Strategy for Attracting FDI, priority sectors include pharmaceuticals, biotechnology, medical equipment, nanotechnologies and nanomaterials, optics and electronics, production of construction materials, electric transport vehicles and light industry products, 5G communications networks, and the information technology and telecommunications sector generally. Potential investors should be aware, however, that following the February 2022 Russian invasion of Ukraine, approximately one-third of all IT workers in Belarus have left the country. Industry insiders expect the outflow of tech workers to continue.

The GOB offers various incentives and programs for FDI depending on the sector and industry.  GOB enters into specific investment agreements with other governments and may accord preferential incentives and benefits including but not limited to:

  • Allocation of a land plot without auctioning the right to lease it;
  • Removal of vegetation without compensation during construction;
  • Full VAT deduction for the purchase of goods, services (works), or property rights;
  • Exemption from import tariffs and VAT on the imports of production equipment;
  • Exemption from fees for the right to conclude a land lease;
  • Exemption from duties for employing foreign nationals;
  • Exemption from compensation for losses sustained by the agriculture and/or forestry industries due to the use of a land plot under the investment agreement;
  • Exemption from land tax on land plots in government or private ownership, and from rent on land plots in government ownership, for a period starting from the first day of the month in which the investment agreement came into effect until December 31 of the year following the year in which the last of the facilities scheduled under the investment agreement started operations.

Investment agreements concluded under the decision of the Belarusian Council of Ministers and with the permission of the President of Belarus may offer additional incentives and benefits not expressly provided for in legislation. Such incentives are provided on a case-by-case basis.

In 2021, Belarus did not develop or introduce any incentives for investment in green energy production or distribution.

Each of Belarus’ six regions has its own free economic zone (FEZ): Minsk, Brest, Gomel-Raton, Mogilev, Grodno Invest, and Vitebsk. The tax and regulatory pattern applicable to businesses in these zones is simpler and lower than elsewhere in Belarus. To become a FEZ resident, an investor needs to make a minimal investment of EUR 1 million, or at least EUR 500,000 provided the entire sum is invested during a three-year period, as well as engage in the production of import-substituting products or goods for export.

In 2005, Lukashenka signed the edict that established uniform rules for all FEZs. The list of main tax benefits for FEZ residents was revised in 2016 to include certain exemptions from the corporate profit tax (CPT), real estate tax, land tax, and rent on government-owned land plots located within the boundaries of the FEZ, among others. As of 2017, FEZ residents benefit from a simplified procedure of export-import operations. Resident enterprises are exempt from customs duties and taxes on facilities, construction materials, other equipment used in implementation of their investment projects. They are also exempt from customs duties and taxes on raw materials and materials used in the process of manufacture of the products sold outside the territory of the Eurasian Economic Union. Otherwise, FEZ residents pay VAT, excise duties, ecological tax, natural resource extraction tax, state duty, patent duties, offshore duty, stamp duty, customs duties and fees, local taxes and duties, and contributions to the Social Security Fund according to the general guidelines. For more details please visit:

FEZ Minsk:   http://www.fezminsk.by/en/  
FEZ Gomel: http://www.gomelraton.com/en/  
FEZ Vitebsk:   http://www.fez-vitebsk.com/en/  
FEZ Brest:   http://fezbrest.com/en/  
FEZ Mogilev:   http://www.fezmogilev.by/    
FEZ GrondoInvest:   https://grodnoinvest.by/en/   
FEZ Brest:   http://fezbrest.com/en/  

Employing five percent of Belarus total workforce in 2021, Belarus’ six FEZs attracted 23 percent of all FDI, accounted for 21 percent of total exports, generated 18 percent of all industrial production, and contributed five percent of the country’s GDP.

Created in 2005 to foster development of the IT and software industry, the High Technology Park (Hi-Tech Park or HTP) is a “virtual” legal regime that extends over the entire territory of Belarus. A physical campus of the HTP is found in the eastern part of Minsk and a satellite campus is located in Hrodna. The legislation behind the HTP was updated in 2017 with the signing of Presidential Decree No. 8 “On the Development of the Digital Economy.” The decree extended the HTP preferences from 2022 until 2049 and expanded the list of business activities in which HTP residents may engage, including but not limited to software development; data processing; cryptocurrency and token-related activity; data center services; development and deployment of Internet-of-Things technologies; ICT education; and cybersports.

The HTP provides residents with beneficial tax preferences, including but not limited to exemptions from VAT and CPT on sale of goods or services; exemptions from customs duty and VAT on certain kinds of equipment imported into Belarus for use in investment projects; immovable property tax and land tax benefits with regard to buildings and land within the boundaries of the HTP campuses; and caps on personal income tax at five percent for foreign entities. However, a cap on personal income tax at nine percent for employees was removed in late 2020 and the HTP’s employees must now pay a regular income tax of 13 percent. Following continued human rights abuses by Belarusian authorities in response to the protests and the February 2022 Russian invasion of Ukraine, approximately one-third of all IT professionals have relocated outside of Belarus. Industry insiders expect the outflow to continue as the government continues its repressive tactics and as Western sanctions make doing business with international partners more difficult.

In a January 28, 2022 address to parliament, Lukashenka suggested tech workers employed by foreign companies were disloyal and likely received politically-motivated instructions from their employers. Lukashenka said he was weighing whether the HTP was doing the country more good or harm. He hinted that he would insist on a renegotiation of many of the benefits of residency at the HTP, but the exodus of IT professionals caused the government to change course and offer as yet undeclared incentives for companies to keep their employees at the park.

Foreign nationals who are hired on contract by an HTP resident company, who are founders of a HTP resident company, or who are employed by such founders are eligible for visa-free entry into Belarus for a stay of up to 180 days per year. Foreigners employed by HTP residents are not required to have working permit in Belarus and are entitled to apply for a temporary residence permit for the duration of their contract.

For more information on HTP, please visit:   http://www.park.by/  

The Great Stone Industrial Park is a special economic zone of approximately 112.5 square kilometers located adjacent to the Minsk National Airport and Belarusian highway M1, which extends from Moscow to Berlin. Before the launch of Western sanctions against Belarus and the start of Russia’s invasion of Ukraine, Great Stone resident companies had access to Lithuania’s Klaipeda seaport on the Baltic Sea.  According to a master plan approved in 2013, Great Stone was planned to eventually include production facilities, dormitories and residential areas for workers, offices and shopping malls, and financial and research centers. Great Stone is primarily a Belarus-China joint venture but any company – regardless of its country of origin – can apply to join the industrial park. Interested companies must submit either a business project worth at least USD 500,000, to be invested within three years from the moment of the business’ registration; submit a business project worth at least USD 5 million without any time limit for investment; or submit a business project worth at least USD 500,000 tied to research and development.

As of 2020, Great Stone residents receive, among other preferences, certain exemptions on income tax, real estate and land taxes, and dividend income; the right to import goods, including raw materials, under a preferential customs regime; full VAT repayment on goods used for the design, building, and equipment of facilities in Great Stone; exemptions from environmental compensatory payments; and a preferential entry/exit program allowing Great Stone residents and their employees to stay in Belarus without a visa for up to 180 days. Great Stone residents are also exempt from any new taxes or fees through 2027 should the government make adverse changes to the tax code. Great Stone residents are permitted to purchase land in the zone whereas foreign land ownership in the rest of Belarus is highly restricted. The special preferential legal regime of Great Stone will be valid until 2062. The list of priorities planned for implementation in the park include projects in electronics, biomedicine, chemistry, and mechanical engineering.

Following the start of the war in Ukraine in late February 2022, several residents of Great Stone have terminated their operations in the special economic zone and departed Belarus.

Small and medium-sized cities and rural areas in Belarus are defined by a 2012 presidential decree as settlements with populations under 60,000. Individual entrepreneurs and legal entities working in rural settlements of less than 2,000 people receive additional tax benefits and exemptions.

Since 2012, companies and individual entrepreneurs operating in all rural areas and towns enjoy the following benefits in the first seven years after registration: exemption from profit tax on the sale of goods, work, and services of a company’s own production; exemption from other taxes and duties, except for VAT, excise tax, offshore duty, land tax, ecological tax, natural resources tax, customs duties and fees, state duties, patent duties, and stamp duty; exemption from mandatory sale of foreign currency received from sale of goods, work, and services of a company’s own production, and from leasing property; no restrictions on insuring risks with foreign insurers; exemption from import tariffs on certain goods brought into Belarus that contribute to the charter fund of a newly established business. The special legal regime does not apply to banks, insurance companies, investment funds, professional participants in the securities market, businesses operating under other preferential legal regimes (e.g. FEZ or HTP), and certain other businesses.

The GOB does not mandate local employment. Foreign investors have the right to invite foreign citizens and stateless persons, including those without permanent residence permits, to work in Belarus provided their labor contracts comply with Belarusian law. The GOB often imposes various conditions on permission to invest and pursues localization policies. Other performance requirements are often applied uniformly to both domestic and foreign investors.

According to official Belarusian sources, licenses are not required for data storage. Law enforcement regulations governing electronic communications do not include any requirements specifically for foreign internet service providers. Beginning in 2016, internet service providers are required by law to maintain all electronic communications for a one-year period. IT companies operating in Belarus were not aware of any requirements for IT providers to turn over source code and/or provide access to encryption.

According to the 2021 Human Rights Report, the government monitored internet communications without appropriate legal authority and filtered and blocked internet traffic. For several days following the August 2020 election, internet access and mobile communications were severely restricted. While authorities blamed foreign cyberattacks for the disruptions, independent experts attributed the disruptions to the government. Since August 2020, there have been repeated internet and mobile communications disruptions, usually coinciding with major protests and police actions to disperse them. Private internet service providers notified customers that the shutdowns were requested by the government on national security grounds. Telecommunications companies reported that authorities ordered them to restrict mobile internet data severely on the days when large-scale demonstrations occurred. On March 24, 2022, Lukashenka instructed authorities to explore banning YouTube and social media applications because they were ostensibly casting Belarus’ facilitation of the Russian invasion of Ukraine in a bad light.

Belgium

4. Industrial Policies

In Belgium, investment incentives and subsidies are the responsibility of Belgian’s three regions: Flanders, Wallonia, and Brussels-Capital.  Nonetheless, most tax measures remain under the control of the federal government as do the parameters (social security, wage agreements) that govern general salary and benefit levels.  In general, all regional and national incentives are available to foreign and domestic investors alike.   The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Belgian investment incentive programs at all levels of government are limited by EU regulations and are normally kept in line with those of the other EU member states.  The European Commission has tended to discourage certain investment incentives in the belief that they distort the single market, impair structural change, and threaten EU convergence, as well as social and economic cohesion.

In their investment policies, the regional governments emphasize innovation promotion, research and development, energy savings, environmental protection, exports, and employment. In order achieve this, a wide variety of tax benefits and incentives is available at both the federal and regional levels. The three regional agencies have staff specializing on specific regions of the world, including the United States, and have representation offices in different countries.  In addition, the Finance Ministry has a foreign investment tax unit to provide assistance and to make the tax administration more “user friendly” to foreign investors.

More information about investing in Belgium, the Belgian tax system, tax benefits and incentives can be found at:  https://business.belgium.be/en .

Tax advice and support can be requested, free of charge at the Foreign Investment Tax Unit of the Federal Public Service Finance ( taxinvest@minfin.fed.be ).

There are no foreign trade zones or free ports as such in Belgium.  However, the country utilizes the concept of customs warehouses.  A customs warehouse is approved by the customs authorities where imported goods may be stored without payment of customs duties and VAT.  Only non-EU goods can be placed under a customs warehouse regime.  In principle, non-EU goods of any kind may be admitted, regardless of their nature, quantity, and country of origin or destination.  Individuals and companies wishing to operate a customs warehouse must be established in the EU and obtain authorization from the customs authorities.  Authorization may be obtained by filing a written request and by demonstrating an economic need for the warehouse.

Performance requirements in Belgium usually relate to the number of jobs created. There are no national requirement rules for senior management or board of directors. There are no known cases where export targets or local purchase requirements were imposed, with the exception of military offset programs.  While the government reserves the right to reclaim incentives if the investor fails to meet his employment commitments, enforcement is rare.  However, in 2012, with the announced closure of an automotive plant in Flanders, the Flanders regional government successfully reclaimed training subsidies that had been provided to the company.

There is currently no requirement for foreign IT providers to share source code and/or provide access to surveillance agencies.

Belize

4. Industrial Policies

The legal framework authorizing and providing for investment incentives include the Fiscal Incentives Act, the Designated Processing Areas Act, the Free Zones Act, the International Business Companies Act, the Retired Persons Incentives Act, the Diaspora Retiree Incentive Program, the Trusts Act, the Offshore Banking Act, and the Gaming Control Act.  These acts offer a range of incentives including tax deferments, tax reductions, access to land and capital, and preferential access to some government concessions.

While government policies support public private partnerships, they do not generally issue guarantees or joint financing of foreign direct investment projects.  In exceptional circumstances, guarantees have been issued for SOE investments to purse funding from development institutions. In October 2021, the GoB approved a draft public private partnership policy (PPP) and the creation of the PPP unit to mobilize private sector capital to support large-scale investments in infrastructure and other development projects.

In March 2022, the government amended the Income and Business Tax Act to decrease the incentive lending rate from 15 percent to 12 percent in strategic foreign exchange earning sectors including tourism, agriculture, and business processing outsourcing. The Central Bank of Belize and the Government of Belize also established the Emergency Business Support Program (EBSP) in the last year to provide financing through domestic banks and the Development Finance Corporation to businesses affected by the COVID –19 pandemic.

The Designated Processing Areas Act (DPA) was passed in 2018 to replace the former Export Processing Zone Act.  The DPA remains a tool to attract local and foreign investments that follow value-added business models to boost production for export markets.  Approved companies under this program receive a DPA status for a period of up to ten years and may qualify for various tax exemptions.  Approved companies are given certain exemptions, including from the Trade Licensing Act requirements for operating in a municipality and the Supplies Control Act, in relation to the importation of raw materials for production that are not available in Belize.  Companies may maintain a foreign currency account in a domestic or international bank located in Belize as well as sell, lease, or transfer goods and services between DPA companies.  While subject to the Income and Business Tax, businesses may qualify for a preferential tax rate on chargeable income.  They may also be eligible for an annual quota for fuel solely for specified uses.

A Free Zone Act passed in 2019 amended the Commercial Free Zone (CFZ) Act.  Belize currently has two CFZs, one on the northern border with Mexico and a small zone on the western border with Guatemala.  The legislation limited the activities allowed in CFZ to specific sectors. Banks and financial institutions licensed under the laws of Belize are allowed to operate within a CFZ, but their transactions are limited to only CFZ-centered business.

Companies may operate both in the national customs territory and in the Free Zone, but must maintain separate accounts in respect of business activities.  Additionally, goods entering the customs territory are subject to customs duties.  The Commercial Free Zone Management Agency (CFZMA) monitors and administers the free zones.  Incentives include exemptions from import duties, income tax, taxes on dividends, capital gains tax, or any new corporate tax levied by the government during the first ten years of operation.  In addition, imports and exports of a CFZ are exempt from customs duties, consumption taxes, excise taxes, or in-transit taxes, except those destined for or directly entering areas subject to the national customs territory.

Domestic and foreign investors seeking to access incentives offered under the various incentive programs must comply with the program conditions including performance requirements. Investments that have been approved for incentives generally report to the authorizing agency, namely BELTRAIDE or the Ministry of Finance, Economic Development and Investment, to ensure they meet stipulations on the concession.

The Fiscal Incentives Act awards a qualified entity a development concession during the start-up or expansion stages to foster growth by offsetting custom duties.  According to BELTRAIDE (www.belizeinvest.org.bz), two programs are offered under this Act: the Regular Program for investments exceeding US $150,000 and the Small and Medium Enterprise (SME) program for investments of less than US $150,000.

In general, investment incentives are applicable to both domestic and foreign investors.  The Fiscal Incentives SME Program, however, is aimed at smaller enterprises with a minimum of 51 percent Belizean ownership.  The SME Program offers the same benefits of the Regular Program, except for the allowable timeframe for duty exemptions.  Under this program, companies are allowed a maximum of five years of development concessions, with the expectation that after this period, companies can mature into the Regular Program.

The Qualified Retirement Program (QRP) was created to facilitate eligible persons who have met the income requirements to permanently live and retire in Belize.  The Belize Tourism Board oversees this program designed to benefit retired persons over 45 years of age.  To qualify, applicants need proof of income not less than US $2,000 per month through a pension or annuity generated outside of Belize.  An approved QRP is allowed to import personal effects as well as approved means of transportation, free of customs duties and taxes.  Under the program, beneficiaries cannot engage in employment, own a business or invest in Belize.

In November 2021, Belize passed the Data Protection Act, which is partially aligned with Europe’s General Data Protection Regulation (GDPR). The Act mandates the sharing of data between governmental agencies and categorizes financial records as sensitive personal data. It also lays out fines are as high as US $250,000. The Act creates a carve-out for international transfers of data to cloud storage outside Belize whereby no consent is required from data subjects. Additionally, the Act gives a three-day window as the default for notifying the Commissioner and data subjects of breaches.

Benin

4. Industrial Policies

Depending on the size of the investment, investors may benefit from reduced tax liability on profits or imported industrial equipment for up to one year from the date of business registration. Investors must meet several criteria including employing a minimum number of Beninese nationals, safeguarding the environment, and meeting nationally accepted accounting standards. The Investment Control Commission monitors companies that receive these incentives to ensure compliance. The GDIZ also offers many investment incentives, notably tax breaks and government services located on-site to expedite business start-up requests.

The Investment Code allows for the creation of SEZs and establishes incentives such as tax reductions for investors. SEZ investors may benefit from reduced tax liability on profits and exemptions for import and export duties. Investors must meet several criteria including employing a minimum number of Beninese nationals, safeguarding the environment, and meeting nationally accepted accounting standards. Local entities and foreign investors enjoy the same opportunities.

There are no government-imposed conditions on permission to invest and there is no “forced localization” policy pertaining to the use of domestic content in goods or technology. Moreover, there are no requirements in place for foreign IT providers to turn over source code and/or provide access to encryption.

The Benin Post and Communications Regulatory Authority (ARCEP) ensures the confidentiality of the content of all communications by the service provider or operator, whether this is information or other data the service provider obtains in the course of providing the services offered. No information may be disclosed without the written consent of ARCEP or a signed order of the competent judicial authority. Additional information may be found at www.arcep.bj .

Bolivia

4. Industrial Policies

To attract more investment, the government enacted an investment law in 2014 stating each Ministry will provide incentives for sector-specific investment.

Article 14 of the 2014 investment law requires technology transfer from foreign companies operating in Bolivia to Bolivian workers and institutions.  The law also specifies that Bolivians should work in operational, administrative, and executive offices of foreign companies.  Finally, Article 14 states companies investing in Bolivia should donate equipment and machinery to universities and technical schools in the same area as the investment, and conduct research activities that will find solutions that contribute to public welfare.

Article 21 of the investment law stipulates that the government can incentivize investment in certain sectors that contribute to the economic and social development of the country.

Law 767 from 2015 aims to promote investments in the exploration and exploitation of hydrocarbons.  However, many companies considered this regulation as skewed to production and insufficient to incentivize new exploration.  In 2016, Supreme Decree 2830 was issued, providing a 12 percent reduction in the payment of the direct tax on hydrocarbons and other incentives in order to better incentive exploration.

The Bolivian government does not offer business incentives for direct foreign investment. It also does not offer any direct green investment or clean energy incentives. There are opportunities to obtain such green incentives through private funding.

In 2016, Supreme Decree 2779 was enacted, approving regulations for a new system of free trade zones in Bolivia.  The decree establishes a period of one year for existing free trade zones to transform into free industrial zones, which allow for industrial operations and assembly.  Free industrial zones exist in El Alto, Patacamaya, Oruro, Puerto Suarez, and Warnes.  Cobija is the only remaining free trade zone under this new system, with operations approved until 2038.  Concessions within free industrial zones last 15 years and are renewable.  The decree also eased customs procedures for goods entering the zones and established stronger government support for the promotion of productive investments in the zones. Bolivia does not have special economic zones.

Bolivian labor law requires businesses to limit foreign employees to 15 percent of their total work force and requires foreign hires be technical staff.  These workers require a work visa that can be obtained in any Bolivian consulate, and in the case that they work for a Bolivian company, both the company and the workers should also contribute to the Bolivian Pension System (Pension Law Article 104.1)

Supreme Decree 27328 regulates national and local level government procurement, which give priority to national sourcing.  If an item required is not produced in Bolivia, buying decisions are made based on price.  Supreme Decree 28271 (Article 10), establishes the following preference margins for sourcing with Bolivian products:

Except for national tenders, 10 percent preference margin for Bolivian products regardless of the origin of materials.

For national public tenders, if the cost of Bolivian materials represents more than 50 percent of the total cost of the product, the producers receive a 10 percent preference margin over other sellers.

In national and international public tenders, if Bolivian inputs and labor represent more than the 50 percent of the total cost of the product, the seller receives a 25 percent preference margin over other sellers.  If the Bolivian inputs and labor represent between 30-50 percent of the total cost of the product, the seller receives a 15 percent preference margin over other sellers.

Under the Bolivian Criminal Code (Article 226), it is a crime to raise or lower the price of a product based on false information, interests, or actions.  For those caught doing so, punishment is six months to three years in prison.  It is also a crime to hoard or conceal products in order to raise prices.  The Bolivian government has applied these provisions in a number of cases, applying regulations that allow them to request accounting records and audit companies’ financial actions looking for evidence of speculation.

Bosnia and Herzegovina

4. Industrial Policies

There are some incentives for foreign direct investment, including exemptions from payment of customs duties and customs fees. Bosnia and Herzegovina is divided into three jurisdictions for direct tax purposes: the Federation, the RS, and the Brčko District.

In the Federation, RS, and Brčko District, the corporate income tax allows offsetting of losses against profits over a five-year period. The corporate tax rate is 10 percent across the country. Foreign investors can open bank accounts in all jurisdictions and transfer their profits abroad without any restrictions. The rights and benefits of foreign investors granted and obligations imposed by the Law on the Policy of Foreign Direct Investment cannot be terminated or overruled by subsequent laws and regulations. Should a subsequent law or regulation be more favorable to foreign investors, the investor has the right to choose the most beneficial regulations.

In addition to the BiH-wide incentives listed above, the two entities and the Brčko District have specific incentives. In the Brčko District, investments in fixed assets are subject to tax relief.

In the Federation:

A taxpayer who invests KM 20 million (approx. USD 12 million) over a period of five years is exempted from paying corporate income tax for the period of five years beginning from the first investment year. A taxpayer who does not make the prescribed investment in the period of five years loses the right of tax exemption. In that case, unpaid corporate income tax is determined in accordance with the provisions of the Law on Corporate Income Tax augmented with a penalty and interest for late payment of public revenues.

Qualifying investments include fixed assets such as real estate, plants, and equipment for carrying out production activity. A taxpayer loses the right to tax exemption if the corporation makes a dividend payment during first three years of investment. A taxpayer whose workforce is more than 50 percent disabled persons and persons with special needs in any given year is exempted from paying corporate income tax. The exemption applies to the applicable year in which disabled persons and persons with special needs met the required threshold. Employees must have been with the company for longer than one year to be considered.

In the Republika Srpska:

In its Amendments to the Law on Profit Tax, the RS reduced taxes on investments in equipment intended for company production and investment in plants and immovable property used for manufacturing and processing.

For employers with at least 30 workers during a calendar year, there is a tax base reduction in personal income tax and mandatory employer contribution of the employer. Employees must be officially listed with the RS Employment Office.

The 2012 RS Decree on Conditions and Implementation of the Investment and Employment Support Program (Official Gazette of RS No. 70/12) also established incentives meant to encourage and support direct investments, employment growth, and transfer of new knowledge and technologies. To qualify for the incentives, participants must have existing investment projects in the RS manufacturing sector, a minimum investment value of KM 2 million (USD 1.2 million), and new employment for at least 20 workers. The total funding awarded is proportional to the investment value, the number of newly employed, and the development level of the investment location.

In 2015, the RS government passed the Law on Property Tax, which imposes a flat rate for property taxes in all municipalities; the Law on Income Tax, which exempts dividends and profit shares from taxation; the Law on Corporate Income Tax, which broadens the scope of deductible expenses and harmonizes taxes for foreign investors; and the Law on Contributions, which decreases tax contributions employers pay on salaries by 1.4 percent.

The BiH’s renewable energy incentives use a feed-in tariff model, under which the producer must obtain the status of privileged producer of electricity and meet other prescribed requirements. All the technologies in the system are based on a feed-in tariff.

The BiH Law on Free Trade Zones allows the establishment of free trade zones (FTZs) as part of the customs territory of BiH. Currently there are four free trade zones in BiH: Vogošća, Visoko, Herzegovina-Mostar, and Holc Lukavac. One or more domestic or foreign legal entities registered in BiH may create a FTZ.

FTZ users do not pay taxes and contributions, with the exception of those related to salaries and wages. Investors are free to invest capital in the FTZ, transfer their profits, and retransfer capital. Customs and tariffs are not paid on imports into FTZs. An FTZ is considered economically justified if the submitted feasibility study and other evidence can prove that the value of goods exported from a free zone will exceed at least 50 percent of the total value of goods imported to the free zone within the period of 12 months.

The BiH government does not have a “forced localization” policy in which foreign investors must use domestic content or sourcing in goods, human capital, or technology. Also, there are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance. There are no mechanisms in place used to enforce rules on maintaining a certain amount of data storage within the country.

Botswana

4. Industrial Policies 

Botswana has several mechanisms in place to attract FDI.  BITC assists local and foreign investors.  BITC is responsible for promoting FDI, investor aftercare, and promoting locally manufactured goods in export markets.  Through its one-stop service center, BITC assists investors with company registration, land acquisition, factory shells, utility connections, and work and residence permit for essential staff.  Investors’ requests for support from BITC and other agencies are evaluated based on the proposed project’s potential to diversify Botswana’s economy, grow priority sectors, and provide employment and training to Botswana citizens.  The GoB also makes grants available to investors who partner with citizens and will extend credit to investors presenting proposals that have undergone appropriate due diligence and that have completed a feasibility study.  Foreign investors are encouraged to transfer technology to Botswana and skills to Botswana citizens with a view to preparing them for promotion into management positions.

Botswana’s tax rates are relatively low at 22 percent on corporate taxable income of resident companies and 10 percent withholding tax on all dividends distributed.  However, non-resident companies’ tax is charged at 30 percent.  MITI can grant manufacturing companies the reduced level of 15 percent taxable income.  Companies can pay the reduced rate of 15 percent of profit with accreditation from the Innovation Hub or the International Financial Services Centre on approved operations.

The Minister of Finance and Economic Development has the authority to issue development approval orders that are used for specific projects, which include providing tax holidays, education, and training grants.  The Minister must be satisfied the proposed project will benefit Botswana’s economy.  Any firm, local or foreign, may apply for a Development Approval Order through the Permanent Secretary at the finance ministry.  Applications are evaluated against the following criteria: job creation for Botswana citizens; the company’s training plans for Botswana citizens; the company’s plans to localize non-citizen positions; Botswana citizen participation in company management; amount of equity held by Botswana citizens in the company; the location of the proposed investment; the project’s effect on the stimulation of other economic activities; and the project’s effect on reducing local consumer prices.  MITI also offers rebates on imported materials for manufacturers that produce products for export.

In 2017, Parliament approved and implemented a special incentive package for Selebi-Phikwe geared to promote economic growth and diversification.  Some of the incentives include reduced corporate tax of five percent for the first five years and 10 percent thereafter (versus the 22 percent national tax rate), zero customs duty on imported raw materials, rebates for customs duty and value-added tax for any exports outside the SACU, and a minimum of 50 years on land leases (instead of the standard lease of 25 years).

The GoB is actively encouraging green energy investment through independent power producer (IPP) developed renewable energy projects that have been outlined in the Integrated Resource Plan, and these include solar power plants, wind energy power projects, and biogas.  In 2020 the GoB, with the assistance of USAID’s Southern Africa Energy Program (SAEP), launched the Rooftop Solar program.  The program allows domestic consumers to install their own solar systems to generate electricity and permits consumers to sell their excess electricity to the Botswana Power Corporation (BPC).  The Botswana Energy Regulatory Authority (BERA) regulates investment in the energy sector and is responsible for setting feed-in tariffs for IPPs.  The GoB includes the Mega Solar Program (a multi-donor partnership coordinated by the USG through Power Africa) in its renewable energy plans and will be using it to fast-track existing renewable energy (solar and wind) projects.

The Special Economic Zones Authority (SEZA) was established with the mandate to develop and operate special economic zones around the country.  It earmarked five geographic areas with a total of eight zones and is actively recruiting investors, private developers, and manufacturers.  In 2015, Parliament approved a Special Economic Zones (SEZ) law to streamline investment in sector-targeted geographic areas including two Gaborone area SEZs (multi-use, diamond processing, and financial services); two Selebi-Phikwe SEZs (mineral processing and horticulture); and additional SEZs in Lobatse (beef, leather, biogas); Palapye (energy); Pandamatenga (agriculture); and Francistown (mining and logistics).  The Gaborone financial services zone is fully operational, servicing of land has begun in the Gaborone multi-use/diamond zone, construction of silos and factory shells is underway in the Pandamatenga zone, while the rest are still to be developed.  The Special Economic Zones Act is available for sale in hard copy at the GoB bookshop.

The Selebi-Phikwe Economic Diversification Unit (SPEDU), another economic diversification agency, though regional and only focused in the greater Selebi-Phikwe region (eastern part of the country), was set up to transform its region into a vibrant economic zone.  The region has its own special incentive packet that was approved by parliament in 2017.  Some of the incentives include a five percent corporate tax for the first five years and 10 percent thereafter, zero customs duty on imported raw materials, minimum 50-year land leases, dedicated One-Stop Services for the region, etc.  BURS has also introduced an electronic Customs Management System to replace the Automated System for Customs Data and launched the National Single Window, an electronic trade platform that makes trading more secure and efficient.

Performance requirements are not imposed as a condition for establishing, maintaining, or expanding an investment in Botswana.  Foreign investors are encouraged, but not compelled, to establish joint ventures with citizens or citizen-owned companies. Several incentives have been set for local companies, encouraging foreign companies in a way to register companies locally.  Foreign investors wishing to invest in Botswana are required to register the company in accordance with the Companies Act and comply with other applicable legislation. Investors are encouraged, but not required, to purchase from local sources.  The GoB does not require investors to locate in specific geographical areas, use a specific percentage of local content, permit local equity in projects, manufacture substitutes for imports, meet export requirements or targets, or use national sources of financing for private-sector investments.  However, GoB entities, including BITC, use the criteria of diversifying the economy, creating employment, and transferring skills to Botswana citizens in determining whether to assist foreign investors. As a matter of policy, the GoB encourages foreign firms to hire qualified Botswana nationals rather than expatriates.  The granting of work permits for foreign workers may be made contingent upon establishment of demonstrable localization efforts.  The government may additionally require evidence that a local is being trained to assume duties currently being fulfilled by a foreign worker, specially focused at the middle-management level.  The GoB offers incentives to companies that train local employees, including the deduction of 200 percent of training expenses when an accredited institution conducts the training.

Business leaders cite difficulty securing work permits combined with local skills deficits and constrained labor productivity among the foremost business constraints in Botswana. However, since President Masisi assumed power in April 2018, GoB reports indicate permits for foreign workers have increased with approval rates exceeding 90 percent.  Select grants are available to foreign investors who partner with Botswana citizens.  The Citizen Entrepreneurial Development Agency has established a venture capital fund to provide equity to citizens and ventures between citizens and foreign investors.  Most GoB loans and grants are designed specifically for citizen-owned contracting firms or for small enterprises and are therefore not available to foreign investors.  However, the National Development Bank (NDB) finances both citizens and non-citizens, joint ventures, partnerships, and locally registered foreign owned companies, and covers different sectors of the economy (agriculture, property, education, retail, commerce, etc.).

The GoB, the largest procuring entity in the country, has directed central government, local authorities, and state-owned enterprises to purchase all products and services from locally based manufacturers and service providers if the goods and services are locally available, competitively priced, and meet tender specifications in terms of quality standards as certified or recognized by the Botswana Bureau of Standards.  Local preferences arise from numerous sources.  In 2015, MITI instituted a preferential procurement program for local companies based on company size – small companies receive a 15 percent preferential price margin on GoB procurement, mid-sized companies receive a 10 percent margin, and large companies a five percent margin.  The directive applies to 27 categories of goods and services ranging from textiles to chemicals, and food, in addition to a broad range of consultancy services.  In 2014, the GoB and the Chamber of Mines created a committee to oversee the purchase of mining supplies with a 10 percent preference towards those produced locally.  The 2012 Citizen Economic Empowerment Policy also emphasized the preference for local companies. In 2020, the GoB announced a new policy that all government contracts less than $900,000 were reserved for citizen-owned businesses.  The GoB has recently enacted the Economic Inclusion Act to make provision for the establishment of an Economic Empowerment Office, whose mandate is to empower targeted citizens by facilitating their participation in the development and growth of the economy and facilitating the enforcement of various sets of economic empowerment initiatives such as the ones mentioned above.

For a foreign firm to qualify with the Department of Industrial Affairs as a local manufacturer or service provider to sell goods or services to the GoB, the firm must be registered with the Registrar of Companies and possess a relevant license or waiver letter.  These procedures can be completed online, however, companies may choose to engage the services of a Company Secretary to perform these and other required documentation services.  Tenders are generally designed based on the products available in the local market and with locally based companies in mind.  In addition, many tenders require local registration as a prerequisite for bids and the GoB frequently breaks up large-scale projects into a series of tenders.  These requirements make it difficult to compete for tenders from outside Botswana.

Brazil

4. Industrial Policies

The GoB extends tax benefits for investments in less-developed parts of the country, including the Northeast and the Amazon regions, with equal application to foreign and domestic investors. These incentives were successful in attracting major foreign plants to areas like the Manaus Free Trade Zone in Amazonas State, but most foreign investment remains concentrated in the more industrialized southeastern states in Brazil.

Individual states seek to attract private investment by offering tax benefits and infrastructure support to companies, negotiated on a case-by-case basis. Competition among states to attract employment-generating investment leads some states to challenge such tax benefits as beggar-thy-neighbor fiscal competition.

While local private sector banks are beginning to offer longer credit terms, the state-owned National Economic and Social Development Bank (BNDES) is the traditional Brazilian source of long-term credit as well as export credits. BNDES provides foreign- and domestically-owned companies operating in Brazil financing for the manufacturing and marketing of capital goods and primary infrastructure projects. BNDES provides much of its financing at subsidized interest rates. As part of implementing a fiscal tightening policy, in December 2014 the GoB announced its intention to scale back the expansionary activities of BNDES and ended direct treasury support to the bank. Law 13.483, from September 2017, created a new Long-Term Lending Rate (TLP) for BNDES. On January 1, 2018, BNDES began phasing in the TLP to replace the prior subsidized loan rates. After a five-year phase in period, the TLP will float with the market and reflect a premium over Brazil’s five-year bond yield (which incorporates inflation). Although the GoB plans to reduce BNDES’s role further as it continues to promote the development of long-term private capital markets, BNDES will continue to play a large role, particularly in concession financing, such as Rio de Janeiro’s water and sanitation privatization projects, in which BNDES can finance up to 65 percent of direct investments.

BNDES also established the Finame low carbon program, which provides financing for the acquisition and sale of solar and wind energy generation systems, solar heaters, buses and trucks that are either electric hybrids or powered exclusively by biofuel, and other machines and equipment with higher energy efficiency rates or that contribute to the reduction of greenhouse gas emissions. The program allows for the financing of up to 100 percent of the investment on energy efficient products with payment terms of up to ten years with a two-year grace period, however, the products must be new, manufactured in Brazil, and accredited by the Finame program. Financing conditions are defined with BNDES’s financial partners, which currently include seven commercial banks.

In December 2018, Brazil approved a new auto sector incentive package – Rota 2030 – providing exemptions from Industrial Product Tax (IPI) for research and development (R&D) spending. Rota 2030 replaced the Inovar-Auto program, which was found to violate WTO rules. Rota 2030 increases standards for energy efficiency, structural performance, and the availability of assistive technologies; provides exemptions for investments in R&D and manufacturing process automation; incentivizes the use of biofuels; and funds technical training and professional qualification in the mobility and logistics sectors. To qualify for the tax incentives, businesses must meet conditions including demonstrating profit, investing a minimum amount of funds in R&D, and not having any outstanding tax liabilities.

Brazil’s Special Regime for the Reinstatement of Taxes for Exporters, or Reintegra Program, provides a tax subsidy of two percent of the value of goods exported.

Brazil provides tax reductions and exemptions on many domestically-produced information and communication technology (ICT) and digital goods that qualify for status under the Basic Production Process (PPB). The PPB is product-specific and stipulates which stages of the manufacturing process must be carried out in Brazil in order for an ICT product to be considered produced in Brazil. Brazil’s Internet for All program, launched in 2018, aims to ensure broadband internet to all municipalities by offering tax incentives to operators in rural municipalities.

Law 12.598/2012 offers tax incentives to firms in the defense sector. The law’s principal aspects are to: 1) establish special rules for the acquisition, contract, and development of defense products and systems; 2) establish incentives for the development of the strategic defense industry sector by creating the Special Tax Regime for the Defense Industry (RETID); and 3) provide access to financing programs, projects, and actions related to Strategic Defense Products (PED).

In April 2020, the Brazilian Defense and Security Industry Association (ABIMDE) requested the Minister of Defense to consider implementing improvements to Law 12.598 by allowing all its members to: 1) have access to special bidding terms (TLE) for defense and security materials; and 2) automatically utilize their RETID status, rather than being required to individually apply to the Ministry of Defense for certification, per the current process. However, as of March 2022 the Ministry of Defense is still reviewing the proposed improvements to the law.

A RETID beneficiary, known as a Strategic Defense Company (EED), is accredited by the Ministry of Defense. An EED is a legal entity that produces or develops parts, tools, and components to be used in the production or development of defense assets. It can also be a legal entity that provides services used as inputs in the production or development of defense goods. RETID benefits include sale price credit and tax rate reduction for the manufacturing supply chain, including taxes on imported components. Additionally, RETID provides exemption from certain federal taxes on the purchase of materials for the manufacture of defense products and services provided by EEDs.

The federal government grants tax benefits to certain free trade zones. Most of these free trade zones aim to attract investment to the country’s relatively underdeveloped North and Northeast regions. The most prominent of these is the Manaus Free Trade Zone, in Amazonas State, which has attracted significant foreign investment, including from U.S. companies. Constitutional amendment 83/2014 extended the status of Manaus Free Trade Zone until the year 2073.

The GoB maintains a variety of localization barriers to trade in response to the weak competitiveness of its domestic tech industry. These include:

  1. Tax incentives for locally-sourced information and communication technology (ICT) goods and equipment (Law 8248/1991, amended by Law 13.969/2019 and Decree 87/2013)
  2. Government procurement preferences for local ICT hardware and software (2014 Decrees 8184, 8185, 8186, 8194, and 2013 Decree 7903); and the CERTICS Decree 8186, which aims to certify that software programs are the result of development and technological innovation in Brazil

In 2019, Brazil adopted the New Informatic Law which revised the tax and incentives regime for the ICT sector. The regime is aligned with the requirements of the World Trade Organization (WTO), following complaints from Japan and the European Union that numerous Brazilian tax programs favored domestic products in contravention of WTO rules.

The New Informatic Law provides tax incentives to ICT goods manufacturers that invest in research, development, and innovation (RD&I) in Brazil. To receive the incentives, the companies must meet a minimum nationalization requirement for production, but the nationalization content is reduced commensurate with increasing local RD&I investment. At least 60 percent of the production process is required to take place in Brazil to ensure eligibility.

The Institutional Security Cabinet (GSI) (an executive branch body that advises the presidency on security affairs) mandated the localization of all government data stored in the cloud during a review of cloud computing services contracted by the Brazilian government in Ordinance No. 9 (previously NC 14), issued in March 2018. While it does allow the use of cloud computing for non-classified information, it imposes a data localization requirement on all use of cloud computing by the Brazil government.

Investors in certain sectors in Brazil must adhere to the country’s regulated prices, which fall into one of two groups: prices regulated at the federal level by a federal company or agency, and prices set by sub-national governments (states or municipalities). Regulated prices managed at the federal level include telephone services, certain refined oil and gas products (such as bottled cooking gas), electricity, and healthcare plans. Regulated prices controlled by sub-national governments include water and sewage fees, and most fees for public transportation such as local bus and rail services. For firms employing three or more people, Brazilian nationals must constitute at least two-thirds of all employees and receive at least two-thirds of total payroll, according to Labor Law Articles 352 to 354. This calculation excludes foreign specialists in fields where Brazilians are unavailable. There is a draft bill in congress (PL 2456/2019) to remove the mandatory requirement for national employment; however, the bill would maintain preferential treatment for companies that continue to employ a majority of Brazilian nationals.

Decree 7174/2010, which regulates the procurement of information technology goods and services, requires federal agencies and parastatal entities to give preferential treatment to domestically produced computer products and goods or services with technology developed in Brazil based on a complicated price/technology matrix.

Brazil’s Marco Civil, the framework law governing internet user rights and company responsibilities, states that data collected or processed in Brazil must respect Brazilian law, even if the data is subsequently stored outside of the country. Penalties for non-compliance could include fines of up to 10 percent of gross Brazilian revenues and/or the suspension or prohibition of related operations. Under the law, internet connection and application providers must retain access logs for specified periods of time or face sanctions. Brazil’s General Law for Protection of Personal Data (LGPD) went into effect in August 2020. The LGPD governs the processing and transfer of the personal data of subjects in Brazil by people or entities, regardless of the type of processing, the country where the data is located, or the headquarters of the entity processing the data. It also established a National Data Protection Authority (ANPD) to administer the law’s provisions, responsible for oversight and sanctions (which will go into effect August 2021) which can total up to R$50 million (approximately $10 million) per infringement.

Brunei

4. Industrial Policies

Companies involved in the exportation of agriculture, forestry, and fishery products can apply for tax relief on export profits. Tax exemption may be available for pioneer industry companies. For non-pioneer enterprises, the tax relief period is eight years and up to 11 years for pioneer enterprises.

In 2015, the government reduced the corporate income tax rate in Brunei from 20 percent to 18.5 percent.

Sole proprietorships and partnerships are not subject to tax. Individuals do not pay any capital gains tax, and profits arising from the sale of capital assets are not taxable. Brunei has double-taxation agreements with the United Kingdom, Indonesia, China, Singapore, Vietnam, Bahrain, Oman, Japan, Pakistan, Malaysia, Hong Kong, Laos, Kuwait, Tajikistan, Qatar, and United Arab Emirates. Under the Income Tax (Petroleum) Act, a company is subject to taxes of up to 55 percent for any petroleum operation pursuant to production sharing agreements.

Darussalam Assets is a private limited company established in December 2012 under the purview of the Ministry of Finance and Economy to spur the growth of government-linked companies (GLC) through active ownership and management of its GLC portfolio based on commercial principles, in line with Brunei’s 2035 development vision. More info on Darussalam Assets may be found at their website .

In 2017, Brunei announced the creation of its first Free Trade Zone, Terunjing Industrial Park, a 235-acre site located between two main highways near Brunei International Airport and Muara Port.

Darussalam Enterprise (DARe), under the Ministry of Finance and Economy, works closely with other relevant government agencies to facilitate the implementation of investors’ projects. DARe oversees and manages 26 industrial parks across Brunei.

The government of Brunei seeks to increase the number of Bruneians working in the private sector. Brunei’s Local Business Development Framework seeks to increase the use of local goods and services, train a domestic workforce, and develop Bruneian businesses by placing requirements on all companies operating in the oil and gas industry in Brunei to meet local hiring and contracting targets. These requirements also apply to information and communication technology firms that work on government projects. The Framework sets local content targets based on the difficulty of the project and the value of the contract, with more flexible local content requirements for projects requiring highly specialized technologies or with a high contract value. In 2019, senior officials stated an intent to extend local hiring targets to additional sectors of the economy.

Expatriate employment is controlled by a labor quota system administered by the Labor Department and the issuance of employment passes by the Immigration Department. Brunei allows new companies to apply for special approval to expedite the recruitment of expatriate workers in select positions. According to the Ministry of Home Affairs, the special approval is only available to new companies for up to six months and covers businesses such as restaurants and retail stores. The special approval cuts the waiting time for a quota from 21 days to seven.

Brunei has not announced any specific legislation pertaining to data storage and data localization requirements.

Bulgaria

4. Industrial Policies 

The 2004 Investment Promotion Act (revised in 2018) stipulates equal treatment of foreign and domestic investors. The law encourages investment in manufacturing, services, high technology, education, and human resource development via a range of incentives, which include helping investors purchase municipal or state-owned land without tender, providing state financing for basic infrastructure and for training new staff, and reimbursing the employer’s portion of social security payments. The law also provides tax incentives and fast-track administrative procedures for public-private partnerships. Priority investors may receive incentives such as below-market prices when acquiring property rights (full or limited) from the central or municipal government, government grants for research and development (R&D) and education projects, and institutional support for establishing PPPs. The government policy for investment promotion excludes a number of sectors classified as strategic.

Additional investment incentives include a two-year valued-added tax (VAT) exemption on equipment imports for investment projects over EUR 2.5 million, provided the project will be implemented within a two-year period and create at least 20 new jobs.

The share of renewable energy (RE) in the total power mix has doubled in less than ten years due to a generous feed-in tariff that fueled a solar investment boom. In 2018, feed-in tariff contracts with RE producers with at least 4MW of capacity were terminated. Other RE producers who were receiving feed-in tariffs have been offered feed-in premium contracts. Pre-existing renewable electricity producers with a capacity below 5MW, new rooftop or facade photovoltaic installations with a maximum installed capacity of 30kW, and certain installations using combined cycle and indirect use of biomass are still eligible for a feed-in tariff. The gradual phase out of subsidized RE production aims at increasing the market volumes and achieving full energy market liberalization.

The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

The role of Free Trade Zones vastly diminished following Bulgaria’s full integration into the EU single market in 2007. At the same time, EU integration encouraged local authorities to seek partnerships with the private sector and provide resources (i.e., land, infrastructure, etc.) for the development of industrial zones and technological parks. Industrial zones or technology parks with the necessary technical infrastructure to attract new investment can be designated as nationally significant projects by a Council of Ministers decision following a proposal by the Minister of Economy. The government’s industrial park policy is conducted by the Council of Ministers, the Minister of Economy, and local municipalities. The Ministry of Economy keeps an electronic registry of all industrial parks.

The Trakia Economic Zone in south-central Bulgaria is one of the largest industrial areas in Southeast Europe, attracting over EUR 3 billion in investment and sustaining over 50,000 jobs. In addition, the state-owned National Industrial Zones Company (NIZC) currently operates fully functioning industrial zones in Sofia, Burgas, Vidin, Ruse, Svilengrad, Stara Zagora and Varna. Under construction are future industrial zones in Suvorovo (Varna), Telish (Pleven), Kardzhali, Karlovo, and Stara Zagora. Investors in these economic zones benefit from established infrastructure, location, and transport logistics. The common thread among all these economic zones is that they are either located in regions with sufficient available labor, in poor regions where the government provides special investment incentives, or at important cross-border junctures. Sofia Tech Park is the first science and technological park in Bulgaria and has partnered with the Bulgarian Academy of Sciences, several local universities, and several local groups.

Bulgaria does not impose export performance or local content requirements as a condition for establishing, maintaining, or expanding an investment. Employment visas and work permits are required for most expatriate personnel from non-EU countries. Many U.S. companies have experienced difficulties obtaining work permits for their non-Bulgarian, non-EU employees. Recently adopted changes in the Law on Labor Migration and Labor Mobility no longer mandate that Bulgarian employers canvass the local labor market before hiring non-EU labor. Non-EU workers with long-term residence permits cannot exceed 35 percent of the total workforce in Bulgarian small- and medium-sized companies, or 20 percent in large firms. In 2017 the government simplified procedures and reduced issuance time for work visas for non-EU workers. Furthermore, it is possible for non-EU students who have completed their education in Bulgaria to continue working in the country without having to reenter the country.

Bulgarian law mandates that when the government purchases new software it should also have access to the source code. U.S. companies have found this requirement to be unreasonable and discriminatory.

Burkina Faso

4. Industrial Policies

The 2018 investment code demonstrates the government’s interest in attracting FDI to create industries that produce export goods and provide training and jobs for its domestic workforce. The code provides standardized guarantees to all legally established firms operating in Burkina Faso, whether foreign or domestic. It contains five investment and operations preference schemes, which are equally applicable to all investments, mergers, and acquisitions. Since its adoption in October 2018 to date, there are approximately 195 companies which have been approved for the various schemes under the new Investment Code. The current investment does not envisage any incentives for clean energy investments such as tax incentives, feed-in tariffs, or discounts on electricity rates.

Burkina Faso’s regulations governing the establishment of businesses include most forms of companies admissible under French business law, including public corporations, limited liability companies, limited share partnerships, sole proprietorships, subsidiaries, and affiliates of foreign enterprises. With each corporate structure, there is a corresponding set of related preferences, duty exceptions, corporate tax exemptions, and operation-related taxes.

Under the investment code, all personal and legal entities lawfully established in Burkina Faso, both local and foreign, are entitled to the following rights: fixed property, forest and industrial rights, concessions, administrative authorizations, access to permits, and participation in state contracts.

There are no foreign trade zones, free ports, or special economic zones in Burkina Faso. The Burkinabe investment code prohibits discrimination against foreigners. American firms not registered in Burkina Faso can compete for contracts on projects financed by international sources such as the World Bank, U.N. organizations, or the African Development Bank.

The African Continental Free Trade Area (AfCFTA) refers to a continental geographic zone where goods and services move among member states of the AU with no restrictions. The AfCFTA aims to boost intra-African trade by providing a comprehensive and mutually beneficial trade agreement among the member states, covering trade in goods and services, investment, intellectual property rights and competition policy. As of May 2022, 43 countries (including Burkina Faso) have deposited their instruments of ratification. Of the 55 AU member states, only Eritrea has yet to sign. Start of trading under the AfCFTA Agreement began on January 1,2021. The AfCFTA will be governed by five operational instruments: The Rules of Origin; the online negotiating forum; the monitoring and elimination of non-tariff barriers; a digital payments system and the African Trade Observatory. A digital payments system was scheduled to start in 2020 but has since been postponed due to the COVID-19 pandemic. On March 10, 2022, the Enhanced Integrated Framework (EIF) of the United Nations Economic Commission for Africa (UNECA) and the International Islamic Trade Finance Corporation (ITFC) launched a project to support the implementation of more than 30 activities in the AfCFTA in signatory countries, including Burkina Faso.

The GoBF does not mandate local employment, but in recent years has encouraged investors to promote local employment and support local economies. The GoBF does not require investors to purchase materials from local sources or to export a certain percentage of output. However, regarding the mining sector, according to the article 101 of the mining code, “Holders of mining title or authorization and their subcontractors give preference to Burkinabe enterprises for any contract of provision of services or supplies of goods in equivalence of price, quality and time.” A decree was adopted by the Burkina Faso government in September 2021 to guide the application of the provision of article 101 and provided a list of goods for which the decree is applicable. It will come into force on January 1, 2023. The GoBF does not impose “offset” requirements, which dictate that major procurements be approved only if the foreign supplier invests in Burkinabe manufacturing, research and development, or service facilities in areas related to the items being procured. Burkina Faso does not have “forced localization” policies.

Burma

4. Industrial Policies

In January 2020, the Ministry of Investment and Foreign Economic Relations (MIFER) announced tax exemptions for investments made in five priority sectors in all 14 states and regions in Burma as well as the capital territory. The tax exemption period is three, five, or seven years depending on the location. For a list of priority sectors by state and regions, please see MIFER’s website at:  http://www.mifer.gov.mm/region.  

Myanmar Investment Commission permit and endorsement holders are entitled to tax incentives and the right to use land. With a MIC permit, foreign companies can lease regional government-approved land for periods of up to 50 years with the possibility of two consecutive ten-year extensions.

Burma has no established sovereign guarantee mechanism for foreign direct investments nor does it generally provide joint financing for foreign direct investment projects.

The government does not offer any incentives, such as feed-in tariffs, discounts on electricity rates, or tax incentives for clean energy investments.

Burma has three Special Economic Zones (SEZs) in Thilawa, Dawei, and Kyauk Phyu with preferential policies for businesses that locate there. Of the three SEZs, Thilawa is the only SEZ currently in operation. Under the Myanmar Special Economic Zones Law, investors located in a Special Economic Zone may apply for income tax exemption for the first five years from the date of commencement of commercial operations, followed by a reduction of the income tax rate by 50 percent for the succeeding five-year period. Under the law, if profits during the third five-year period are re‐invested within one year, investors can apply for a 50 percent reduction of the income tax rate for profits derived from such re‐investment. In 2015, the government issued rules governing the SEZs, including the establishment of on-site one-stop-service centers to ease the approval and permitting of investments in SEZs, incorporate companies, issue entry visas, issue the relevant certificates of origin, collect taxes and duties, and approve employment permits and/or permissions for factory construction and other investments.

Foreign investors must recruit at least 25 percent of their skilled employees from the local labor force in the first two years of their investment. The local employment ratio increases to 50 percent for the third and fourth years, and 75 percent for the fifth and sixth years. In August 2021, the regime recommended private banks name a citizen of Myanmar as CEO. The investors are also required to submit a report to the MIC with details of the practices and training methods that have been adopted to improve the skills of Burmese nationals.

Foreign investors may appoint expatriate senior management, technical experts, and consultants, but are required to submit a copy of the expatriate’s passport, proof of ability, and profile to the MIC for approval.

In part because of travel restrictions implemented in 2020 by the Burmese government to prevent the spread of COVID-19 including the suspension of international commercial flights, as well as regime-instituted additional measures, foreign investors have found it difficult to enter Burma or to travel within the country to check on investments. These restrictions were lifted on April 17, 2022. Business travelers may receive e-visas. Several foreign investors have complained about inability to secure or renew required work or residency permits for foreign employees.

Foreign investors are not required to use domestic content in goods or technology. Burma is developing laws, rules, and regulations on information technology (IT) and data protection standards but does not currently have a legal requirement for foreign IT providers to turn over source code and/or provide access to surveillance. Burma has not implemented data localization laws although the military regime proposed such laws in 2022. In 2021, the military regime has required some IT companies to disclose all wi-fi subscribers’ identities and provide all their usage data including websites visited. The regime Ministry of Transport and Communications and the State Administrative Council appear to both have authority to initiate these data requests. In January 2022, the regime proposed banning VPNs as part of an updated Cyber Security Law; no implementation has taken place to date.

Burundi

4. Industrial Policies

The updated investment code grants potential fiscal and customs benefits for up to five years, or up to ten years for certain sectors as determined by presidential decree and based on the country’s development needs.  Benefits include exemption from transfer duties for the acquisition of land or buildings, exemption from Value Added Tax (VAT) and customs duties on the importation of construction materials and production inputs, and reduced tax rates on profits ranging from 5 to 25 percent for the first five years, after which the corporate tax rate is set at 30 percent.

The GoB does not issue guarantees, but does co-finance foreign direct investment projects, albeit typically on an in-kind basis, such as by granting land for facilities.

Burundi belongs to the trading blocs of the EAC, the Economic Community of the Great Lakes Countries (CEPGL), the Common Market for Eastern and Southern Africa (COMESA), and the Economic Community of the States of Central Africa (CEEAC).  During the reporting period, Burundi ratified the African Continental Free Trade Area (AfCFTA) agreement, accepting all conditions of the agreement.  The GoB has set up an ad hoc committee to continue working on AfCFTA integration and Burundi hopes to benefit from AfCFTA’s market due to its strategic location and natural resources.

The government indicates it aims to accelerate integration into other trading blocs, such as the Tripartite Free Trade Area (TFTA) between COMESA, EAC and Southern Africa Development Community (SADC).  The GoB also began harmonizing its policies and legal framework with those of regional entities to advance regional integration, improve its competitiveness, and take better advantage of external economic potentials.  However, as the enabling regulations do not yet exist, Burundi does not yet have operational free economic zones.

The GoB is working to establish its first Special Economic Zone (ZESB) in order to enhance growth and development.  ZESB is still under construction on the Warubondo site (a strategic location of 5.43 square kilometers located between Burundi and neighboring DRC with easy access to Bujumbura city, Bujumbura International Airport, Bujumbura Port and Lake Tanganyika).  ZESB is a result of a business partnership between the GoB and private foreign investors and its main objective is to revive the industrial sector and to promote exports.  The economic model behind this partnership is that the zone will be a window for foreign investors, but all the products produced within the zone will bear the label “Made in Burundi.”

The current government policy for both domestic and foreign companies is mandatory employment of local workers unless it is not possible to find a local candidate with the required skills or expertise.  The number of expatriate employees is limited to 20 percent of the total workforce.  There is no policy mandating foreign companies to appoint local personnel to senior management or boards of directors.

Burundian visa requirements are not excessively onerous and do not generally inhibit the mobility of foreign investors and their employees.  During the reporting period, Burundi reauthorized visitors to apply for a visa upon arrival at the airport.  A foreigner holding a residency visa is permitted to work in Burundi.  A two-year residence visa (renewable) costs $500 and it can only be issued after making a refundable deposit of $1,500 in a local bank (BANCOBU).

The 2000 Arusha Agreements for peace and reconciliation for Burundi and the Constitution recommend ethnic and gender quotas for new hires (60 percent from the Hutu ethnic group, 40 percent from the Tutsi ethnic group and 30 percent women) in state and security institutions.    However, neither the Constitution nor the Arusha Agreements mention ethnic or gender quotas for the private sector.  In 2017, a law was passed obliging International Non-Governmental Organizations (INGOs) to recruit local staff while respecting the ethnic and gender quotas that apply to state institutions.

There are no requirements that investors purchase from local sources.  However, the mining code currently requires a commitment from investors to recruit staff or subcontractors of Burundian nationality as a precondition for granting a mining license, with mandatory quotas currently in place (although the mining code is under revision as of March 2022).  The GoB imposes no performance requirements on investors as a condition for establishing, maintaining, or expanding their investments or for access to tax and investment incentives.

There are no laws requiring foreign IT providers to turn over source code and/or provide access to encryption except for a law requiring that companies share user information with law enforcement authorities during terrorism investigations; this law applies equally to Burundian and foreign companies.  There are no laws that prevent companies from transmitting data outside the country.

Cabo Verde

4. Industrial Policies

Cabo Verde reduced the corporate income tax CIT rate to 22 percent from 25 percent in 2019. The Investment Law establishes incentives for investment by foreigners and Cabo Verdean emigrants. For industrial activity, corporate tax credits are available for up to 50 percent of eligible investments, and unused tax credits can be carried forward up to 10 years. Industrial activities may benefit from exemption from property tax on acquisition of immovable property exclusively used for industrial purposes and on customs duties on machinery and raw material.

Renewable energy projects may benefit from a corporate income tax credit for up to 30 percent of the eligible investment and property tax incentives. There are additional customs tax benefits for renewable energy projects and acquisition of new electric vehicles for collective transport of passengers.

Companies must obtain authorization and define areas of economic activity in industrial, commercial, or financial services to be eligible to take part in special economic zones. Fiscal benefits and incentives will be available on a case-by-case basis for participation in the government’s Maritime Special Economic Zone in Sao Vicente (ZEEM-SV). The International Business Center will assess investments and incentives that apply.

The government also plans to create a tax-free Special Economic Zone for Technology (ZEET) with incentives to attract international companies. In March 2022, parliament approved a Special Economic Zone for the Island of Maio (ZEEIM), and there are plans to expand tax-free zones to the island of Fogo.

Access to work and residence permits for foreign workers, managers, and investors is regulated by the Labor Code and Law 80/VIII/2014. Foreigners are required to apply for a work permit, but the authorization process is not onerous. There is no “forced localization” in any sector in Cabo Verde. Investors are granted work and residence permits independently of the amount they invest.

The regime for foreign hires differs depending on category. The Labor Code regulates residence permits for foreign workers, managers, and investors. There are four categories of permits for foreigners: investors, employees, independent professionals, and highly qualified employees.

Cambodia

4. Industrial Policies

Cambodia’s new Law on Investment offers varying types of investment incentives for projects that meet specified criteria. Investors seeking incentives as part of a QIP must submit an application to the CDC and pay an application fee of KHR 7 million (approximately $1,750), which covers securing necessary approvals, authorizations, licenses, or registrations from all relevant ministries and entities, including stamp duties.

The new Law on Investment provides investment incentives to QIPs classified into three types: basic incentives, additional incentives, and special incentives. Basic incentives include income tax exemptions, special depreciation rates, and eligibility for customs duty exemptions and VAT exemptions for the import of construction equipment and materials. Additional incentives include VAT exemptions for the purchase of locally produced production inputs, while special incentives may be granted to investment projects that have a high potential to contribute to national economic development.

Investment projects located in designated special promotion zones or export-processing zones are also entitled to the same incentives. More information about the criteria and investment areas eligible for incentives can be found at the following link .

The CDC is required to seek approval from the Council of Ministers for investment proposals that involve capital of $50 million or more, politically sensitive issues, the exploration and exploitation of mineral or natural resources, or infrastructure concessions. The CDC is also required to seek approval for investment proposals that will have a negative impact on the environment or the government’s long-term strategy.

To facilitate the country’s development, the Cambodian government has shown great interest in increasing exports via geographically defined special economic zones (SEZs).  Cambodia is currently drafting a Law on Special Economic Zones, which is now undergoing technical review within the CDC. There are currently 25 special SEZs, which are located in Phnom Penh, Koh Kong, Kandal, Kampot, Sihanoukville, and the borders of Thailand and Vietnam. The main investment sectors in these zones include garments, shoes, bicycles, food processing, auto parts, motorcycle assembly, and electrical equipment manufacturing.

Cambodia permits investors to hire foreign nationals for employment as managers, technicians, or skilled workers if the qualifications/expertise are not available in Cambodia. According to Cambodia’s Labor Law, the number of foreign employees should not exceed ten percent of the total number of Cambodian employees. In practice, Cambodia can request an increase in this allotment from the Ministry of Labor.

Cambodia does not have any forced localization policy that obligates foreign investors to use domestic contents in goods or technology. Cambodia also does not currently require foreign information technology providers to turn over source code.

Cameroon

4. Industrial Policies

Cameroon’s investment incentives remain in place. The 2013 investment law lists several types of investment incentives for investors and specifies the conditions that they must meet to benefit from those incentives. This law specifies incentives available to Cameroonian or foreign legal entities, whether established in Cameroon, conducting business therein, or holding shares in Cameroonian companies, to encourage private investment and boost national production. For example, during the establishment phase (which cannot exceed five years), the code provides for exemptions from VAT and duties on key services/assets (including an exemption from stamp duties on the lease of immovable property). During the operation phase (which cannot exceed 10 years), further exemptions from, or reductions of, other taxes (including a corporate tax), duties (such as a stamp duty on loans), and other fees are granted. Overall, the law seeks to facilitate, promote, and attract productive investment to develop activities geared towards strong, sustainable, and shared economic growth as well as job creation. In a context where businesses must navigate between national and regional incentives, U.S. companies and investors must seek local and regional expertise if they plan to operate in the CEMAC region.

Common incentives are granted to investors during the establishment and operation phases.  During the operation phase, which may not exceed 10 years, the investor may enjoy exemptions from or reductions of payment of several taxes, duties, and other fees including corporate tax, tax on profit and stamp duties on loans. In addition, any investor may benefit from a tax credit provided he or she meets one of the following criteria: (1) employs at least five graduates each year, (2) combats pollution, or (3) develops public interest activities in rural areas.

BEAC foreign exchange regulations govern how investors in Cameroon open foreign currency accounts and carry out transactions on such accounts.  The regulations also stipulate how funds are transferred abroad. Notwithstanding BEAC regulations, the investor shall enjoy the following benefits during establishment phase, which may not exceed five years, with effect from the date of issuance of the approval:

  • Exemption from stamp duty on establishment or capital increase;
  • Exemption from stamp duty if immovable property used exclusively for professional purposes and that is part of an integral part of the investment program;
  • Exemption from transfer taxes on the acquisition of immovable property, land, and buildings essential for the implementation of the investment program;
  • Exemption from stamp duties on contracts for the supply of equipment and construction of buildings and installations that are essential for the implementation of their investment program;
  • Full deduction of technical assistance fees in proportion to the amount of the investment made, calculated on the basis of the total amount of the investment;
  • Exemption from VAT on the provision of services related to the execution of the project and obtained from abroad;
  • Exemption from stamp duty on concession contracts;
  • Exemption from business license tax;
  • Exemption from taxes and duties on all equipment and materials related to the investment program;
  • Exemption from VAT on the importation of equipment and materials;
  • Immediate removal of equipment and material related investment program during clearance operations;
  • The right to freely keep abroad dividends and proceeds of any kind from capital invested, as well as proceeds from the liquidation or sale of their assets;
  • The right to directly pay abroad non-resident suppliers of goods and services essential for conduct of business; and,
  • Free transfer of dividends and proceeds from the sale of shares in case of disinvestment.

With respect to foreign staff employed by the investor and resident in Cameroon, they shall enjoy free conversion and free transfer to their country of origin of all or part of amounts due them, subject to prior payment of various taxes and social security contributions to which they are liable in compliance with the regulations in force. Finally, the government shall institute facilities necessary for the establishment of a specific visa and a reception counter at all airports throughout the national territory for investors, subject to their presentation of a formal invitation from the body in charge of investment promotion of small and medium-sized enterprises. There are additional incentives in priority economic sectors. In addition to the above-mentioned incentives, specific incentives may be provided to enterprises, which carry out investments that contribute to the attainment of the following priority objectives:

  • Development of agriculture, fisheries, livestock, and plant, animal or fishery product packaging activities;
  • Development of tourism and leisure facilities, social economy, and handicrafts;
  • Development of housing, including social housing;
  • Promotion of agroindustry, manufacturing industries, industry, construction materials, iron and steel industry, construction, maritime and navigation activities;
  • Development of energy and water supply; encouragement of regional development and decentralization;
  • The fight against pollution and environmental protection;
  • Promotion and transfer of innovative technologies and research and development;
  • Promotion of exports; and,
  • Promotion of employment and vocational training.

The government does not offer incentives for businesses owned by underrepresented investors such as women. The government does not offer incentives for clean energy investments.

In Cameroon, Foreign Trade Zones (FTZ) are demarcated and fenced geographic areas, with controlled access, where some standard trade barriers, tariffs, quotas, or other bureaucratic requirements are lifted or lowered to attract investments. Cameroon passed a special law instituting FTZs in 1990. An Industrial Free Zone (IFZ) is a type of FTZ in Cameroon. Applications for an authorization to establish an IFZ are submitted to the National Office for Industrial Free Zones. The Minister in Charge of Industrial Development grants authorization to establish an IFZ. To qualify for industrial free zone status, a company must export 80 percent of its products. The status of FTZs has not changed since the last reporting period.   Additionally, Law No. 2013/11 of December16, 2013 defines an economic zone as an area made up of one or more geographical areas that are serviced, developed, and equipped with infrastructure, with a view to enabling the entities located there to produce goods and services in optimal conditions. Decree No. 2019/195 of April 17, 2019, also establishes the modalities for the creation and management of economic zones in Cameroon. The ports of Douala and Kribi have economic zones.

The government of Cameroon does not mandate local employment except as an incentive to entice foreign investment. It encourages investors to create jobs and employ local labor. There are no compulsory or legal requirements on senior management and boards of directors either, although local managers can facilitate the understanding of the domestic business environment. Prospective investors and their employees can travel to Cameroon on standard international visas. The fees may vary per country of application. Once they settle in Cameroon, they can apply for long-term residence permits. The government of Cameroon applies the visa reciprocity rules to a limited extent, but companies have in the past complained about the difficulty of obtaining work permits or the fact that work visas expire after six months and frequently are single entry. Longer term work permits are now said to be available, but they have not been issued to U.S. Embassy Yaoundé’s interlocutors unless included as residency work permits, a different category with more complicated application procedures.

The government does not impose conditions on permission to invest in Cameroon. It gives incentives to investors to transform local raw materials, goods, and services in their production or their projects. There is no “forced localization” policy. Enforcement procedures for performance requirements are not yet standardized, but the government generally develops terms of reference on a case-by-case basis for contract performance. The government has not stated intentions to maintain, increase, or decrease performance requirements.

Investment incentives, described above, are available to both domestic and foreign investors.  Foreign information technology providers are not required to turn over source code and/or provide access to encryption, but they can be required to provide them in cases of cybercrime under the national cybercrime law. U.S. Embassy Yaoundé officials are unaware of any measures designed to prevent or impede companies from freely transmitting customer or other business-related data outside of Cameroon.

Canada

4. Industrial Policies

Federal and provincial governments offer a wide array of investment incentives designed to advance broader policy goals, such as boosting research and development, and promoting regional economies. The funds are available to qualified domestic and foreign investors. Export Development Canada offers financial support to inward investments under certain conditions. The government maintains a Strategic Innovation Fund that offers funding to firms advancing “the Canadian innovative ecosystem.” Canada also provides incentives through the Innovation Superclusters Initiative, which is investing more than USD 700 million over five years (2017‑2022) to accelerate economic and investment growth in Canada. The five superclusters focus on digital technology, protein industries, advanced manufacturing, artificial intelligence, and the ocean. Foreign firms may apply for supercluster funding. A 2020 Canada Parliamentary Budget Office report concluded Supercluster Initiative spending lagged budgetary targets and the Initiative was unlikely to meet its ten-year goal to increase GDP by USD 37 billion.

Several provinces also offer incentive programs available to foreign firms. These incentives are normally restricted to firms established in the province or that agree to establish a facility in the province. Quebec is implementing “Plan Nord” (Northern Plan), a 25-year program to incentivize natural resource development in its northern and Arctic regions. The program provides financing to facilitate infrastructure, mining, tourism, and other investments. Ontario provides financial support to investments in targeted sectors (e.g., life sciences) and provincial areas including Northern Ontario, southwest Ontario, rural Ontario, and Eastern Ontario. Alberta offers companies a provincial tax credit worth up to USD 220,000 annually for scientific research and experimental development, as well as Alberta Innovation Vouchers worth up to USD 75,000 to help small early-stage technology and knowledge-driven businesses get their ideas and products to market faster.

The federal government and several provincial governments offer specific incentives for businesses owned by underrepresented investors. The Black Entrepreneurship Program, for example, is a partnership between the Government of Canada, Black-led business organizations, and financial institutions which will provide up to USD 160 million over four years (2021-2025) in loans to help Black Canadian business owners and entrepreneurs grow their businesses.

The federal government and several provincial governments offer incentives aimed at attracting and facilitating green investment. The federal government’s Clean Growth in Natural Resource Sectors Program is a USD 120 million fund to incentivize clean technology investment in the energy, mining, and forestry sectors. In April 2022, the federal government proposed a 50 percent tax credit for the construction of carbon capture, utilization, and storage projects for heavy greenhouse gas emitters.

Incentives for investment in cultural industries at both the federal and provincial level are generally available only to Canadian-controlled firms. Incentives may take the form of grants, loans, loan guarantees, venture capital, or tax credits. Provincial incentive programs for film production in Canada are available to foreign filmmakers.

Under the USMCA, Canada operates as a free trade zone for products made in the United States. Most U.S.-made goods enter Canada duty free.

As a general rule, foreign firms establishing themselves in Canada are not subject to local employment or forced localization requirements, although Canada has some requirements on local employment for boards of directors. Ordinarily, at least 25 percent of the directors of a corporation must be resident Canadians. If a corporation has fewer than four directors, however, at least one of them must be a resident Canadian. In addition, corporations operating in sectors subject to ownership restrictions (such as airlines and telecommunications) or corporations in certain cultural sectors (such as book retailing, video, or film distribution) must have a majority resident Canadian director.

Data localization is an evolving issue in Canada. The province of Quebec adopted a law in September 2021 that amends its data protection regime. Under the new law, the transfer of personal data outside of Quebec is limited to jurisdictions with data protection regimes possessing an adequate level of protection based on generally accepted data protection principles. Implementation of the law will be phased in 2021-2024. The federal government failed to pass a bill to modernize data protection and privacy standards in 2021, but pledged to re-introduce privacy legislation. Privacy rules in Nova Scotia mandate that personal information in the custody of a public body must be stored and accessed only in Canada unless one of the few limited exceptions applies. The law prevents public bodies such as primary and secondary schools, universities, hospitals, government-owned utilities, and public agencies from using non-Canadian hosting services. British Columbia maintained similar rules, however, the province passed legislation November 25, 2021 permitting some public bodies to disclose and store personal information outside of Canada to ensure operations, including meeting public health demand during the pandemic. Under the USMCA, parties are prevented from imposing data-localization requirements.

The Canada Revenue Agency stipulates that tax records must be kept at a filer’s place of business or residence in Canada. Current regulations were written over 30 years ago and do not consider current technical realities concerning data storage.

Chad

4. Industrial Policies

The Chadian tax code (CGI, Code General des Impôts) offers incentives to new business start-ups, new activities, or substantial extensions of existing activities. Eligible economic activities are limited to the industrial, mining, agricultural, forestry, and real estate sectors, and may not compete with existing enterprises already operating in a satisfactory manner (Articles 16 and 118 of the National Investment Charter).

To spur investment into target sectors, the GOC authorized tax credits, discounts, and exemptions for investments in the agriculture, animal husbandry, solar and wind energy, information technology, oil, and plastics sectors in the 2021 Finance Law.

Foreign investors may ask the GOC for other incentives through investment-specific negotiations. Large companies usually sign separate agreements with the government, which contain negotiated incentives and obligations. The possibility of special tax exemptions exists for some public procurement contracts, and a preferential tax regime applies to contractors and sub-contractors for major oil projects. The government occasionally offers lower license fees in addition to ad hoc tax exemptions. Incentives tend to increase with the size of a given investment, its potential for job creation, and the location of the investment, with rural development being a GOC priority. Investors may address inquiries about possible incentives directly to the Ministry of Industrial and Commercial Development and Private Sector Promotion.

The GOC does not issue guarantees but jointly finances some foreign direct investments, with mixed results.

There are currently no foreign trade zones in Chad. The Chadian Agency for Investment and Exportation (ANIE) is examining the possibility of creating a duty-free zone. The United Nations Conference on Trade and Investment (UNCTAD) estimated in 2014 that Chad received less than one percent of Foreign Direct Investment (FDI) to Africa. There are no Special Economic Zones and none currently planned. Given poor infrastructure, lack of port access, and high cost of air transport (especially for relatively heavy agricultural or livestock products that result from the large percentage of the unskilled population employed in those industries), Chad’s non-oil exports have historically been extremely limited. Intra-African trade is no different; UNCTAD estimates that Chad accounts for 0.2 percent of intra-African exports (the lowest on the continent).

Chad does not follow forced localization, the policy in which foreign investors must use domestic content in goods or technology.

Foreign companies are legally required to employ Chadian nationals for 98 percent of their staff. Firms can formally apply for permission from the Labor Promotion Office (ONAPE) to employ more than two percent expatriates if they can demonstrate that skilled local workers are not available. Most foreign firms operating in Chad have obtained these permissions. Foreign workers require work permits in Chad, renewable annually. Companies must present personnel files of local candidates not hired to the GOC for comparison against the profiles of foreign workers. Multinational companies and international non-governmental organizations routinely protest these measures.

There are no requirements for foreign IT providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn over keys for encryption). There are no rules on maintaining a certain amount of data storage within Chad.

Chile

4. Industrial Policies

The Chilean government generally does not subsidize foreign investment, nor does it issue guarantees or joint financing for FDI projects. There are, however, some incentives directed toward isolated geographical zones and to the information technology sector. These benefits relate to co-financing of feasibility studies as well as to incentives for the purchase of land in industrial zones, the hiring of local labor, and the facilitation of project financing. Other important incentives include accelerated depreciation accounting for tax purposes and legal guarantees for remitting profits and capital. Additionally, the Start-Up Chile program provides selected entrepreneurs with grants of up to US$ 80,000, along with a Chilean work visa to develop a “startup” business in Chile over a period of four to seven months. Chile has other special incentive programs aimed at promoting investment and employment in remote regions, as well as other areas that suffer development lags.

Chile has two free trade zones: one in the northern port city of Iquique (Tarapaca Region) and the other in the far south port city of Punta Arenas (Magallanes Region). Merchants and manufacturers in these zones are exempt from corporate income tax, value added taxes (VAT) – on operations and services that take place inside the free trade zone – and customs duties. The same exemptions also apply to manufacturers in the Chacalluta and Las Americas Industrial Park in Arica (Arica and Parinacota Region). Mining, fishing, and financial services are not eligible for free zone concessions. Foreign-owned firms have the same investment opportunities in these zones as Chilean firms. The process for setting up a subsidiary is the same inside as outside the zones, regardless of whether the company is domestic or foreign-owned.

Chile mandates that 85 percent of a firm’s workers must be local employees. Exceptions are described in Section 11. The costs associated with migration regulations do not significantly inhibit the mobility of foreign investors and their employees.

Chile does not follow “forced localization.” A draft bill that is pending in Chile’s Congress could result in additional requirements (owner’s consent) for international data transfers in cases involving jurisdictions with data protection regimes below Chile’s standards. The bill, modeled after the European Union’s General Data Protection Regulation (GDPR) also proposes the creation of an independent Chilean Data Protection Agency that would be responsible for enforcing data protection standards.

Neither Chile’s Foreign Investment Promotion Agency nor the Central Bank applies performance requirements in their reviews of proposed investment projects. The investment chapter in the U.S.–Chile FTA establishes rules prohibiting performance requirements that apply to all investments, whether by a third party or domestic investors. The FTA investment chapter also regulates the use of mandatory performance requirements as a condition for receiving incentives and spells out certain exceptions. These include government procurement, qualifications for export and foreign aid programs, and non-discriminatory health, safety, and environmental requirements.

China

4. Industrial Policies

To attract foreign investment, different provinces and municipalities offer preferential packages like a temporary reduction in taxes and/or import/export duties, reduced costs for land use, research and development subsidies, and funding for initial startups. Often, these packages stipulate that foreign investors must meet certain benchmarks for exports, local content, technology transfer, or other requirements. However, many economic sectors that China deems sensitive due to broadly defined national or economic security concerns remain closed to foreign investment.

As part of efforts to attract green investment, China and the EU issued a green investment taxonomy on the sidelines of the 26th U.N. Climate Change Conference of the Parties (COP26) on November 4. The International Platform on Sustainable Finance (IPSF) Taxonomy Working Group issued the Common Ground Taxonomy- Climate Change Mitigation (CGT) to accelerate cross-border sustainability-focused investments and scale up the mobilization of green capital internationally. The CGT listed 80 economic activities across six industries as sustainable, including: (1) agriculture, forestry and fishing; manufacturing; (2) electricity, gas, steam and air conditioning supply; (3) construction; (4) water supply, and sewage, waste management and remediation activities; as well as (6) transportation and storage. The taxonomy includes criteria for calculating a project’s contribution to mitigating climate change. This taxonomy was the result of consultations held between the EU and China over the two years to conduct analyses between China’s “Catalogue of Green Bond Supported Projects” and the “EU Taxonomy Climate Delegated Act.” Green finance contacts reported the CGT would likely promote the issuance of cross-border green investment products and lower or avoid the cost of double certification. Environmental NGO contacts, however, noted the CGT was focused on climate change mitigation, without taking into consideration the principle of “do no significant harm.” The CGT is not legally binding for either the EU or China and is not formally endorsed by other members of the IPSF. Please see climate issues section for additional information on government incentives towards attracting green investment.

In 2013, the State Council announced the Shanghai pilot FTZ to provide open and high-standard trade and investment services to foreign companies. China gradually scaled up its FTZ pilot program to a total of 20 FTZs and one Free Trade Port (FTP), which are in all or parts of Fujian, Guangdong, Guangxi, Hainan (FTZ and FTP), Hebei, Heilongjiang, Henan, Hubei, Jiangsu, Liaoning, Shaanxi, Shandong, Sichuan, Yunnan, and Zhejiang provinces; Beijing, Chongqing, Shanghai, and Tianjin municipalities. The goal of China’s FTZs/FTP is to provide a trial ground for trade and investment liberalization measures and to introduce service sector reforms, especially in financial services, that China expects to eventually introduce in other parts of the domestic economy. The FTZs promise foreign investors “national treatment” investment in industries and sectors not listed on China’s negative lists.

Special Economic Zones (SEZs) in China include: Shantou, Shenzhen, Zhuhai, (Guangdong Province); Xiamen (Fujian Province) Hainan Province; Shanghai Pudong New Area; and Tianjin Binhai New Area.

In 2021, the PRC formulated the first negative list in the field of cross-border trade in services, effective in Hainan Free Trade Port. Separately, the PRC government has shortened the negative list for foreign investment in Pilot Free Trade Zones. In 2021, the seventh revision to the free trade zone negative list reduced close off sectors from 30 items to 27 items. Please see above section on negative lists for more details.

Colombia

4. Industrial Policies

The Colombian government offers investment incentives such as income tax exemptions and deductions in specific priority sectors, including the so-called “orange economy” (creative industries), agriculture, and entrepreneurship. In 2020, the government announced additional incentive schemes that aim to attract large investments exceeding USD 350 million and create at least 250 local jobs, facilitate COVID-19 recovery, and generate investments in former conflict municipalities. Investment incentives through free trade agreements between Colombia and other nations include national treatment and most-favored-nation treatment of investors; establishment of liability standards assumed by countries regarding the other nation’s investors, including the minimum standard of treatment and establishment of rules for investor compensation from expropriation; establishment of rules for transfer of capital relating to investment; and specific tax treatment.

The government offers tax incentives to all investors, such as preferential import tariffs, tax exemptions, and credit or risk capital. Some fiscal incentives are available for investments that generate new employment or production in areas impacted by natural disasters and former conflict-affected municipalities. Companies can apply for these directly with participating agencies. Tax and fiscal incentives are often based on regional, sector, or business size considerations. Border areas have special protections due to currency fluctuations in neighboring countries which can impact local economies. National and local governments also offer special incentives, such as tax holidays, to attract specific industries.

The Colombian government introduced a variety of incentives for specific sectors as part of the 2019 tax reform. Among the incentives are:

  • Income from hotels built, renovated, or extended through January 1, 2029 in municipalities of less than 200,000 inhabitants will be taxed at nine percent for 20 years. The same facilities in larger municipalities will be taxed at nine percent for 10 years.
  • Income normally taxed at 33 percent that is invested in agricultural projects or orange (creative) economy initiatives will be tax free.
  • Income from the sale of electric power generated by wind, biomass, solar, geothermal, or tidal movement will be tax free, provided carbon dioxide emission certificates are sold in accordance with the Kyoto Protocol and 50 percent of the income from the certificate sale is invested in social projects benefiting the region where the power was generated.

Foreign investors can participate without discrimination in government-subsidized research programs, and most Colombian government research has been conducted with foreign institutions. Investments or grants to technological research and development projects are fully tax deductible in the year the investment was made. R&D incentives include Value-Added Tax (VAT) exemptions for imported equipment or materials used in scientific, technology, or innovation projects, and qualified investments may receive tax credits.

In a tax reform passed in 2016, the Colombian government created two tax incentives to support investment in the 344 municipalities most affected by the armed conflict (ZOMAC). Small and microbusinesses that invest in ZOMACs and meet a series of other criteria will be exempt from paying any taxes through 2021, pay 25 percent of the general rate through 2024, and 50 percent through 2027. Medium and large-sized businesses will pay 50 percent of their normal taxes through 2021 and 75 percent through 2024. The second component is entitled “works for taxes” (“Obras por Impuestos”), a program through which the private sector can directly fund social investments and infrastructure projects in lieu of paying taxes.

To attract foreign investment and promote the importation of capital goods, the Colombian government uses a number of duty deferral programs. One example is free trade zones (FTZs). While DIAN oversees requests to establish FTZs, the Colombian government is not involved in their operations. Benefits under the FTZ regime include a single 20 percent tax rate (compared to 31 percent normally) and no customs value-added taxes or duties on raw material imports for use in the FTZ. Each FTZ must meet specific investment and direct job creation requirements, depending on their total assets, during the first three years. These incentives were maintained in the 2021 tax reform.

Colombia also has initiated Special Economic Zones for Exports in the municipalities of Buenaventura, Cucuta, Valledupar, and Ipiales to encourage investment. These zones receive the same import benefits of FTZs, and operators are exempt from some payroll taxes and surcharges. Infrastructure projects in the zones are also exempt from some income taxes.

Performance requirements are not imposed on foreigners as a condition for establishing, maintaining, or expanding investments. The Colombian government does not have performance requirements, local employment requirements, or require excessively difficult visa, residency, permission, or work permit requirements for investors. Under the f, Colombia grants substantial market access across its entire services sector.

The SIC, under the Deputy Office for Personal Data Protection, is the Data Protection Authority (DPA) and has the legal mandate to ensure proper data protection. It has defined adequate data protection and responsibilities with respect to international data transfers. The SIC requires data storage facilities that hold personal data to comply with government security and privacy requirements, and data storage companies have one year to register. The SIC enforces the rules on local data storage within the country through audits/investigations and imposed sanctions.

Software and hardware are protected by IPR. There is no obligation to submit source code for registered software.

Costa Rica

4. Industrial Policies

Four investment incentive programs operate in Costa Rica: the free trade zone system, an inward-processing regime, a duty drawback procedure, and the tourism development incentives regime. These incentives are available equally to foreign and domestic investors, and include tax holidays, training of specialized labor force, and facilitation of bureaucratic procedures. PROCOMER is in charge of the first three programs and companies may choose only one of the three. As of early 2022, 568 companies are in the free trade zone regime, 90 in the inward processing regime, and 10 in duty drawback.

ICT administers the tourism incentives; through early 2022, 1,133 tourism firms are declared as such with access to incentives of various types depending on the firm’s operations (hotels, rent-a-car, travel agencies, airlines and aquatic transport). The free trade zone regime is based on the 1990 law #7210, updated in 2010 by law #8794 and attendant regulations, while inward processing and duty drawback derive from the General Customs Law #7557. Tourism incentives are based on the 1985 law #6990, most recently amended in 2001.

The inward-processing regime suspends duties on imported raw materials of qualifying companies and then exempts the inputs from those taxes when the finished goods are exported. The goods must be re-exported within a non-renewable period of one year. Companies within this regime may sell to the domestic market if they have registered to do so and pay applicable local taxes. The drawback procedure provides for rebates of duties or other taxes that were paid by an importer for goods subsequently incorporated into an exported good. Finally, the tourism development incentives regime provides a set of advantages, including duty exemption – local and customs taxes – for construction and equipment to tourism companies, especially hotels and marinas, which sign a tourism agreement with ICT.

Costa Rica has not established distinct incentives for under-represented investors, for example women. Incentives for environmentally “green” investment tend towards structural or institutional facilitation rather than subsidy. Electricity tariffs, including net-metering and access tariffs for rooftop solar installation, are designed to encourage renewable energy generation and use without creating a clear subsidy of those activities. Green hydrogen production is encouraged through several executive decrees that provide import tariff exemptions for equipment and seek to establish a flexible and enabling regulatory framework for the use of national grid surpluses in the development of a green hydrogen economy in Costa Rica.

Individual companies are able to create industrial parks that qualify for free trade zone (FTZ) status by meeting specific criteria and applying for such status with PROCOMER. Companies in FTZs receive exemption from virtually all taxes for eight years and at a reduced rate for some years to follow. Established companies may be able to renew this exemption through additional investment. In addition to the tax benefits, companies operating in FTZs enjoy simplified investment, trade, and customs procedures, which provide a convenient way to avoid Costa Rica’s burdensome business licensing process. Call centers, logistics providers, and software developers are among the companies that may benefit from FTZ status but do not physically export goods. Such service providers have become increasingly important participants in the free trade zone regime. PROCOMER and CINDE are traditionally proactive in working with FTZ companies to streamline and improve law, regulation and procedures touching upon the FTZ regime. A study of the benefits of FTZ regime for the broader economy is available on PROCOMER’s website.

Costa Rica does not impose requirements that foreign investors transfer technology or proprietary business information or purchase a certain percentage of inputs from local sources. However, the Costa Rican agencies involved in investment and export promotion do explicitly focus on categories of foreign investor who are likely to encourage technology transfer, local supply chain development, employment of local residents, and cooperation with local universities. The export promotion agency PROCOMER operates an export linkages department focused on increasing the percentage of local content inputs used by large multinational enterprises.

Costa Rica does not have excessively onerous visa, residence, work permit, or similar requirements designed to inhibit the mobility of foreign investors and their employees, although the procedures necessary to obtain residency in Costa Rica are often perceived to be long and bureaucratic. Existing immigration measures do not appear to have inhibited foreign investors’ and their employees’ mobility to the extent that they affect foreign direct investment in the country. The government is responsible for monitoring so that foreign nationals do not displace local employees in employment, and the Immigration Law and Labor Ministry regulations establish a mechanism to determine in which cases the national labor force would need protection. However, investors in the country do not generally perceive Costa Rica as unfairly mandating local employment. The Labor Ministry prepares a list of recommended and not recommended jobs to be filled by foreign nationals. Costa Rica does not have government/authority-imposed conditions on any permission to invest.

Costa Rica does not require Costa Rican data to be stored on Costa Rican soil. Under law #8968 ‒ Personal Data Protection Law – and its corresponding regulation, companies must notify the Data Protection Agency (PRODHAB) of all existing databases from which personal information is sold or traded. Costa Rica does not impose measures that unduly impede companies from securing and freely transmitting customer or other business-related data. While Costa Rica in the next several years is looking to modernize its law pertaining to data privacy and cross border data transfer, Costa Rica’s vibrant digital services industry will likely ensure that the new regulations do not interfere unduly with legitimate digital services business.

Côte d’Ivoire

4. Industrial Policies

The 2018 Investment Code offers a mixture of fiscal incentives, combining tax exoneration and tax credits focusing on agriculture, agri-business, tourism, health, and education.  These may include a full exoneration of customs duties or suspended VAT, and tax exemptions to business operations in some remote areas, with incentives based on the type of investment, phase of operation, local content, and participation.  There are also incentives to promote small businesses and entrepreneurship, low-cost housing construction, factories, and infrastructure development, which the government considers key to the country’s broad-scale economic development.  The Investment Code, the Petroleum Code and the Mining Code delineate incentives available to new investors in Côte d’Ivoire.

Bloomfield Investment stated that, in 2021, the Ivoirian government implemented subsidies and incentives to enhance the performance of the rubber industry.  The government provided fiscal incentives for investments regarding rubber transformation.

Following the peak of the COVID-pandemic, the government subsidized the construction sector by easing access to bank loans, reducing taxes on cement, capping cement prices, reducing the time needed to register land, and encouraging foreign investors to take up social housing projects by providing loan guarantees.

Though not a common practice, the government occasionally guarantees loans or jointly finances foreign direct investment projects.

Created in 2008, the Ivoirian free trade zone (FTZ) for information technology and biotechnology (VITIB) is in the town of Grand Bassam in the greater Abidjan area.  In 2014, VITIB established the Mahatma Gandhi Technology Park at Grand Bassam. Bonded warehouses exist, and bonded zones within factories are allowed. High port costs and maritime freight rates have inhibited the development of in-bond manufacturing or processing, and there are consequently no general foreign trade zones.

A FTZ exists at the Port of Abidjan specifically for fish processing.  In force since December 2005, this FTZ is reserved for companies that earn at least 90% of their turnover from exports.  Eligible companies are exempt from all duties and taxes, including on imported and exported goods and services.  They also enjoy preferential rates for water, electricity, telephone, and fuel supplied by public or semi-public establishments.   A fee applies to FTZ companies, the amount of which is fixed by decree.

Côte d’Ivoire’s ports (the Autonomous Port of Abidjan and the Autonomous Port of San-Pedro) follow the ISPS security code (International Ship and Port Facility Security Code).  In November 2021, the U.S. Coast Guard assessed Ivorian ports to be a trusted maritime security partner, having achieved overall progress and maturity in port operations.

The government strongly encourages investors and firms to hire Ivoirian employees via incentives outlined in the Investment Code, but this is not a requirement.  In March 2021, the government implemented the law on local content in the oil and gas sector.  This law gives preference to Ivoirian companies and Ivoirian employees.  The country aims to build “National Champions” in the oil and gas sector, while transferring knowledge and technical know-how to local employees. It also provides incentives and access to financial services and local insurance.

The 2018 Investment Code guarantees the freedom to designate senior management and board members.

Citizens of Economic Community of West African States (ECOWAS) countries can legally work in Côte d’Ivoire without additional permissions and do not need a residency permit.  For other nationalities, visas and permits for work and residency are required.   The investment promotion agency CEPICI facilitates the visa and permit process. The process is not onerous and does not inhibit the ability of foreign investors and their employees to enter and exit the country.

There are no government-imposed trade restrictions on investment, including tariff and non-tariff barriers.  However, all imports are subject to the External Common Tariff for all ECOWAS countries.

The government does occasionally place conditions on location, local content, equity ownership, import substitution, export requirements, host country employment, and technology.  For example, the Ivoirian government required that one U.S. fast food franchise use locally sourced key ingredients, which it can do.  The government also makes use of tax exemptions and customs exonerations to incentivize companies to do more value-added processing in CDI.  There are no performance requirements for investments.

Cellular telephone companies must meet technology performance requirements to maintain their licenses.  The U.S. government does not know of any requirements that CDI imposes on foreign information technology firms to give the government source code or provide access to encryption.  Sometimes, the government advocates for fair competition between companies.

ART-CI is responsible for the oversight of local data storage.

Croatia

4. Industrial Policies

The Investment Promotion Act (IPA), amended in 2021, offers incentives to investment projects in manufacturing and processing activities, development and innovation activities, business support activities and high added value services.  The incentives are either tax refunds or cash grants.  After they are approved for implementation, they are not distributed immediately.  Those who receive cash grants are required to provide documentation proving they have fulfilled the criteria under which the request was granted for every year they have received approval for the incentive.  Tax refunds are provided to companies on an annual basis, based on information provided in tax returns.  Incentive measures can be combined or used individually up to the allowed maximum rate for the investment project. Also as of 2022, applicants for EU funds can apply for a maximum of 70 percent of investment costs for projects in the Pannonian and North Croatia region, 60 percent for areas along the Adriatic coast, and 55 percent for micro and small enterprises in the capital city Zagreb.

The IPA provides the following incentive measures: tax refunds for microenterprises; tax advantages for small, medium and large enterprises; cash grants for eligible costs of new jobs linked to the investment project; cash grants for eligible training costs linked to the investment project; additional aid for development and innovation activities, business support and high value-added services; cash grants for capital costs of investment projects; cash grants for labor intensive investment projects; incentives for investments which utilize inactive government-owned property; and incentives to modernize business processes through automation and digitalization of production and manufacturing processes. Historically, the government has given incentives or grants to underrepresented investors such as women and minorities, however there were no such incentives provided in 2021. Under Croatia’s National Recovery and Resilience Plan, the Ministry of Economy and Sustainable Development plans on creating new incentive programs targeted to minority and women investors.

Substantial tax cuts on profits are available depending on the size of the investment and the number of new jobs created.  A 50 percent tax reduction applies for up to 10 years for companies that invest up to $1.1 million and create at least five new jobs (three jobs for microenterprises or 10 jobs for companies investing in ICT system and software development centers).  This reduction increases to 75 percent for companies investing $1.1-3.26 million and creating at least 10 new jobs, and up to 100 percent for companies that invest over $3.26 million and create at least 15 new jobs.

Tax cuts on profits are also available at the same rates as above for investments to modernize the manufacturing industry.  These projects must include a minimum fixed asset investment of $545,000, all employees must be retained for the project duration, and the per-employee productivity after three years must increase at least 10 percent compared to the one-year period prior to the project’s start.

Cash grants for the creation of new jobs can be from 10 to 30 percent of costs per new position, depending on the unemployment rate in the county where the investment is located and the category of the person employed. Additional incentives are offered for labor-intensive investment projects within the first three years of the project start date, depending on the number of jobs created, and for development and innovation activities in the manufacturing, industrial engineering, ICT, logistics, tourism, and creative industries sectors.

There are also programs to reimburse costs for employee education and training connected to an investment project which can cover up to 50 percent of the education and training costs for large companies, up to 60 percent for medium sized companies or if training is given to workers with disabilities, or up to 70 percent for small businesses and microenterprises.

Cash grants for the capital costs of investment projects are approved for investments over $5.5 million which generate 50 new positions within 3 years of the start of the investment. The grants cover 10 percent of the cost of new factory construction, production facility construction, or the purchase of new equipment (up to $550,000) in counties where the unemployment rate is from 10-20 percent.  This incentive increases to 20 percent of the investment cost (up to $1.1 million) in counties where the unemployment rate is above 20 percent, with the condition that at least 40 percent of the investment is in machines or equipment and at least 50 percent of those machines or equipment are of high-value technology.  There are also grants for buying equipment or machinery for research and development activities up to 20 percent of the cost of the equipment, or up to $550,000.

There are incentives for investment projects which revitalize inactive state-owned property and provide free land leases for investors investing $3.26 million and creating at least 15 new jobs. Additional information regarding the types of incentives offered by the Ministry of Economy and Sustainable Development, as well as an investment incentives calculator, can be found at https://investcroatia.gov.hr/en/ .

The Act on Strategic Investment Projects, amended in 2018, accelerates administrative procedures for projects deemed to be of strategic interest for Croatia.  The minimum amount for an investment to be considered strategic is approximately $11 million. Investments may also be treated as strategic if they are valued at $1.4 million or more and are implemented in underserved areas or on the islands, or are in the agriculture, fisheries, and forestry sector.  A guide and application materials for private investors interested in applying for status under the Act on Strategic Investment Projects is located at https://investcroatia.gov.hr/en/ .

The Construction Act allows investors to secure permits through an e-licensing system. The investor may obtain a license valid for three years, which allows for a three percent change in the dimensions of the project from start to finish. The e-licensing system can be accessed at  https://dozvola.mgipu.hr/ .

In 2021, the government implemented a new aid scheme in the form of a premium power tariff to support electricity production from renewable sources. The Croatian Energy Market Operator (HROTE) publishes tenders for market premiums and tenders for guaranteed purchase prices of electricity from renewable sources. The amounts for premiums cannot be higher than the difference between the average production cost and the market price. To date, the incentives have proven successful, with the renewable sector growing rapidly and more than 11,000 MW of projects in the pipeline.

There are 11 operational duty-free zones in Croatia, of which seven are land-based and four are at seaports.  Contact information for each of the zones can be found at  https://www.croatianfreezones.org/primjer-stranice  . Both domestic and foreign investors are afforded equal treatment in the zones.  Since Croatia’s entrance to the European Union, many of these zones have transitioned to industrial/business zones, which also offer investment incentives.  For more information regarding business zones go to  https://investcroatia.gov.hr/zone/ 

Croatian law does not impose performance requirements on or mandate employment requirements for foreign or domestic investors, nor are senior management or board of directors’ positions mandated in private companies.  Regarding U.S. investors, Article VII of the U.S.-Croatia BIT prohibits mandating or enforcing specified performance requirements as a condition for a covered investment.

Although procedures for obtaining business visas are generally clear, they can be cumbersome and time-consuming.  Foreign investors should familiarize themselves with the provisions of the Act on Foreigners.  Questions relating to visas and work permits should be directed to the Croatian Embassy or a Croatian Consulate in the United States.  The U.S. Embassy in Zagreb maintains a website with information on this subject at https://hr.usembassy.gov/u-s-citizen-services/local-resources-of-u-s-citizens/entry-residence-requirements/.

The amended Law on Foreigners also allows for digital nomads, defined as “a third country national who is employed or performs work through communication technology for a company or their own company that is not registered in the Republic of Croatia and does not work or provide services to employers in the Republic of Croatia.” Temporary stay for this purpose is granted for up to one year and cannot be extended.

There are no government-imposed conditions for investment, nor are there “forced localization” policies for investors in terms of goods and technology. Foreign IT providers are not required to turn over source code or give access to surveillance.  There are no measures that prevent companies from freely transmitting customer or other business-related data outside the country’s territory.  There are no requirements for investors to maintain or store data within the territory of Croatia.

Cyprus

4. Industrial Policies

REPUBLIC OF CYPRUS

The ROC offers investors one of the lowest corporate tax rates in the EU at 12.5 percent, although this rate will likely increase to 15.0 percent in the foreseeable future, in line with global trends. Cyprus’ other tax advantages include:

  • One of the EU’s lowest top statutory personal income tax rates at 35 percent;
  • An extensive double tax treaties network with 67 countries, enabling lower withholding tax rates on dividend or other income received from the subsidiaries abroad;
  • No withholding tax on dividend income received from subsidiary companies abroad under certain conditions.
  • No withholding tax on dividends received from EU subsidiaries; and
  • Low Tonnage Tax for shipping.

Effective November 1, 2020, the ROC abolished a program offering Cypriot citizenship through foreign investment, due to abuses. The abrupt abolition of the citizenship program has left a considerable number of high-end residential properties (each valued at around USD 2 million or more) up for sale. The ROC continues to offer a Residency by Investment program, requiring a minimum investment of USD 360,000 (EUR 300,000).

In recent years, the ROC has harmonized and enhanced its regulations regarding investment funds, becoming a more attractive jurisdiction for managing and home-basing investment funds. As a result, the number of financial services companies regulated by the Cyprus Securities and Exchange Commission (CySEC) has tripled in the last eight years, from 249 in 2012 to 746 in 2019, with total assets under management reaching USD 10.2 billion (EUR 9.1 billion) in 2019. Brexit, the withdrawal of the United Kingdom from the EU since January 31, 2020, has also prompted several financial services companies based in the UK to relocate to Cyprus over the past year – a trend ROC authorities are trying to encourage.

Since 2017, the ROC also offers a program to attract foreign investment to Cyprus through third country – i.e., non-European Union – innovative start-ups. The plan invites third-country nationals with start-up capital of at least USD 58,500 (EUR 50,000), undergraduate-level education, and fluent either in Greek or English, to set up their headquarters and tax residence in Cyprus, provided their proposed business is certifiably innovative. The plan made 150 visas available to eligible investors, valid for two years, provided the relevant business is successful. The program was renewed in February 2019 for two more years.

In May 2021, the European Commission approved the ROC’s Recovery and Resilience Plan (RRP), which forms part of the Next Generation EU recovery instrument, envisioning broad-reaching reforms from 2021-26 in exchange for $1.3 billion in EU funding ($1.1 billion in grants and $220 million in loans). Around 41 percent of this funding will go to green transition projects, and another 23 percent to digital transition, with residual funding for many other reforms, including encouraging innovation and advancing the role of women in business. More information on Cyprus’ RRP available at: https://ec.europa.eu/info/business-economy-euro/recovery-coronavirus/recovery-and-resilience-facility/cyprus-recovery-and-resilience-plan_en .

AREA ADMINISTERED BY TURKISH CYPRIOTS

There are incentives for tourism and industrial-related investments, including:

  • 100 to 200 percent investment allowance on the initial fixed capital investment expenditure for certain regions and sectors;
  • Exemption from corporate tax and income tax until the above-mentioned allowance percentages are met;
  • Exemption from custom duties when importing machinery and equipment the projects;
  • Exemption from construction license fees;
  • Exemption from VAT for both imported and locally purchased machinery and equipment; and
  • Reduction of stamp duty and mortgage procedure fees.

REPUBLIC OF CYPRUS

The lead government agency handling areas subject to a special customs regime is the Department of Customs and Excise. Specific rules for the two main areas, namely Customs Warehouses and Free Zones, are listed below and are fully harmonized with equivalent EU norms: https://www.mof.gov.cy/mof/customs/customs.nsf/All/6D61C14C3E95345CC22572A6003BCBD5?OpenDocument .

There are two types of Free Zones:

  • Control Type I Free Zone, in which controls are principally based on the existence of a fence; and
  • Control Type II Free Zone, in which controls are principally based on the formalities carried out in accordance with the requirements of the customs warehousing procedure.

Cyprus has two Control Type II Free Zones (FZs) located in the main seaports of Limassol and Larnaca, which are used for transit trade. These areas are treated as outside normal EU customs territory. Consequently, non-EU goods placed in FZs are not subject to import duties, VAT, or excise tax. FZs are governed under the provisions of relevant EU and ROC legislation. The Department of Customs has jurisdiction over both normal zones and FZs and can impose restrictions or prohibitions on certain activities, depending on the nature of the goods. Additionally, the MECI has management oversight over the Larnaca FZ.

A Customs Warehouse can be set up anywhere in the ROC, provided the right criteria are met and meet with the approval of the Department of Customs. For more information, interested parties may contact:

Department of Customs and ExciseMichali Karaoli Str.1096 NicosiaTel. +357 22 601754 or 55Fax: +357 22 302018Email: headquarters@customs.mof.gov.cy  Website: https://www.mof.gov.cy/mof/customs/customs.nsf/index_en/index_en?OpenDocument 

When larger projects are involved, potential investors interested in establishing their own customs warehouse or seeking to engage existing customs warehouses may also contact the One Stop Shop ( https://www.businessincyprus.gov.cy/ ) for guidance on identifying suitable locations.

Additional information on the Limassol and Larnaca FZs can be obtained from:

Cyprus Ports AuthorityP.O. Box 220071516 Nicosia23 Kritis Street1061 NicosiaTel. +357 22 817200, X-0Fax: +357 22 762050Email: cpa@cpa.gov.cy Website: https://www.cpa.gov.cy/ 

AREA ADMINISTERED BY TURKISH CYPRIOTS

Famagusta has a “free port and zone,” which is regulated by the Free Ports and Free Zones “Law.”

Operations and activities permitted there include:

  • Engaging in all kinds of industry, manufacturing, and production;
  • Storage and export of goods imported to the “Free Port and Zone”;
  • Assembly and repair of goods imported to the “Free Port and Zone”;
  • Building, repair, and assembly of ships; and
  • Banking and insurance services.

REPUBLIC OF CYPRUS

There are no requirements for local sourcing, ownership, or employment. Hiring Cypriot and EU staff is quite easy, though a tight labor market prior to the COVID-19 pandemic strained labor supply in certain fields. Securing work permits for non-EU staff can be difficult, particularly in sectors where there is abundant local labor readily available. In order to overcome this problem, a foreign investor must explain to the satisfaction of ROC authorities why the non-EU staff in question is essential to the business. As with other such matters, Invest Cyprus can assist investors in overcoming hiring problems (see Section 2 on Business Facilitation, and Section 12 on Labor Policies and Practices.)

AREA ADMINISTERED BY TURKISH CYPRIOTS

In order to recruit foreign labor, companies or investors apply to the local labor authorities for “work permits.” Once they apply, the vacancy is announced locally. Priority is given to local “TRNC citizens” with the required expertise or skillset. If the skillset is not available locally, employers can recruit foreign labor.

In evaluating a foreign investment incentives application, the “State Planning Office” carries out a feasibility study regarding the type of investment. For more information on employment, visit the labor authorities’ website: http://csgb.gov.ct.tr/en-us/ .

Czechia

4. Industrial Policies  

The Czech Republic offers incentives to foreign and domestic firms alike that invest in the manufacturing sector, technology and R&D centers, and business support centers.  The amended Act No. 72/2000 Coll. came into force September 6, 2019, and shifted availability of incentive programs from all types of investments to only those requiring R&D and that create jobs for university graduates, as well as in specialized sectors such as aerospace, information and communication technology, life sciences, nanotechnology and advanced segments of the automotive industry.  Incentives are funded from the Czech Republic’s national budget as well as from EU Structural Funds.  The government provides investment incentives in the form of corporate income tax relief for 10 years, cash grants for job creation up to USD13,000 per job, cash grants for training up to 70 percent of training costs, and cash grants for the purchase of fixed assets up to 20 percent of eligible costs.  In response to COVID-19, the government approved November 30, 2020, an amendment to this law, which enables producers of personal protective equipment and medical products to more easily obtain investment incentives, because the state considers these products strategic for the protection of citizens’ lives and health during the pandemic.  In addition, film industry incentives cover up to 20 percent of eligible costs of foreign filmmakers.

The government does not typically issuing guarantees or engaging in joint financing for FDI projects.

The government primarily provides subsidies, as opposed to incentives (such as feed-in tariffs, discounts on electricity rates, or tax incentives) for clean energy investments.

Both Czech and EU laws permit foreign investors involved in joint ventures to take advantage of commercial or industrial customs-free zones into which goods may be imported and later exported without depositing customs duties.  Free trade zone treatment means duties need to be paid only in the event that the goods brought into the free trade zone are introduced into the local economy.  Since the Czech Republic became part of the single customs territory of the European Community and now offers various exemptions on customs tariffs, the original tariff-driven use of these free trade zones has declined.  The Czech Republic does not have special economic zones.

There are no government-imposed conditions on permission to invest.  The host government does not follow “forced localization.”

The visa process for non-EU foreign investors and their employees is the same for domestic, EU, and non-EU companies.

The Czech Republic abides by EU law governing data localization and performance.  The Czech Republic strongly supported creating the EU Regulation on free flow of non-personal data which came into effect in May 2019, stating that it would boost the competitive data economy and accelerate the development of artificial intelligence.

The July 16, 2020 ruling of the EU’s highest court in the Schrems II case, which invalidated the legal basis for the EU-U.S. Privacy Shield framework, has put a significant burden on companies transferring personal data from the Czech Republic to the United States.

The “Bill on Digitalization of Public Authorities (“Cloud Bill”) came into force February 1, 2022, marking the latest step in the country’s efforts to move government data to the cloud.   The legislation enables government ministries to partner with global cloud service providers to migrate government data to the cloud.  The legislation seeks to operationalize a “Cloud Catalogue” of cloud service providers that are certified as secure and trustworthy partners for government data.  The  legislation mandates that sensitive government data be stored in the EU but allows global cloud services providers (including U.S. companies) to transfer data overseas for routine maintenance purposes.  The legislation also allows cloud service providers managing Czech government data to comply with the U.S. CLOUD Act, which gives U.S. law enforcement agencies the right to access personal data stored outside the United States.

Democratic Republic of the Congo

4. Industrial Policies

The 2002 Investment Code provides for attractive customs and tax exemptions for investors who submit their investment plan to ANAPI. Once the project is approved by ANAPI within a period not exceeding 30 days, the investor benefits from the following customs, fiscal and parafiscal advantages: (1) exemption from import duties and taxes on machinery, materials, and equipment (excluding the 2% administrative tax and VAT (to be paid upstream by the promoter, but to be refunded by the tax authorities); (2) exemption from income tax; (3) exemption from property tax; and (4) exemption from proportional duties when setting up a limited liability company or increasing its share capital.

The duration of the advantages granted is from three to five years depending on the economic region where the investment is located: three years for economic region A (Kinshasa, the Capital); four years for economic region B (Bas-Congo, cities of Lubumbashi, Likasi, Kolwezi); and five years for economic region C (everywhere else).

The conditions for accessing the benefits of the Investment Code are simple; establishment as an economic entity under Congolese law; the overall cost of the planned investment (all expenses included) must be at least $200,000 (or at least $10,000 for SMEs/SMIs); commitment to respect environmental regulations; commitment to respect labor regulations; and a guarantee the investment has a value-added rate of at least 35%. There are no additional incentives for businesses owned by underrepresented investors such as women.

The GDRC does not issue guarantees or jointly finance foreign direct investment projects.

Aside from the incentives offered in the Investment Code, the GDRC does not offer additional incentives for clean energy investments (including renewable energy, energy storage, energy efficiency, clean hydrogen, carbon sequestration, low-carbon transport, and fuels, and other decarbonization technologies). A group of off-grid electricity producers is pushing the government to provide an exemption from import taxes for off-grid solar products brought into the DRC.

The DRC does not have any areas designated as Free Trade Zones or Duty-Free Zones. The DRC is a signatory to the SADC but is not a SADC Free Trade Area member. In February 2022, the DRC deposited its instrument of ratification and became the 42nd country to ratify the African Continental Free Trade Agreement (AFCFTA). The agreement aims to facilitate imports and exports among member countries with reduced or zero tariffs, free market access and market information, and the elimination of trade barrier, and provides numerous benefits to SMEs. In March 2022, the DRC joined the East African Community (EAC) as the seventh member, massively expanding the territory of this trading bloc, giving it access to the Atlantic Ocean and greatly increasing the number of francophones in what was originally a club of former British colonies. The GDRC is committed to experimenting with Special Economic Zones (SEZ). It is in this context that it promulgated in 2014, the Law n°14/022 fixing the regime of SEZ in the DRC.

To date, six areas for the creation of SEZs have been defined: the Industrial Zone of the Kinshasa Area, comprising the City Province of Kinshasa; Kongo Central Province, and the former Province of Bandundu; the Industrial Zone of the Kasaï Area, comprising the Provinces of Kasaï, Kasaï Central, Eastern Kasaï, Lomami and Sankuru; the Industrial Zone of the former Katanga Province; the Industrial Zone of Great Kivu; the Industrial Zone of the former Eastern Province; and the Industrial Zone of the former Equateur Province. According to the provisions of article 6 of this law, the administration of the SEZs in the DRC is the responsibility of a public establishment called the “Agency of Special Economic Zones (AZES).”

With a view to attracting and promoting investments in SEZs, the GDRC, in accordance with the provisions of the law on SEZs, issued Decree No. 20/004 of March 5, 2020, which sets out the advantages and facilities to be granted to investors operating in SEZs in DRC.

  • For developers: a total exemption from property, furniture, and business taxes on profits for 10 years, renewable once after evaluation; a 50 percent reduction in the tax rate set from the 21st year; a total exemption from import duties and taxes on machinery, tools and new or used equipment, capital goods, etc. for 10 years, etc.
  • For companies: a total exemption from property, movable and professional taxes on profits for 5 years, renewable once after evaluation; a reduction of 50 percent of the tax rate from the 11th year; an application of the exceptional depreciation system; a total exemption from import duties and taxes on machinery, tools, and equipment, new or used, and capital goods for 10 years; an exemption from export duties and taxes on finished products for 10 years.

On November 4, 2020, the GDRC launched the construction of the first Special Economic Zone – Maluku SEZ in Kinshasa, with the aim of attracting foreign investment and stimulating the creation of local businesses. This SEZ offers tax and regulatory advantages for investors and entrepreneurs including a 5-to-10-year tax exemption. More information is available at https://azes-rdc.com/ .

In August 2021, the GDRC presented its Industrialization Master Plan (PDI) accompanied by a cost estimate of the structuring and industrializing infrastructures. The transport and communication infrastructure package (airport, rail, river, lake, maritime, road and energy), together with the densification of Special Economic Zones, is estimated at $58.3 billion.

The GDRC does not follow “forced localization,” the policy in which foreign investors must use domestic content in goods or technology. The DRC does not have specific legislation on data storage or limits on the transmission of data.

There are no known enforcement procedures for performance requirements in the DRC.

Investors benefiting from the Investment Code regime must guarantee the investment has a value-added rate of at least 35%

The GDRC does not require IT companies to hand over encryption data. Cellular phone companies must meet technology performance requirements to maintain their license.

According to officials, the Ministry of Digitalization is developing measures to prevent or restrict companies from freely transmitting customer data or data to other companies outside the economy/country. These measures may go beyond the requirements for data transferred within the country.

On November 25, 2020, President Tshisekedi enacted Law No. 20/017 on telecommunications and information and communication technologies. This law provides in its articles 126 to 133 the right to privacy and the protection of personal data in telecommunications and information technology and communication. This protection of privacy is secured by the right to secrecy of correspondence for all users of telecommunications networks and services and information and communication technologies (ICT). The law thus prohibits any interception, listening, recording, transcription and disclosure of correspondence without prior authorization from the General Prosecutor’s Office of the Court of Cassation. The authorization from the Public Prosecutor’s Office of the Court of Cassation, for a renewable period of three months, must demonstrate the facts in a judicial file, and it must include all the identification elements of the targeted link, the offence that justifies the interception, as well as its duration. The Post and Telecommunications Regulatory Authority of Congo (ARPTC) ensures the regulation and control of personal data protection.

Denmark

4. Industrial Policies

Performance incentives are available to both foreign and domestic investors. Examples include grants or preferential financing in designated regional development areas. Foreign subsidiaries located in Denmark can participate in government-financed or subsidized research programs on a national-treatment basis.

Denmark is recognized as a global leader in green and renewable energy. The government provides a multitude of support programs to private households and companies for energy efficiency renovations. Similarly, several programs exist for maturation and tech commercialization of green technologies. In December 2021, the Danish parliament reached a political framework agreement for a total of $2.5 billion (DKK 16 billion) support for carbon capture, utilization, and storage (CCUS) between 2022 and 2030. The Energy Technology Development and Demonstration Program (EUDP) supports private companies and universities to develop and demonstrate new energy technologies, in support of Denmark’s goal of a 70 percent carbon reduction by 2030 and climate neutrality by 2050. The EUDP has contributed $905.9 million (DKK 5.7 billion) to more than 1,000 projects since its inception in 2007. An overview of the programs can be found on the Danish Energy Agency’s website in Danish: https://ens.dk/service/tilskuds-stoetteordninger .

The only free port in Denmark is the Copenhagen Free Port, operated by the Port of Copenhagen. The Port of Copenhagen and the Port of Malmö (Sweden) merged their commercial operations in 2001, including the free port activities, in a joint company named CMP. CMP is one of the largest port and terminal operators in the Nordic Region and one of the largest Northern European cruise ship ports; it occupies a key position in the Baltic Sea region for the distribution of cars and transit of oil. The facilities in the Free Port are mainly used for tax-free warehousing of imported goods, for exports, and for in-transit trade. Tax and duties are not payable until cargo leaves the Free Port. The processing of cargo and the preparation and finishing of imported automobiles for sale can freely be set up in the Free Port. Manufacturing operations can be established with permission of the customs authorities, which is granted if special reasons exist for having the facility in the Free Port area. The Copenhagen Free Port welcomes foreign companies establishing warehouse and storage facilities.

Danish law mandates performance requirements only in connection with investments in hydrocarbon exploration, where concession terms typically require a fixed work program, including seismic surveys, and in some cases, exploratory drilling, consistent with applicable EU directives. Performance requirements are primarily designed to protect the environment, mainly by encouraging reduced energy and water use. Several environmental and energy requirements are universally applied to households as well as businesses in Denmark, both foreign and domestic. For instance, Denmark was the first of the EU countries, in January 1993, to introduce a carbon dioxide (CO2) tax on business and industry. This includes specific reimbursement schemes and subsidy measures to reduce the costs for businesses, thereby safeguarding competitiveness.

Performance requirements are governed by Danish legislation and EU regulations and are applied uniformly to domestic and foreign investors. Potential violations of the rules governing this area are punishable by fines or imprisonment.

The Danish government does not follow “forced localization” policies, nor does it require foreign IT providers to turn over source code or provide access to surveillance. The Danish Data Protection Agency, the Ministry of Justice, and the Ministry of Culture are the entities involved with data storage.

Djibouti

4. Industrial Policies

Tax benefits and incentives fall under two categories detailed in the investment code. Investments greater than DJF 50 million (USD 282,486) that create several permanent jobs may be exempted from license and registration fees, property taxes, taxes on industrial and commercial profits, and taxes on the profits of corporate entities. Imported raw materials used in manufacturing are exempted from the internal consumption tax. These exemptions apply for up to a maximum of ten years after companies start producing materials in Djibouti. Incentives are often unique to an individual company or investment and are agreed upon with relevant ministries. Projects can be delayed if all relevant ministries are not consulted during negotiations. To promote exports, Djibouti has multiple free zones where companies enjoy full exemption from direct and indirect taxes for a period of up to ten years.

The Djibouti Free Zone (DFZ) is located on 40 hectares and offers office space, warehouses, light industrial units, and hangars. Businesses located in the Free Zone do not pay corporate taxes, have a simplified registration process, and receive other benefits such as assistance obtaining work permits and visas. Currently, 180 companies from more than 30 countries operate out of the Free Zone. In December 2013, the DAM Commercial Free Zone opened in the Damerjog region, south of Djibouti City. In March 2018, the Djibouti Ports and Free Zone Authority and China Merchants Group began construction on a large free zone called Djibouti International Free Trade Zone (DIFTZ). The first phase, a 240-hectare pilot zone is currently operational. It consists of four industrial clusters which will focus on trade and logistics, export processing, business, and financial support services, as well as manufacturing and duty-free merchandise retail. When complete it will cover 4,800 hectares and offer office space, warehouses, industrial units, and will be connected directly with the ports in later phases. It will be the largest free zone in Africa.

Djibouti Damerjog Industrial Development (DDID) free-trade zone is in its first of three five-year phases. The project includes a multipurpose port, a liquefied natural gas terminal, a livestock terminal, dry docks and a ship repair area, a power plant and a factory that will produce construction materials. DDID will offer all the preferential policies guaranteed by the free zone authority, such as tax exemption, minimized restrictions on foreign labor and competitive water and electricity rates.

According to local regulations, companies are required to hire locally as long as the qualifications or expertise is available on the local market. However, these schemes are not equally applied to senior management and board of directors where foreign employment is more readily accepted. The process for visas, work permits, and other requirements in order to operate as a foreign employee is not onerous and is easily accessible through Djibouti’s Guichet Unique. Work permits follow a graduated fee schedule: 200,000 Djibouti francs (USD 1,124), 100,000 Djibouti francs (USD 563) and 50,000 Djibouti francs (USD 281) according to the qualifications required for a position.

The government does not follow “forced localization.” The Djiboutian investment code guarantees investors the right to freely import all goods, equipment, products, or material necessary for their investments; display products and services; determine and run marketing policy and production; choose customers and suppliers; and set prices. Performance requirements are not a pre-condition for establishing, maintaining, or expanding foreign direct investments. Incentives do, however, increase with the size of the investment and the number of jobs created.

There are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the economy/country’s territory. There are no rules requiring local data storage within Djibouti.

Dominica

4. Industrial Policies

The Government of Dominica implemented a series of investment incentives codified in the Fiscal Incentives Act.  These include tax holidays for up to 20 years for approved hotel and resort development projects, duty-free concessions on the purchase of machinery and equipment, and various tax exemptions.  While there is no requirement for enterprises to purchase a fixed percentage of goods from local sources, the government encourages local sourcing.  There are no requirements for participation by nationals or the government in foreign investment projects.

Under the Fiscal Incentives Act, four types of enterprise qualify for tax holidays.  The length of the tax holiday for the first three types of enterprises depends on the amount of value added in Dominica.  The fourth type of enterprise, known as an enclave industry, must produce goods exclusively for export outside of the CARICOM region.

Enterprise Value Added Maximum Tax Holiday
Group I 50 percent or more 15 years
Group II 25 percent to 50 percent 12 years
Group III 10 percent to 25 percent 10 years
Enclave Enclave 15 years

Companies that qualify for tax holidays are allowed to import into Dominica duty-free all equipment, machinery, spare parts, and raw materials used in production.

The Hotel Aid Act provides relief from customs duties on items brought into the country for use in construction, extension, and equipping of a hotel of not less than five bedrooms.  In addition, the Income Tax Act provides special tax relief benefits for approved hotels and villa development.  A tax holiday for up to 20 years is available for approved hotel and resort developments and up to 10 years for income accrued from the rental of villas in approved developments.  The Cabinet must approve these developments.

The standard corporate income tax rate is 25 percent.  There is no capital gains tax.  International businesses are exempt from tax.  Corporate tax does not apply to exempt companies or to enterprises that have been granted tax concession.

Dominica provides companies with a further tax concession effective at the end of the tax holiday period.  In effect, it is a rebate of a portion of the income tax paid based on export profits as a percentage of total profits.  Full exemption from import duties on parts, raw materials, and production machinery is also available.

The government offers incentives for investors in the renewable energy sector, including the reduction or exemption of import duties and VAT on related inputs and a reduction in corporate tax.

The Government of Dominica does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

There are no foreign trade zones or free ports in Dominica.

Dominica does not mandate use of local equipment.  The provisions of the Labor Code outline the requirements for acquiring a work permit and prohibit anyone who is not a citizen of Dominica or the OECS to engage in employment unless they have obtained a work permit.  When the government grants work permits to senior managers because no qualified nationals are available for the post, the government may recommend a counterparty trainee who is a Dominican citizen.  There are no excessively onerous visa, residency, or work permit requirements.

As a member of the WTO, Dominica is party to the Agreement to the Trade Related Investment Measures.  While there are no formal performance requirements, the government encourages investments that will create jobs and increase exports and foreign exchange earnings.  There are no requirements for participation by nationals or by the government in foreign investment projects.  There is no requirement that enterprises must purchase a fixed percentage of goods or technology from local sources, but the government encourages local sourcing.  Foreign investors receive national treatment. There are no requirements for foreign information technology providers to turn over source code and/or provide access to surveillance.  There are no measures or draft measures that prevent or restrict companies from freely transmitting customer or other business-related data outside the country.

Dominica

4. Industrial Policies

The Government of Dominica implemented a series of investment incentives codified in the Fiscal Incentives Act.  These include tax holidays for up to 20 years for approved hotel and resort development projects, duty-free concessions on the purchase of machinery and equipment, and various tax exemptions.  While there is no requirement for enterprises to purchase a fixed percentage of goods from local sources, the government encourages local sourcing.  There are no requirements for participation by nationals or the government in foreign investment projects.

Under the Fiscal Incentives Act, four types of enterprise qualify for tax holidays.  The length of the tax holiday for the first three types of enterprises depends on the amount of value added in Dominica.  The fourth type of enterprise, known as an enclave industry, must produce goods exclusively for export outside of the CARICOM region.

Enterprise Value Added Maximum Tax Holiday
Group I 50 percent or more 15 years
Group II 25 percent to 50 percent 12 years
Group III 10 percent to 25 percent 10 years
Enclave Enclave 15 years

Companies that qualify for tax holidays are allowed to import into Dominica duty-free all equipment, machinery, spare parts, and raw materials used in production.

The Hotel Aid Act provides relief from customs duties on items brought into the country for use in construction, extension, and equipping of a hotel of not less than five bedrooms.  In addition, the Income Tax Act provides special tax relief benefits for approved hotels and villa development.  A tax holiday for up to 20 years is available for approved hotel and resort developments and up to 10 years for income accrued from the rental of villas in approved developments.  The Cabinet must approve these developments.

The standard corporate income tax rate is 25 percent.  There is no capital gains tax.  International businesses are exempt from tax.  Corporate tax does not apply to exempt companies or to enterprises that have been granted tax concession.

Dominica provides companies with a further tax concession effective at the end of the tax holiday period.  In effect, it is a rebate of a portion of the income tax paid based on export profits as a percentage of total profits.  Full exemption from import duties on parts, raw materials, and production machinery is also available.

The government offers incentives for investors in the renewable energy sector, including the reduction or exemption of import duties and VAT on related inputs and a reduction in corporate tax.

The Government of Dominica does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

There are no foreign trade zones or free ports in Dominica.

Dominica does not mandate use of local equipment.  The provisions of the Labor Code outline the requirements for acquiring a work permit and prohibit anyone who is not a citizen of Dominica or the OECS to engage in employment unless they have obtained a work permit.  When the government grants work permits to senior managers because no qualified nationals are available for the post, the government may recommend a counterparty trainee who is a Dominican citizen.  There are no excessively onerous visa, residency, or work permit requirements.

As a member of the WTO, Dominica is party to the Agreement to the Trade Related Investment Measures.  While there are no formal performance requirements, the government encourages investments that will create jobs and increase exports and foreign exchange earnings.  There are no requirements for participation by nationals or by the government in foreign investment projects.  There is no requirement that enterprises must purchase a fixed percentage of goods or technology from local sources, but the government encourages local sourcing.  Foreign investors receive national treatment. There are no requirements for foreign information technology providers to turn over source code and/or provide access to surveillance.  There are no measures or draft measures that prevent or restrict companies from freely transmitting customer or other business-related data outside the country.

Dominican Republic

4. Industrial Policies

Investment incentives exist in various sectors of the economy, which are available to all investors, foreign and domestic. Incentives typically take the form of preferential tax rates or exemptions, preferential interest rates or access to finance, or preferential customs treatment. Sectors where incentives exist include agriculture, construction, energy, film production, manufacturing, and tourism.

Incentives for manufacturing apply principally to production in free trade zones (discussed in the subsequent section) or for the manufacturing of textiles, pharmaceutical products, tobacco and derivatives, clothing, and footwear specifically under Laws 84-99 on Re-activation and Promotion of Exports and 56-07 on Special Tax Incentives for the Textile Sector. Additionally, Law 392-07 on Competitiveness and Industrial Innovation provides a series of incentives that include exemptions on taxes and tariffs related to the acquisition of materials and machinery and special tax treatment for approved companies.

Special Zones for Border Development, created by Law No. 28-01, encourage development near the Dominican Republic-Haiti border. Law No. 12-21, passed in February 2021, modified and extended incentives for direct investments in manufacturing projects in the Zones for a period of 30 years. Incentives still largely take the form of tax exemptions but can be applied for a maximum period of 30 years, versus the 20 years in the original law. These incentives include the exemption of income tax on the net taxable income of the projects, the exemption of sales tax, the exemption of import duties and tariffs and other related charges on imported equipment and machinery used exclusively in the industrial processes, as well as on imports of lubricants and fuels (except gasoline) used in the processes.

Tourism is a particularly attractive area for investment and one the government encourages strongly. Law 158-01 on Tourism Incentives, as amended by Law 195-13, and its regulations, grants wide-ranging tax exemptions, for fifteen years, to qualifying new projects by local or international investors. The projects and businesses that qualify for these incentives are: (a) hotels and resorts; (b) facilities for conventions, fairs, festivals, shows and concerts; (c) amusement parks, ecological parks, and theme parks; (d) aquariums, restaurants, golf courses, and sports facilities; (e) port infrastructure for tourism, such as recreational ports and seaports; (f) utility infrastructure for the tourist industry such as aqueducts, treatment plants, environmental cleaning, and garbage and solid waste removal; (g) businesses engaged in the promotion of cruises with local ports of call; and (h) small and medium-sized tourism-related businesses such as shops or facilities for handicrafts, ornamental plants, tropical fish, and endemic reptiles. In January 2020, the government announced a special incentive plan to promote high-quality investment in tourism and infrastructure in the southwest region of Pedernales for more information contact the Ministry of Tourism at https://www.mitur.gob.do/ .

For existing projects, hotels and resort-related investments that are five years or older are granted complete exemption from taxes and duties related to the acquisition of the equipment, materials and furnishings needed to renovate their premises. In addition, hotels and resort-related investments that are fifteen years or older will receive the same benefits granted to new projects if the renovation or reconstruction involves 50 percent or more of the premises.

In addition, individuals and companies receive an income tax deduction for investing up to 20 percent of their annual profits in an approved tourist project. The Tourism Promotion Council (CONFOTOUR) is the government agency in charge of reviewing and approving applications by investors for these exemptions, as well as supervising and enforcing all applicable regulations. Once CONFOTOUR approves an application, the investor must start and continue work in the authorized project within a three-year period to avoid losing incentives.

The Dominican Republic encourages investment in the renewable energy sector. Under Law 57-07 on the Development of Renewable Sources of Energy, investors in this area are granted, among other benefits, the following incentives: (a) no custom duties on the importation of the equipment required for the production, transmission and interconnection of renewable energy; (b) no tax on income derived from the generation and sale of electricity, hot water, steam power, biofuels or synthetic fuels generated from renewable energy sources; and (c) exemption from the goods and services tax in the acquisition or importation of certain types of equipment. Foreign investors praise the provisions of the law but have historically expressed frustration with approval and execution of potential renewable energy projects. Ongoing reforms to the energy sector discussed in Section 7 on State-Owned Enterprises should alleviate some of these concerns and have already enabled the completion of several solar power concessions over the past year. The Minister of Energy and Mines, Antonio Almonte, affirmed March 9 that the only way that the Dominican Republic has to counteract the fuel crisis in the international market is by stimulating and promoting the production of renewable energies.

The Dominican government does not currently have a practice of jointly financing foreign direct investment projects. However, in some circumstances, the government has authority to offer land or infrastructure as a method of attracting and supporting investment that meets government development goals. Anticipated reforms to government-owned asset management (See Section 7) may change the institutional actors and framework for engaging with government-owned resources.

In February 2020, the government passed a law on public-private partnerships (PPPs) that may encourage high-quality infrastructure projects and help catalyze private sector-led economic growth. In 2020, the Abinader administration officially launched the DGAPP as the government office responsible for planning, executing, and overseeing investment projects financed via PPPs. Their website has the most up to date information on their initiatives and mandates ( https://dgapp.gob.do/en/home/ ).

Law 8-90 on the Promotion of Free Zones from 1990 governs operations of the Dominican Republic’s free trade zones (FTZs), while the National Council of Free Trade Zones for Export (CNZFE) exercises regulatory oversight. The law provides for complete exemption from all taxes, duties, charges, and fees affecting production and export activities in the zones.

According to the Ministry of Industry and Commerce, the Dominican Republic has established 79 free trade zones – 38 in the Northern Zone, 17 in the Santo Domingo and the National District, 13 in the Southern Zone, and seven in the Eastern Zone. Additionally, there are 734 companies operating in the zones that employ over 182,700 people.

CNZFE delineates policies for the promotion and development of Free Trade Zones, as well as approving applications for operating licenses, with discretionary authority to extend the time limits on these incentives. CNZFE is comprised of representatives from the public and private sectors and is chaired by the Minister of Industry and Commerce.

Border FTZs located in one of the seven provinces along the Dominican-Haitian border benefit from incentives for a 20-year period, while those located throughout the rest of the country benefit for a 15-year period. Companies operating in the FTZs do pay tax on the purchase of locally sourced inputs and relevant taxes do apply when products produced in FTZs are sold in the Dominican market.

In general, firms operating in the FTZs report fewer bureaucratic and legal problems than do firms operating outside the zones. Foreign currency flows from the FTZs are handled via the free foreign exchange market. Foreign and Dominican firms are afforded the same investment opportunities both by law and in practice and Dominican companies operating in or adjacent to the FTZs benefit from exposure to international business standards and best practices.

According to CNZFE’s 2020 Statistical Report, exports from FTZs totaled $5.9 billion, comprising 3.5 percent of GDP. Investments made in FTZs by U.S. companies in 2020 represented approximately 32.7 percent of total investments. Other major investors include companies registered in the Dominican Republic (39.5 percent), Canada (2.7 percent), Germany (2.6 percent), and Puerto Rico (2.3 percent). Companies registered in 38 other countries comprised the remaining investments. The top exports from FTZs are medical and pharmaceutical products, tobacco and derivatives, apparel and textiles, jewelry, electronics, and footwear. Estimates for 2021 predict over $7 billion in exports from FTZs, representing over 60% of total exports from the country.

Exporters/investors seeking further information from the CNZFE may contact:

Consejo Nacional de Zonas Francas de Exportación
Leopoldo Navarro No. 61
Edif. San Rafael, piso no. 5
Santo Domingo, Dominican Republic
Phone: (809) 686-8077
Fax: (809) 686-8079
Website: http://www.cnzfe.gov.do

Law 16-92 on the Labor Code stipulates that 80 percent of the labor force of a foreign or national company, including free trade zone companies, must be comprised of Dominican nationals. Senior management and boards of directors of foreign companies are exempt from this regulation.

The Dominican Republic does not have excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees. The host government does not have a forced localization policy to compel foreign investors to use domestic content in goods or technology.

There are no performance requirements as there is no distinction between Dominican and foreign investment. Investment incentives are applied uniformly to both domestic and foreign investors in accordance with World Trade Organization (WTO) requirements. In addition, there are no requirements for foreign IT providers to turn over source code or provide access to encryption.

Law No. 172-13 on Comprehensive Protection of Personal Data restricts companies from freely transmitting customer or other business-related data inside the Dominican Republic or beyond the country’s borders. Under this law, companies must obtain express written consent from individuals to transmit personal data unless an exception applies. The Superintendency of Banks currently supervises and enforces these rules, but its jurisdiction generally covers banks, credit bureaus, and other financial institutions. Industry representatives recommend updating this law to designate a national data protection authority that oversees other sectors.

Ecuador

4. Industrial Policies

On November 29, 2021, a new Tax Reform Law went into effect, repealing the August 2018 National Productive Development Law that provided income tax exemptions and VAT exemptions for 12 years for certain investments. Investors who initiated the investment process under the 2018 law could obtain the 2018 tax benefits by signing with the delegating entity on behalf of the Ecuadorian government both an investment agreement by December 31, 2021 and a contract by April 30, 2022. In December 2015, Ecuador’s National Assembly approved a Public-Private Partnership law intended to attract investment. The law offers incentives, including the reduction of the income tax, value added tax, and capital exit tax, for investors in certain projects. It designates Latin American arbitration bodies as the dispute resolution mechanism. The law came into effect upon publication in the Official Registry on December 18, 2015. The Organic Law of Production Incentives and Tax Fraud Prevention, which took effect on December 30, 2014, provides tax incentives related to depreciation calculations and income tax rates, which could benefit some foreign investors. The Ecuadorian government is moving toward a Public-Private Partnership model to attract investments — particularly in the energy and transportation sectors — but does not yet offer sovereign guarantees or joint financing for those projects.

Green energy incentives include a 12-year tax exemption under the Productive Development Law. However, companies are required to submit an Investment Protection Agreement by December 30, 2021, and receive approval from MPCEIP by April 30, 2022, to receive the tax exemption benefits. The government launched a 500 MW renewable energy block of tenders December 2021. Companies must provide their own financing.

The 2021 Tax Reform Law repealed the zero-tariff income tax incentives included in previous legislation and replaced them with income tax reductions. These range from three to five percentage points of the current corporate income tax rate (25 percent), provided the compliance with certain conditions. Investments done under the prior legal framework will continue to enjoy the benefits offered from that legislation.

The 2010 Production Code authorized the creation of Special Economic Development Zones (ZEDEs) that are subject to reduced taxes and tariffs. The government considers the extent to which projects promote technology transfer, innovation, and industrial diversification when granting ZEDE status; foreign-owned firms have the same investment opportunities as national firms.

Visa and residency requirements are relatively relaxed and do not inhibit foreign investment.

There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption. Article 146 of the 2014 Code of the Social Economy of Knowledge, Creativity, and Innovation establishes that data related to national security and strategic sectors must be hosted in computer centers physically located in the Ecuadorian territory. Therefore, foreign companies without local data storage facilities are unable to provide cloud services to many public sector entities under this provision. The Lasso administration pledged to remove Article 146 during its term following a July 2021 ransomware attack that Ecuador’s data localization provisions may have facilitated.

In May 2021, Ecuador´s first Personal Data Protection Law went into effect. One of its provisions establishes that the international transfer of personal data can only be made to organizations or economic territories that provide adequate levels of protection. Companies do not need prior authorization for data transfer. The regulating body, yet to be created, will define what these adequate levels entail. The law also establishes fines on data protection infractions that will come into force in mid-2023. The penalties range between 0.7 percent and 1.0 percent of revenues based on business volume.

On October 11, 2016, Ecuador’s National Assembly passed the Code of the Social Economy of Knowledge, Creativity, and Innovation (Ingenuity Code), covering a wide range of intellectual property matters. Article 148 of the Code establishes that agencies must give preference to open-source software with content developed in Ecuador when procuring software for government use. Executive Decree 1073 of June 2020 mandated an order of preference when procuring software for the government: 1) Open-Source; 2) Ecuadorian-Developed; 3) Software with Some Ecuadorian Content; and 4) Internationally Developed.

Egypt

4. Industrial Policies

Green economy and climate change incentives:

In March 2022, the GoE announced in March 2022 a series of incentives for companies undertaking green projects and investments, including:

  • The ability to deduct between 30 and 50 percent of investment costs from taxes for green hydrogen and green ammonia production, storage, and export, and for manufacturing plastics-alternatives;
  • Projects in the Suez Canal Economic Zone, the New Administrative Capital, and Upper Egypt are eligible for the largest tax breaks;
  • Companies involved in other green and renewable energy projects are eligible for other non-tax incentives that the 2017 Investment Law authorizes, but did not provide further details; and
  • Projects in green hydrogen, green ammonia, electric vehicle manufacturing and charging, plastics alternatives, and waste management will be fast-tracked through the approvals and permit process, with a 20 working day window for making decisions on new investment and project proposals.

The 2017 Investment Law

The Investment Law (Law 72 of 2017) gives multiple incentives to investors as described below.  In August 2019, President Sisi ratified amendments to the Investment Law that allow its incentive programs to apply to expansions of existing investment projects in addition to new investments.

General Incentives:

  • All investment projects subject to the provisions of the new law enjoy the general incentives provided by it.
  • Investors are exempted from the stamp tax, notary fees, registration of the Memorandum of Incorporation of the companies, credit facilities, and mortgage contracts associated with their business for five years from the date of registration in the Commercial Registry, in addition to the registration contracts of the lands required for a company’s establishment.
  • If the establishment is under the provisions of the new investment law, it will benefit from a two-percent unified custom tax over all imported machinery, equipment, and devices required for the set-up of such a company.

Special Incentive Programs:

  • Investment projects established within three years of the date of the issuance of the Investment Law (Law 72 of 2017) will enjoy a perpetual deduction from their net profit subject to the income tax;
  • Fifty percent deduction of depreciated investment costs from taxes, infrastructure fees, and cost of lands for projects in regions the government has identified as most in need of development, as well as designated projects in Suez Canal Special Economic Zone and the “Golden Triangle” along the Red Sea between the cities of Safaga, Qena, and El Quseer; or
  • Thirty percent deduction of depreciated investment costs from taxes, infrastructure fees, and land costs for projects elsewhere in Egypt; and
  • Provided that such deduction shall not exceed 80 percent of the paid-up capital of the company, the incentive could be utilized over a maximum of seven years.

Additional Incentive Program:

The Cabinet of Ministers may decide to grant additional incentives for investment projects in accordance with specific rules and regulations as follows:

  • The establishment of special customs ports for exports and imports of the investment projects.
  • The state may incur part of the costs of the technical training for workers.
  • Free allocation of land for a few strategic activities may apply.
  • The government may bear in full or in part the costs incurred by the investor to invest in utility connections for the investment project.
  • The government may refund half the price of the land allocated to industrial projects in the event of starting production within two years from receiving the land.

Other Incentives related to Free Zones according to Investment Law 72 of 2017:

  • Exemption from all taxes and customs duties.
  • Exemption from all import/export regulations.
  • The option to sell a certain percentage of production domestically if customs duties are paid.
  • Limited exemptions from labor provisions.
  • All equipment, machinery, and essential means of transport (excluding sedan cars) necessary for business operations are exempted from all customs, import duties, and sales taxes.
  • All licensing procedures are handled by GAFI. To remain eligible for benefits, investors operating inside the free zones must export more than 50 percent of their total production.
  • Manufacturing or assembly projects pay an annual charge of one percent of the total value of their products excluding all raw materials. Storage facilities are to pay one percent of the value of goods entering the free zones, while service projects pay one percent of total annual revenue.
  • Goods in transit to specific destinations are exempt from any charges.

Other Incentives related to the Suez Canal Economic Zone (SCZone):

  • 100 percent foreign ownership of companies allowed.
  • 100 percent foreign control of import/​export activities allowed.
  • Imports are exempted from customs duties and sales tax.
  • Customs duties on exports to Egypt imposed on imported components only, not the final product.
  • Fast-track visa services.
  • A full service one-stop shop for registration and licensing.
  • Allowing enterprises access to the domestic market; duties on sales to domestic market will be assessed on the value of imported inputs only.

The Tenders Law (Law 89 of 1998) requires the government to consider both price and best value in awarding contracts and to issue an explanation for refusal of a bid. However, the law contains preferences for Egyptian domestic contractors, who are accorded priority if their bids do not exceed the lowest foreign bid by more than 15 percent.

The Ministry of Industry & Foreign Trade and the Ministry of Finance’s Decree 719 of 2007 provides incentives for industrial projects in the governorates of Upper Egypt (Upper Egypt refers to governorates in southern Egypt). The decree provides an incentive of 15,000 EGP (approx. $940) for each job opportunity created by the project, on the condition that the investment costs of the project exceed 15 million EGP (approx. $940,000). The decree can be implemented on both new and ongoing projects.

Public and private free-trade zones are authorized under GAFI’s Investment Incentive Law 72 of 2017. Free zones are located within the national territory, but are considered to be outside Egypt’s customs boundaries, granting firms doing business within them more freedom on transactions and exchanges. Companies producing largely for export (normally 80 percent or more of total production) may be established in free-trade zones and operate using foreign currency. Free-trade zones are open to investment by foreign or domestic investors. Companies operating in free-trade zones are exempted from sales taxes or taxes and fees on capital assets and intermediate goods. The Legislative Package for the Stimulation of Investment, issued in 2015, stipulated a one-percent duty paid on the value of commodities upon entry for storage projects and a one-percent duty upon exit for manufacturing and assembly projects.

There are currently nine public free trade zones in operation in the following locations: Alexandria; Damietta; Ismailia; Qeft; Media Production City; Nasr City; Port Said; Shebin el Kom; and Suez. Private free-trade zones may also be established with a decree by GAFI but are usually limited to a single project. Export-oriented industrial projects are given priority.  There is no restriction on foreign ownership of capital in private free zones.

The Special Economic Zones (SEZ) Law (Law 83 of 2002) allows establishment of special zones for industrial, agricultural, or service activities designed specifically with the export market in mind.  The law allows firms operating in these zones to import capital equipment, raw materials, and intermediate goods duty free. Companies established in the SEZs are also exempt from sales and indirect taxes and can operate under more flexible labor regulations. The first SEZ was established in the northwest Gulf of Suez.

Investment Law (Law 72 of 2017) authorized creation of investment zones with Prime Ministerial approval. The government regulates these zones through a board of directors, but the zones are established, built, and operated by the private sector. The government does not provide any infrastructure or utilities in these zones. Investment zones enjoy the same benefits as free zones in terms of facilitation of license-issuance, ease of dealing with other agencies, etc., but are not granted the incentives and tax/custom exemptions enjoyed in free zones. Projects in investment zones pay the same tax/customs duties applied throughout Egypt. The aim of the law is to assist the private sector in diversifying its economic activities. There are currently five investment zones located in Cairo, Giza, and Ismailia, and in 2019 GAFI approved the development of an additional 12 investment zones in the Alexandria, Dakhalia, Damietta, Fayoum, Giza, Qalyubia, and Sharkia governorates.

The Suez Canal Economic Zone ( http://www.sczone.com.eg/English/Pages/default.aspx) , a major industrial and logistics services hub announced in 2014, includes upgrades and renovations to ports located along the Suez Canal corridor, including West and East Port Said, Ismailia, Suez, Adabiya, and Ain Sokhna. The Egyptian government has invited foreign investors to take part in the projects, which are expected to be built in several stages, the first of which was scheduled to be completed by mid-2020. Reported areas for investment include maritime services like ship repair services, bunkering, vessel scrapping and recycling; industrial projects, including pharmaceuticals, food processing, automotive production, consumer electronics, textiles, and petrochemicals; IT services such as research and development and software development; renewable energy; and mixed use, residential, logistics, and commercial developments.

Egypt has rules on national percentages of employment and difficult visa and work permit procedures. The government plans to phase out visas for unskilled workers, but as yet has not done so. For most other jobs, employers may hire foreign workers on a temporary six-month basis, but must also hire two Egyptians to be trained to do the job during that period. Only jobs where it is not possible for Egyptians to acquire the requisite skills will remain open to foreign workers. The application of these regulations is inconsistent. The Labor Law allows Ministers to set the maximum percentage of foreign workers that may work in companies in a given sector. There are no such sector-wide maximums for the oil and gas industry, but individual concession agreements may contain language establishing limits or procedures regarding the proportion of foreign and local employees.

No performance requirements are specified in the Investment Incentives Law, and the ability to fulfill local content requirements is not a prerequisite for approval to set up assembly projects. In many cases, however, assembly industries still must meet a minimum local content requirement in order to benefit from customs tariff reductions on imported industrial inputs.

Decree 184 of 2013 allows for the reduction of customs tariffs on intermediate goods if the final product has a certain percentage of input from local manufacturers, beginning at 30 percent local content. As the percentage of local content rises, so does the tariff reduction, reaching up to 90 percent if the amount of local input is 60 percent or above. Exporters receive additional subsidies if they use a greater portion of local raw materials. In certain cases, a minister can grant tariff reductions of up to 40 percent in advance.

Prime Minister issued Decision 3053 of 2019 regarding the formation of joint committees in the inspection yards at each customs port. These committees include representatives of the customs authority and the concerned authorities and bodies according to type of goods. The committees are responsible for completing inspection and control procedures for imported or exported goods within a period not exceeding three working days from the date of the customs declaration was registered.

Manufacturers wishing to export under trade agreements between Egypt and other countries must complete certificates of origin and satisfy the local content requirements contained therein. Oil and gas exploration concessions, which do not fall under the Investment Incentives Law, have performance standards specified in each individual agreement, which generally include the drilling of a specific number of wells in each phase of the exploration period stipulated in the agreement.

Egypt does not impose localization barriers on ICT firms. Egypt’s Personal Data Protection Act (Law 151 of 2020), signed into law in July 2020, will require licenses for cross-border data transfers once the law’s executive regulations are finalized, but it will not impose any data localization requirements. Similarly, Egypt does not make local production a requirement for market access, does not have local content requirements, and does not impose forced technology or intellectual property transfers as a condition of market access. But there are exceptions where the government has attempted to impose controls by requesting access to a company’s servers located offshore, or requested servers to be located in Egypt and thus under the government’s control.

El Salvador

4. Industrial Policies

The International Services Law, approved in 2007, established service parks and centers with incentives similar to those received by El Salvador’s free trade zones. Service Park developers are exempted from income tax for 15 years, municipal taxes for ten years, and real estate transfer taxes. Service Park administrators are exempted from income tax for 15 years and municipal taxes for ten years.

Firms located in the service parks/service centers may receive the following permanent incentives:

Tariff exemption for the import of capital goods, machinery, equipment, tools, supplies, accessories, furniture, and other goods needed for the development of the service activities, along with full exemption from income tax and municipal taxes on company assets.

Service firms operating under the existing Free Trade Zone Law are also eligible for the incentives, though firms providing services to the Salvadoran market cannot receive the incentives. Eligible services include: international distribution, logistical international operations, call centers, information technology, research and development, marine vessels repair and maintenance, aircraft repair and maintenance, entrepreneurial processes (e.g., business process outsourcing), hospital-medical services, international financial services, container repair and maintenance, technology equipment repair, elderly and convalescent care, telemedicine, cinematography postproduction services, including subtitling and translation, and specialized services for aircraft (e.g., supply of beverages and prepared food, laundry services and management of inventory).

The Tourism Law establishes tax incentives for those who invest a minimum of $25,000 in tourism-related projects in El Salvador, including: value-added tax exemption for the acquisition of real estate; import tariffs waiver for construction materials, goods, equipment (subject to limitation); and a ten-year income tax waiver. The investor also benefits from a five-year exemption from land acquisition taxes and a 50 percent reduction of municipal taxes. To take advantage of these incentives, the enterprise must contribute five percent of its profits during the exemption period to a government-administered Tourism Promotion Fund. More information about tax incentives for tourism, please visit: http://www.mitur.gob.sv/ii-aspectos-legales-en-beneficio-de-la-inversion-contemplados-en-la-ley-de-turismo/ 

The Renewable Energy Incentives Law promotes investment projects that use renewable energy sources. In 2015, the Legislative Assembly approved amendments to encourage the use of renewable energy sources and reduce dependence on fossil fuels. These reforms extended the incentives to power generation using renewable energy sources, such as hydro, geothermal, wind, solar, marine, biogas, and biomass. The incentives include a 10-year exemption from customs duties on the importation of machinery, equipment, materials, and supplies used for the construction and expansion of substations, transmission, or sub-transmission lines. Revenues directly derived from renewable power generation enjoy full income tax exemptions for a period of five years in case of projects above 10 MW and 10 years for smaller projects. The Law also provides a tax exemption on income derived directly from the sale of certified emission reductions (CERs) under the Mechanism for Clean Development of the Kyoto Protocol, or carbon markets (CDM).

El Salvador does not issue guarantees or directly co-finance foreign direct investment projects. However, El Salvador has a Public-Private Partnerships Law that allows private investment in the development of infrastructure projects, including in areas of health, education, and security. Under the second MCC Compact, El Salvador launched international tenders for two Public-Private Partnerships projects. In August 2021, the Legislative Assembly approved the contract award of the first-ever PPP project to design, expand, construct, and operate expanded cargo operations of El Salvador’s primary international airport. The estimated budget for the PPP is $57 million. A second PPP tender was released in January 2020 for the design, financing, installation, equipment, operation and maintenance of a public lighting and video surveillance systems on approximately 143 kilometers of roads in San Salvador, La Libertad and La Paz departments. The GOES, however, cancelled the tender in 2022, because the key components of the project were dated after passing nearly two years since it was initially published. It is unclear if the GOES will relaunch the tender.  El Salvador has undertaken pre-feasibility studies on other potential PPP projects, including a second airport in eastern El Salvador, a toll road concession to connect its biggest port (Acajutla) to the La Hachadura border with Guatemala, and improvements of four border crossings (La Hachadura, Anguiatu, El Poy and El Amarillo) and three intermediate customs facilities (Metalio, Santa Ana and San Bartolo). The GOES has planned a total of 16 PPPs.

The Free Trade Zone Law is designed to attract investment in a wide range of activities, although most of the businesses in free trade zones are textile plants. A Salvadoran partner is not needed to operate in a free trade zone, and some textile operations are completely foreign owned.

There are 17 free trade zones in El Salvador. They host 206 companies in sectors including textiles, distribution, call centers, business process outsourcing, agribusiness, agriculture, electronics, and metallurgy. Owned primarily by Salvadoran, U.S., Taiwanese, and Korean investors, free trade zone firms employ more than 81,000 people. The point of contact is the Chamber of Textile, Apparel and Free Trade Zones of El Salvador (CAMTEX) at: https://www.camtex.com.sv/site/ .

The Free Trade Zone Law establishes rules for free trade zones and bonded areas. The free trade zones are outside the nation’s customs jurisdiction while the bonded areas are within its jurisdiction, but subject to special treatment. Local and foreign companies can establish themselves in a free trade zone to produce goods or services for export or to provide services linked to international trade. The regulations for the bonded areas are similar.

Qualifying firms located in the free trade zones and bonded areas may enjoy the following benefits:

Exemption from all duties and taxes on imports of raw materials and the machinery and equipment needed to produce for export;

Exemption from taxes for fuels and lubricants used for producing exports if they not domestically produced;

Exemption from income tax, municipal taxes on company assets and property for either 15 years (if the company is in the metropolitan area of San Salvador) or 20 years (if the company is located outside of the metropolitan area of San Salvador);

Exemption from taxes on certain real estate transfers, e.g., the acquisition of goods to be employed in the authorized activity; and

Exemption from value-added tax on goods and services sourced locally to be employed in the authorized activity, including goods that are not incorporated into the final product, security and transportation services, as well as construction services and materials.

Companies in the free trade zones are also allowed to sell goods or services in the Salvadoran market if they pay applicable taxes on the proportion sold locally. Additional rules apply to textile and apparel products.

Regulations allow a WTO-complaint “drawback” to refund custom duties paid on imported inputs and intermediate goods exclusively used in the production of goods exported outside of the Central American region. Regulations also included the creation of a Business Production Promotion Committee with the participation of the private and public sector to work on policies to strengthen the export sector, and the creation of an Export and Import Center.

All import and export procedures are handled by the Import and Export Center (Centro de Trámites de Importaciones y Exportaciones – CIEX El Salvador). More information about the procedures can be found at: https://www.ciexelsalvador.gob.sv/ciexelsalvador/

El Salvador’s Investment Law does not require investors to meet export targets, transfer technology, incorporate a specific percentage of local content, turn over source code or provide access to surveillance, or fulfill other performance criteria.

In August 2021, the Legislative Assembly passed amendments to the Credit History Law. The amendments introduce data localization requirements mandating credit bureaus and economic agents that report on credit history to store data and its backup exclusively in El Salvador and grant unrestricted access to the Central Bank and the Superintendence of the Financial System. The amendments took effect September 9, 2021, with a grace period of six months for companies to comply as the Central Bank develops technical norms for implementation. U.S. stakeholders have expressed concerns that these new requirements could compromise consumer data privacy and protection. There are no restrictions on cross-border transfers of other business-related data.

Foreign investors and domestic firms are eligible for the same incentives. Exports of goods and services are exempt from value-added tax.

The International Services Law establishes tax benefits for businesses that invest at least $150,000 during the first year of operations, including working capital and fixed assets, hire at least 10 permanent employees, and have at least a one-year contract. For hospital/medical services, the minimum capital investment must be $1 million and a minimum of $250,000 for care services for the elderly and convalescent. Hospitals or clinics must be located outside of major metropolitan areas, and medical services must be provided only to patients with insurance.

Equatorial Guinea

4. Industrial Policies

To stimulate investment and job creation, Law No. 7/1992 on the Investment Regime establishes the following incentives, which have been in place since 1992:

  • A reduction in the company’s tax base equivalent to 50 percent of the salary of an employee in a newly created position.
  • A reduction in the company’s personal income tax equivalent to 200 percent of the cost of training offered to local employees.
  • A credit worth 15 percent the value of non-traditional exports, which can be used in the payment of any fiscal obligations.
  • Additional incentives offered to investors operating in the country’s rural areas, as described in the government’s tax law.

In addition, since the start of the pandemic the government has attempted to incentivize local business creation by reducing the minimum capital investment threshold for registering an LLC. The government does not currently offer any incentives for clean energy investments or for businesses owned by underrepresented investors, such as women.

In 2014, the government established Holding Equatorial Guinea (HOLDING G.E.) to manage a $1.6 million investment fund created to finance its joint ventures with private companies in sectors identified as key to its economic diversification strategy. Previously, the government allocated up to 20 percent of the country’s general budget to this fund every three years, but now it provides funding on a case-by-case basis when HOLDING G.E. identifies co-investment opportunities. Information on investment opportunities in strategic sectors is available on HOLDING G.E.’s website ( https://www.holdingequatorialguinea.com/ ), as is the agency’s “Equatorial Guinea Investment Guide,” which has not been updated since 2018.

Three entities have tax-free status: the Luba Free Port, the Port of Bata, and the K5 Free Port Oil Centre. Goods that are properly cleared through a fellow CEMAC member country are not taxed when entering Equatorial Guinea. In January 2021, Presidential Decree 2/2021 introduced new regulations on cross-border trade with neighboring Cameroon and Gabon, including establishing an import-export office.

Under Equatorial Guinea’s Local Content Law, a significant percentage of the goods and technology used by foreign hydrocarbon companies must be produced or assembled locally or within the CEMAC region. The Ministry of Mines and Hydrocarbons has fined, suspended, and expelled companies perceived to be noncompliant with local content laws, although such cases are more often related to the failure to hire local nationals rather than the failure to use equipment and technology produced in the region.

The government requires internet service providers, whether local or foreign, to turn over source code or to allow surveillance. According to Article 15 of the Telecommunication Law 7, dated November 7, 2015, the Regulating Organ of Telecommunications (ORTEL) oversees official communication lines and networks. The government has no requirements regarding locating data storage within the country.

Eritrea

4. Industrial Policies

Any investment incentives offered to foreign investors, if they exist, are negotiated directly between a small group of GSE and PFDJ officials and foreign governments or companies. There is no published investment incentive framework available for review by all potential foreign investors.

For mining projects, the government requires the ability to buy up to 30% of the equity in the project, in addition to the 10% equity they get by right.

There are two designated Free Trade Zones in Eritrea: 1) The Free Trade Zone in the port city of Massawa, and 2) the Free Trade Zone along the common border between Eritrea and Sudan. However, neither FTZ is operational.

The few large foreign enterprises allowed to operate in Eritrea are believed to employ large amounts of non-domestically produced or acquired goods and technology. However, due to a lack of transparency, it is impossible to determine if their agreements encourage or require them to use some minimal amounts of local goods or technology.

There are no public or transparent procedures for establishing performance requirements for domestic or foreign enterprises.

In Eritrea, there are no requirements for foreign IT providers to turn over source code and/or provide access to encryption. The lack of internet and cellphone data infrastructure (internet penetration in the country is believed to approximate 1.5%) impede data transfer from Eritrea, but there are no publicly stated policies that impede data transmission.  There are no publicly stated rules on local data storage.

Estonia

4. Industrial Policies

Estonia is open for FDI and foreign investors are treated on an equal footing with local investors with respect to incentives. There are no investment incentives or government guarantees available to foreign investors.

As the green transition is one of the Government of Estonia’s main priorities, a wide range of assistance is available to all companies, including those with foreign ownership. Grants and co-financing are available for clean energy, energy efficiency, and circular economy projects. More info on assistance: Keskkonnainvesteeringute Keskus | (kik.ee) 

Estonia’s Customs Act permits the government to establish free trade zones. Goods in a free trade zone are considered to be outside the customs territory. Value-added tax, excise, import and export duties, as well as possible fees for customs services, do not have to be paid on goods brought into free trade zones for later re-export.

In Estonia, there are four free trade zones: Muuga port (near Tallinn), Sillamae port (northeast Estonia), Paldiski north port (northwest Estonia) and in Valga (southern Estonia). All free trade zones are open for FDI on the same terms as Estonian investments.

There are no specific performance requirements for foreign investments that differ from those required of domestic investments. The Estonian government does not mandate local employment or follow “forced localization” in which foreign investors must use domestic content in goods or technology.

Estonia continues to refine its immigration policies and practices. More info on work permits, visas, residence permits in Estonia: https://www.politsei.ee/en 

U.S. citizens are exempt from the quota regulating the number of immigration and residence permits issued, as are citizens of the EU and Switzerland.

There are no requirements for foreign IT service providers to turn over source code and/or provide access to surveillance (e.g., backdoors into hardware and software or turning over keys for encryption) or to maintain a certain amount of data storage in Estonia. There is no general requirement to register data processing activities in Estonia. Registration is required only if the data processor handles sensitive personal data.

The EU General Data Protection Regulation (GDPR) entered into force on May 25, 2018, with the goal of harmonizing the already existing data protection laws across Europe. The Estonian Personal Data Protection Act came into force on January 15, 2019. More info: https://e-estonia.com/how-to-be-compliant-gdpr-5-steps/ 

Restrictions on transfer of data offshore:

Information on data transfer is available at: https://www.riigiteataja.ee/en/eli/523012019001/consolide  or by contacting:

Estonian Data Protection Inspectorate39 Tatari Street, 10134Tel: (+372) 627 4135 https://www.aki.ee/en 

Eswatini

Ethiopia

4. Industrial Policies

Investment Regulation 474/2020 retains the investment incentive provisions as outlined under the 2012 law. Accordingly, investors in manufacturing, agri-processing, and selected agricultural products are entitled to income tax exemptions ranging from two to five years, depending on the location of the investment. Additionally, investors in manufacturing; agriculture; ICT; electricity generation, transmission, and distribution; and producers who produce for export or supply to an exporter, or who export at least 60 percent of the products or services, are entitled to an additional two years of income tax exemption. Investors in renewable energy generation are eligible for 4-5 years of income tax exemptions. There are no special incentives for investments made by members of under-represented social groups such as women.

Industrial Park Proclamation 886/2015 mandates that the Ethiopian Industrial Parks Corporation develop and administer industrial parks under the auspices of government ownership. The law designates industrial parks as duty-free zones, and domestic as well as foreign operators in the parks are exempt from income tax for up to 10 years. Investors operating in parks are also exempt from duties and other taxes on the import of capital goods, construction materials, and raw materials for production of export commodities and vehicles.

An investor who operates in a designated Industrial Development Zone in or near Addis Ababa is entitled to two years of income tax exemptions, and four more years of income tax exemption if the investment is made in an industrial park in other areas, provided 80 percent or more of production is for export or constitutes input for an exporter.

Industrial Parks can be developed by either government or private developers. In practice, the majority have been developed by the GOE with Chinese financing. The list of operational industrial parks is available at https://ipdc.gov.et/service/parks.

Ethiopia does not impose official performance requirements on foreign investors, though foreign investors routinely encounter business visa delays and onerous paperwork requirements. In addition, foreign investors are required to comply with a $100,000 minimum capital investment requirement for architectural or engineering projects and a $200,000 requirement to projects in other sectors. For most joint investments with a domestic partner, the minimum capital investment requirement is $150,000.

The minimum capital requirement is waived if the foreign investor reinvests profits or dividends generated from an existing enterprise in any investment area open to foreign investors; and if a foreign investor purchases a portion or the entirety of an existing enterprise owned by another foreign investor. There are no forced localization or data storage requirements for private investors. Local content in terms of hiring, products, and services is strongly encouraged but not required.

Proclamation 808/2013 mandates that the Information Network Security Agency (INSA) control the import and export of information technology, build an information technology testing and evaluation laboratory center, and regulate cryptographic products and their transactions.

Fiji

4. Industrial Policies

Fiji offers incentives for a range of sectors to encourage investments in agriculture, residential housing development, energy, audio & visual, retirement village / aged care facilities, health sector, tourism, manufacturing, and the information communication technology (ICT) / business process outsourcing (BPO) sector.

Government is increasingly participating in public private partnerships. Although it does not practice issuing guarantees to foreign direct investments, it has previously offered a tax holiday for the entire period of the partnership agreement.

Fiji offers tax holidays for investments in biofuel production for investments of at least $117,925 (FJD$250,000). The tax holidays range from five to 13 years depending on the level of investment. The incentive package further includes duty free importation of plant, machinery, and equipment for initial establishment of the factory and duty-free importation of chemical required for biofuel production. The importation of all agricultural items will be subject to zero duty provided a support letter is obtained from Fiji’s Ministry of Agriculture.

A five-year tax holiday is offered to investors for new renewable energy projects and power cogeneration upon approval. Investment projects for electric vehicle charging station businesses will receive a seven-year tax holiday and will be granted a subsidy up to a maximum of five percent of the total capital outlay incurred in the development of electric vehicle charging stations, provided the capital expenditure is at least $47,170 (FJD$100,000), and will be allowed to carry loss forward to eight years. Any business investing in electric buses shall be allowed a tax deduction of 55 percent.

The northern and selected maritime regions of Fiji have been declared Tax Free Regions (TFR) to encourage development in these isolated outposts. The specific areas include Vanua Levu, Rotuma, Kadavu, Levuka, Lomaiviti, Lau, and the Nausori-Lautoka region (from Nausori Airport side of the Rewa River (excluding township boundary) to the Ba side of the Matawalu River). Businesses established in these regions which meet the prescribed requirements enjoy a corporate tax holiday of up to 13 years and import duty exemption on raw materials, machinery, and equipment. The Wairabetia Economic Zone (WEZ) is a government project planned to be established by 2023 in Lautoka to provide the necessary facilities to support businesses with the provision of developed lots close to Lautoka Port and Nadi airport.

The government does not follow “forced localization.” However, immigration “time post” permits reserved for specialist positions encourage the transfer of knowledge and skills from expatriate workers to local workers. Investors permits are granted and extended by the Department of Immigration based on recommendations submitted by Investment Fiji through a progress report. The progress report provides the Department of Immigration an update on the progress of the investment project by the foreign investor.

There are performance requirements to use domestic content in goods to qualify for trade under the trade agreements between Fiji and partner countries, and to receive the “Fijian Made” branding by the MCTTT. These requirements apply to both foreign and domestic investors. Investment incentives are applied systematically.

To support the implementation of newly approved investments, Investment Fiji established a monitoring system to assist companies in obtaining necessary approvals to commence operations. The investing firm must ensure that commercial production begins within 12 months for investments under $1.18 million (FJD$2.5 million) or within 18 months of the date of approval of the project for investments above $1.18 million (FJD$2.5 million).

The U.S. Embassy is unaware of any policies regulating data storage or requiring foreign IT providers to turn over source code or provide access to surveillance.

Under the Investment Act 2021, any new investments relating to data storage or access to sensitive information or the ability to control sensitive information must have their proposals vetted by the MCTTT.

Finland

4. Industrial Policies

Foreign-owned companies in Finland are eligible for government and EU incentives on an equal footing with Finnish-owned companies. Support is given in the form of grants, loans, tax benefits, equity participation, guarantees, and employee training.

Assistance is administered through one of Finland’s Centers for Economic Development, Transport, and the Environment (ELY) that provide advisory, training, and expert services as well as grant funding for investment and development projects. Investment aid can be granted to companies in the regional development areas, especially small and medium enterprises (SMEs). Large companies may also qualify if they have a major employment impact in the region. Aid to business development can be granted to improve or facilitate the company’s establishment and operation, know-how, internationalization, product development or process enhancement. Subsidies for start-up companies are available for establishing and expanding business operations during the first 24 months. Transport aid may be granted for deliveries of goods produced to sparsely populated areas. Energy subsidies can be granted to companies for investments in energy efficiency and conservation. EU finance is largely also channeled through the ELY Centers. http://www.ely-keskus.fi/en/web/ely-en/business-and-industry;jsessionid=0B09A1B237B74FAC485AAD7C8E068DBF .

Business Finland provides low-interest loans and grants to challenging and innovative projects potentially leading to global success stories. The organization offers funding for research and development work carried out by companies, research organizations, and public sector service providers in Finland. Besides funding technological breakthroughs, Business Finland emphasizes also service-related, design, business, and social innovations. Startups and both SMEs and large companies can benefit from Business Finland incentives.

A company can use guarantees from the state-owned financing company Finnvera: https://www.finnvera.fi/eng/start/applying-for-financing-when-setting-up-a-business . Finnvera offers services to businesses in most sectors and is also Finland’s official Export Credit Agency (ECA).

Business Finland helps foreign investors set up a business in Finland. Its services are free of charge, and range from data collection and matchmaking to location management. Business Finland’s innovation funding provides low-interest loans and grants to challenging and innovative projects potentially leading to global success stories. The organization offers funding for research and development work carried out by companies, research organizations, and public sector service providers in Finland: https://www.businessfinland.fi/en/do-business-with-finland/invest-in-finland/invest-in-finland. More on Business Finland’s incentives: https://www.businessfinland.fi/en/do-business-with-finland/invest-in-finland/business-environment/incentives/incentives-short and incentives fact sheet : https://mediabank.businessfinland.fi/l/CGccrMLqwN5d

Support for innovative business ventures can also be obtained from the Foundation for Finnish Inventions: https://www.wipo.int/members/en/details.jsp?country_id=57  https://www.keksintosaatio.fi/en/keksintosaatio-etusivu-english/

As part of the Sustainable Growth Program (the recovery and resilience plan), Finland is promoting energy investment and energy infrastructure projects that reduce greenhouse gas emissions in Finland and support Finland’s 2035 carbon neutrality target. The 520 million eur funding promotes climate objectives and new business opportunities in sustainable growth for companies. For more see: https://tem.fi/en/-/energy-investments-of-finland-s-sustainable-growth-programme-promote-the-green-transition )

Finland’s feed-in premium scheme for renewable electricity production (wind power, biogas, forest chips and wood fuels) entered into force in 2011 (Act No. 1396/2010). Wind power, biogas power and wood-based fuel power stations accepted in the feed-in system were paid a subsidy meeting the difference between the target price and the electricity’s market price for a 12-year period. Support for wind power was closed the end of 2017, biogas and wood-based fuel power plant end of 2018 and wood chip power plants in mid-March 2021.

Finnish tax legislation provides certain tax incentives for using renewable energy sources (for example, simplified excise taxation and possibility to apply for a tax refund). For more see: https://www.vero.fi/en/About-us/newsroom/news/uutiset/2021/taxation-changes-2022/

Government aid is available for the implementation of energy audits, investments that conserve energy and investments related to the use of renewable energy as well as for European Skills, Competences, Qualifications and Occupations (ESCO) projects. For more see: https://www.motiva.fi/en/solutions/policy_instruments/energy_aid

In Finland, the level of energy taxation is higher than the minimum tax levels set by the EU. According to Finnish Energy, a lobby organization for the energy sector, companies operating in Finland are disadvantaged in international competition due to Finland’s high energy taxation. Electricity tax on industry is lower than that on consumers and other businesses, but it is still high on the international scale.

In Finland, the current national policy is to tax energy production based on the carbon intensity of the fuel used, leaving renewable energy sources outside this tax. These carbon-based tax incentives for renewable energy production promote technologies with higher maturity and lower subsidy needs.

Free trade zone area regulations have been harmonized in the EU by the Community Customs Code. The European Union Customs Code UCC, its Delegated Act and Implementing Act entered into force on May 1, 2016, and will be implemented gradually; the free zone of control type II was abolished and the operator authorizations were changed into customs warehouse authorizations on Customs’ initiative. In Finland, uncleared goods can be stored in temporary warehouses or customs warehouses. There are no free zones or special economic zones in Finland.

The Code also allows the processing of non-Union goods without import duties and other charges. For more see: https://tulli.fi/en/businesses/customs-declarations/entry-and-temporary-storage

There are no performance requirements or commitments imposed on foreign investment in Finland. However, to conduct business in Finland, some residency requirements must be met. The Limited Liability Companies (LLC) Act of Finland is at: http://finlex.fi/en/laki/kaannokset/2006/en20060624 . A LLC must be reported for registration within three months from the signing of the memorandum of association: https://www.prh.fi/en/kaupparekisteri/yrityksen_perustaminen/osakeyhtio.html . There is no forced localization policy for foreign investments in Finland.

The legal basis for the limitation on admission of third country nationals for the purpose of employment is set out in the Council Resolution C274/3 of 1994. Labor Market Tests (LMT) are mechanisms that aim to ensure that migrant workers are only admitted after employers have seriously and unsuccessfully searched for local workers. As a tool to manage labor migration and to facilitate entry of certain categories of third-country national workers, Finland applies various exemptions from the LMT for certain categories of worker, according to national labor market needs. These categories include: highly qualified workers or top specialists, inter-corporate transferees (ICTs), posted workers, persons holding high ranking positions, sports professionals, workers in the field of research, science, art, and culture. LMT for persons already working in Finland and transferring to other sectors was removed in June 2019 in order to improve the labor mobility of foreign citizens already in the labor market.

To improve availability of workforce in sectors with labor shortage, a regional LMT pilot was launched in September 2021 through February 2023. Common guidelines on work permits in selected areas are introduced to increase labor mobility between regions and ease permit processes.

Finland participates actively in the development of the EU’s Digital Single Market (DSM) and, aside from privacy issues, encourages a light regulatory approach in this area. Since May 2018, data transfers from Finland to non-EU countries must abide by EU General Data Protection Regulation (GDPR) (EU) 2016/679. Finland supports the EU Commission’s view on promoting European digitalization and creating a single market for data.

In February 2021, an Advisory Board for Network Security (NSAB) was established to assess and develop the security of domestic communications networks and to support decision-making by the authorities. The Board operation is based on the new provisions of the Act on Electronic Communications Services that entered into force in early 2021, and is part of the implementation of the EU guidelines and 5G security toolbox in Finland.

Personal data may be transferred across borders per the Finnish Personal Data Act (PDA) at: http://finlex.fi/en/laki/kaannokset/1999/en19990523, which states that personal data may be transferred outside the European Union or the European Economic Area only if the country in question guarantees an adequate level of data protection. Office of the Data Protection Ombudsman legislation is at: https://tietosuoja.fi/en/organisations .

In November 2020, the Office of the Data Protection Ombudsman and the Finnish Information Society Development Center TIEKE started a pilot program providing micro enterprises and SMEs with information and tools to help ensure effective data protection. More information here: https://tietosuoja.fi/en/-/data-protection-opening-doors-into-europe-for-smes

France and Monaco

4. Industrial Policies

Following the election of President Emmanuel Macron in May 2017, the French government implemented significant labor market and tax reforms. By relaxing the rules on companies to hire and fire employees and by offering investment incentives, Macron improved the operating environment in France, based on surveys of U.S. investors.

However, with the onset of the pandemic, Macron put an end to his planned pension reforms and introduced his overhaul of France’s unemployment insurance in stages throughout 2021. Under his new plan, employees must work longer to qualify for unemployment benefits: they are required to work at least six of the last 25 months, instead of four of the last 28 months under previous rules. Furthermore, employees under 57 years of age, earning €4,500 ($4,952) in pre-tax monthly wages, will see their benefits decrease by 30 percent after the seventh month of unemployment. The other major aspect of this reform mandates that the rules for calculating unemployment benefits are based on an average monthly income from work rather than the number of days worked, as was the case previously. The purpose is to ensure unemployment benefits never exceed the amount of the average monthly net salary (which is currently the case for some beneficiaries).

In 2021, the government’s focus shifted to mitigating France’s most severe economic crisis in the post-war era. The economy shrank 8.3 percent in 2020 compared to the year prior as a result of the COVID-19 pandemic. In response, the government implemented extensive direct fiscal support to households and businesses in 2020 and 2021. The “France Relaunch” recovery program was mainly comprised of loan guarantees, unemployment schemes that support workers’ wages, subsidies to vulnerable sectors, investment in green and developing technologies, production tax cuts and other tax benefits, and funding for research and development. The cost of the emergency measures was around €70 billion ($76.9 billion) in 2020 (2.9 percent of 2019 GDP), according to the national accounts. In 2021, the measures reached €64 billion ($70.3 billion), or 2.6 percent of 2019 GDP. The government’s agenda aims to bolster competitiveness, increase productivity, and accelerate the ecological transition.

In addition, the authorities announced a new investment plan to 2030 in October 2021. The plan, called “France 2030,” allocates €30 billion ($33 billion) over five years and aims to complement France Relance recovery plan. “France 2030” targets further investment in the energy sector (€8 billion/$8.8 billion), as well as the health (€7 billion/$7 billion) and transport sectors (€4 billion/$4.4 billion). The permanent production tax cuts (€10 billion annually), included in France Relance, bring the estimated level of support to around 7.1 percent of 2019 GDP for the period 2020-27.

Both “France Relaunch” and “France 2030” fiscal packages support France’s green transition, the “decarbonization of the French economy,” and the “French green hydrogen plan.” Measures include the energy renovation of public buildings, private housing, social housing, and the operating premises of VSEs (Very Small Enterprises) and SMEs (Small and Medium Enterprises); support for the rail sector in order to renovate the national network and develop freight; development of green hydrogen; support for public transport and the use of bicycles; aid for industrial companies to invest in equipment that emits less CO2; and support for the green transition of agricultural.

“France 2030” supports the transformation of France’s automotive, aerospace, digital, green industry, biotechnology, culture, and healthcare sectors. Its objectives include the development of small-scale nuclear reactors, becoming a leader in green hydrogen (hydrogen made using renewable energy sources), producing two million electric and hybrid vehicles, and decarbonizing France’s industry by reducing greenhouse gas emissions by 35 percent relative to 2015. Of the plan’s €30 billion ($33.8 billion) to be invested over the five years, €3-4 billion ($3.4-4.5 billion) will be spent beginning in 2022. Additionally, one-third of France’s €100 billion ($106 billion) “France Relance” pandemic recovery package is allocated to the ecological transition, including energy sector related investments. The plan also targets green technology, including the development of a hydrogen economy. With approximately two thirds of its electricity coming from nuclear power, France supports the use of nuclear energy to meet near-term emissions reductions targets. Of the developed economies, France has one of the lowest rates of greenhouse gas emissions per capita and per unit of GDP due to its reliance on nuclear power. France aims to phase out fossil fuels over the next decade, shut down the last of its coal plants by 2022, and end public financial support for fossil fuels and natural gas by 2025 and 2035, respectively. In October 2020, France announced it would phase out export guarantees for foreign projects involving fossil fuels by 2035.

France’s “Ma Prime Renov” scheme allocates €1.4 billion to homeowners to finance insulation, heating, ventilation, or energy audit works for single-family house or apartments in collective housing. Such investment will finance the thermal renovation of 400,000 households. To guarantee quality standards, the renovation projects must be carried out by companies with a label classified as “recognized as guarantor of the environment.”

Former PM Jean Castex presented in March 2022 France’s “Resilience Plan” to support households and businesses affected by sanctions associated with the Russia-Ukraine conflict. The first portion of the plan provides support for specific sectors impacted directly by the conflict: fisheries, agriculture and livestock, transportation and trucking, and construction. There are also non-sectoral support targeting exporting firms and energy-intensive companies, plus continued state-guaranteed loans and delayed tax collection for companies facing higher energy costs and exports difficulties. The additional measures in the “Resilience Plan” will cost the government an additional €5-6 billion ($5.5-6.6 billion), on top of previously-implemented measures that include a gas price cap (€10 billion/ $11 billion), electricity price cap (€8 billion/ $8.8 billion), and energy cheques and inflation offsets (€2 billion/ $2.2 billion).

France is subject to all EU free trade zone regulations. These allow member countries to designate portions of their customs’ territory as duty-free, where value-added activity is limited. France has several duty-free zones, which benefit from exemptions on customs for storage of goods coming from outside of the European Union. The French Customs Service administers them and provides details on its website ( http://www.douane.gouv.fr ). French legal texts are published online at http://legifrance.gouv.fr .

In September 2018, President Macron announced the extension of 44 Urban Free Zones (ZFU) in low-income neighborhoods and municipalities with at least 10,000 residents.  The program provides incentives for employers, who have created 600 new jobs since 2016. Incentives include exemption from payment of payroll taxes and certain social contributions for five years, financed by €15 million ($17.7 million) a year in State funds.

While there are no mandatory performance requirements established by law, the French government will generally require commitments regarding employment or R&D from both foreign and domestic investors seeking government financial incentives. Incentives like PAT regional planning grants (Prime d’Amenagement du Territoire pour l’Industrie et les Services) and related R&D subsidies are based on the number of jobs created, and authorities have occasionally sought commitments as part of the approval process for acquisitions by foreign investors.

The French government imposes the same conditions on domestic and foreign investors in cultural industries:  all purveyors of movies and television programs (i.e., television broadcasters, telecoms operators, internet service providers and video services) must contribute a percentage of their revenues toward French film and television productions. They must also abide by broadcasting cultural content quotas (minimum 40 percent French, 20 percent EU).

The 2018 Directive on audio-visual media services, implemented in France by a December 21, 2020 government decree, requires streaming services exceeding a certain revenue threshold to contribute 20 or 25 percent of their revenues in France to the development of French and European production, depending on how quickly they show movies after their theatrical release. For example, Netflix has signed the agreement under the new windowing rules and will benefit from having access to movies 15 months after their theatrical release. Other streaming services such as Disney Plus will have a 17-month window for new films. Netflix, Amazon, Disney Plus, and Apple TV Plus signed in December 2021 an agreement with France’s broadcasting authority CSA to start investing 20 percent of their annual revenues in French content.

Gabon

Georgia

4. Industrial Policies

The Georgian government has created several tools to support investment in Georgia’s economy. The JSC Partnership Fund is a state-owned investment fund, established in 2011. The fund owns the largest Georgian state-owned enterprises operating in the transportation, energy, and infrastructure sectors. The Fund’s main objective is to promote domestic and foreign investment in Georgia by providing co-financing (equity, mezzanine, etc.) in projects at their initial stage of development, with a focus on tourism, manufacturing, energy, and agriculture ( www.fund.ge ).

In 2013, the government launched the Georgian Co-Investment Fund (GCF) to promote foreign and domestic investments. According to the government, the GCF is a $6 billion private investment fund with a mandate of providing investors with unique access, through a private equity structure, to opportunities in Georgia’s fastest growing industries and sectors ( www.gcfund.ge ).

Due to the absence of customs and import tariffs in Georgia, investors can take advantage of access to over 2.3 billion potential customers without customs tariffs. In order to support Georgia’s position as a regional hub for trade and logistics, the government invests heavily to develop infrastructure. Some recent incentives that the Georgian Government has put in place include the following:

FDI Grant: The goal of the program is to promote the growth of foreign direct investments in Georgia, the inflow of technology, and the creation of new jobs. See more information and eligibility criteria at https://www.investingeorgia.org/en/agency/news-events/news/the-state-program-fdi-grant.page .

International Company Status: “International Company Status” grants IT sector companies a preferential tax regime, which qualifies them for reduced rates of Corporate Tax (5%), Dividends Tax (0%), and Personal Income Tax (5%). More information is available at https://www.rs.ge/LegalEntityPreferentialTax-en?cat=10&tab=1 .

Credit Guarantee Mechanism: This program aims at improving access to finance for small and medium size businesses, facilitates lending, and ensures inclusive economic growth. The program opens opportunity for small and medium size businesses which do not meet the requirements of the loan collateral. See more information at https://www.enterprisegeorgia.gov.ge/en/business-development/Credit-guarantee-mechanism .

The government’s “Produce in Georgia” program is another tool for jointly financing foreign investment under which investors establish limited liability companies in Georgia. This program includes co-financing of the annual interest rate on loans issued by commercial banks, as well as the transfer of state property (both land and buildings) to private ownership at a symbolic price – 1 GEL (approximately $0.30), with a certain investment commitment. The program aims to develop and support entrepreneurship, encourage creation of new enterprises, and increase export potential and investment in the country. Coordinated by the Ministry of Economy and Sustainable Development through Enterprise Georgia, the National Agency of State Property, and the Agriculture and Rural Development Agency, the project provides access to finance, access to real property, and technical assistant to entrepreneurs.

The program “Produce in Georgia” unites several programs, such as Film in Georgia, Business Universal ( https://www.enterprisegeorgia.gov.ge/en/business-development/universal-industry ) – which in itself contains “Business Export” ( https://www.enterprisegeorgia.gov.ge/en/business-development/business-export ) and “Development of Agro and Eco-Tourism” ( https://www.enterprisegeorgia.gov.ge/en/business-development/tourism-development ). “Film in Georgia”- allows local and international producers and filmmakers to film or undertake video, audio, and other productions in Georgia, and reimburse between 20% to 25% of qualified expenses through a cashback mechanism ( https://www.enterprisegeorgia.gov.ge/en/business-development/filmingeorgia ). For more information please also visit http://enterprisegeorgia.gov.ge/en/home .

The National Agency of State Property oversees the Physical Infrastructure Transfer Component, the free-of-charge transfer of government-owned real property to an entrepreneur under certain investment obligations.

In October 2018, Georgia’s Prime Minister introduced the concept of electronic residency, allowing citizens of 34 countries to register their companies electronically and open bank accounts in Georgia while not having a physical presence in the country.

Incentives for Construction of RES Capacities: Under Article 5 of the Energy Law, one of the general principles of organization, regulation and monitoring of energy activities is promotion of the generation of electricity from renewable energy sources and of the combined generation of electricity and heat. Moreover, Article 7 of the Energy Law states The State Energy Policy shall provide measures aimed at the use of renewable energy sources for the generation of electricity and consumption of electricity produced from such sources, as well as any incentives and support mechanisms applied for the promotion of the use of renewable energy sources.

The new energy legislation promotes domestic and foreign investment in rehabilitation and improving industries such as coal, natural gas, water supply, and using local hydropower and other sustainable and alternative tools. It also emphasizes the value of small power plants with an installed capacity of 15 megawatts (MW) for the effective and environmentally friendly use of renewable energy resources.

Resolution No 403 of the Government of Georgia, On the approval of Support Scheme (Hydroelectric Power Plants) of the Generation and Use energy from Renewable Energy Sources Energy Support and Use Scheme from Renewable Sources, was adopted in 2020 and amended in 2021 ( https://matsne.gov.ge/ka/document/view/4914589?publication=0, in Georgian). This resolution outlines support schemes for construction and operation of power plants which are initiated by the private developer and have installed capacity more than 5 MW. These schemes include the following:

  • A 10-year support period, for eight months during each year after the commissioning starts, according to the applicable law;
  • Premium tariff of up to 1.5 cents (in USD) per kilowatt-hour (kW/h);
  • Premium tariff paid in the form of adding to the wholesale price recorded at the organized electricity market for the relevant hour, only in the cases when during the support period for the relevant hour generated by the Power Plant and at the organized electricity market sold wholesale electricity price is lower than 5.5 cents (in USD) per kW/h;
  • In an organized electricity market, at the relevant hour, the difference between the wholesale price and 5.5 cents (in USD) is lower than 1.5 cents (in USD), the premium tariff is calculated in accordance with the difference.

Low labor costs contribute to the attractiveness of Georgia as a foreign investment destination. Georgia is also increasingly recognized as a regional transportation hub that links Asia and Europe. Georgia’s free trade regimes provide easy access for companies to export goods produced in Georgia to foreign markets. In some cases, foreign investors can benefit from these agreements by producing goods that target these markets.

In June 2007, the Parliament of Georgia adopted the Law on Free Industrial Zones, which defines the form and function of free industrial/economic zones. Financial operations in such zones may be performed in any currency. Foreign companies operating in free industrial zones are exempt from taxes on profit, property, and VAT. Currently, there are four free industrial zones (FIZ) in Georgia:

Poti Free Industrial Zone (FIZ): This is the first free industrial zone in the Caucasus region, established in 2008. UAE-based RAK Investment Authority (RAKIA) initially developed the zone, but in 2017, CEFC China Energy Company Limited purchased 75 percent of shares, with the Georgian government holding the remaining 25 percent. Poti FIZ ( www.potifreezone.ge ), a

300-hectare area, benefits from its proximity to the Poti Sea Port.

A 27-hectare plot in Kutaisi is home to the Egyptian company Fresh Electric, which constructed a kitchen appliances factory in 2009. The company has committed to building about one dozen textile, ceramics, and home appliances factories in the zone, and announced its intention to invest over $2 billion.

Chinese private corporation “Hualing Group,” based in Urumqi, China, developed another FIZ in Kutaisi in 2015. This FIZ is a 36-hectare area that houses businesses focused on sales of wood, furniture, stone, building materials, pharmaceuticals, auto spare parts, electric vehicles, and beverages ( www.hualingfiz.ge ).

The Tbilisi Free Zone (TFZ) in Tbilisi occupies 17 hectares divided into 28 plots. TFZ has access to the main cargo transportation highway, Tbilisi International Airport (30 km), and the Tbilisi city center (17 km). For more information, visit: https://www.tfz.ge/en/510/ .

Performance requirements are not a condition of establishing, maintaining, or expanding an investment, but the government has imposed requirements on a case-by-case basis in some privatizations of large state assets, such as commitments to maintain employment levels or to make additional investments within a specified time period. Performance requirements such as scope and time limit on licenses to extract natural resources or production sharing agreements have triggered complaints from some companies that transactions lacked transparency. Most types of performance requirements are prohibited by the U.S.-Georgia BIT.

Georgia’s Law on Promotion and Guarantees of Investment Activity prohibits setting the required minimum number of Georgian citizens to be elected or appointed in leading bodies of enterprises.

The government does not follow a forced localization policy though recent legislative changes have created difficulties in acquiring residence permits for foreign employees working for VAT exempt entities. Foreign investors have no obligation to use domestic content in goods or technology. In addition, there are no requirements for foreign IT providers to turn over source codes and/or provide access to surveillance.

Customer and business-related data transfer is not restricted in Georgia, neither within nor outside the country, unless it concerns personal or national security matters, which are protected by the law.

The Data Exchange Agency (DEA), under the Ministry of Justice, coordinates e-governance development, data exchange infrastructure, unified governmental networks, informational and communication standards, and cybersecurity policy. The DEA requires any company managing critical data to implement a number of security protocols to protect that information ( www.data.gov.ge ).

Germany

4. Industrial Policies

Federal and state investment incentives – including investment grants, labor-related and R&D incentives, public loans, and public guarantees – are available to domestic and foreign investors alike. Different incentives can be combined. In general, foreign and German investors must meet the same criteria for eligibility.

Germany’s Climate Action Program provides targeted support for research and development into climate-friendly technologies, through which it aims to build on Germany’s position as a leading provider and a lead market for such technology. The Energy and Climate Fund, which is scheduled to reach a volume of $220 billion (200 billion euros) by 2026, is the main instrument for financing Germany’s energy transition and climate action measures. It facilitates investments in climate protection and security of supply.

The federal government also funds a program offering subsidized loans or nonrepayable cash grants to support the purchase of equipment leading to energy savings. Up to 45 percent of energy efficiency expenditures by large enterprises and 55 percent of expenditures by SMEs are eligible for coverage under the program.

Germany Trade & Invest (GTAI), Germany’s federal economic development agency, provides comprehensive information on incentives in English at: https://www.gtai.de/gtai-en/invest/investment-guide/incentive-programs .

There are currently two free ports in Germany operating under EU law: Bremerhaven and Cuxhaven. The duty-free zones within the ports also permit value-added processing and manufacturing for EU-external markets, albeit with certain requirements. All are open to both domestic and foreign entities. In recent years, falling tariffs and the progressive enlargement of the EU have eroded much of the utility and attractiveness of duty-free zones.

In general, there are no discriminatory export policies or import policies affecting foreign investors: no requirements for local sourcing, export percentage, or local or national ownership. In some cases, however, there may be performance requirements tied to an incentive, such as creation of jobs or maintaining a certain level of employment for a prescribed length of time.

Visa, residence, and work permit procedures for foreign investors are non-discriminatory and, for U.S. citizens (as investors or employees), generally liberal. No restrictions exist on the numbers of foreign managers brought in to supervise foreign investment projects. Work permits for managers can be granted for a maximum of three years and permits can only be renewed after a six-month “cooling off period.”

U.S. companies can generally obtain the visas and work permits required to do business in Germany. U.S. citizens may apply for work and residential permits from within Germany. Germany Trade & Invest offers detailed information online at https://www.gtai.de/gtai-en/invest/investment-guide/coming-to-germany .

There are no general localization requirements for data storage in Germany. However, the invalidation of the Privacy Shield by the European Court of Justice in July 2020 in the Schrems II case has led not only to increased calls for localized data storage in Germany but also to greater scrutiny by the German data protection commissioners of U.S. service providers handling German user data. In recent years, German and European cloud providers have also sought to market the domestic location of their servers as a competitive advantage.

Ghana

4. Industrial Policies 

Investment incentives differ slightly depending upon the law under which an investor operates.  For example, while all investors operating under the Free Zone Act are entitled to a ten-year corporate tax holiday, investors operating under the GIPC law are not.  Tax incentives vary depending upon the sector in which the investor is operating.

All investment-specific laws contain some incentives.  The GIPC law allows for import and tax exemptions for plant inputs, machinery, and parts imported for the purpose of the investment.  Chapters 82, 84, 85, and 89 of the Customs Harmonized Commodity and Tariff Code zero-rate these production items.  In 2015, the Government of Ghana imposed a new five percent import duty on some items that were previously zero-rated to conform to the new Economic Community of West African States (ECOWAS) common external tariff.

The Ghanaian tax system is replete with tax concessions that considerably reduce the effective tax rate.  The minimum incentives are specified in the GIPC law and are not applied in an ad hoc or arbitrary manner.  Once an investor has been registered under the GIPC law, the investor is entitled to the incentives provided by law.  The government has discretion to grant an investor additional customs duty exemptions and tax incentives beyond the minimum stated in the law.

The GIPC website ( www.gipc.gov.gh ) provides a thorough description of available incentive programs.  The law also guarantees an investor all the tax incentives provided for under Ghanaian law.  For example, rental income from commercial and residential property is exempt from tax for the first five years after construction.  Similarly, income from a company selling or leasing out premises is income tax exempt for the first five years of operation.  Rural banks and cattle ranching are exempt from income tax for ten years and pay eight percent thereafter.

The corporate tax rate is 25 percent, and this applies to all sectors, except income from non-traditional exports (eight percent tax rate), companies principally engaged in the hotel industry (22 percent rate), and oil and gas exploration companies (35 percent tax rate).  For some sectors there are temporary tax holidays.  These sectors include Free Zone enterprises and developers (0 percent for the first ten years and 15 percent thereafter); real estate development and rental (0 percent for the first five years and 25 percent thereafter); agro-processing companies (0 percent for the first five years, after which the tax rate ranges from 0 percent to 25 percent depending on the location of the company in Ghana), and waste processing companies (0 percent for seven years and 25 percent thereafter).  In December 2019, to attract investments under the Ghana Automotive Development Policy, corporate tax holidays among other import duty and value-added tax exemptions were granted to manufacturers or assemblers of semi-knocked-down vehicles (0 percent for three years) and complete knocked down vehicles (0 percent for ten years).  Tax rebates are also offered in the form of incentives based on location.  A capital allowance in the form of accelerated depreciation is applicable in all sectors except banking, finance, commerce, insurance, mining, and petroleum.  Under the Income Tax Act, 2015 (Act 896), all businesses can carry forward tax losses for at least three years.

Ghana has no discriminatory or excessively burdensome visa requirements.  While ECOWAS nationals do not require a visa to enter Ghana for 90 days, they need a work and residence permit to live and work in Ghana.  The current fees for work and residence permit for ECOWAS nationals is USD 500 while that for non-ECOWAS nationals is USD 1,000.  A foreign investor who invests under the GIPC Act is automatically entitled to a specific number of visas/work permits based on the size of the investment.  When an investment of USD 50,000 but not more than USD 250,000 or its equivalent is made in convertible currency or machinery and equipment, the enterprise can obtain a visa/work permit for one expatriate employee.  An investment of USD 250,000, but not more than USD 500,000, entitles the enterprise to two visas/work permits.  An investment of USD 500,000, but not more than USD 700,000, allows the enterprise to bring in three expatriate employees.  An investment of more than USD 700,000 allows an enterprise to bring in four expatriate employees.  An enterprise may apply for extra visas or work permits, but the investor must justify why a foreigner must be employed rather than a Ghanaian.  There are no restrictions on the issuance of work and residence permits to Free Zone investors and employees.  Overall, the process of issuing work permits is not very transparent.

Free Trade Zones (called Free Zones in Ghana) were first established in May 1996, with one near Tema Steelworks, Ltd., in the Greater Accra Region, and two other sites located at Mpintsin and Ashiem near Takoradi in the Western Region.  The seaports of Tema and Takoradi, as well as the Kotoka International Airport in Accra and all the lands related to these areas, are part of the Free Zone.  The law also permits the establishment of single factory zones outside or within the areas mentioned above.  Under the law, a company qualifies to be a Free Zone company if it exports more than 70 percent of its products.  Among the incentives for Free Zone companies are a ten-year corporate tax holiday and zero import duty.

To make it easier for Free Zone developers to acquire the various licenses and permits to operate, the Ghana Free Zones Authority ( www.gfzb.gov.gh ) provides a “one-stop approval service” to assist in the completion of all formalities.  A lack of resources has limited the effectiveness of the Authority.  Foreign employees of Free Zone businesses require work and residence permits.

In most sectors, Ghana does not have performance requirements for establishing, maintaining, and expanding a business.  Investors are not required to purchase from local sources or employ prescribed levels of local content, except in the mining sector, the upstream petroleum sector, and the power sector, which are subject to substantial local content requirements.  Similar legislation is being drafted for the downstream petroleum sector, and a National Local Content Policy is being debated by Cabinet that may extend to a broad array of sectors of the economy, but there is no clear timeline for its approval.

Generally, investors are not required to export a specified percentage of their output, except for Free Zone enterprises which, in accordance with the Free Zone Act, must export at least 70 percent of their products.  Government officials have intimated that local content requirements should be applied to sectors other than petroleum, power, and mining, but no local content regulations have been promulgated for other sectors.

As detailed earlier in this report, there are a few areas where the GOG does impose performance requirements, including the mining, oil and gas, insurance, and telecommunications sectors.

Greece

4. Industrial Policies

Investment incentives are available on an equal basis for both foreign and domestic investors in productive enterprises.  The investment laws in Greece aim to increase liquidity, accelerate investment processes, and ensure transparency.  They provide an efficient institutional framework for all investors and speed the approval process for pending investment projects.  The basic investment incentives Law 4146/2013, “Creation of a Development Friendly Environment for Strategic and Private Investments,” aims to improve the institutional and legal framework to attract private investment.  Separately, Law 3908/2011 (which replaced Law 3299/2004) provides incentives in the form of tax relief, cash grants, leasing subsidies, and soft loans on qualifying investments in all economic sectors with some exceptions.

In evaluating applications for tax and other financial incentives for investment, Greek authorities consider several criteria, including the viability of the planned investment; the expected impact on the economy and regional development (job creation, export orientation, local content use, energy conservation, environmental protection); the use of innovative technology; and the creditworthiness and capacity of the investor.  Progress assessments are conducted on projects receiving incentives, and companies that fail to implement projects as planned may be forced to give up incentives initially granted to them.  All information transmitted to the government for the approval process is to be treated confidentially by law.

Investment categories are:

  • General Entrepreneurship
  • Regional Cohesion
  • Technological development
  • Youth Entrepreneurship (18-40 years old)
  • Large Investment Plans (above €50 million)
  • Integrated, Multi-Annual Business Plans

The entire application and evaluation process shall not exceed six months (more information can be found at https://www.ependyseis.gr).

Greece offers incentive packages for green investments and expects to offer more as it receives its European Recovery and Resilience Facility allocations.  In 2021, the European Commission approved a €2.27 billion Greek program to award aid for renewable energy production, including a joint competitive tendering procedure for onshore wind and solar installations and two-way contract-for-difference premiums for electricity production from renewable energy sources.  The incentives have spurred increased investment in the renewable energy sector; auctions to secure long-term electricity production contracts for onshore wind and solar projects have been oversubscribed.  Law 4710/2020 offers incentives to promote e-mobility, including subsidies for purchases of electric vehicles and associate charging equipment, as well as tax incentives for green investments.  Law 4710/2020 offers incentives to promote e-mobility, including subsidies for purchases of electric vehicles and associate charging equipment, as well as tax incentives for green investments.  In 2021, the European Commission also approved Greek plans to establish an incentive scheme to help drive renewables deployment across 47 Greek islands, for example premium payments to generators to bridge the gap between generation costs and wholesale electricity prices.

Greece has four free-trade zones, located at the Piraeus, Thessaloniki, Heraklion, and Platigiali Astakos Etoloakarnias port areas.  Greek and foreign-owned firms enjoy the same advantages in these zones.  Goods of foreign origin may be brought into these zones without payment of customs duties or other taxes and may remain free of all duties and taxes if subsequently transshipped or re-exported.  Similarly, documents pertaining to the receipt, storage, or transfer of goods within the zones are free from stamp taxes.  Handling operations are carried out according to EU regulations 2504/1988 and 2562/1990.  Transit goods may be held in the zones free of bond.  These zones also may be used for repackaging, sorting, and re-labeling operations.  Assembly and manufacture of goods are carried out on a small scale in the Thessaloniki Free Zone.  Storage time is unlimited, as long as warehouse rents are paid every six months.

The Greek government does not follow a policy of forced localization or mandate local employment designed to require foreign investors to use domestic content in goods or technology, with the exception of economic development requirements in many defense contracts (see Research and Development, below).  Some foreign investors partner with local companies or hire local staff/experts, however, as a way to facilitate their entry into the market.  In 2019, the government enacted a new amendment to the Greek tourism legislation, which obligates tour operators from third countries who do not own a travel agency in Greece to collaborate with a local travel agency established in the country to be able to conduct its business locally.  The government is not taking steps to force foreign investors to keep a specific amount of the data they collect and store within Greek national borders.

Offset agreements, co-production, and technology transfers are commonplace in Greece’s procurement of defense items.  Although the most recent Greek defense procurement law eliminated offset requirements, there are some remaining ongoing active offset contracts, as well as expired offset contracts with U.S. firms that are potentially subject to non-performance penalties.  Defense procurements are still subject to economic development requirements, which are, in effect, similar to offsets.  In 2014, the government committed to resolving offset contract disputes in a way that would satisfy both parties and avoid the imposition of penalties or fines.

In general, U.S. and other foreign firms may participate in government-financed and/or subsidized research and development programs.  Foreign investors do not face discriminatory or other formal inhibiting requirements.  However, many potential and actual foreign investors assert the complexity of Greek regulations, the need to deal with many layers of bureaucracy, and the involvement of multiple government agencies all discourage investment.

Grenada

4. Industrial Policies

Grenada provides a legal package of benefits and concessions for specific investment activities. Incentives include tax waivers, import duty exemptions, repatriation of profits, and withholding tax exemptions.

Trade-related incentives are notified under Article 25 and Article 27 of the Agreement on Subsidies and Countervailing Measures. Concessions are available under the Income Tax Act, the Common External Tariff (SRO 42/09), the Property Transfer Act, the Petrol Tax Act, and the Customer Service Charge Act.

Fiscal incentives include:

  • 100 percent investment allowances up to 15 years
  • 50-100 percent property transfer tax waivers
  • 50-100 percent withholding tax waivers
  • Tax credits of 150 percent for training, research, and development
  • Waiver of VAT on importation of capital goods
  • Tax exemptions and waiver of duties on building materials

Non-fiscal incentives include:

  • Equal treatment of all investors regardless of nationality or residence
  • Conversion into freely convertible currency
  • No discrimination among foreign investors
  • Repatriation of profits allowed

Other incentives include accelerated depreciation (10 percent on physical plant and machinery; 2 percent on industrial buildings); investment allowance (100 percent write-off on total investment); carry forward of losses for three years; reductions in the property transfer tax; and 100 percent relief from customs duties on physical plant, equipment, and raw materials. Certain incentives may be linked to the site of investment, the number of persons employed, or other factors, including for green energy investments. These investment incentives also apply to businesses owned by underrepresented investors such as women.

Energy is a priority sector for investment in Grenada. This also includes any business activity that involves the production of energy, including fuel extraction, renewables, refining and distribution. The government offers the following investment incentives for the energy sector:

Capital Investment Allowance

100 percent of the qualifying capital expenditure (EC$3 million and over) will be written off against taxable income for a period not exceeding 15 years.

Customs Duties Exemptions on the following:

  • Building materials, fixtures and furnishings, networking elements and computer hardware and software.
  • Production machinery, equipment and spare parts for approved machinery and equipment for use in operations.
  • 50-100 percent relief from import duties and taxes on a maximum of four to six commercial vehicles.
  • Value Added Tax (VAT) Suspension/Exemption
  • Applied to capital goods imported for the establishment of the operation.
  • Property Transfer Tax Waivers
  • 50 -100 percent (based on qualifying investment) property transfer tax waivers on the acquisition of property.
  • Carry forward of losses
  • 100 percent of losses incurred in any one year be carried forward for six years and offset against 100 percent of taxable income.
  • Tax credit for Training: Training allowance (deductible) at the rate of 150 percent on the qualifying cost of training not exceeding EC$5000 per employee trained of taxable income and to include the following:
  • The cost of hiring an instructor to conduct the training
  • Tuition paid to an educational or other institution offering training
  • A stipend paid to the individual being trained to cover subsistence during the training period but not in excess of two months for a particular individual

There was no instance where Grenada needed to review an approved investor for non-compliance with incentive requirements. Grenada does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

There are no foreign trade zones or free ports in Grenada.

CARICOM investors are accorded Rights of Establishment, while other foreign investors are required to obtain work permits and alien landholding licenses to invest in property.

The application fee for a work permit is USD $37/XCD $100 payable to the Work Permit Division of the Ministry of Labor. Along with the completed application form, applicants must also submit four passport-sized photos, a police certificate of character from their country, certificates of qualification, and a letter of intention. In addition, investors will need a character reference from a reputable person/former employer, a copy of the passport page indicating the last date of arrival in Grenada, a business registration certificate, company stamp, National Insurance Scheme compliance certificate, and recent tax compliance and VAT receipts.

The approval process takes two to three weeks, longer if there are questions, and is valid for one year. U.S. investors and workers are required to pay USD $1,111 or XCD $3,000 per year for renewal. The local government does not mandate local employment but encourages it.

There is no policy of “forced localization” of data storage and Grenada does not pressure international information and communications technology providers to provide source code or encryption keys. The OECS and other stakeholders have begun to develop draft model laws on electronic regimes. Laws specific to data storage and protection have not yet made it onto the national legislative agenda.

There are no measures to prevent or impede companies from transmitting customer or business-related data outside the country. There are no performance requirements. Investment incentives are applied uniformly to domestic and foreign investors on a case-by-case basis.

There is no requirement for foreign IT providers to turn over source code and/or provide access to encryption. There are no measures or draft measures that restrict companies from freely transmitting customer or other business-related data outside the economy/country’s territory.

Guatemala

4. Industrial Policies

Guatemala’s main investment incentive programs are specified in law and are offered nationwide to both foreign and Guatemalan investors without discrimination.

Guatemala’s primary incentive program – the Law for the Promotion and Development of Export Activities and Maquilas (factories that import duty-free materials and assemble products for export) – is aimed mainly at the apparel and textile sector and at services exporters such as call centers and business processes outsourcing (BPO) companies. The government grants investors in these two sectors a 10-year income tax exemption. Additional incentives include an exemption from duties and value-added taxes (VAT) on imported machinery and equipment and a one-year suspension of the same duties and taxes on imports of production inputs, samples, and packing material. The Free Trade Zone Law provides similar incentives to the incentive program described above. The Guatemalan congress approved the Law for Conservation of Employment (Decree 19-2016) in February 2016,amending Guatemala’s two major incentive programs to replace tax incentives related to exports that Guatemala dismantled on December 31, 2015, per WTO requirements. Congress approved new amendments to the Free Trade Zones (FTZ) Law in May 2021 to reincorporate some of the economic activities that had been excluded during the 2016 reforms, such as manufacturing of plastic products, medications, and electronic devices and household appliances. The amendments to the FTZ law establish that local and foreign businesses and individuals with activities already taxed in the national customs territory may not migrate to FTZ or benefit from the incentives provided by this law. However, companies already operating in country that create new businesses with different activities than those already taxed are exempt from this provision.

The public Free Trade Zone of Industry and Commerce Santo Tomas de Castilla (ZOLIC) that operates contiguous to the state-owned port Santo Tomas de Castilla issued a regulation in January 2019 allowing the establishment of ZOLIC’s special public economic development zones outside of ZOLIC’s customs perimeter. The ZOLIC law grants businesses operating within the new special public economic development zones a 10-year income tax exemption. Additional exemptions include an exemption from VAT, customs duties, and other charges on imports of goods entering the area, including raw materials, supplies, machinery and equipment, as well as a VAT exemption on all taxable transactions carried out within the free trade zone when goods are exported. The law states that the incentives are available to local and foreign investors engaged in manufacturing and commercial activities as well as the provision of services.

The Law on Incentives for the Development of Renewable Energy Projects (Decree 52-2003) is aimed at municipalities, the National Electricity Institute (INDE), joint ventures, individuals and businesses that develop any renewable energy projects. It grants a 10-year exemption from import duties, including value added tax on imported machinery and equipment used exclusively for the generation of electricity in the area where the renewable projects are located. This incentive is valid only during the pre-investment and construction periods. The law also provides a 10-year income tax exemption valid from the date when a project starts commercial operation. The incentive is granted only to individuals and businesses that directly develop the project and only for the project.

Decree 65-89, Guatemala’s Free Trade Zones Law and its amendments approved through Decree 19-2016, Law for Conservation of Employment and Decree 6-2021, permits the establishment of free trade zones (FTZs) in any region of the country. Developers of private FTZs must obtain authorization from MINECO to install and manage a FTZ. Businesses operating within authorized FTZs also require authorization from MINECO. The law specifies investment incentives, which are available to both foreign and Guatemalan investors without discrimination. As of March 2022, there were four authorized FTZs operating in Guatemala. The Guatemalan congress approved amendments to the Free Trade Zones Law in May 2021 to reinstate tax incentives to some of the activities removed during the previous reform. Decree 22-73, ZOLIC’s law and its amendments approved through Decree 30-2018, allow the establishment of ZOLIC’s special public economic development zones outside of ZOLIC’s customs perimeter as described under the Investment Incentives subsection above. Special public economic development zones can be installed in ZOLIC’s facilities or property owned by third parties that is leased or granted in usufruct to ZOLIC. Administrators of special public economic development zones must obtain authorization from ZOLIC’s board of directors for a minimum period of 12 years. ZOLIC´s board of directors had approved nine special public economic development zones as of March 2022.

Guatemalan law does not impose performance, purchase, or export requirements nor does the government require foreign investors to use domestic content in goods or technology. Companies are not required to include local content in production.

Guatemalan companies do not require foreign IT providers to turn over source code. Some industries, such as the banking and financial sector, can request that their institution or a source code facilities management company receive a copy of the source code in case of potential problems with the IT provider.

Guinea

4. Industrial Policies

The Investment Code provides preferential tax treatment for investments meeting certain criteria (See Screening of FDI).  Some mining companies currently benefit from preferential tax treatment.  Other exemptions can be agreed to during contract negotiations with the government.  The government’s priority investments categories include promotion of small- and medium-sized Guinean businesses, development of non-traditional exports, processing of local natural resources and local raw materials, and establishment of activities in economically less developed regions.  Priority activities include agricultural promotion, especially of food, and rural development; commercial farming involving processing and packaging; livestock, especially when coupled with veterinary services; fisheries; fertilizer production, chemical or mechanical preparation and processing industries for vegetable, animal, or mineral products; health and education-related businesses; tourism facilities and hotel operations; socially beneficial real estate development; and investment banks or any credit institutions settled outside specified population centers.  Detailed information on each of these opportunities is available at http://invest.gov.gn.

Neither former President Conde’s government nor the transition government provide incentives for businesses owned by underrepresented investors, such as women.

Guinea currently has no foreign trade zones or free ports. In 2017, a presidential decree created a special economic zone in the Boke corridor of western Guinea.

Under the revised 2013 Mining Code, mining companies are required to employ Guinean citizens as a certain percentage of their staff, to eventually transition to a Guinean country director, and to award a certain percentage of contracts to Guinean-owned firms.  The percentage varies based on employment category and the chronological phase of the project.  The Mining Code requires that 20 percent of senior managers be Guinean; however, the Code does not define what constitutes senior management.  The Code also aims to liberalize mining development and promote investment.  In 2013, the Code called for the creation of a Mining Promotion and Development Center, a One Stop Shop for mining administrative processes for investors, which opened in May 2016.  Guinea has no forced localization policy related to the use of domestic content in goods or technology, and there are no requirements for foreign IT providers to turn over source code or provide access to surveillance or to store data within Guinea.

In 2019, the government launched an e-visa platform allowing for online visa applications at http://www.paf.gov.gn/.  Fees vary depending on citizenship.  This is the only way to apply for a visa to Guinea as Guinean embassies around the world no longer process visa applications.

Guyana

4. Industrial Policies

Guyana offers an array of incentives to foreign and domestic investors alike in the form of exemption from various taxes, accelerated depreciation rates, full and unrestricted repatriation of capital, profits, and dividends. The first point of contact in applying for tax concessions is GOINVEST. The GoG utilizes investment incentives to advance its broader policy goals, such as boosting research and development, or spurring growth in a particular region. Guyana offers fiscal incentives for clean energy investments including value added tax (VAT) and import duty exemptions for renewable energy equipment, one off corporate tax holidays of two years, and a capital expenditure write off within two years. The GoG offers co-investing options for outlying regions.

Information on investment incentives in Guyana can be found on the following websites:

Guyana does not have free trade zones, however, the GoG is contemplating establishing free trade zones in Lethem, a Guyanese town on the Brazilian border that relies heavily on cross border commerce.

Guyana was the 53rd WTO member and first South American country to ratify the new Trade Facilitation Agreement (TFA).  The WTO Secretariat received Guyana’s instrument of acceptance on November 30, 2015.

There are no data localization requirements in Guyana requiring foreign investors to establish or maintain a certain amount of data storage within the country. There is no visa requirement for U.S. citizens to visit Guyana. There are no government-imposed conditions to invest. However, if seeking tax concessions, an entity will be bound to an investment agreement.

A requirement to hire locally at least 80 percent of employees is applied equally to domestic and foreign investment projects. The GoG formalized this requirement in the oil and gas sector through with the passage of the LCA in 2021. While there are no concrete plans to expand the LCA model to other industries at this time, the GoG has expressed interest in protecting other industries from foreign competition.

Although no explicit government policy exits regarding performance requirements, some are written into contracts with foreign investors and could include the requirement of a performance bond.  Some contracts require a certain minimum level of investment. Investors are not required to source locally, nor must they export a certain percentage of output.  Foreign exchange is not rationed in proportion to exports, nor are there any requirements for national ownership or technology transfer. Foreign IT providers are not required to turn over source code and/or provide access to encryption.

There are no measures to prevent or restrict companies from transmitting customer or business data. The government agencies involved for local data storage include the National Data Management Authority and the Office of the Prime Minister.

Haiti

4. Industrial Policies

In order to attract investment to certain industries, the Investment Code privileges eligible firms with customs, tax, and other advantages. Investments that provide added value of at least 35 percent in the processing of local or imported raw materials are eligible for preferential status.

The statute, as modified by the FY2021 budget decree in October 2020, allows for a five-year income tax exemption. Industrial or crafts-related enterprises must meet one of the following criteria in order to benefit from this exemption:

  • Make intensive and efficient use of available local resources (i.e., advanced processing of existing goods, recycling of recoverable materials);
  • Increase national income;
  • Create new jobs and/or upgrade the level of professional qualifications;
  • Reinforce the balance of payments position and/or reduce the level of dependency of the national economy on imports;
  • Introduce or extend new technology more appropriate to local conditions (i.e., utilize non-conventional sources of energy, use labor-intensive production);
  • Create and/or intensify backward or forward linkages in the industrial sector;
  • Promote export-oriented production;
  • Substitute a new product for an imported product, if the new product presents a quality/price ratio deemed acceptable by the appropriate entity and comprises a total production cost of at least 60 percent of the value added in Haiti, including the cost of local inputs used in its production;
  • Prepare, modify, assemble, or process imported raw materials or components for finished goods that will be re-exported;
  • Utilize local inputs at a rate equal or superior to 35 percent of the production cost.

Companies that enjoy tax-exempt status are required to submit annual financial statements. Fines or withdrawal of tax advantages may be assessed to firms failing to meet the Code’s provisions. A progressive tax system applies to income, profits, and capital gains earned by individuals.

A law on Free Trade Zones (FTZ) was established in 2002. The law defines the conditions for operating and managing economic FTZs, with exemption and incentive regimes granted to investment in such zones. The law is not specific to a particular activity. Instead, it defines FTZs as geographical areas to which a special regime on customs duties and controls, taxation, immigration, capital investment, and foreign trade applies, and where domestic and foreign investors can provide services, import, store, produce, export, and re-export goods.

FTZs may be private or joint venture. The law provides the following incentives and benefits for enterprises located in FTZs:

  • Full exemption from income tax for a maximum period of 15 years, followed by full taxation, per the FY2021 budget issued by decree in October 2020;
  • Customs and tax exemptions for the import of capital goods and equipment needed to develop the area, with the exception of tourism vehicles;
  • Exemption from all communal taxes (with the exception of proportional duties) for a period not exceeding 15 years;
  • Registration and transfer of the balance due for all deeds relating to purchase, mortgages, and collateral.

Examples of functioning FTZs include one in the northeastern city of Ouanaminthe, where a Dominican company, Grupo M, manufactures clothing for a variety of U.S. companies at its CODEVI facility. Additionally, several U.S. apparel companies lease factory space in this free zone. All the factories at CODEVI combined employ over 18,200 workers as of September 2021.

In October 2012, the Haitian government, with the support of the Inter-American Development Bank and the United States government, opened the 617-acre Caracol Industrial Park in Haiti’s northeastern region. As of 2021, five companies are operating in the park: S&H Global, a South Korean company and the largest single private sector employer in Haiti; MAS Holdings, a Sri Lankan company; Everest, a Taiwanese factory; and two Haitian companies, Peintures Caraibes and Sisalco.

In 2015, three major FTZs were established: Agritrans, the first agricultural free trade zone in Haiti in Trou du Nord; Digneron, an entity of the Palm Apparel Group; and Lafito, a $150 million Panamax port and industrial park. Port Lafito, located 12 miles north of Port au Prince, includes port facility business services that cater to bulk and loose cargo imports, as well as terminal services to worldwide container service shipping lines.

In February 2021, the Government of Haiti authorized a new agro-industrial export free zone in the town of Savane-Diane (ZFAISD) in Artibonite Department, per the application of Haitian company Stevia Agro Industries S.A.

Foreign firms are encouraged to participate in government-financed development projects. However, performance requirements are not imposed on foreign firms as a condition for establishing or expanding an investment, unless indicated in a signed contract.

Under Haitian laws, foreign investors operate their businesses and use their assets to organize production freely. Companies are not forced to localize or to use local raw materials for the production of goods. Foreign information technology providers are not required to turn over source code or keys for encryption to any public agencies.

Honduras

4. Industrial Policies

The 2017 Tourism Incentives Law offers tax exemptions for national and international investment in tourism development projects. The law provides income tax exemptions for the first 10 years of a project and permits the duty-free import of goods needed for a project, including publicity materials. To receive benefits, a business must be located in a designated tourism zone. Restaurants, casinos, nightclubs, movie theaters, and certain other businesses are not eligible for incentives under this law. Foreigners or foreign companies seeking to purchase property exceeding 3,000 square meters for tourism or other development projects in designated tourism zones must present an application to the Honduran Tourism Institute at the Ministry of Tourism. The buyer must prove a contract to purchase the property exists and present feasibility studies and plans about the proposed tourism project.

The Honduran government historically has offered four primary tax-advantaged structures to incentivize investment in Honduras: the Free Trade Zone (ZOLI), the Free Tourism Zone (ZOLT), the Industrial Zone for Export Processing (ZIP) and the Temporary Import Law (RIT). Although there has been no formal announcement, the Castro administration has expressed its intentions both publicly and privately to eliminate these tax incentive structures.

Both ZOLIs and ZIPs allow foreign investors tariff and tax incentives for export-only manufacturing. The following cities have been designated as free zones: Puerto Cortes, Omoa, Choloma, Tela, La Ceiba, and Amapala. The government allows the establishment of ZIPs anywhere in the country. Currently, ZIPs are located in Choloma, Buffalo, La Lima, San Pedro Sula, Tegucigalpa, and Villanueva. Companies operating in ZIPs are exempt from paying import duties and other charges on goods and capital equipment. The RIT allows exporters to introduce raw materials, parts, and capital equipment (except vehicles) into Honduras exempt from surcharges and customs duties if a manufacturer incorporates the input into a product for export (up to five percent can be sold locally).  Additional information on these incentive programs is available from the National Investment Council (https://www.cni.hn).

In April 2022, President Castro abolished Honduras’ Zones for Employment and Economic Development (ZEDEs), the largely autonomous economic zones created by the Honduran National Congress in 2013. Opponents viewed ZEDEs as an unconstitutional abrogation of Honduran sovereignty, ceding national territory and resources to rich investors who would elude Honduras’ already weak oversight of environmental standards, property laws, human rights, and labor standards, while providing no economic benefit to ordinary Hondurans. ZEDE owners saw them as an opportunity to spur economic growth through secure, privately-run enclaves with their own tax and regulatory schemes, security forces, and dispute-resolution mechanisms, as well as a model of how life could be in Honduras with more government efficiency and less corruption. ZEDE owners, who are exploring possible litigation, say they relied in good faith on the legality of the ZEDE law and have tried to negotiate with the Castro Administration to identify a mutually satisfactory way forward, but the government has so far been unwilling to engage in talks.

Honduras ratified the World Trade Organization’s (WTO) Trade Facilitation Agreement (TFA) in July 2016, agreeing to expedite the movement, release, and clearance of goods, including goods in transit. The TFA also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. According to the WTO/TFA database, Honduras’ current rate of implementation of TFA Category A notification commitments stands at 58.4 percent. The Honduran government has received significant technical assistance from the U.S. government to meet compliance requirements in publication, notification, advance rulings, border agency cooperation, and establishing a national trade facilitation committee. Honduras, Guatemala, and El Salvador operate a trilateral customs union to foster and increase efficient cross-border trade, but implementation challenges persist.  Honduras uses digitized import permits for agricultural products to reduce costs and dispatch times. Honduras and Guatemala also use an online pre-arrival screening protocol to reduce border times and transit costs for goods.

With U.S. support, the GOH has advanced several initiatives to facilitate trade and reduce dispatch times and costs at key land and sea borders. Use of high-spec tablets by Aduanas (Customs) at Puerto Cortes has reduced dispatch times by over 30 percent; expansion of tablet use is envisioned to La Mesa as well (San Pedro Sula airport Customs). A streamlined inspections manual for to be adopted by Aduanas and the National Health and Agrifood Safety Entity (SENASA) as well as additional IT developments to integrate Aduanas and SENASA inspection systems will further compound time and cost reductions at key land and border crossings. Trade policy is overseen by the National Trade Committee, chaired by the Minister of Economic Development.

Many U.S. companies that operate in Honduras take advantage of the commercial framework established by the Central American and Dominican Republic Free Trade Agreement (CAFTA-DR).  Substantial intra-industry trade now occurs in textiles and electrical machinery, alongside continued trade in traditional Honduran exports such as coffee and bananas.

The government rushed the opening in December 2021 of an incomplete, controversial new airport, Palmerola, designed to reduce costs for airlines, passengers, and shipping companies once cargo processing procedures have been fully implemented.  The airport connects with a recently completed highway (the ‘Dry Canal’) to the Pacific coast and with another highway to the Caribbean coast and its deep-water port – for a sea-to-sea logistics and transit system.  As of this writing, cargo functions are not operational at the airport and drive time to Tegucigalpa is approximately an hour and a half.

The Honduran government encourages foreign investors to hire locally and to make use of domestic content, especially in manufacturing and agriculture. The government looks favorably on investment projects that contribute to employment growth, either directly or indirectly. U.S. investors in Honduras have not reported instances in which the government has imposed performance or localization requirements on investments.

The Honduran government and courts can require foreign and domestic investors that operate in Honduras to turn over data for use in criminal investigations or civil proceedings. Honduran law enforcement, prosecutors, and civil courts have the authority to make such requests.

Hong Kong

4. Industrial Policies

The HKG does not have a practice of issuing guarantees or jointly financing foreign direct investment projects. Hong Kong imposes no export performance or local content requirements as a condition for establishing, maintaining, or expanding a foreign investment. There are no requirements currently that Hong Kong residents own shares, that foreign equity is reduced over time, or that technology is transferred on certain terms.

However, the PRC’s 14th Five-Year Plan through 2025 with long-range objectives to 2035 does lay out a plan for Hong Kong to become an international innovation and technology hub, to become better integrated into the overall development of the Mainland, and to encourage deeper co-operation between the Mainland and Hong Kong related to innovation and technology. Closer alignment between the Hong Kong and mainland authorities on policies related to investment, innovation, and technology is expected.

The HKG offers an effective tax rate of around three to four percent to attract aircraft leasing companies to develop business in Hong Kong. To attract more maritime businesses to establish a presence in Hong Kong, the HKG also offers tax exemption or a reduced profit tax rate of 8.25 percent to eligible ship leasing and maritime insurance companies. The HKG allows a deduction on interest paid to overseas associated corporations and provides an 8.25 percent concessionary tax rate derived by a qualifying corporate treasury center.

Hong Kong-registered companies with a significant proportion of their research, design, development, production, management, or general business activities located in Hong Kong are eligible to apply to the Innovation and Technology Fund (ITF), which provides financial support for research and development (R&D) activities in Hong Kong. Hong Kong Science & Technology Parks (Science Park) and Cyberport are HKG-owned enterprises providing subsidized rent and financial support through incubation programs to early-stage startups.

The HKG offers additional tax deductions for domestic expenditure on R&D incurred by firms. Firms enjoy a 300 percent tax deduction for the first HKD 2 million (USD 255,000) qualifying R&D expenditure and a 200 percent deduction for the remainder. Since 2017, the Financial Secretary has announced over HKD 130 billion (USD 16.7 billion) in funding to support innovation and technology development in Hong Kong. These funds are largely directed at supporting and adding programs through the ITF, the Science Park, and Cyberport.

In September 2021, the Securities and Futures (Amendment) Bill 2021 and Limited Partnership Fund and Business Registration Legislation (Amendment) Bill 2021 were passed to facilitate the re-domicile of foreign investment funds to Hong Kong for registration as Open-ended Fund Companies (OFCs) or Limited Partnership Funds (LPFs). To strengthen Hong Kong’s position as an asset management center, the HKG announced in March 2022 a proposal to provide tax concessions for the eligible family investment management entities managed by single‑family offices. Subject to certain conditions, the entities would be exempted from Hong Kong profits tax for its profits derived from certain qualifying transactions and incidental transactions.

In May2021, the HKG launched the Green and Sustainable Finance Grant Scheme to subsidize eligible bond issuers and loan borrowers to cover their expenses on bond issuance and external review services.

Hong Kong, a free port without foreign trade zones, has modern and efficient infrastructure making it a regional trade, finance, and services center. Rapid growth has placed severe demands on that infrastructure, necessitating plans for major new investments in transportation and shipping facilities, including a planned expansion of container terminal facilities, additional roadway and railway networks, major residential/commercial developments, community facilities, and environmental protection projects. Construction on a third runway at Hong Kong International Airport was completed in September 2021.

Hong Kong and mainland China have a Free Trade Agreement Transshipment Facilitation Scheme that enables mainland-bound consignments passing through Hong Kong to enjoy tariff reductions in the Mainland. The arrangement covers goods traded between mainland China and its trading partners, including ASEAN members, Australia, Bangladesh, Chile, Costa Rica, Georgia, Iceland, India, Japan, Mongolia, Mauritius, New Zealand, Pakistan, Peru, South Korea, Sri Lanka, Switzerland, and Taiwan.

The HKG launched in December 2018 phase one of the Trade Single Window (TSW) to provide a one-stop electronic platform for submitting ten types of trade documents, promoting cross-border customs cooperation, and expediting trade declaration and customs clearance. Phase two is expected to be implemented in 2023. The latest version of the Closer Economic Partnership Arrangement (CEPA), has established principles of trade facilitation, including simplifying customs procedures, enhancing transparency, and strengthening cooperation.

The HKG does not mandate local employment or performance requirements. It does not follow a forced localization policy making foreign investors use domestic content in goods or technology.

Foreign nationals normally need a visa to live or work in Hong Kong. Short-term visitors are permitted to conduct business negotiations and sign contracts while on a visitor’s visa or entry permit. Companies employing people from overseas must show that a prospective employee has special skills, knowledge, or experience not readily available in Hong Kong.

Hong Kong generally allows free and uncensored flow of information, though the imposition of the NSL and subsequent Hong Kong legislation created certain limits on free expression, especially that which may be viewed as critical of the HKG or the mainland government. Thus, while Hong Kong authorities did not generally disrupt open access to the internet, there were numerous reports that the Hong Kong police, exercising powers granted by the NSL, required internet providers to block access to certain websites.

The freedom and privacy of communication is enshrined in Basic Law Article 30. The HKG has no requirements for foreign IT providers to turn over source code and does not interfere with data center operations. However, the NSL introduced a heightened risk of Mainland and Hong Kong authorities using expanded legal authorities to collect data from businesses and individuals in Hong Kong for actions that may violate “national security.” For more information, please refer to the Hong Kong business advisory released jointly by the Department of State, together with the Department of the Treasury, the Department of Commerce, and the Department of Homeland Security on July 16, 2021.

The NSL grants Hong Kong police broad authorities to conduct wiretaps or electronic surveillance without warrants in national security-related cases. The NSL also empowers police to conduct searches, including of electronic devices, for evidence in national security cases. Police can also require Internet Service Providers (ISPs) to provide or delete information relevant to these cases. In January 2021, the organizer of an online platform alleged that local Internet providers have made the site inaccessible for users in Hong Kong following requests from the Hong Kong government. One ISP subsequently confirmed that it blocked a website “in compliance with the requirement issued under the National Security Law.” In July 2021, Hong Kong police sent a letter to an Israel-based web hosting company demanding that the company remove a website and claiming that the website contained messages “likely to constitute offenses endangering national security.” In March 2022, Hong Kong police sent a letter to a UK-based human rights organization ordering the organization to remove its website within 72 hours or face potential fines and/or imprisonment under the NSL.

Hong Kong does not currently restrict transfer of personal data outside the SAR, but Section 33 the Personal Data (Privacy) Ordinance would prohibit such transfers unless the personal data owner consents or other specified conditions are met. The Privacy Commissioner is authorized to bring Section 33 into effect at any time, but it has been dormant since 1995. The PRC’s Personal Information Protection Law (PIPL) does not apply to data for Hong Kong-based operations, and companies that wish to transfer mainland data that falls under the PIPL to Hong Kong would be required to undergo a PRC cybersecurity review.

In October 2021, the HKG amended the Personal Data (Privacy) Ordinance to introduce new provisions to combat doxxing acts and empower the Privacy Commissioner for Personal Data (PCPD) to carry out criminal investigations and institute prosecution towards doxxing-related offenses, including potentially against online platforms and service providers. The PCPD made its first arrest in December 2021 under this new legislation in which a suspect was arrested and accused of disclosing the victim’s personal details on an online platform.

In December 2020, Hong Kong’s Securities and Futures Commission (SFC) required licensed corporations in Hong Kong to seek the SFC’s approval before using the following for storing regulatory records: 1) premises controlled exclusively by an external data storage provider(s) located inside or outside Hong Kong, such as cloud service providers like Google Cloud, Microsoft Azure, or Amazon AWS; or 2) server(s) for data storage at data centers located inside or outside Hong Kong.

Hungary

4. Industrial Policies

Hungary has a well-developed incentive system for investors, the cornerstone of which is a special incentive package for investments over a certain value (typically over EUR 10 million or $11 million).  The incentives are designed to benefit investors who establish manufacturing facilities, logistics facilities, regional service centers, R&D facilities, and bioenergy facilities, or those who make tourism industry investments.  Incentive packages may consist of cash subsidies, development tax allowances, training subsidies, and job creation subsidies. The incentive system is compliant with EU regulations on competition and state aid and is administered by the Hungarian Investment Promotion Agency (HIPA) and managed by the Ministry of Innovation and Technology (MIT) and the Ministry of Foreign Affairs and Trade (MFAT). The government provides non-refundable subsidies to foreign investments in less developed areas and certain sectors including research and development, innovation, and high-tech manufacturing, based on case-by-case government decisions. In 2020, the GOH extended additional incentives or support to foreign investments as part of its economic response to the pandemic. For more information please see:  https://hipa.hu/additional-favourable-changes-in-the-non-refundable-cash-incentives-system  .

In 2017 Hungary introduced a new Renewable Energy Support Scheme (METAR) – replacing the former feed-in tariff system (KAT) – in which producers of renewable energy can bid for state subsidies, paid as a premium over the market reference price. Newly established renewable energy producing facilities from 0.5 to 1 MW can apply for a feed-in premium in addition to the market price, and over 1 MW the support level is set through competitive auctions. Applicants can be companies with a registered office in the EU, the EEA or the Energy Community, Hungarian branch offices of foreign companies and Hungarian business entities or municipalities, but the tender is only available to projects located in Hungary. Since the first METAR tender in 2019, the Hungarian Energy Authority has launched six successful tenders, each time generating a significant interest and oversubscription from bidders. For more information on the METAR scheme, please see: HYPERLINK “http://www.mekh.hu/information-on-the-renewable-energy-support-system” http://www.mekh.hu/information-on-the-renewable-energy-support-system

Foreign trade zones were eliminated because of EU accession.

Hungary does not mandate the hiring of local employees. The number of work permits issued for third-country nationals is limited by law, but in recent years, this limit was well above the actual number of registered third-country employees.  Residency and work permits are issued by the Immigration Office and the local labor offices.

As of 2021, investments in certain strategic sectors including the military, intelligence, public utilities, financial services, and electronic information systems require investment permits issued by the Ministry of Interior; in other key sectors, the Ministry for Innovation and Technology issues permits.  There are no laws in place requiring the fulfilment of special labor force related conditions to get investment permits. However, in certain cases, the GOH has established retention of workforce as a condition to award state grants to investors.

Hungary has no forced data localization policy.  Foreign IT providers do not need to turn over source code or provide access to encryption.  Hungary follows EU rules on transfer of personal data outside the economy. Storage of personal data is regulated by a data protection law and falls under the authority of a Data Protection Ombudsman.

There are no general performance requirements for investors in Hungary.  However, investors may receive government subsidies in the event they meet certain performance criteria, such as job creation or investment minimums, which are available to all enterprises registered in Hungary and are applied on a systematic basis.  To comply with EU rules, the GOH no longer grants tax holidays based on investment volume. There is no requirement that investors must purchase from local sources, but the EU Rule of Origin applies. Investors are not required to disclose proprietary information to the GOH as part of the regulatory process.

Hungary, as an EU Member State, follows the General Data Protection Regulation (GDPR) on transmitting data outside of the EU and local data storage requirements.  The National Authority for Data Protection and Freedom of Information is responsible for enforcing GDPR rules.

Iceland

4. Industrial Policies

Iceland welcomes foreign direct investment. Iceland has, through the public-private agency Invest in Iceland, identified the following “key sectors” in Iceland: algae culture; data centers; life sciences; and tourism. Iceland “focuses on favorable environment for businesses in general, including low corporate tax, availability of land and efficiency in a European legislative framework.” Iceland offers a reimbursement scheme in the film industry. Authorities reimburse 25 percent of cost incurred during the production of television programs and films in Iceland. For more information visit ( www.invest.is ).

The 2015 Act on Incentives for Initial Investments in Iceland implemented to “promote initial investment in commercial operations, the competitiveness of Iceland and regional development by specifying what incentives are permitted in respect to initial investments in Iceland and how they should be used.” For more information see the English translation of the act ( https://www.government.is/topics/business-and-industry/incentives-and-investment-agreements/ ).

There is significant debate regarding the appropriate types and level of FDI in Iceland, particularly within the energy sector and with regard to job creation and the environmental impact associated with certain projects. Historically, foreign investment has been in energy-intensive industries, such as aluminum smelting, although investments in tourism, life sciences, and information technology have grown as a proportion of total FDI in recent years.

Subsidiaries of foreign companies are able to participate in government-subsidized research and development programs, but only to cover R&D costs that are borne in Iceland. For further information see ( http://en.rannis.is ).

For information on importing to Iceland and customs procedures, please visit the Iceland Revenue and Customs website ( https://www.skatturinn.is/english/companies/customs-matters/importing-to-iceland/ ).

Iceland follows the EU General Data Protection Regulation and is a member of the U.S.-EU Privacy Shield arrangement for transatlantic data transfers. The Icelandic Data Protection Authority (DPA) monitors the implementation of Regulation 2016/679 of the European Parliament and of the Council on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and of the Act on Data Protection and the Processing of Personal Data no. 90/2018. DPA’s law-enforcement work includes “monitoring data controllers and ensuring that they take appropriate security measures, in accordance with law.” For more information see the Icelandic Data Protection Authority’s website ( https://www.personuvernd.is/information-in-english/ ).

India

4. Industrial Policies

The regulatory environment in terms of foreign investment has been eased to make it investor friendly. The measures taken by the government opened new sectors for foreign direct investment, increased the investment limit of existing sectors, and simplified other conditions of the FDI policy. The government also adopted production linked incentives to promote manufacturing in pharmaceuticals, automobiles, textiles, electronics, and other sectors. Details can be accessed at- https://www.investindia.gov.in/production-linked-incentives-schemes-india 

The government established several foreign trade zone initiatives to encourage export-oriented production. These include Special Economic Zones (SEZs), Export Processing Zones (EPZs), Software Technology Parks (STPs), and Export Oriented Units (EOUs). According to the Ministry of Commerce and Industry, as of February 2022, 425 SEZ’s have been approved and 376 SEZs were operational with 5,604 operating units. The SEZs are treated as foreign territory, and businesses operating within the zones are not subject to customs regulations, FDI equity caps, or industrial licensing requirements and enjoy tax holidays and other tax breaks. Since 2018, the Indian government also announced guidelines for the establishment of the National Industrial and Manufacturing Zones (NIMZs), envisaged as integrated industrial townships to be managed by a special purpose vehicle and led by a government official. So far, three NIMZs have received “final approval” and 13 more have received “in-principal approval.” In addition, eight investment regions along the Delhi-Mumbai Industrial Corridor (DIMC) have also been established as NIMZs. EPZs are industrial parks with incentives for foreign investors in export-oriented businesses. STPs are special zones with similar incentives for software exports. EOUs are industrial companies, established anywhere in India, that export their entire production and are granted duty-free import of intermediate goods; income tax holidays; exemption from excise tax on capital goods, components, and raw materials; and a waiver on sales taxes. These initiatives are governed by separate rules and granted different benefits, details of which can be found at: http://www.sezindia.nic.in,  

https://www.stpi.in/  

http://www.fisme.org.in/export_schemes/DOCS/B- 

1/EXPORT%20ORIENTED%20UNIT%20SCHEME.pdf and http://www.makeinindia.com/home. 

The Indian government does issue guarantees to investments but only for strategic industries.

The government has an ambitious target of installing 500 gigawatts of renewable energy (RE) by 2030 and has introduced several schemes and policies  supporting clean energy deployment. State governments used to provide feed-in tariffs during the initial stages of RE development. However, with the RE sector becoming competitive, the scheme was discontinued in 2016. Most projects now are awarded through a Tariff Based Competitive Bidding Process . The Ministry of New & Renewable Energy (MNRE) provides ‘ Must Run ’ status to RE projects. MNRE offers Production Linked Incentives (PLI) under the National Program on High Efficiency Solar PV Modules. The PLI scheme was initially offered for just under $617 million and was oversubscribed. Under the FY 2022-23 budget, it was expanded by another $2.6 billion. The Ministry of Heavy Industry (MHI) launched the National Electric Mobility Mission to provide a roadmap for the faster adoption of electric vehicles. Can be accessed at https://policy.asiapacificenergy.org/sites/default/files/National%20Electric%20Mobility%20Mission%20Plan%202020.pdf . MHI also launched a PLI scheme National Program on Advance Chemistry Cell (ACC) Battery Storage  to promote battery manufacturing. The Department of Science & Technology leads Carbon Capture Utilization & Storage (CCUS)  efforts to enable near-zero CO2 emissions from power plants and carbon-intensive industries with the program limited to R&D and pilots. The Bureau of Energy Efficiency (BEE) leads the National Mission on Enhanced Energy Efficiency  and manages several programs promoting Energy Efficiency  across sectors, including buildings, E-Mobility, fuel efficiency for heavy duty vehicles and passenger cars, demand side management, standards, and labelling and certification. The National Hydrogen Mission was launched in August 2021, with the aim to meeting Climate targets and making India a green hydrogen hub. Carbon Capture Utilization & Storage (CCUS)  efforts to enable near-zero CO2 emissions from power plants and carbon-intensive industries with the program limited to R&D and pilots. The Bureau of Energy Efficiency (BEE) leads the National Mission on Enhanced Energy Efficiency  and manages several programs promoting Energy Efficiency  across sectors, including buildings, E-Mobility, fuel efficiency for heavy duty vehicles and passenger cars, demand side management, standards, and labelling and certification. The National Hydrogen Mission was launched in August 2021, with the aim to meeting Climate targets and making India a green hydrogen hub.

Preferential Market Access (PMA) for government procurement has created substantial challenges for foreign firms operating in India. The government and SOEs give a 20 percent price preference to vendors utilizing more than 50 percent local content. However, PMA for government procurement limits access to the most cost effective and advanced ICT products available. In December 2014, PMA guidelines were revised and reflect the following updates:

  1. Current guidelines emphasize that the promotion of domestic manufacturing is the objective of PMA, while the original premise focused on the linkages between equipment procurement and national security.
  2. Current guidelines on PMA implementation are limited to hardware procurement only. Former guidelines were applicable to both products and services.
  3. Current guidelines widen the pool of eligible PMA bidders, to include authorized distributors, sole selling agents, authorized dealers, or authorized supply houses of the domestic manufacturers of electronic products, in addition to OEMs, provided they comply with the following terms:
    1. The bidder shall furnish the authorization certificate by the domestic manufacturer for selling domestically manufactured electronic products.
    2. The bidder shall furnish the affidavit of self-certification issued by the domestic manufacturer to the procuring agency declaring that the electronic product is domestically manufactured in terms of the domestic value addition prescribed.
    3. It shall be the responsibility of the bidder to furnish other requisite documents required to be issued by the domestic manufacturer to the procuring agency as per the policy.
  4. The current guidelines establish a ceiling on fees linked with the compliance procedure. There would be a complaint fee of roughly $3,000, or one percent of the value of the domestically manufactured electronic product being procured, subject to a maximum of about $7,500, whichever is higher.In January 2017, the Ministry of Electronics & Information Technology (MeitY) issued a draft notification under the PMA policy, stating a preference for domestically manufactured servers in government procurement. A current list of PMA guidelines, notified products, and tendering templates can be found on MeitY’s website: http://meity.gov.in/esdm/pma 

In April 2018, the RBI, announced, without prior stakeholder consultation, that all payment system providers must store their Indian transaction data only in India. The RBI mandate went into effect on October 15, 2018, despite repeated requests by industry and U.S. officials for a delay to allow for more consultations. In July 2019, the RBI, again without prior stakeholder consultation, retroactively expanded the scope of its 2018 data localization requirement to include banks, creating potential liabilities going back to late 2018. The RBI policy overwhelmingly and disproportionately has affected U.S. banks and investors, who depend on the free flow of data to both achieve economies of scale and to protect customers by providing global real-time monitoring and analysis of fraud trends and cybersecurity. In 2021, the RBI banned American Express, Diners Club, and Mastercard from issuing new cards for non-compliance with the data localization rule. In November 2021, the RBI deemed Diners Club compliant and permitted them to resume issuing new cards, but the ban on Mastercard and American Express continues.

In addition to the RBI data localization directive for payments companies and banks, the government formally introduced its draft Personal Data Protection Bill (PDPB) in December 2019 which has remained pending in Parliament. The PDPB would require “explicit consent” as a condition for the cross-border transfer of sensitive personal data, requiring users to fill out separate forms for each company that held their data. Additionally, Section 33 of the bill would require a copy of all “sensitive personal data” and “critical personal data” to be stored in India, potentially creating redundant local data storage. The localization of all “sensitive personal data” being processed in India could directly impact IT exports. In the current draft no clear criteria for the classification of “critical personal data” has been included. The PDPB also would grant wide authority for a newly created Data Protection Authority to define terms, develop regulations, or otherwise provide specifics on key aspects of the bill after it becomes a law. The implementation of a New Information Technology Rule through Intermediary Guidelines and a Digital Media Ethics Code added further uncertainty to how existing rules will interact with the PDPB and how non-personal data will be handled.

Indonesia

4. Industrial Policies

Indonesia seeks to facilitate investment through fiscal incentives, non-fiscal incentives, and other benefits. Fiscal incentives are in the form of tax holidays, tax allowances, and exemptions of import duties for capital goods and raw materials for investment. Presidential Regulation No. 10/2021 on investment establishes 245 priority fields that are eligible for tax and other incentives, such as facilitated licensing and land use, to encourage investment in those sectors. The Omnibus Law on Job Creation offers a variety of tax incentives, including eliminating income tax on dividends earned in Indonesia and on certain income, including dividends earned abroad, if they are invested in Indonesia. The Law also exempts dozens of goods and services from value added tax (VAT). The provisions in the Omnibus Law on Job Creation complement several regulations in Law No. 2/2020, which was issued earlier in 2020. Law No. 2 cut the corporate income tax rate, lowering it to 22 percent for 2020 and 2021, and to 20 percent for 2022. However, the Tax Harmonization Law No. 7/2021 reversed this tax cut, keeping corporate income tax for 2022 at 22 percent. In addition, a company can claim a further 3 percent reduction if it is publicly listed, with a total number of shares traded on an Indonesian stock exchange of at least 40 percent. A zero import duty for incompletely knocked down battery-based electronic vehicles came into effect on February 22, 2022 under MOF regulation No. 13/2022. This regulation aims to make Indonesia a production base and export hub of electric motor vehicles. The government is also reportedly preparing incentives to encourage the development of renewable energy and mining down streaming industries as part of the implementation Government Regulation 96/2021 concerning the Implementation of Mineral and Coal Mining Business Activities. However, there is no issued policy yet on these incentives. Investment incentives are outlined at  https://www.investindonesia.go.id/cn/invest-with-us/faq .

To cope with soaring demand and to improve domestic production of medical devices and supplies amid the COVID-19 pandemic, the government through BKPM Regulation No. 86/2020 streamlined licensing requirements for manufacturers of pharmaceuticals and medical devices. The Ministry of Health also accelerated product registration and certification for medical devices and household health supplies. Moreover, the Ministry of Trade issued Regulation 28/2020 to relax import requirements for certain medical-related products.

The Ministry of Finance (MOF) issued Regulation No. 92/2021 to accelerate the provision of fiscal facilities on the import of goods needed for the handling of COVID-19 such as oxygen, laboratory test kits and reagents, virus transfer, medicines, medical equipment and personal protective equipment and Regulation 188/2020 to provide exemptions of import duties and taxes on the import of COVID-19 vaccines. Indonesia’s Customs Authority also implemented a “rush handling policy” to speed up the vaccine import process. MOF Regulation 20/2021 and its amendments were issued to increase motor vehicle sales to support the post-pandemic economic recovery by reformulating the sales tax on luxury goods, specifically motor vehicles. Under Regulation 141/2021, MOF reformulated the sales tax for luxury motor vehicles based on efficiency levels and emissions levels, which aimed to reduce emissions from motor vehicles and to encourage the use of energy-efficient and environmentally friendly motor vehicles.

Indonesia offers numerous incentives to foreign and domestic companies that operate in special economic and trade zones throughout Indonesia. The largest zone is the free trade zone (FTZ) island of Batam, Bintan, and Karimun, located just south of Singapore. The Omnibus Law on Job Creation and its implementing regulation, Government Regulation No. 41/2021 strengthened and unified the three islands (Batam, Bintan, and Karimun) into one integrated Free Trade Zone for the next 25 years to create an international logistics hub to support the industrial, trade, maritime, and tourism sectors. Investors in FTZs are exempted from import duty, income tax, VAT, and sales tax on imported capital goods, equipment, and raw materials. Fees are assessed on the portion of production destined for the domestic market which is “exported” to Indonesia, in which case fees are owed only on that portion. Foreign companies are allowed up to 100 percent ownership of companies in FTZs. Companies operating in FTZs may lend machinery and equipment to subcontractors located outside the zone for two years.

Indonesia also has numerous Special Economic Zones (SEZs), regulated under Law No. 39/2009, Government Regulation No. 1/2020 on SEZ management, and Government Regulation No. 12/2020 on SEZ facilities. These benefits include reduction of corporate income taxes (depending on the size of the investment), luxury tax, customs duty and excise, and expedited or simplified administrative processes for import/export, expatriate employment, immigration, and licensing. Under the Omnibus Law on Job Creation, foreign technology start-up investments located within SEZs are exempt from the minimum investment threshold of IDR 10 billion (USD 700,000), excluding land and buildings. There are minimal export processing requirements within the SEZs. New business activities in the education and health sectors (for which licensing services remain under the central government’s authority) will be allocated by zones and determined by the administrator of the SEZ. The Law lifted limits of imported goods into SEZs but maintained restrictions on specific banned goods in accompanying laws and regulations. It also introduced new tax facilities and incentives for taxpayers in SEZs. As of March 2022, Indonesia has identified twelve SEZs in manufacturing and tourism centers that are operational and six under construction.

Indonesian law also provides for several other types of zones that enjoy special tax and administrative benefits. Among these are Industrial Zones/Industrial Estates (Kawasan Industri), bonded stockpiling areas (Tempat Penimbunan Berikat), and Integrated Economic Development Zones (Kawasan Pengembangan Ekonomi Terpadu). Indonesia is home to 135 industrial estates that host thousands of industrial and manufacturing companies. Ministry of Finance Regulation No. 105/2016 provides several different tax and customs accommodations available to companies operating out of an industrial estate, including corporate income tax reductions, tax allowances, VAT exemptions, and import duty exemptions depending on the type of industrial estate. Bonded stockpile areas include bonded warehouses, bonded zones, bonded exhibition spaces, duty free shops, bonded auction places, bonded recycling areas, and bonded logistics centers.

Companies operating in these areas enjoy concessions in the form of exemption from certain import taxes, luxury goods taxes, and value-added taxes, based on a variety of criteria for each type of location. Most recently, bonded logistics centers (BLCs) were introduced to allow for larger stockpiles, longer temporary storage (up to three years), and a greater number of activities in a single area. The Ministry of Finance issued Regulation No. 28/2018, providing additional guidance on the types of BLCs and shortening approval for BLC applications. By October 2019, Indonesia had designated 106 BLCs in 159 locations, with plans to approve more in eastern Indonesia. In 2021, the Ministry of Finance and the Directorate General for Customs and Excise (DGCE) updated regulations (MOF Regulation No. 65/2021 and DGCE Regulation No. 9/2021) to streamline the licensing process for bonded zones. Together the two regulations are intended to reduce processing times and the number of licenses required to open a bonded zone.

Shipments from FTZs and SEZs to other places in the Indonesia customs area are treated similarly to exports and are subject to taxes and duties. Bonded zones have a domestic sales quota of 50 percent of the initial realization amount on export, sales to other bonded zones, sales to free trade zones, and sales to other economic areas (unless otherwise authorized by the Indonesian government). Sales to other special economic regions are only allowed for further processing to become capital goods, and to companies with a license from the economic area organizer for the goods relevant to their business.

Indonesia expects foreign investors to contribute to the training and development of Indonesian nationals, allowing the transfer of skills and technology required for their effective participation in the foreign companies’ management. Generally, a company can hire foreigners only for positions that the government has deemed open to non-Indonesians. Employers must have training programs aimed at replacing foreign workers with Indonesians. If a direct investment enterprise wants to employ foreigners, the enterprise should submit an Expatriate Placement Plan (RPTKA) to the Ministry of Manpower.

Indonesia recently made significant changes to its foreign worker regulations. Government Regulation No. 34/2021, an implementing regulation of the Omnibus Law on Job Creation, on the utilization of foreign workers stipulates specific documents required for the RPTKA and introduces different types of RPTKA for temporary works (e.g. film production, audits, quality control, inspection and installation of machinery), employment for work under six months, employment that does not require payment to the Foreign Worker Utilization Compensation Fund (DKPTKA), and employment in SEZs. Under the regulation, an RPTKA is not required for commissioners or executives. Foreigners working in technology-based startups are also exempted from the RPTKA requirement in the first three months. Expatriates can use an endorsed RPTKA to apply with the immigration office in their place of domicile for a Limited Stay Visa or Semi-Permanent Residence Visa (VITAS/VBS). Expatriates receive a Limited Stay Permit (KITAS) and a blue book, valid for up to two years and renewable for up to two extensions without leaving the country. While a technical recommendation from a relevant ministry is no longer required, ministries may still establish technical competencies or qualifications for certain jobs or prohibit the use of foreign workers for specific positions, by informing and obtaining approval from the Ministry of Manpower. Foreign workers who plan to work longer than six months in Indonesia must apply for employee social security and/or insurance.

Government Regulation No. 34/2021 outlines the types of businesses that can employ foreign workers, sets requirements to obtain health insurance for expatriate employees, requires companies to appoint local “companion” employees for the transfer of technology and skill development, and requires employers to facilitate Indonesian language training for foreign workers. Any expatriate who holds a work and residence permit must contribute USD 1,200 per year to the DKPTKA for local manpower training at regional manpower offices. Ministry of Manpower Decree No. 228/2019 details the number of jobs open for foreign workers across 18 sectors, ranging from construction, transportation, education, telecommunications, and professionals. Foreign workers must obtain approval from the Manpower Minister or designated officials to apply for positions not listed in the decree. Some U.S. firms report difficulty in renewing KITASs (residency cards/IDs) for their foreign executives.

Indonesia notified the WTO of its compliance with Trade-Related Investment Measures (TRIMS) on August 26, 1998. The 2007 Investment Law states that Indonesia shall provide the same treatment to both domestic and foreign investors originating from any country. Nevertheless, the government pursues policies to promote local manufacturing that could be inconsistent with TRIMS requirements, such as linking import approvals to investment pledges or requiring local content targets in some sectors.

In 2019, Indonesia issued Government Regulation No. 71/2019 to replace Regulation No. 82/2012, further detailed in Ministry of Communication and Information Technology (MCIT) Regulation No. 5/2020, which classifies electronic system operators (ESO) into two categories:  public and private. Public ESOs are either a state institution or an institution assigned by a state institution but not a financial sector regulator or supervisory authority. Private ESOs are individuals, businesses and communities that operate electronic systems. Public ESOs must manage, process, and store their data in Indonesia, unless the storage technology is not available locally. Private ESOs have the option to choose where they will manage, process, and store their data. However, if private ESOs decide to process data outside of Indonesia, they must provide access to their systems and data for government supervision and law enforcement purposes. For private financial sector ESOs, Government Regulation 71/2019 provides that such firms are “further regulated” by Indonesia’s financial sector supervisory authorities regarding the private sector’s ESO systems, data processing, and data storage. MCIT Regulation No. 10/2021 requires private sector operator to register within six months period after the effective implementation of risk-based business licensing through the OSS system. The policy has not been implemented as MCIT is still waiting for an official statement from BKPM on the operational of the Risk-Based OSS system. MCIT also issued Regulation 13/2021 in October, requiring a minimum of 35 percent local content requirement (LCR) for 4G and 5G device distributed and used in Indonesia starting in mid-April 202, while previously it was set at 30 percent.

Additionally, to implement Government Regulation 71/2019, the Financial Services Authority (OJK) issued Regulation No. 13/2020 that became effective March 31, 2020. It is an amendment to Regulation No. 38/2016, which allows banks to operate their electronic data processing systems and disaster recovery centers outside of Indonesia, provided that the system receives approval from OJK. OJK issued Regulation 4/2021, effective on March 9, 2021, which allows some non-bank financial institution data to be transferred and stored outside of Indonesia subject to OJK approval. Unless approved by OJK, data centers and disaster recovery centers must be in Indonesia. Certain core banking data and non-bank financial institution’s core systems must also be stored onshore/within Indonesia. OJK will evaluate whether offshore data arrangements could diminish its supervisory efficiency or negatively affect the bank’s performance, and if the data center complies with Indonesia’s laws and regulations. Data may be mirrored or placed in offshore systems, subject to OJK approval, such as for global integrated analysis, global risk management analysis with headquarters, and integrated anti-money laundering and terrorist financing analysis.

Iraq

4. Industrial Policies

The Iraqi Investment Law offers foreign investors several exemptions for qualified investments, including a 10-year exemption from taxes, exemptions from import duties for necessary equipment and materials throughout the period of project implementation, and exemption from taxes and fees for primary materials imported for commercial operations.  The exemption increases to 15 years if Iraqi investors own more than 50 percent of the project.  The law allows investors to repatriate capital brought into Iraq, along with proceeds.  Foreign investors can trade in shares and securities listed on the Iraqi Stock Exchange.  Hotels, tourist institutions, hospitals, health institutions, schools, and colleges enjoy additional exemptions from duties and taxes for the import of furniture, tools, equipment, machinery, and means of transportation, but foreign companies that sell goods or services to any entity in Iraq may be subject to Iraqi taxes.

Foreign and domestic companies may have tax-exempt profits if their project is with the GOI and the project is listed in the National Investment Plan, which the Ministry of Planning prepares annually.  The GOI ministries overseeing investment projects provide updates for the list of investment contracts to the Ministry of Finance, including its tax commission, also known as the General Commission for Taxies (GCT).  Foreign and domestic companies that have registered businesses to execute contracts outside the national investment plan do not receive tax exemptions.  Companies have reported difficulties obtaining favorable tax treatment after deals are struck.  However, in some cases, GOI entities have negotiated partial or short-term tax exemptions for companies as part of a project contract.

Income tax language pertaining to oil projects is included in GOI petroleum contracts with the Ministry of Oil and applies to each consortium and its partners.  The Council of Ministers (COM) ratified the contract language, which supersedes the Tax Code.  Secondary contracts that a consortium issues are treated differently.  The consortium is required to withhold seven percent from secondary contracts for remittance to the GOI.  Companies pay a profit tax of 15 percent unless they operate in the oil sector, which has a 35 percent tax profit rate.  The definition of “petroleum activities” is subject to interpretation.  Any business or individual considering doing business in Iraq should obtain competent advice from a private accountant and attorney.

Under the IKR’s investment law, foreign and national investors are treated equally and are eligible for the same benefits.  Foreign investors may choose to invest in the IKR with or without local partners, and full repatriation of profits is allowed.  While investors have the right to employ foreign employees in their projects, priority is given to awarding projects that employ a high share of local staff and involve significant knowledge transfer.  The government is considering amending the existing law to require 75 percent of the employees of investment projects be local, but the amended investment laws have never passed the IKP.  However, the KBOI considers local employment when deciding on project approvals or licensing.  Additionally, the law allows an investor to transfer his investment totally or partially to another foreign investor with the approval of the KBOI.

Free Trade Zones (FZs) are permitted under Iraqi law per the Free Zone Authority Law No. 3/1998, for industrial, commercial, and service projects.  The Free Zone Commission in the Ministry of Finance administers the law but lacks a specific mandate to develop the FZs.  Under the law, capital, profits, and investment income from projects in an FZ are exempt from all taxes and fees throughout the life of the project.  Goods entering Iraq’s market from FZs are subject to normal import tariffs; no duty is levied on exports from FZs.

Activities permitted in FZs include industrial activities such as assembly, installation, sorting, and refilling processes; storage, re-export, and trading operations; service and storage projects and transport of all kinds; banking, insurance, and reinsurance activities; and supplementary and auxiliary professional and service activities.  Prohibited activities include weapons manufacture and environmentally polluting industries.

Iraq currently has four FZs with tax exemptions and other incentives for the transportation, industrial, and logistics sectors.  The largest is the Basrah/Khor al-Zubair FZ, comprising 18 square km and located southwest of Basrah at the Khor al-Zubair seaport.  Operational since June 2004, it hosts a number of local and foreign companies.  The Ninewa/Falafel Free Zone is located in the north.  Plans to develop the FZ in Fallujah are ongoing.  The Falafel and Fallujah zones are located in formerly ISIS-held areas, and the possibility of continued political instability makes further development in the near future unlikely.  There is also an FZ in Baghdad.  In May 2019, Iraq and Kuwait announced a new joint FZ project in Safwan port, pending approvals.  More information can be found at the Ministry of Finance website: http://www.mof.gov.iq/pages/ar/FreeZonesInIraq.aspx.

In the IKR, there are currently no FZs.  The KRG has approved plans for zones in all IKR provinces.

Iraqi labor law describes two categories of workers, which are local Iraqis and foreign workers whom the GOI and other Iraqi entities employ.  The Investment Law stipulates the foreign workers may be hired for investment projects, after priority has been given to Iraqi workers.  At least 50 percent of an investment project’s workers must be Iraqi nationals.  International companies have noted that Iraq lacks skilled labor, and it can be a challenge to meet this requirement.  Foreign investors are expected to help train Iraqi employees to increase their efficiency, skills, and capabilities.

In the IKR, hiring locally is encouraged, but not mandated.  Before applying for the residency permit required for legal employment, foreign workers must obtain a security clearance from the KRG MOI, a medical clearance which includes an HIV test, and a work permit from the KRG Ministry of Labor and Social Affairs (MOLSA).  Some foreign companies have reported prolonged delays in obtaining necessary residency permits for foreign workers.  In 2020, the KRG significantly increased its fees for foreign residency permits.  The appointment of foreign nationals as managers of foreign-owned limited liability companies requires additional clearances. Residency permits are only one year in duration.

In March 2021, Iraq’s MOI issued a new directive that would allow visitors from more than thirty countries, including the United States, to obtain visas on arrival at Iraq’s ports of entry, rather than having to do so prior to traveling to Iraq.  In announcing the policy, the GOI said the move aimed to “encourage investment and support jobs.”  Information indicates the visa-on-arrival will cost $75 and permit a single entry for a maximum two-month stay.

The PM-led Committee for National Health and Safety rescinded on March 7 the requirement for inbound and outbound travelers to present a negative PCR test.  Starting April 1, travelers must instead present vaccine certificates that indicate receipt of one dose of the Johnson & Johnson vaccine or two doses of other approved vaccines.  Individuals who cannot receive the vaccine for medical reasons will still need to provide a negative PCR test result and a medical report approved by the Health Ministry.  This new policy applies to Iraqi citizens and foreigners.

U.S. citizens traveling to the IKR can obtain a visa upon arrival at the airport, valid for 30 days.  This visa is not valid for travel in Iraq outside the IKR, as the GOI does not honor KRG-issued visas.  U.S. citizens who plan to stay for longer than 30 days must extend their IKR visa or obtain a residency permit.  The KRG does not require HIV tests if travel is shorter than 15 days.  At the time of this report, KRG announced that from April 1 travelers older than 12 years old just need to have both shots of the Moderna or Pfizer vaccine, or one shot of the Johnson and Johnson vaccine.  No PCR will be required for fully vaccinated people.  If for medical reasons travelers could not get vaccinated, then a PCR (72 hours or less) will be required.  Additional information can be found on the U.S. Department of State’s website: www.travel.state.gov.

The GOI does not follow any forced localization policy in which foreign investors must use domestic content in their goods and technology.  There are no requirements for IT providers to turn over source code and/or provide access to surveillance.

The GOI strongly resists offering ownership or profit sharing with any potential foreign investor.  The GOI prefers to structure foreign investments as contracts by which it agrees to pay for services or equipment at a price that a clause in the annual budget law guarantees, as opposed to a price based on profits or returns.  The KRG, in contrast, has employed “build-own-operate” project structures and production sharing contracts in its management of the energy, oil, and gas sectors.

Ireland

4. Industrial Policies

Three Irish organizations – IDA Ireland (IDA), EI, and Udaras – have regulatory authority for administering grant aid to investors for capital equipment, land, buildings, training, and R&D. Foreign and domestic business enterprises seeking grant aid from these organizations must submit detailed investment proposals. These proposals typically include information on fixed assets (capital), labor, and technology/R&D components, and establish targets using criteria such as sales, profitability, exports, and employment. The submitted information is business confidential, and each investment proposal is subject to an economic appraisal before support is offered or denied.

Ireland’s investment agencies and foreign investors jointly establish employment creation targets, which usually serve as the basis for performance requirements. The agencies only pay grant aid after the foreign investors have attained externally audited performance targets. Grant-aid agreements generally have a repayment term of five years after the date on which the last installment is paid. Parent companies of the investor generally must also guarantee repayment of the government grant if the grant-aided company closes before an agreed time period elapses, normally ten years after the grant was paid. There are no requirements foreign investors must procure locally or allow nationals to own shares.

The EU Regional Aid Guidelines (RAGs) in place from 2022- 2027, govern the maximum grant-aid the Irish government can provide to firms/businesses which are graded based on the regional location. The differences in the various aid ceilings reflect the relative development status of business/infrastructure in regions outside the greater Dublin area.

Investors are generally free, subject to planning permission, to choose the location of their investment, however IDA has actively encouraged investment in regions outside Dublin since the 1990s. Investment regionalization has been government policy since 2001. IDA set out its plan to secure 800 investments and generate 50,000 new jobs by 2025 in its Driving Recovery and Sustainable Growth 2021 – 2024 strategy. IDA’s goal is to locate over half of all new FDI investments outside the two main urban centers of Dublin and Cork. IDA has developed regional hubs to facilitate clusters of activity around the country. In the past IDA has supported construction of business parks in counties Galway and Louth, to encourage biotechnology sector activity in those counties.

There are no restrictions on participation by foreign firms in government-financed and/or -subsidized R&D programs on a national basis. In fact, the government strongly encourages and incentivizes (via a partial tax break) foreign companies to conduct R&D as part of its national strategy to build a more knowledge-intensive, innovation-based economy. Science Foundation Ireland (SFI), the state science agency, has been responsible for administering Ireland’s R&D funding since 2000. Under its current strategy, SFI annually invests over USD 200 million in R&D activities. SFI targets leading researchers in Ireland and overseas to promote the development of biotechnology, information and communications technology; and energy. SFI has specific research centers of excellence – hubs that draw researchers from all of Ireland’s universities together for research on specific themes.

The U.S.-Ireland Research and Development Partnership (UIRDP), launched in 2006, is a unique initiative involving funding agencies across three jurisdictions: the United States, Ireland, and Northern Ireland (NI). Under the program, a ‘single-proposal, single-review’ mechanism is facilitated by the National Science Foundation and National Institutes of Health in the United States, which accept submissions from tri-jurisdictional (U.S., Ireland, and NI) teams for existing funding programs. All proposals submitted under the auspices of UIRDP must have significant research involvement from researchers in all three jurisdictions. In 2015, the UIRDP program topics expanded to include agricultural research; and in 2019 cybersecurity research was also incorporated as a topic.

A key aspect of government support is a tax credit on the cost of eligible research, development, and innovation (RDI) activity; and on buildings used for RDI activity. A tax credit of 25 percent is subject to certain conditions and is available for R&D activities carried out in a wide variety of science and technology areas such as software development, engineering, food and beverage production, medical devices, pharmaceuticals, financial services; agriculture and horticulture. Some U.S. firms have already used these tax credits to build and operate R&D facilities.

The Irish government’s Knowledge Development Box (KDB), introduced in 2016, also offers a lower tax rate for certain R&D activities carried out in Ireland.

The government established Shannon duty-free Processing Zone under legislation in 1957. Firms operating in the area were at the time entitled to taxation and duty-free benefits not available elsewhere in Ireland. Nowadays, all firms in Ireland are treated equally and the Shannon Free Zone (SFZ) as it is now called, continues to operate albeit without any additional tax benefits.

All firms operating in the SFZ area have the same investment opportunities and tax incentives as indigenous Irish companies. More than 150 companies operate within the 254-hectare business park.

U.S. companies are located in SFZ include: Benex (Becton Dickinson), Connor-Winfield, Digital River, Enterasys Networks, Extrude Hone, GE Capital Aviation Services, GE Money, Sensing, Genworth Financial, Intel, Illinois Tool Works, Kwik-Lok, Lawrence Laboratories (Bristol Myers Squibb), Le Bas International, Magellan Aviation Services, Maidenform, Melcut Cutting Tools (SGS Carbide Tools), Mentor Graphics, Phoenix American Financial Services, RSA Security, Shannon Engine Support (CFM International), SPS International/Hi-Life Tools (Precision Castparts Corp), Sykes Enterprises, Symantec, Travelsavers Corp, Viking Pump, Western Well Tool, Xerox, and Zimmer Biomet.

The Shannon Group currently operates the SFZ, as well as Shannon Airport.

Visa, residence, and work permit procedures for foreign investors are non-discriminatory and, for U.S. citizens (as investors or employees), generally liberal. No restrictions exist on the numbers of, and duration of employment for, foreign managers brought in to supervise foreign investment projects, though all work permits must be renewed annually. There are no discriminatory export policies or import policies affecting foreign investors.

Data Storage

The government does not force data-localization, nor does it require foreign information technology providers to turn over source code and/or provide access to surveillance (e.g., backdoors into hardware and software, or encryption keys). There are no rules on maintaining minimum amounts of data storage in Ireland. Many U.S. firms already operate, and are planning for additional, data centers in Ireland. Future construction of new data centers may face additional planning restrictions particularly to access the power grid. In November 2021, Ireland’s energy regulator, the Commission for Regulation of Utilities (CRU), announced new requirements regarding location, energy consumption, and energy storage for future data centers connecting to the power grid.

Israel

4. Industrial Policies

The State of Israel encourages both local and foreign investment by offering a wide range of incentives and benefits to investors in industry, tourism, and real estate. The Law for Encouragement of Capital Investment and the Law for the Encouragement of Industrial Research and Design include grants and tax benefits for potential investors. Israel’s Ministry of Economy places a priority on investments in hi-tech companies and R&D activities. The Ministry of Economy’s Small and Medium Business Agency offers special loan programs for Arab women. Israel also offers tax benefits for new immigrants and Israeli citizens returning from residing abroad, including exemption from capital gains taxes on the sale of assets located outside of Israel.

Most investment incentives available to Israeli citizens are also available to foreign investors. Israel’s Encouragement of Capital Investments Law, 5719-1959, outlines Israel’s investment incentive programs. The Israel Investment Center (IIC) coordinates the country’s investment incentive programs.

For complete information, potential investors should contact:

Investment Promotion Center
Ministry of Economy
5 Bank of Israel Street,
Jerusalem 91036
Tel: +972-2-666-2607
Website: www.investinisrael.gov.il
E-mail: investinisrael@economy.gov.il 

Israel Investment Center
Ministry of Economy
5 Bank of Israel Street,
Jerusalem 91036 490
http://economy.gov.il/English/About/Units/Pages/IsraelInvestmentCenter.aspx
Tel: +972-2-666-2828
Fax: +972-2-666-2905

Israel has bilateral Qualifying Industrial Zone (QIZ) Agreements with Egypt and Jordan. The QIZ initiative allows Egypt and Jordan to export products to the United States duty-free, as long as these products contain inputs from Israel (8 percent in the Israel-Jordan QIZ agreement, 10.5 percent in the Israel-Egypt QIZ agreement). Products manufactured in QIZs must comply with strict rules of origin. More information is available at the Israeli Ministry of Economy’s Foreign Trade Administration website: https://www.gov.il/en/departments/Units/foreign_trade 

Israel has one free trade zone, the Red Sea port city of Eilat.

There are no universal performance requirements on investments, but “offset” requirements are often included in sales contracts with the government. There are no limits to private foreign ownership of Israeli firms. Israel’s visa and residency requirements are transparent. The Israeli government does not impose preferential policies on exports by foreign investors.

Italy

4. Industrial Policies

The GOI offers modest incentives to encourage private sector investment in targeted sectors and economically depressed regions, particularly in southern Italy. The incentives are available to eligible foreign investors as well. Incentives include grants, low-interest loans, and deductions and tax credits. Some incentive programs have a cost cap, which may prevent otherwise eligible companies from receiving the incentive benefits once the cap is reached. The GOI applies cost caps on a non-discriminatory basis, typically based on the order in which the applications were filed. The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Italy provides an incentive for investments by SMEs in new machinery and capital equipment (“New Sabatini Law”), available to eligible companies regardless of nationality. This investment incentive provides financing, subject to an annual cost cap. Sector-specific investment incentives are also available in targeted sectors. The government has renewed “New Sabatini Law” benefits, extending them through 2027.

The GOI allocated €23.8 billion in 2021-2023 for the private investment plan to transition to “Industry 4.0,” which aims to improve the Italian industrial sector’s competitiveness through a combination of policy measures, tax credits, and research and infrastructure funding. The 2022 budget also reformulated the rates of the tax credit of “Industry 4.0” for the purchase of new investment goods. The government also extended the incentives to the purchase of immaterial goods (software, system integration, platforms, and apps). In the 2021 budget, the GOI allocated €2 billion in tax incentives to spur bank mergers and attract a potential buyer for state-owned bank Monte dei Paschi di Siena. The 2022 budget extended these incentives through June 2022. In 2022, the GOI extended the “Transition 4.0” plan to 2025 to support the green transition. The plan extends tax credits for innovation and design (including to 2031 for R&D expenses) and lowers tax rates for capital investments. The GOI is also in the process of revising incentives and subsidies which it considers inefficient or out of alignment with decarbonization targets.

The Italian tax system generally does not discriminate between foreign and domestic investors, though Italy’s digital services tax may impact certain U.S. companies. The corporate income tax (IRES) rate is 24 percent. In addition, companies may be subject to a regional tax on productive activities (IRAP) at a 3.9 percent rate. The World Bank estimates Italy’s total tax rate as a percent of commercial profits at 59.1 percent in 2019, higher than the OECD high-income average of 39.7 percent.

Italy’s main free trade zone (FTZ) is in the northeastern city of Trieste. FTZs allow companies to import goods, transform them for re-export without paying import tariffs, and free of any customs restraints. There is an absolute exemption from duties on products coming from a third country and re-exported to a non-EU country. There is draft legislation proposing FTZs in Genoa and Naples. The government is restructuring the FTZ in place in Venice.

In 2017, Laws 91 and 123 allowed for the creation of eight Special Economic Zones (SEZs) managed by port authorities in Italy’s less-developed south (Abruzzo, Basilicata, Calabria, Campania, Molise, and Puglia) and on the islands of Sardinia and Sicily. Investors will be able to access up to €50 million in tax breaks and take advantage of hiring incentives, reduced bureaucracy, and reimbursement of the IRAP regional business taxes. The program is funded annually (€250 million) through 2022.

The 2021 budget law provided for a 50% reduction of income taxes for all business conducted in SEZs. In addition, the NRRP allocates €630 million for infrastructure investments to ensure development of intermodal transportation connections at SEZs and links to the EU’s Trans-European Networks (TEN-T). The NRRP has targeted another €1.2 billion from its reserves for projects in the main ports in the south.

The SEZ in the Region of Campania was the first to become operational. The Naples SEZ encompasses over 54 million square meters of land in the ports of Naples, Salerno, and Castellamare di Stabia, as well as industrial areas and transport hubs in 37 cities and towns in Campania.  Incentives must be approved by local government bodies in a procedure governed by the Port Authority of the Central Tyrrhenian Sea.  The Region of Campania forecasts that the SEZ will create (or save) between 15,000 and 30,000 jobs. Any business can qualify for the fiscal and administrative benefits of the SEZ in Campania if at least 50% of the related investments are carried out within the borders of Campania’s SEZ.

The port cities of Bari and Brindisi completed their SEZ approval procedures in late 2019, followed by the transshipment port of Gioia Tauro in Calabria.  Other zones in the region include eastern Sicily (Augusta, Catania, and Siracusa), western Sicily (Palermo), Sardinia (Cagliari), SEZ Ionica (Taranto in Puglia and the region of Basilicata); and a shared SEZ between ports located in Abruzzo and Molise, which received local approval in 2020.

With the 2020 budget, the government established that each SEZ is to be chaired by a government commissioner. Only two commissioners have been appointed to date- Rosanna Nisticò in Calabria (October 2020) and Gianpiero Marchesi in Taranto (December 2020).

In addition to SEZs, Italian ports are focusing on Customs Free Zones whereby port operators can conduct commercial activities and take advantage of significant customs incentives. In mid-February 2021, the Port Authority of the Ionian Sea launched Taranto’s Customs Free Zone covering an area of approximately 163 hectares. In March 2021, the Port of Brindisi established a small 20-hectare Customs Free Zone.

Currently, goods of foreign origin may be brought into Italy without payment of taxes or duties, if the material is to be used in the production or assembly of a product that will be exported.  The free-trade zone law also allows a company of any nationality to employ workers of the same nationality under that country’s labor laws and social security systems.

As a member of the EU, Italy does not follow forced localization policies in which foreign investors must use domestic content in goods or technology. Italy does not have enforcement procedures for investment performance requirements. Italy does not require local data storage but companies transmitting customer or other business-related data within or outside of the EU must comply with relevant EU privacy regulations.

In 2020, the GOI exercised its Golden Power authority in several 5G-equipment procurement cases. In some cases, the GOI authorized telecom operators to purchase equipment from certain foreign IT vendors if they could adhere to a set of “prescriptions.” One of these prescriptions includes access to the foreign IT vendors’ source code.

Jamaica

4. Industrial Policies

The Fiscal Incentives (Miscellaneous Provisions) Act 2013 repeals most of the legacy incentive legislation and provides flexibility for new tax incentives only to be granted in relation to the bauxite sector, special economic zone activities, the relocation of corporate headquarters, and Junior Stock Exchange listings.  The Act also outlines the arrangement for transitioning to the new regime.  Continuing beneficiaries may elect to keep old incentives such as relief from income tax and customs duty as well as zero-rated General Consumption Tax (GCT) status for imports.  

Below are short descriptions of notable, recently enacted investment incentives.

Omnibus legislation – Provides tax relief on customs duties, additional stamp duties, and corporate income tax.  These benefits are granted under the following four areas:

(1) The Fiscal Incentives Act: Targets small and medium size businesses and reduces the effective corporate income tax rate by applying: (a) an Employment Tax Credit (ETC) at a maximum value of 30 percent; and (b) a capital allowance applicable to a broadened definition of industrial buildings.

(2) The Income Tax Relief (Large-Scale Projects and Pioneer Industries) Act: Targets large-scale projects and/or pioneering projects and provides for an improved and more attractive rate for the ETC.  Projects will be designated either as large-scale or pioneer based on a decision by Parliament and subject to an Economic Impact Assessment.

(3) Revised Customs Tariff: Provides for the duty-free importation of capital equipment and raw material for the productive sectors. 

(4) Revised Stamp Duty Act: Provides exemption from additional stamp duty on raw materials and non-consumer goods for the manufacturing sector.

Urban Renewal Act: Companies that undertake development within Special Development Areas can benefit from Urban Renewal Bonds, a 33.3 percent investment tax credit, tax-free rental income, and the exemption from transfer tax and stamp duties on the ‘improved’ value of the property. 

Bauxite and Alumina Act: Under this Act, bauxite/alumina producers are allowed to import all productive inputs free of duties, Value Added Tax (VAT), and other port related taxes and charges.  

The Foreign Sales Corporation Act: This Act exempts income tax for five years for qualified income arising from foreign trade.  U.S. law through the Tax Information Exchange Agreement (TIEA) reinforces this incentive.  

Jamaica’s EX-IM Bank provides concessionary interest rate loans for trade financing, while the Development Bank of Jamaica offers reduced lending rates to the productive sectors.  Special tax incentives exist for companies that register on the Junior Stock Exchange.

Income Tax Act (Junior Stock Exchange): As of January 1, 2014, companies listed on the Junior Stock Exchange are not required to pay income tax during the first five years and 50 percent for the next five years.  

Special Economic Zone Act: In 2015, Jamaica passed legislation establishing Special Economic Zones (SEZs).  The SEZ Act repeals the Jamaica Free Zone Act, making way for: (1) the designation; promotion; development; operation; and management of Special Economic Zones; (2) the establishment of a SEZ Authority; and (3) the granting of benefits and other measures in order to attract domestic and foreign investments. 

Productive inputs relief (PIR): There is relief from customs duty and additional stamp duty on the importation of certain ‘productive inputs’ that are directly used in the ‘production of primary products’ or the ‘manufacture of goods’.  In addition to the manufacturing and agricultural sectors, relief is also granted on certain products imported for use in the tourism, creative arts, and healthcare industries.

As at March 2022 there were 164 entities operating in Jamaica’s Special Economic Zones (SEZ), occupying over 25 million square feet.  Operations in Jamaica’s SEZs include business process outsourcing (BPO); warehousing and distribution; manufacturing; and assembly and production facilities.  The Jamaica Special Economic Zone Authority (www.jseza.com) regulates, supervises, and promotes the Special Economic Zone (SEZ).  

SEZ operators benefit from a 12.5 percent corporate income tax rate (effective rate may be as low as 7.5 percent with the approval of additional tax credits); customs duty relief, General Consumption Tax (GCT) relief; employment tax credit; promotional tax credit on research and development; capital allowance; and a stamp duty payable of 50 percent.  Developers receive these benefits plus relief from income tax on rental income and relief from transfer tax.  There is a non-refundable one-time registration fee and renewable annual fee to enter the regime.

Duty-free zones are primarily found in airports, hotels, and tourist centers and, as with special economic zone activities, do not discriminate on the basis of nationality.  

No performance requirements are generally imposed as a condition for investing in Jamaica, and government of Jamaica (GOJ) imposed conditions are not overly burdensome.  The GOJ does not mandate local employment, although the use of foreign workers to fill semi-skilled and unskilled jobs is generally frowned upon, especially by trade unions.  When requesting work permits for foreign workers, both local and foreign employers must describe efforts to recruit locally.  The GOJ requires a description of efforts to recruit locally.  The U.S. government has heard of delays in obtaining work permits for foreign workers as the GOJ does not readily have data available to determine if the requisite skills exist in Jamaica.

The GOJ does not follow “forced localization,” requiring domestic content in goods or technology.  There are no requirements to provide the GOJ access to surveillance of data and there are no restrictions on maintaining certain amounts of data storage within the country.

Japan

4. Industrial Policies

The Japan External Trade Organization (JETRO) maintains an English-language list of national and local investment incentives available to foreign investors on its website: https://www.jetro.go.jp/en/invest/incentive_programs/ .

Japan established a feed-in-tariff (FIT) system in 2012 to incentivize the diversification of its power supply. Under the FIT, approved renewable energy projects – including solar photovoltaic (PV), wind, geothermal, small-scale hydropower, and biomass – sell electricity to the transmission and distribution utilities at a fixed price for 20 years, and the utilities pass these costs on to end users through electricity rates. Solar PV has benefited most from the FIT scheme, with Japan now the world’s third largest solar market by installed capacity. Prices are set annually according to resource type and other conditions. Due to the cost of the FIT system – estimated at JPY 80.2 billion ($671 million) for 2022 – METI has reduced subsidy levels over time, particularly for solar PV projects. It has also taken other measures to control costs, such as introducing a capacity auction system for projects over a certain size.

In line with recent revisions to Japan’s Renewable Energy Act, a new “feed-in-premium” (FIP) scheme will go into effect in April 2022 alongside the existing FIT scheme. Under the FIP, approved projects can receive a premium – based on the variable wholesale power market price – in addition to any revenue earned through market or bilateral transactions. FIP projects over a certain size must also participate in the existing auction system. The revised Renewable Energy Act also established a limit on the time period within which new FIT or FIP projects must commence operations before losing their access to grid interconnection. Further, the revised act requires that new commercial solar projects secure funds necessary for end-of-life decommissioning. These changes to Japan’s renewable energy support scheme, while necessary to address the growing economic costs of the existing FIT scheme, is forcing project developers to change their business models and sharpen their ability to predict revenues. We cannot yet estimate the impact these changes will have on the growth of Japan’s renewable energy market.

Japan no longer has free-trade zones or free ports. Customs authorities allow the bonding of warehousing and processing facilities adjacent to ports on a case-by-case basis.

The National Strategic Special Zones Advisory Council chaired by the Prime Minister has established a total of ten National Strategic Special Zones (NSSZ) to implement selected deregulation measures intended to attract new investment and boost regional growth. Under the NSSZ framework, designated regions request regulatory exceptions from the central government in support of specific strategic goals defined in each zone’s “master plan,” which focuses on a potential growth area such as labor, education, technology, agriculture, or healthcare. Foreign-owned businesses receive equal treatment in the NSSZs; some measures aim specifically to ease customs and immigration restrictions for foreign investors, such as the “Startup Visa” adopted by the Fukuoka NSSZ.

The Japanese government has also sought to encourage investment in the Tohoku (northeast) region, which was devastated by the earthquake, tsunami, and nuclear “triple disaster” of March 11, 2011. Areas affected by the disaster have been included in a “Special Zone for Reconstruction” that features eased regulatory burdens, tax incentives, and financial support to encourage heightened participation in the region’s economic recovery.

The Diet approved a revision to add “advanced data technologies” as one of targeted growth areas for NSSZs in May 2020, which went into effect on September 1, 2020. The revision allowed regions to create “Super City National Strategic Zones,” on the condition that the zone will provide advanced services to its citizens through utilizing artificial intelligence (AI), big data or other data linkage platforms. The Cabinet Office website cited remote schooling/healthcare, cashless payment services, and one-stop administrative services as examples of such projects.

Japan does not maintain performance requirements or requirements for local management participation or local control in joint ventures.

Japan has no general restrictions on data storage. On January 1, 2020, the U.S.-Japan Digital Trade Agreement went into effect and specifically prohibits data localization measures that restrict where data can be stored and processed. These rules are extended to financial service suppliers, in circumstances where a financial regulator has the access to data needed to fulfill its regulatory and supervisory mandate.

Jordan

4. Industrial Policies

Under Investment Law No. 30/2014, the Council of Ministers, upon the recommendation of the Investment Council, may offer investment incentives in accordance with the law and governing regulations for projects outside the Development and Free Zones.  The Investment Council and Investment Commission can also offer certain exemptions for projects in the following sectors:

  1. Agriculture and livestock
  2. Hospitals and specialized medical centers
  3. Hotel and touristic facilities
  4. Tourism-related entertainment and recreation
  5. Contact and communication centers
  6. Scientific research centers and medical laboratories
  7. Technical and media production

Such incentives include customs exemptions, refunding of the general tax for production inputs, and no sales tax. The Ministry of Investment can provide investors with further information on these exemptions ( home new  – Moin). Automatic exemptions are also granted for specific services whether purchased locally or imported.  The Income and Sales Tax Department will refund the general tax levied within 30 days from submitting a written request in accordance with the terms and conditions determined by the Regulations Governing Investment Incentives (Number 33 of 2015).

A number of non-automatic exemptions are granted for production requirements and fixed assets used in industrial or handicrafts activities.  Such exemptions are subject to administrative procedures and approvals obtained from the Ministry of Investment Technical Committee and are governed by the previously referenced regulation.

Article 8-A of the 2014 Investment Law allows the cabinet to grant additional advantages, exemptions, or incentives to any economic activities.  Under this article, the cabinet granted additional incentives to the ICT, tourism, and transport sectors in 2016, as published in the Official Gazette.

As the government implements reforms under the IMF Extended Fund Facility program and its own pro-growth reform agenda, several U.S. investors have reported the government has sought to reduce or eliminate incentives, guarantees, and/or tax exemptions previously expected.

Bylaw number 13 for year 2015 regulates the incentives granted to renewable energy and energy efficiency equipment and projects. The Bylaw exempted those items from customs duties and imposed a General Sales Tax (GST) at a rate of zero percent. However, the Ministry of Energy has stalled all renewable energy projects of more than 1 MW capacity.

Jordanian law and regulation promote and incentivizes water efficiency, waste management, and green building in commercial property development. For example, since 2015 the Jordan National Building Codes have required energy efficient practices in new construction.

Starting April 1, 2022, the Government will implement a new electricity tariff structure, which will reduce production costs for several vital economic sectors including health, tourism, commercial, agricultural, and industrial sectors.

The country is divided into three development areas:  Zones A, B, and C. Investments in Zone C, the least developed areas of Jordan, receive the highest level of incentives while those in Zone A receive the lowest level. All agricultural, maritime, transport and railway investments are classified as Zone C, irrespective of location. Hotel and tourism-related projects along the Dead Sea, leisure and recreational compounds, and convention and exhibition centers receive Zone A designations. Qualifying Industrial Zones (QIZs) are zoned according to their geographical location unless granted an exemption. The three-zone classification scheme does not apply to nature reserves and environmental protection areas.

Jordan’s Investment Law No. 30 of 2014 merged the Development and Free Zones Commission (DFZC) into the newly formed Jordan Investment Commission (now absorbed by the Ministry of Investment), thus it became the main governmental body responsible for creating, regulating, and monitoring Jordan’s free trade zones, industrial estates, and development zones. The development areas are the King Hussein Bin Talal Development Area (KHBTDA) in Mafraq, the Ma’an Development Area, the Irbid Development Area (IDA), the Dead Sea Development Zone, the Jabal Ajloun Development Zone, and the King Hussein Business Park Development Zone. The Investment Law assigns the Jordan Industrial Estates Corporation (JIEC) and the Development and Free Zones Corporation (DFZC) as main developers of industrial estates and development and free zones, under the supervision of the investment commission.

The government has also created nine industrial estates in Amman, Irbid, Karak, Mafraq, Madaba , Tafileh, Salt, and Aqaba, in addition to several privately-run industrial parks, including al-Mushatta, al-Tajamouat, al-Dulayl, Cyber City, al-Qastal, Jordan Gateway, and al-Hallabat. These estates provide basic infrastructure for a wide variety of manufacturing activities, reducing the cost of utilities and providing cost-effective land and buildings. Investors in the estates continue to receive incentives until their contracts expire, and receive various additional exemptions, such as a two-year exemption on income and social services taxes, complete exemptions from building and land taxes, and exemptions or reductions on most municipalities’ fees.

Besides the six public free zones in Zarqa, Sahab, Karak, Karama, Mowaqaar, and Queen Alia Airport, Jordan has over 37 designated free zones administered by private companies under the DFZC’s supervision. The free zones are outside of the jurisdiction of Jordan Customs and provide a duty and tax-free environment for the storage of goods transiting Jordan.

Jordan launched a solar park in Ma’an development zone and announced plans to establish two new industrial parks in Zarqa and Jerash.

Under the Investment Law, establishments operating within development zones are subject to a unified tax rate of 5 percent.  However, Income Tax Law No. 38 of 2018 modified the tax rates applicable to entities operating in the Development Zones depending on the source of the income; industrial activities with a local value-added of at least 30 percent are subject to 5 percent income tax rate, while other projects and activities are subject to 10 percent.

The Investment Law also grants entities registered in the free zones a tax exemption on any activity conducted within the borders of the free zones, the export of goods and services outside the Kingdom, and associated transit trade.  Profits earned on activities pertaining to the sale, disposal, or importation of goods and services within the borders of the free zones are subject to tax based on the normal income tax rates applicable to each entity, depending on its status (corporation or individual).

The Aqaba Special Economic Zone (ASEZA) is an independent economic zone not governed by the Investment Commission or the articles in the Investment Law governing investments in free zones or development zones.  It offers special tax exemptions, a flat five percent income tax, and facilitates customs handling at Aqaba Port.  In recent years, ASEZA has attracted projects, mainly in hotel and property development sectors, valued at over $8 billion.  The government continues to implement development projects aimed at attracting commerce and tourism through the Port of Aqaba.  The Aqaba New Port project became operational in 2018 and reached design capacity in 2019.  The new port, 20 kilometers south of the previous port, added four new terminals and expanded general ship berthing and marine services, in addition to adding dedicated terminals for grain silos, liquefied natural gas, phosphates, and propane.

Investors, foreign or domestic, face specific requirements in trade, services, and industrial projects in free zones. Industrial projects must be related to one of the following industries:

  • New industries that depend on advanced technology;
  • Industries that require locally available raw material and/or locally manufactured parts;
  • Industries that complement domestic industries;
  • Industries that enhance labor skills and promote technical know-how; or,
  • Industries that provide consumer goods and that contribute to reducing market dependency on imported goods.

In 2021, the government passed tax legislation to address gaps and loopholes to prevent tax leakages and ensure transparency and fairness; This included legislation on economic substance and transfer pricing and brought ASEZA under the national control for tax and customs administration.

For further details, please visit:

Jordan does not follow “forced localization.” However, some of the incentives are being tied to deployment of local content at certain percentages.

Jordan does not have requirements for foreign IT providers to turn over source code or provide access to surveillance.

In 2020, the Ministry of Digital Economy and Entrepreneurship submitted a draft for the personal Data Protection Law, which supports Jordan’s digitization efforts. The Council of Ministers approved the law and sent it to the Legislative and Opinion Bureau for review, as of March 2022, the draft law is with the Lower House for review. Jordan does not have a modern data protection law. The Criminal Law, Cybercrime Law, and Telecommunication Law offer partial protection of personal data.

Kazakhstan

4. Industrial Policies

The Entrepreneurial Code and Tax Code incentivize foreign and domestic investment in priority sectors, which include agriculture, metallurgy, extraction of metallic ores, chemical and petrochemical industries, textile and pharmaceutical industries, food production, machine manufacturing, waste recycling, and renewable energy. Firms in priority sectors receive tax and customs duty waivers, in-kind grants, investment credits, and simplified work permits.

Model investment contracts are prepared and signed for investment priority projects by the Investment Committee of the Ministry of Foreign Affairs and KazakhInvest. Details on their requirements are available here: https://invest.gov.kz/doing-business-here/regulated-sectors/ .

In January 2021, the government added investment agreements to the Entrepreneurial Code. Such projects exceed $50 million in industries selected by the government. Only Kazakhstan companies or residents of the AIFC are eligible. Under this agreement, the government provides incentives and a stabile legal regime for 25 years.

A U.S. investor signed the first investment agreement of this type in January 2021. The government will establish a special economic zone with tax and customs preferences.

The government offers incentives for clean energy investments by facilitating the sale of electricity generated by renewable energy sources (RES). The Financial Settlement Center of Kazakhstan’s Electric Grid Operating Company guarantees purchases of electricity produced from RES and connects RES to the grid on a priority basis.

The Law on Special Economic Zones allows foreign companies to establish enterprises in special economic zones (SEZs), simplifies permit procedures for foreign labor, and establishes a special customs zone regime not governed by EAEU rules. Kazakhstan has thirteen SEZs.

Kazakhstan altered its local content requirements to meet WTO accession requirements. Subsoil use contracts concluded after January 1, 2015, no longer contain local content requirements, and any local content requirements in contracts signed before 2015 phased out on January 1, 2021.

The GOK established a fund for the development of local content.  The fund invests in technology, IT, assembly of oil and gas equipment, and environmental projects.

In 2021, Kazakhstan introduced a scoring system for localization to stimulate local assembly of vehicles and agricultural equipment.

Foreign investors may participate in government and quasi-government procurement tenders, if they have established production facilities in Kazakhstan and are recognized as a pre-qualified bidder. The product must be made in Kazakhstan and be on the register of trusted producers. The pandemic has amplified the import substitution trend.

The GOK introduced significant recycling fees on imported combines and tractors. The government contends that the fee is applied to foreign and domestically produced vehicles, combines and tractors; however, it subsidizes the fee for domestic producers. Foreign companies consider this to be coercion to localize production. The government announced a 50-percent decrease in the recycling fee rate after President Tokayev publicly criticized the fee, but this change has not yet come into force.

Cross-border transmission of data is possible if countries receiving this data provide data protection. The National Security Committee and the Ministry of Digital Development, Innovations and Aerospace Industry supervise data protection and data storage in Kazakhstan.

Kenya

4. Industrial Policies

Kenya provides both fiscal and non-fiscal incentives to foreign investors (http://www.invest.go.ke/starting-a-business-in-kenya/investment-incentives/).  The minimum foreign investment to qualify for GOK investment incentives is USD 100,000.  Investment Certificate benefits, including entry permits for expatriates, are outlined in the Investment Promotion Act (2004).  Investment incentives are revised annually through the government’s budget policy statement and the Finance Act based on government’s strategic priorities at a given time.

The government allows all locally-financed materials and equipment for use in construction or refurbishment of tourist hotels to be zero-rated for purposes of VAT calculation – excluding motor vehicles and goods for regular repair and maintenance.  The National Treasury principal secretary, however, must approve such purchases.  In a measure to boost the tourism industry, one-week employee vacations paid by employers are a tax-deductible expense.  In 2018, the Kenya Revenue Authority (KRA) exempted from VAT certain facilities and machinery used in the manufacturing of goods under Section 84 of the East African Community Common External Tariff Handbook.  VAT refund claims must be submitted within 12 months of purchase.

The Finance Act (2014) amended the Income Tax Act (1974) to reintroduce capital gains tax on transfer of property.  Under this provision, gains derived from the sale or transfer of property by an individual or company are subject to a five percent tax.  Capital gains on the sale or transfer of property related to the oil and gas industry are subject to a 37.5 percent tax.  The Finance Act (2014) also reintroduced the withholding VAT system by government ministries, departments, and agencies.  The system excludes the Railway Development Levy (RDL) imports for persons, goods, and projects; the implementation of an official aid-funded project; diplomatic missions and institutions or organizations gazetted under the Privileges and Immunities Act (2014).

Kenya’s Export Processing Zones (EPZ) and Special Economic Zones (SEZ) offer special incentives for firms operating within their boundaries.  By the end of 2019, Kenya had 74 EPZs, with 137 companies and 60,383 workers contributing KES 77.1 billion (about USD 713 million) to the Kenyan economy.  Companies operating within an EPZ benefit from the following tax benefits:  a 10-year corporate-tax holiday and a 25 percent tax thereafter; a 10-year withholding tax holiday; stamp duty exemption; 100 percent tax deduction on initial investment applied over 20 years; and VAT exemption on industrial inputs.

About 54 percent of EPZ products are exported to the United States under AGOA.  The majority of the exports are textiles – Kenya’s third largest export behind tea and horticulture – and more recently handicrafts.  Eighty percent of Kenya’s textiles and apparel originate from EPZ-based firms.  Approximately 50 percent of the companies operating in the EPZs are fully-owned by foreigners – mainly from India – while the rest are locally owned or joint ventures with foreigners.

While EPZs aim to encourage production for export, Special Economic Zones (SEZ) are designed to boost local economies by offering benefits for goods that are consumed domestically and for export.  SEZs allow for a wider range of commercial ventures, including primary activities such as farming, fishing, and forestry.  The 2016 Special Economic Zones Regulations state that the Special Economic Zone Authority (SEZA) maintain an open investment environment to facilitate and encourage business by establishing simple, flexible, and transparent procedures for investor registration.  The 2019 draft regulations include customs duty exemptions for goods and services in the SEZs and no trade related restrictions on the importation of goods and services into the SEZs.  The rules also empower county governments to set aside public land to establish industrial zones.

Companies operating in the SEZs receive the following benefits:  all SEZ produced goods and services are exempted from VAT; the corporate tax rate for enterprises, developers, and operators reduced from 30 percent to 10 percent for the first 10 years and 15 percent for the next 10 years; exemption from taxes and duties payable under the Customs and Excise Act (2014), the Income Tax Act (1974), the EAC Customs Management Act (2004), and stamp duty; and exemption from county-level advertisement and license fees.  There are currently SEZs in Mombasa (2,000 sq. km), Lamu (700 sq. km), Kisumu (700 sq. km), Naivasha (1,000 acres), Machakos (100 acres) and private developments designated as SEZs include Tatu City (5,000 acres) and Northlands (11,576 acres) in Kiambu.  The Third Medium Term Plan of Kenya’s Vision 2030 economic development agenda calls for a feasibility study for an SEZ at Dongo Kundu in Mombasa, and the GOK is also considering establishing an SEZ near the Olkaria geothermal power plant.

The Public Procurement and Asset Disposal Act (2015) offers preferences to firms owned by Kenyan citizens and to products manufactured or mined in Kenya.  The “Buy Kenya, Build Kenya” policy mandates that 40 percent of the value of each GOK procurement be sourced locally.  Tenders funded entirely by the government, with a value of less than KES 50 million (approximately USD 500,000), are reserved for Kenyan firms and goods.  If the procuring entity seeks to contract with non-Kenyan firms or procure foreign goods, the act requires a report detailing evidence of an inability to procure locally.  The act also calls for at least 30 percent of government procurement contracts to go to firms owned by women, youth, and persons with disabilities.  The act further reserves 20 percent of county procurement tenders to residents of that county.

The Finance Act (2017) amends the Public Procurement and Asset Disposal (PPAD) Act (2015) to introduce Specially Permitted Procurement as an alternative method of acquiring public goods and services.  The new method permits state agencies to bypass existing public procurement laws under specific circumstances.  Procuring entities are allowed to use this method where market conditions or behavior do not allow effective application of the 10 methods outlined in the Public Procurement and Disposal Act.  The act gives the National Treasury Cabinet Secretary the authority to prescribe the procedure for carrying out specially permitted procurement.  The 2020 PPAD regulations exempt government to government (G2G Exemption) procurements from PPAD Act requirements.  G2G Exemption procurements must:  provide a plan for local technology transfer; reserve 50 percent of the positions for Kenyans; and locally source 40 percent of inputs.

The Data Protection Act (DPA) (2019) restricts the transfer of data in and out of Kenya without consent from the Data Protection Commissioner (DPC) and the data owner, functionally requiring data localization.  Entities seeking to transfer data out of Kenya must demonstrate to the DPC that the destination for the data has sufficient security and protection measures in place.  The 2019 DPA gives discretion to the Ministry of Information Communication Technology Cabinet Secretary to prescribe localization requirements for data centers or servers, including strategic interests, protection of government revenue, and “certain nature of strategic processing.”  The DPA authorizes the DPC to investigate data breaches and issue administrative fines of up to USD 50,000 and/or imprisonment of up to 10 years, depending on the severity of the breach.

Kosovo

4. Industrial Policies

Kosovo has established a flat corporate income tax of ten percent. To encourage investment, the government can grant certain VAT-related privileges, such as a six-month VAT deferment upon presentation of a bank guarantee for companies importing capital goods. Suppliers may export goods and services without being required to collect VAT from foreign buyers. Suppliers may claim credit for taxes on inputs by offsetting those taxes against gross VAT liabilities or claiming a refund. The government can issue guarantees or jointly finance foreign direct investment projects but has not yet done so. Kosovo does not have legislation that incentivizes businesses owned by underrepresented investors.

The Customs agency has enacted an administrative instruction that reduces the number of documents required for export and import. Only two documents are needed to export (a commercial invoice and a customs export declaration) and only three are now required to import (a commercial invoice, a customs import declaration, and a certificate of origin).

Kosovo has previously offered feed-in tariffs for a quota of renewable energy projects, which has been fulfilled. Kosovo currently does not offer any incentives for renewable energy investments, but it is working on its energy strategy which will define its energy future and subsequent policies.

The Kosovo Customs and Excise Code is compliant with EU and World Customs Organization standards, and addresses topics such as bonded warehouses, inward and outward processing, transit of goods, and free-trade zones. In addition to imported goods, some domestically produced goods from designated industries can be stored in bonded warehouses when these goods meet export criteria. Foreign firms are permitted to import production inputs for the manufacture of export goods without paying taxes or customs duties.

The Customs Code permits the establishment of zones for manufacturing and export purposes, and the Law on Economic Zones regulates their establishment. In 2014, Kosovo established three economic zones in the municipalities of Mitrovica/e, Gjakovë/Djakovica, and Prizren. Currently only the economic zone of Mitrovica/e has completed the legal and administrative procedures for building infrastructure, but the zone remains to be established and operationalized. Three business parks and one business incubator are operational.

Kosovo does not specify performance requirements as a condition for establishing, maintaining, or expanding investments in Kosovo. There are no onerous requirements that would inhibit the mobility of foreign investors or their staff. There are no conditions on permissions to invest, and the government does not mandate local employment. Investment incentives apply uniformly to both domestic and foreign investors, on a case-by-case basis.

Depending on the tender, Kosovo may require foreign IT providers to turn over source code and/or provide access to surveillance. Kosovo does not yet have standard rules on data transmission or storage. The Agency for Information Society is responsible for the storage of data for the central government, and other institutions store their respective data as well.

Kuwait

4. Industrial Policies

Incentives under the 2013 FDI Law include tax benefits (15 percent corporate tax on foreign firms may be waived for up to 10 years), customs duties relief, land and real estate allocations, and permissions to recruit required foreign labor. Kuwait does not offer incentives for businesses owned by demographically underrepresented investors.

Other tax benefits exist.  For example, entities incorporated in the GCC that are 100 percent owned by GCC nationals are exempt from paying a tax on corporate profits.  Capital gains arising from trading in securities listed on Kuwait’s stock market are exempt from tax. Foreign principals selling goods through Kuwaiti distributors are not subject to tax.

Kuwait does not have personal income, property, inheritance, or sales taxes. Kuwait, alongside its GCC neighbors, agreed in 2016 to implement a 5 percent value added tax on consumption. In 2019, Kuwait announced that it would delay implementation until 2021. As of March 2022, the VAT has not been implemented nor is it being seriously discussed in the National Assembly or government.

Kuwait does not offer any incentives for clean energy investment. Conversely, heavily subsidized utilities like electricity and desalinated water incentivize unmitigated use of emissions intense resources.

The Kuwait Free Trade Zone was established at Shuwaikh port in 1999.  The Council of Ministers approved legislation that would establish a new Free Trade Zone area as part of Kuwait’s Northern Gateway megaproject.  The legislation is pending in the National Assembly. Many restrictions normally faced by foreign firms, as well as corporate taxes, would not apply within the free trade zone.  KDIPA is developing three Economic Zones (Abdali, Al-Na’ayem and Al-Wafra) that were authorized by Law No. 116 of 2013.

The government requires foreign firms to hire a percentage of Kuwaitis that varies according to sector.  The percentages are as follows:

  • banking: 75 percent
  • communications: 65 percent
  • investment and finance: 40 percent
  • petrochemicals and refining industries: 30 percent
  • insurance: 22 percent
  • real estate: 20 percent
  • air transportation, foreign exchange, cooperatives: 15 percent
  • manufacturing and agriculture: 3 percent

Employers must obtain a no-objection certificate for a work permit for foreign employees from the Public Authority for Manpower (PAM) prior to the employee’s arrival in the country.  Obtaining a no-objection certificate requires submission of the employee’s criminal history and a completion of a health screening through a Kuwaiti Embassy or Consulate. Upon arrival, the employee must obtain a work permit from PAM and complete health and security screenings before receiving final status as a resident foreign worker from the Ministry of Interior.

Kuwait requires that foreign companies store data locally, although an upcoming data privacy law may permit for some external data storage. Kuwait has strict laws governing the use and transmission of data on Kuwaiti citizens. Foreign investors are subject to a 30 percent local content requirement on construction projects and when manufacturing goods locally.  Each company may determine whether and how it chooses to store data. Most governmental agencies follow International Organization for Standardization (ISO) certificate standards, which mandate the storage of data for five years.  Banks and other financial institutions are required by the Anti-Money Laundering/Combatting the Financing of Terrorism Law 106 of 2013 to maintain transactions data for five years. Contractors are subject to performance and completion bonds.

Kyrgyz Republic

4. Industrial Policies

The Kyrgyz Government has reduced the tax burden on repatriation of profits by foreign investors to conform to the tax rate for domestic investors. The Ministry of Economy and Commerce and the Kyrgyz National Investments Agency (KNIA) often express the government’s willingness to discuss potential incentives, including access to land, with specific foreign investors. To attract investment in the IT sector, the Kyrgyz government has created a “zero-tax zone” at the High Technology Park of the Kyrgyz Republic, which waives tax burden for companies in which 80 percent of total products and services are exported. The 2022 Tax Code provides some tax breaks for certain industries including agriculture, textiles, jewelry, aviation, and export-oriented production.

Incentives for clean energy investments are mostly tax breaks, such as VAT exemption for e-vehicles, though they are subject to the EAEU 15% import duty. (Consumers must still pay 12% VAT when they purchase an e-vehicle). The government has expressed a desire to attract investment to develop domestic hydropower production, but hurdles remain.  For example, while the government offers a feed-in tariff with a co-efficient of 1.3 for companies that produce renewable electricity, the government will only sign the agreement to purchase this electricity once the renewable energy infrastructure (such as a hydropower plant) has been built. The lack of a purchase agreement prior to construction has led to little investment appetite beyond a handful of domestic investors. Other outstanding issues involve contradictions in legislation that involve water and land regulation that would affect any new hydropower plant project.

There are five Free Economic Zones (FEZs) in the Kyrgyz Republic: Bishkek, Naryn, Karakol (Issyk-Kul province), Leylek (Batken province) and Maimak (Talas province). Each is situated to make use of transportation infrastructure and/or customs posts along the Kyrgyz borders. Government incentives for investment in the zones include exemption from several taxes, duties and payments, simplified customs procedures, and direct access to utility suppliers. The production and sale of petroleum, liquor, and tobacco products in FEZs are banned.  Additional information on FEZs can be found at https://invest.gov.kg/free-economic-zones/.

While there are no formal legal requirements for local employment, most major international investors are subject to tremendous public pressure to support threshold local employment, particularly in the mining and construction sectors. New investors may find local employment quotas included in potential investment agreements, mandating numbers for boards of directors, senior management, and/or other employees. The Kyrgyz government currently does not have any “forced localization” policies but in 2021 officials, including President Japarov, began to discuss introducing legal localization requirements. There are no known government/authority-imposed conditions on permission to invest. The U.S.-Kyrgyz Bilateral Investment Treaty ensures that investments are guaranteed freedom from performance requirements, including requirements to use local products or to exports local goods.  Foreign investors may freely transmit customer or other business-related data outside the country’s territory upon their own need as long as it does not contradict with local law on investments.

There are no known instances of requiring foreign IT providers to turn over source code and/or provide access to encryption. There is no legislation on maintaining data storage within the country.

Laos

4. Industrial Policies

Laos offers a range of investment incentives depending on the investment vehicle, with particular focus on government concessions and special economic zones. Many of these incentives can be found at www.investlaos.gov.la  and are generally governed by the Investment Promotion Law.

The new Foreign Investment Law allows for the establishment of special economic zones and specific economic zones (both referred to as SEZs). Special economic zones are intended to support development of new infrastructure and commercial facilities and include incentives for investment. Specific economic zones are intended for the development of existing infrastructure and facilities and provide a lower level of incentives and support than special economic zones. Laos has announced plans to construct as many as 40 special and specific zones, but as of 2020, it has only established 12. Some, such as Savan Seno SEZ in Savannakhet and the Vientiane Industry and Trade Area SEZ, or VITA Park, in Vientiane, have successfully attracted foreign investors. Others are accused of harboring illegal activities, such as the Golden Triangle SEZ in Bokeo province that houses the Kings Roman Casino. The Department of Treasury Office of Foreign Assets Control in early 2018 designated the Kings Roman Casino and its owners a Transnational Criminal Organization for engaging in drug trafficking, human trafficking, money laundering, bribery, and wildlife trafficking. More Chinese-invested SEZs are expected to open in the coming years, especially along the Laos-China Railway line. Thai companies are also exploring new SEZ-style industrial parks in Laos.

Generally, the Lao government places a high priority on trade facilitation measures in international fora, particularly as Laos relies upon trade moving across its neighboring countries in order to reach seaports. Since 2012, customs management has been modernized through the implementation of the Automated System for Customs Data (ASYCUDA) system assisted by the United Nations and the World Bank to operate customs declarations and border inspections across international check points, including airports and SEZs. The government has also developed a National Single Window to facilitate requests and issue permits for the import, export, and transit of all goods. These approaches reduced the use of paperwork and time involving customs’ clearance from two days in the past to less than eight hours in 2020.

With assistance from Japan, the Lao government instituted a new system for electronic collection of customs fees at several major border crossings in 2016, which is a significant improvement, and in early 2019 the Department of Customs introduced electronic customs payments at the Lao – Thai Friendship Bridge. On several border crossings with Vietnam, Lao and Vietnamese officials jointly conduct inspections to facilitate movement of goods.

On top of these actions, the government published a new version of the Tax Law (No. 81/NA) in late 2020 focusing on trade facilitation rather than revenue collection by eliminating required approvals by some agencies in the approval process. Nonetheless, Laos has struggled to harmonize its own internal processes. For example, customs practices vary widely at different ports of entry.

Laos does not have performance requirements. Requirements relating to foreign hiring are governed by the 2014 Labor Law, but in practice, large investors have been able to extract additional government concessions on use of foreign labor. Some foreign-owned businesses have criticized labor regulations for strict requirements that foreign employees not travel abroad during the first months of their Lao residency.

Laos does not currently have enacted laws or regulations on domestic data storage or localization requirements.

Latvia

4. Industrial Policies

Latvia does not offer tax incentives. The Cross-Sectoral Coordination Center of Latvia is the main agency in charge of National Development Planning. In accordance with the Law on the Development Planning System (https://likumi.lv/doc.php?id=175748 ), national development planning documents are prepared for a long-term (up to 25 years), medium-term (up to seven years) and short-term (up to three years). More information available here: https://www.pkc.gov.lv/en/national-development-planning. 

In addition, Latvia has identified the following sectors as having the highest potential for new investment: woodworking, metalworking and mechanical engineering, transport and storage, information technology (including global business services), green technology, health care, life sciences, and food processing. The information is disseminated to the general public and potential investors via the Latvian Investment and Development Agency’s official website ( http://liaa.gov.lv/invest-latvia/sectors-and-industries ), and through its representative offices ( LIAA representative offices abroad | Latvijas Investīciju un attīstības aģentūra ).

Because the Latvian government extends national treatment to foreign investors, most investment incentives and requirements apply equally to local and foreign businesses. Latvia has three special economic zones and two free ports in which companies benefit from various tax rebates (real estate, dividend, and corporate income) and do not pay VAT. The full list of investment incentives is available here: https://www.liaa.gov.lv/en/invest-latvia/business-guide/business-incentives .

Latvia does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Latvia has the third highest share of renewables in total energy consumption (42.1 percent) within the European Union only behind Sweden and Finland. In Latvia, renewable electricity generation is promoted through a support system based on feed-in tariffs, but the current support mechanism is being revised due to concerns of lack of transparency and abuse of the system. Latvia’s National Climate and Energy Action Plan 2021-2030 is available here: https://www.em.gov.lv/en/national-energy-and-climate-plan-2021-2030 .

There are five free trade areas in Latvia. Free ports have been established in Riga and Ventspils. Special economic zones (SEZ) have been created in Liepaja, a port city in western Latvia; Rezekne, a city in eastern Latvia; and an additional SEZ in Latgale, the poorest region in Latvia, which borders Russia and Belarus.

Somewhat different rules apply to each of the five zones. In general, the two free ports provide exemptions from indirect taxes, including customs duties, VAT, and excise tax. The SEZs offer additional incentives, such as an 80-100 percent reduction of corporate income taxes and real estate taxes. To qualify for tax relief and other benefits, companies must receive permits and sign agreements with the appropriate authorities: the Riga and the Ventspils Port Authorities, for the respective free ports; the Liepaja SEZ Administration; the Rezekne SEZ Administration; or the Latgale SEZ Administration. The SEZs are expected to be in place until 2035.

Except for specific requirements for investors acquiring former state enterprises through the privatization process, there are no performance requirements for a foreign investor to establish, maintain, or expand an investment in Latvia. In the privatization process, performance requirements for investors, both foreign and domestic, are determined on a case-by-case basis.

Under Latvian Immigration Law, foreign citizens can enter and reside in Latvia for temporary business activities for up to three months in a six-month period. For longer periods of time, foreigners are required to obtain residence and work permits. The Latvian Investment and Development Agency has created a guide to help third-country nationals interested in working in Latvia obtain work permits: https://investinlatvia.org/assets/upload/Relocation%20Guide-web.pdf .

A third-country national may obtain a five-year temporary residence permit if he or she has made certain minimum equity investments in a Latvian company, certain subordinated investments in a Latvian credit institution, or purchased real estate for certain designated sums, subject to limitations in each case. More information is available here: https://www.liaa.gov.lv/en/invest-latvia/business-guide/operating-environment .

Latvia’s Law on Personal Data Processing, implementing the EU’s General Data Protection Regulation, entered into force in July 2018. Full text of the Law available here: https://likumi.lv/ta/en/en/id/300099-personal-data-processing-law. 

More information is available here: https://www.dvi.gov.lv/en/. 

Lebanon

4. Industrial Policies

Lebanon’s Investment Law No. 360 encourages investment in information technology, telecom, media, tourism, industry, agriculture, and agro-industry.  The law divides the country into three investment zones, with different incentives in each zone.  These include facilitating permits for foreign labor and tax benefits, which range from a five-year, 50 percent reduction on income and dividend distribution taxes to a total exemption of these taxes for 10 years, starting from the date of operation (tied to the issuance of the first invoice).  Companies that list 40 percent of their shares on the Beirut Stock Exchange (BSE) are exempt from income tax for two years.  The law also introduces tailored incentives through package deals for large investment projects, regardless of the project’s location.  These may include tax exemptions for up to 10 years, reductions on construction and work permit fees, and a total exemption on land registration fees.  IDAL exempts joint-stock companies that benefit from package deal incentives from the obligation to have a majority of a board of directors be Lebanese nationals (Law No. 771, dated November 2006).  Investors who seek to benefit from work permit incentives under package deals must hire two Lebanese for every foreigner and register them with the NSSF. In 2019, Parliament approved amendments to Investment Law 360 that would expand incentives to existing projects and grant additional incentives to ICT and telecom projects; however, implementation decrees await Cabinet’s approval.  The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Other laws and legislative decrees provide tax incentives and exemptions depending on the type of investment and its geographical location.  Industrial investments in rural areas benefit from tax exemptions of six or 10 years, depending on specific criteria (Law No. 27, dated July 19, 1980, Law No. 282, dated December 30, 1993, and Decree No. 127, dated September 16, 1983).  Exemptions are also available for investments in South Lebanon, Nabatiyeh, and the Bekaa Valley (Decree No. 3361, dated July 2, 2000).  For example, new industrial establishments manufacturing new products benefit from a 10-year income tax exemption.  Factories currently based on the coast, which relocate to rural areas or areas in South Lebanon, Nabatiyeh, or the Bekaa Valley benefit from a six-year income tax exemption.  Parliament enacted a law in April 2014 to reduce income tax on industrial exports by 50 percent.  More information can be found on IDAL’s website at  http://investinlebanon.gov.lb/en/doing_business/investment_incentives .

Domestic and foreign investors may benefit from Central Bank subsidies for the import of industrial raw materials (Intermediate Circular No. 556 dated May 2020). In addition, the Central Bank has made preparations to launch “The Oxygen Fund” to support the import of raw materials to Lebanese industries and provided $175 million to this fund.. Analysts question whether such efforts, absent external assistance, will be enough.

The government grants customs exemptions to industrial warehouses for export purposes.  Companies located in the Beirut Port or the Tripoli Port Free Zone benefit from customs exemptions and are exempt from the value-added tax (VAT) for export purposes.  They are also not required to register their employees with the NSSF, if they provide equal or better benefits.

As part of its mandate, IDAL promotes and supports Lebanese exports, especially in the agriculture, agro-industry, and industry sectors, by providing assistance on export requirements and studies on potential new markets, supporting exporter participation in international fairs and exhibitions, as well as subsidizing export transportation costs.

Lebanon does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Foreign-owned firms have the same investment opportunities as Lebanese firms.  Lebanon has one duty-free zone at Beirut-Rafik Hariri International Airport and two free trade zones, the Beirut Port and the Tripoli Port.  The WTO-compatible Customs Law issued by Decree No. 4461 fosters the development of free zones (Articles 242-261 cover free trade zones and Articles 262-266 cover duty free zones) and is available online at www.customs.gov.lb . The government enacted Law No. 18, dated September 5, 2008, that established the Tripoli Special Economic Zone (TSEZ) to attract investment in trade, industry, services, storage, and other services, as well as to grant investors tax exemptions and offer other incentives such as relaxed allowances for foreign labor and unrestricted currency conversion.  On April 9, 2015, the Cabinet appointed a TSEZ Authority to regulate the zone, and according to the TSEZ Authority, it received from the International Finance Corporation a policy note for the licensing regime and the regulatory framework. The TSEZ Authority is developing its licensing regime to grant licenses for logistics and industrial activities, and has completed the strategic environmental impact assessment and detailed design for all infrastructure.  The master plan for the industrial and logistics site next to Tripoli Port is complete and awaits Cabinet approval.

On March 29, 2018, the Cabinet approved expanding the geographical area of the TSEZ to include an additional 75,000 square meters of the Rachid Karami Fair in Tripoli and to establish a knowledge-innovation center.  The Authority has completed the architectural concept for the Rachid Karami zone for knowledge and innovation center and will start with the Master Plan this year. The Authority expects the TSEZ will begin logistics activities in early 2022.

Registration with a chamber of commerce is required to import and handle a limited number of products that are subject to control requirements for safety reasons.  Products with such special import requirements constitute less than one percent of total tradable goods.  Registration with a chamber of commerce is required to ensure that established facilities meet safety, handling, and storage requirements.

Lebanon does not follow any forced localization policy and does not require foreign IT providers to turn over source code or provide access to surveillance.  Lebanon’s Central Bank requires all banks to keep data backups in Lebanon, while service providers are required to do the same.

Lesotho

4. Industrial Policies

There are tax, factory space, and financial incentives available to manufacturing companies establishing themselves in Lesotho, such as: No withholding tax on dividends distributed by manufacturing firms to local or foreign shareholders, unimpeded access to foreign exchange, export finance facility, and long-term loans.  These incentives are applied uniformly to both domestic and foreign investors.  For more information, see  http://www.lndc.org.ls    The incentives are specified in government administrative policies and regulations.

Lesotho does not have any free or foreign trade zones. Lesotho drafted a Free Trade Policy which was presented to Parliament. Labor-intensive textile manufacturing companies that export beyond the SACU market including those who export under the African Growth and Opportunity Act (AGOA) enjoy the benefits of free trade zones since they can import raw materials then export finished products duty and tax free.

The government imposes mandates for local employment with an exception on shareholders and investors.

Requirements for visas and residence permits are not intentionally discriminatory; however, procedures are lengthy and not integrated.  For executive positions, work permits to foreign nationals are generally issued and renewed without significant delay. For technical positions, firms have to provide justification based on local skill shortage.  The procedures for obtaining technical permits are transparent but foreign investors complain about excessive fees charged and long delays in processing.

Work permits for the manufacturing sector are issued at the OBFC, while all other sectors need to lodge their applications with the office of the Labor Commissioner.  The maximum period provided for a work permit is one year. The Ministry of Labor and Employment with the financial support of the U.S. government and the International Organization for Migration (IOM) is conducting research to improve the effectiveness of the work permit system. For more information on the requirements for visas, residence permits and work permits, please visit:  http://www.obfc.org.ls/business/default.php  

The GOKL does not follow a policy of “forced localization” designed to force foreign investors to increase investment and/or employment in the local economy.  The government does not force foreign investors to establish and maintain data storage within Lesotho; however, foreign investors are required to keep records of local sales and employees’ remuneration locally for tax purposes.  The country drafted a localization program to guide businesses in adhering to domestic conduct. The country introduced the training incentive program which applies for both local and foreign investors. Training costs are allowable at 125 percent for tax purposes.

Liberia

4. Industrial Policies

The government provides tax deductions for equipment, machinery, cost of buildings and fixtures used in manufacturing. It also provides exemptions on import duties and goods and services taxes as investment incentives for the following sectors:

  • Tourism
  • Manufacturing
  • Energy
  • Hospitals and Medical
  • Housing
  • Transportation
  • Information Technology
  • Banking
  • Agriculture and Agro-processing (fisheries, poultry, aquaculture, food processing)

Investments in economically deprived regions qualify for additional incentives of up to 12.5 percent. Additional investment incentives are available if an investment creates more than 100 direct jobs, or if an investment uses at least 60 percent local materials to manufacture finished products.

The government does not issue guarantees or jointly finance foreign direct investment projects.

In 2019, the government established a Special Economic Zone (SEZ) Steering Committee, “to create, drive, guide, enhance, coordinate, and manage single, multiple and mixed-use (SEZs) in Liberia.” The government identified the port city of Buchanan in Grand Bassa County for the first special economic zone, now known as the Buchanan Special Economic Zone. In 2021, the African Development Bank (AfDB)  announced it would fund a Special Agro-Industrial Processing Zone (SAPZ) Project in the Buchanan Special Economic Zone.

Liberia has no performance or data localization requirements.

Libya

4. Industrial Policies

Investments set up according to the 2010 Investment Law benefit from the following incentives: tax and customs exemptions on equipment, a five-year income tax exemption, a tax exemption on reinvested profits and exemptions on production tax expert fees for goods produced for export markets. It also allowed for investors to transfer net profits overseas, defer losses to future years, import necessary goods, and hire foreign labor if local labor is unavailable. The government does not offer any additional investment incentives.

Libyan Law Number 215 of 2006 established the Zuwara Free Trade Zone (ZFTZ), and Law Number 495 of 2000 (amended by Law Number 32 of 2006) created the Misrata Free Trade Zone (MFTZ). Both the ZFTZ and the MFTZ are overseen by the Libya Free Trade Zone Board, created by Law Number 168 of 2006. By law, the ZFTZ and MFTZ are financially and administratively independent, and are free to legislate “within the boundaries of Libyan law.” Foreign companies can apply for a license to operate in the free FTZs and enjoy the same benefits as Libyan companies.

The host government does not follow forced localization. The 2010 Investment Law mandates that 30 percent of a foreign-owned company’s workforce consist of Libyans. Exemptions are available if the required skills for a position are not available on the local labor market.

U.S. citizens traveling to Libya on business visas require an invitation from/sponsorship by a company operating in Libya. Obtaining a Libyan business visa regularly requires several weeks or months. There is anecdotal evidence of enhanced vetting of U.S. citizen visa requests by Libyan authorities. Libyan Embassies in third countries have followed varying rules and procedures regarding the issuance of visas, but all visa applications require approval by the Libyan Ministry of Foreign Affairs. Libyan law prohibits using a tourist visa to travel to Libya for business purposes. The Government of Libya does not allow persons with passports bearing an Israeli visa or entry/exit stamps from Israel to enter Libya. Further information can be found in the Consular Information Sheet for Libya at the State Department website travel.state.gov. The 2010 Investment Law grants investors the right to a residence permit for a period of five years, subject to renewal if the project continues.

Lithuania

4. Industrial Policies

The Lithuanian government taxes corporate income and capital gains at 15 percent and the personal income tax rate is 20 percent. The value added tax is 21 percent, and the annual real estate tax ranges from 0.3 to three percent, depending on the market value of a property. For more details, please visit  https://investlithuania.com/investor-guide/running-your-business/ 

Lithuanian municipalities provide special incentives to investors who create jobs or invest in infrastructure. Municipalities may tie designation criteria to additional factors, such as the number of jobs created or environmental benefits. Strategic investors’ benefits could include favorable tax incentives for up to ten years. Municipalities may grant special incentives to induce investments in municipal infrastructure, manufacturing, and services.

Lithuania has seven Free Economic Zones (FEZs) located near the cities of Kaunas, Klaipeda, Siauliai, Kedainiai, Panevėžys, Akmenė, and Marijampolė. The FEZs in Kaunas and Klaipėda have attracted the most business; there are about one hundred companies from 18 countries operating in the Klaipėda FEZ, and 38 in the Kaunas FEZ. Companies operating in FEZs must follow the same accounting and reporting rules as companies operating in the rest of the country.

Companies that invest or are operating within the zones enjoy:

  • six years’ exemption from corporate income tax and a 50 percent reduction during the
  • exemption from real estate tax;
  • no tax on foreign company dividends.

In January 2017, the parliament passed legislation providing for a Startup Visa, designed for non-EU entrepreneurs wishing to start or expand information technology, biotech, nanotech, mechatronics, electronics, or laser technology businesses. For more information on the new Startup Visa, visit: https://startupvisalithuania.com/Lithuania also participates in the EU BlueCard program, which simplifies the residency and work permit application process for highly-skilled non-EU citizens. Once secured, the BlueCard is valid for up to three years and can be extended for an additional three years. BlueCard holders are also eligible to apply for permanent residency after five years. For more information on the BlueCard program, visit: http://www.eubluecard.lt/ .

Nevertheless, foreign investors that do not qualify for these programs, including U.S. citizens, may face difficulties obtaining and renewing residency permits. U.S. citizens can stay in Lithuania no more than 90 days without a visa (and no more than 90 days in any six-month period). Those who stay longer face fines and deportation. However, foreigners may only submit residency permit applications after they arrive in Lithuania. Therefore, the Embassy recommends applicants work with Lithuanian embassies and consulates to review documentation required for a permit well in advance of their first visit to Lithuania. For more information on the various types of visas and their requirements, visit: https://www.migracija.lt/en/search?q=visas 

Lithuania provides special incentives to strategic investors. The criteria by which the national government or a municipality designates a strategic investor vary from project to project. In general, the national government requires that a strategic investor initially invests $50 million or more. Municipalities may tie the designation criteria to additional or other factors, such as the number of jobs created and the environmental benefits that accrue. Strategic investors’ rewards include special business conditions, such as favorable tax incentives for up to ten years. Significant tax incentives apply to foreign investments made before 1997. Municipalities may grant special incentives to induce investments in municipal infrastructure, manufacturing, and services.

The Lithuanian government does not follow “forced Localization” policy and foreign investors can use domestic and foreign content in goods or technology alike. As a member of the European Union, Lithuania follows the General Data Protection Regulation. Enforcement is carried out by the State Data Protection Inspectorate. Foreign IT providers are not required to turn over source code and/or provide access to the encryption.

Luxembourg

4. Industrial Policies

Luxembourg is considered to be a very attractive tax location for conducting business: low effective corporate tax rates of 18 percent (with an adjusted rate of 15 percent for entities with annual taxable income less than 25,000 euro); the lowest VAT (value-added tax) rate in Europe (at 17 percent); and a variety of tax incentives, including investment tax credits, new business tax credit, subsidies for film productions, venture capital investment certificates, small business incentives, regional and national incentives, research and development incentives, and environmental incentives. The investment incentives are provided within the limitations of the EU rules on State aid, which were relaxed by the EU because of the Covid-19 pandemic. Luxembourg has taken full advantage by raising the aid ceiling for investment aid for projects focusing on digitization, sustainability, and the circular economy. Until recently, the European Court of Justice has been increasingly stringent on individual tax treatment, including a ruling specific to Luxembourg and its tax treatment of Apple. During 2020, the ECJ deemed to relax its approach in a case involving Amazon, ruling in the company’s favor. The full impact of these decisions and their impact on judicial review of these arrangements has yet to be fully determined.

U.S. and foreign firms can participate in government/authority-financed and subsidized research and development programs.

The Government offers discounts on electricity rates, tax credits as well as subsidies for companies investing into energy efficiency and the reduction of carbon emissions. These investments need to be externally audited to qualify for government aid. The Government also promotes low-carbon transport through the roll-out of charging stations for electric vehicles. The measures regarding energy efficiency have proven very popular with energy intensive companies, which have benefited from millions of dollars of price advantages over the years on their electricity and gas rates, as a counterpart to establishing an energy efficiency performance program with dedicated measures. The de-carbonatization aid measures are a recent tool that is being rolled out and whose effects will be seen in the coming years.

Luxembourg opened a free-trade zone called Le Freeport in 2014, which was built and integrated into the cargo logistics center at Luxembourg Airport. This zone, modeled after other successful customs warehousing in premier trade regions such as Geneva and Singapore, allows the warehousing and handling of high-value merchandise (art, cars, wines) in a secure location free of fiscal obligations (no Value-Added-Tax (VAT) or import duties to be paid as long as the goods remain on the premises). Taxation only occurs when the articles leave the zone as imports into the country of consumption (or if a bottle of wine is opened at Le Freeport, it is also subject to taxation).

Data storage has been greatly enhanced via new state-of-the-art data centers, built by the government as part of the long-term massive ICT infrastructure development plan which includes replacing old transmission lines with fiber-optic cable across the country. The data centers have served to optimize international connectivity to large hubs such as Paris, Amsterdam, and Frankfurt, and have attracted major ICT and e-commerce players, such as Amazon and PayPal, which located their EU headquarters in Luxembourg. The centers are rated at the highest security level for data storage.

Enforcement on the respect of data storage rules, such as the EU GDPR, rests with the Luxembourg data protection regulator CNPD.

Macau

4. Industrial Policies

To attract foreign investment, the GOM offers investment incentives to investors on a national treatment basis. These incentives are contained in Decrees 23/98/M and 49/85/M and are provided so long as companies can prove they are doing one of the following: promoting economic diversification, contributing to the promotion of exports to new unrestricted markets, promoting added value within their activity’s value chain, or contributing to technical modernization. There is no requirement that Macau residents own shares. These incentives are categorized as fiscal incentives, financial incentives, and export diversification incentives.

Fiscal incentives include full or partial exemption from profit/corporate tax, industrial tax, property tax, stamp duty for transfer of properties, and consumption tax. The tax incentives are consistent with the WTO Agreement on Subsidies and Countervailing Measures, as they are neither export subsidies nor import substitution subsidies as defined in the WTO Agreement. In 2019, the GOM put forward an enhanced tax deduction for research and development (R&D) expenditure incurred for innovation and technology projects by companies whose registered capital reached USD 125,000, or whose average taxable profits reached USD 62,500 per year in three consecutive years. The tax deduction amounts to 300 percent for the first USD 375,000 of qualifying R&D expenditure and 200 percent for the remaining amount, subject to a limit of USD 1.9 million in total). In addition, income received from Portuguese speaking countries is exempt from the corporate tax, provided such income has been subject to tax in its place of origin.

Two new laws to encourage financial leasing activities in Macau became effective in April 2019. Under the new regime, the minimum capital requirement of a financial leasing company is reduced from USD 3.75 million to USD 1.25 million. In addition, the acquisition by the financial leasing company of a property exclusively for its sole use has an exemption of up to USD 62,500 from a stamp duty. An approved financial leasing company can also be exempted from stamp duty for registration of initial and additional capital, interest and commission, and financial contracts.

Financial incentives include government-funded interest subsidies. Export diversification incentives include subsidies given to companies and trade associations attending trade promotion activities organized by IPIM. Only companies registered with the Economic and Technological Development Bureau (ETDB) may receive subsidies for costs such as space rental or audio-visual material production. Macau also provides other subsidies for the installation of anti-pollution equipment.

Macau is a free port; however, there are four types of dutiable commodities: liquors, tobacco, vehicles, and petrol (gasoline). Licenses must be obtained from the ETDB prior to importation of these commodities.

In order to promote the MICE (meetings, incentives, conventions, and exhibitions) and logistics industries in Macau, the GOM has accepted the ATA Carnet (Admission Temporaire/Temporary Admission), an international customs document providing an efficient method for the temporary import and re-export of goods that eases the way for foreign exhibitions and businesses.

The latest CEPA addition established principles of trade facilitation, including simplifying customs procedures, enhancing transparency, and strengthening cooperation.

Macau does not follow a forced localization policy in which foreign investors must use domestic content in goods or technology. The Macau government adopts stringent foreign labor policies, however, mandating that Macau residents receive priority in the hiring process so that their opportunities for work are not compromised by the importation of foreign workers.

Non-residents are approved to work in Macau only when employers are unable to find suitable candidates in the local labor market. Employers who want to hire foreign labor must request a prior authorization from the Macau Labor Affairs Bureau and attest that the manpower provided by the non-resident workers is, according to the law, supplemental, provisional, secondary, and sustainable. Critics of the Macau labor policies say the asymmetrical legal provisions in the hiring process between Macau residents and non-resident undermine the labor rights of the foreign worker on a practical level. Applications for employing foreign workers are processed by the Macau Labor Affairs Bureau.

There are no requirements by the GOM for foreign IT providers to turn over source code and/or provide access to surveillance (i.e., backdoors into hardware and software or turning over keys for encryption).

According to the Personal Data Protection Act (Decree 8/2005), if there is transfer of personal data to a destination outside Macau, the opinion of the Office for Personal Data Protection — the regulatory authority responsible for supervising and enforcing the Act — must be sought to confirm if the destination ensures an adequate level of protection.

In December 2019, Macau’s Cybersecurity Law came into force. Under this law, public and private network operators in certain industries must meet obligations, including providing real-time access to select network data to Macau authorities, with the stated aim of protecting the information network and computer systems. For example, network operators must register and verify the identity of users before providing telecommunication services. The new law creates new investment and operational costs for affected businesses and has raised some privacy and surveillance concerns.

In December 2021, the Legislative Assembly passed a new wiretapping bill stipulating duties of conservation of data for telecommunications operators, in which they must keep the communication records, except the content of communications, produced by the use of their services for one year. During the retention period, telecommunications operators must guarantee the security and confidentiality of relevant data.

Malawi

4. Industrial Policies

The government offers tax and non-tax incentives in various sectors. Incentives vary by year and are available to both domestic and foreign investors. In recent years, the government has offered incentives in manufacturing, agriculture, and mining. The current list of investment incentives can be found on the MITC and Malawi Revenue Authority websites. Firms must negotiate to establish their eligibility with the relevant government entity. Long delays in accessing incentives and accrued benefits are not uncommon. The government occasionally issues guarantees and joint financing on foreign direct investment projects of national importance. To support clean energy investment, government recently removed import duty, import excise and value added tax (VAT) on most imported renewable energy products.

Regulations to enable export processing zones (EPZs) were established in 1995. The original program was limited to companies strictly engaged in manufacturing for export. In 2020, the EPZ program was amended to allow export processing firms to sell up to 20 percent of their product on the local market. As of 2022, there are 13 companies operating under the auspices of the EPZ, 11 of the companies in the program are foreign owned, though the law does not discriminate on ownership. The government began the process to establish Special Economic Zones (SEZ), in 2021. The SEZs will have broader coverage than EPZs and include a mix of commercial activities and services.

Malawi does not follow “forced localization” or use geographic requirements for goods or financing, nor set performance requirements for establishing, maintaining, or expanding an investment. There is an ongoing local campaign to “Buy Malawi” to encourage the purchase of locally produced goods. Legal restrictions on foreign investment are based on environmental, health, biosafety, and national security concerns. The primary sectors subject to restrictions are firearms and ammunition, chemical and biological weapons, explosives, and manufacturing involving hazardous waste treatment/disposal or radioactive material. All business ventures in Malawi must navigate complex and often confusing bureaucratic processes. Minimum requirements include, business license, tax registration number, temporary employment permit, business residency permits, and land use permits. Depending on the sector additional licensing or permits may also be required. These procedures are time consuming and may constitute an impediment to investment.

Currently there are no requirements for foreign IT providers to turn over source code or provide access to encryption to prevent free transmission of customer or other business-related data outside the country’s territory, or a mandate for local data storage within the country. The Malawi Communications Regulatory Authority ( MACRA ) and the Ministry of Information and Digitization are responsible for IT issues. The Ministry of Information and Digitization is drafting a data protection bill, it is expected to be tabled in parliament sometime in 2022.

Maldives

4. Industrial Policies

Maldives introduced a Special Economic Zones Act (Law No.: 24/2014) in September 2014, with the goal of encouraging private investment in large-scale projects in priority areas, including: export processing activities; transportation and transshipment; universities, hospitals, and research facilities; information communication and technology parks; international financial services; oil and gas exploration; and initiatives that introduce new technologies.  SEZ investments in excess of USD 150 million qualify for special tax and regulatory incentives guaranteed under the SEZ law.  The list of priority sectors is reviewed by the President on a yearly basis.

Incentives under the SEZ law include:

  1. Exemption from business profit tax
  2. Exemption from goods and services tax

Exemption from withholding tax:

  1. Flexible procedures in foreign employment
  2. Exemption from taxes on sale and purchase of land
  3. Option of acquiring freehold land by registered companies in Maldives with at least 50 percent local shareholding

The duration of these tax exemptions depends on the business area of the investment and the scale of the investment.

As of March 2021, no companies have invested in Maldives under the SEZ law.

Sovereign Guarantee are issued as per the approved SG guidelines of the government in line with policy and priority. Guideline for issuance of sovereign guarantees is published on the Ministry of Finance website ( https://www.finance.gov.mv/media/regulations/guideline-for-the-issuance-of-sovereign-guarantees-unofficial-translation ).

Details of active sovereign guarantees as of September 21, 2021 can be accessed at: https://www.finance.gov.mv/public/attachments/mBb3dwgKLN1YZvSJOkAOdNDmzUSq8bn1uwXovIEK.pdf .

There are no discounts or tax incentives for clean energy investments issued through the government budget. However, there are some active Power Purchase Agreements between public utility companies and renewable energy investors. There is no set feed-in tariff. However, project proponents may propose a cost-effective tariff. There is no specific discount for electricity generated from renewable energy sources. Depending on the size and type of the investment, the government grants import duty exemptions, such as for items imported for renewable energy and energy efficiency projects.

As mentioned immediately above Maldives introduced a Special Economic Zones Act (Law No.: 24/2014) in September 2014. Please refer to the above section for details of investment incentives provided for under the Act.

The Law on Foreign Investments requires Maldivian nationals to be employed unless employment of foreigners is a necessity.  Qualifying employers are provided a quota, limiting the number of expatriates who can be employed.  Quota levels depend on the sector and size of the investment.  Employers obtain quotas from the Ministry of Economic Development before applying for employment approval.  SEZ investments receive some exceptions to these rules.  A report by the International Labor Organization (ILO) found that the quota system is cumbersome and difficult to implement and that inefficiencies and red tape create unnecessary administrative burdens while doing little to increase local employment.  In addition, the ILO reported that when labor is not available because of quota requirements, employers often resort to the irregular labor market, providing incentives to the phenomena of visa trading.

Mali

4. Industrial Policies

Mali’s investment, mining, commerce, and labor codes aim to encourage investment and attract foreign investors. By law, there is no discrimination between foreign-owned firms and Malian entities with regard to investment opportunities. The investment code offers incentives to companies that reinvest profits to expand existing businesses or diversify into another relevant sector. The code also encourages the use of locally sourced inputs, which can offer tax exemptions. Companies that use at least 60 percent locally produced raw materials in their products are eligible for certain tax exemptions. Companies that invest at least five percent of their turnover in supporting local research and development are eligible for a reduction of payroll taxes for Malian employees.

Companies (foreign or domestic) that export at least 80 percent of their production are entitled to tax-free status. As such, they benefit from duty-free status on all equipment and other inputs needed for their operations. Mali encourages investment in the cultural sector by reducing taxes on imports of cultural goods. In March 2020, Mali adopted an order exempting renewable energy equipment from VAT and import taxes. Mali may also provide short-term tax exemptions on certain essential products (such as rice, cooking oil, milk, and sugar) when the prices of those goods are unusually high.

Most businesses are located in the capital city of Bamako. The investment code encourages the establishment of new businesses in other areas through incentives such as income tax exemptions for five- to eight-year periods, reduced energy prices, and the installation of water, electric power, and telecommunication lines in areas lacking public utilities.

To date, there are no dedicated free trade zones in Mali. Mali, Cote d’Ivoire, and Burkina Faso have planned to establish a special economic zone involving the agricultural areas of Sikasso in Mali, Korogho in Cote d’Ivoire, and Bobo-Dioulasso in Burkina Faso, but the zone is not yet operational. The investment code states companies operating in special economic zones will benefit from reductions of taxes on profits and of corporate taxes to 25 percent over a period of seven years.

The 2019 mining code requires large mining companies (for which there is no precise definition in the mining code) to recruit Malian nationals who possess the requisite skills and experience. Mining companies must also progressively replace foreign employees with Malian nationals who possess the requisite skills and experience. Feasibility studies for large mines must incorporate a plan to replace foreign employees with Malian employees. There is no requirement that foreign investment or foreign equity in a mine be reduced over time.

Malta

4. Industrial Policies

The Government of Malta offers several investment incentives to attract FDI. All investment incentives are specified by law and cannot be made available in an ad hoc manner. However, the way in which incentives are designed allows the opportunity to offer relatively tailor-made solutions, even though treatment of local and foreign investors is identical. There are no stated requirements that a foreign investor should transfer technology, employ Maltese nationals, or reduce shareholding interest over time. These factors might, however, influence Malta Enterprise’s decision regarding a firm’s application for assistance. Malta Enterprise monitors compliance with any conditions set by the government as a condition of government assistance. Investors are not required to disclose proprietary information.

The Government of Malta offers generous incentives to trading and financial companies registered with the Malta Financial Services Authority. Legislative changes in 1994 removed the distinction between offshore and onshore companies, so all companies in Malta are subject to a 35 percent tax rate on profits. However, the fact that the Maltese tax system is a full imputation system – and the only one remaining in the EU – means that a tax paid by a company will essentially remain a prepaid tax on behalf of the tax liability of the shareholders. Shareholders then are entitled to claim a tax refund, which may be equivalent to roughly 85 percent (in the case of trading income) of the tax paid at the corporate level. Companies operating within the Malta Freeport, a customs-free zone, may also benefit from reduced rates of taxation and investment tax credits. An additional tax benefit initiative recently introduced is to be given to businesses that reinvest a percentage of their retained profits into eligible projects in the same business or in another enterprise.

The Government of Malta offers specific incentives for companies to engage in industrial research and development (see “Investment Incentives” section above). The government does not differentiate between U.S. or other foreign firms and local firms regarding participation in incentive programs.

U.S. companies also can partner with local firms to participate in Horizon Europe, the EU Framework program for funding research and innovation. Horizon Europe will run until the end of 2027 and has a budget of €95.5 billion.

Malta’s budgetary plans have placed environmental and social responsibility at the top of the country’s agenda, with a long-term vision aiming to support the post-pandemic economic regeneration. Malta Enterprise offers support to businesses based in Malta to engage in the twin green and digital transition, and to meet international ESG expectations. The agency has launched a number of specific support measures, including the Smart and Sustainable Investment Grant, which encourages enterprises to invest further in sustainability, leading to reduction of waste, increased use of sustainable materials, and higher levels of energy and water efficiency. Eligible businesses can benefit from up to €50,000 for every project, covering 50% of the total eligible costs.

Furthermore, as part of Malta’s efforts to meet its emission targets and build a more sustainable future, Malta Enterprise is launching several programs, including a scheme designed to help enterprises replace their fossil fuel-powered vehicles with electric ones.

Cognizant of the current worldwide challenges related to supply chains and to mitigate price hikes in the cost of international movement, the government has extended its rent subsidy incentive to reach an even larger number of eligible businesses, particularly in covering expenses for the rental cost of warehouses for stockpiling.

Another related development, specifically to the address the circular economy, Malta launched the Blue Med Hub, with the aim of bringing together various blue economy experts and that of attracting start-ups and small and medium-sized enterprises, both local and foreign, related to this field. The Hub will collaborate with African and Middle Eastern entities to open investment opportunities in this sector.

Malta’s Freeport container port offers modern transshipment facilities, storage, assembling and processing operations, as well as an oil terminal and bunkering facilities. Following a corporate restructuring from 1998 through 2001, Malta established a distinction between authority and operator of the Freeport. Malta Freeport Corporation Ltd. (“Malta Freeport Authority”) fulfils the role of landlord and authority, whereas Malta Freeport Terminals Ltd. (“Malta Freeport”) carries out the role of operator. Malta Freeport Terminals Ltd. is the single operating company of the warehousing facilities and two container terminals, handling container vessels at 20,000 TEU and larger. In October 2004, the Government of Malta granted a 30-year concession for operation and development of Malta Freeport Terminals CMA CGM, which transferred its half of shares in Malta Freeport Terminals Ltd. to the Yilidirim Group of Turkey in November 2011 and sold a 49 percent interest in port operator Terminal Link to China Merchant Holdings (International) Company Ltd. in June 2013.

For a company to carry out business within the Freeport zone, Malta Freeport Authority must grant it a license, and its operations must complement the Freeport’s activities. Through the utilization of these facilities, clients can engage in an extensive range of handling operations, including cargo consolidation, break-bulk, storage, re-packing, re-labelling, and onward shipping. Malta Freeport also offers assembly and processing options in accordance with the Malta Freeports Act. The operator must ensure that it does not label goods that have been processed in the Freeport with Malta as their country of origin unless their identity has been substantially transformed within the zone. Companies operating within the Freeport benefit from reduced tax rates, as well as investment tax credits without customs interventions.

Malta Freeport offers round-the-clock industrial storage operations supported by a highly developed, customized infrastructure, as well as extensive transport networks, which link Malta to various important markets on a regular basis, including port connections in North America, Central America, and South America. Warehousing facilities lie only six kilometers from the island’s international airport, offering excellent opportunities for sea and air links stretching worldwide.

Currently, no performance requirements exist, other than the goals that the investors link to applications for assistance with Malta Enterprise. Foreign investors can repatriate or reinvest profits without restriction and take disputes before the International Center for the Settlement of Investment Disputes (ICSID).

The government does not require foreign investors to establish or maintain data storage in Malta. However, the Malta Gaming Authority (MGA), the independent regulatory body responsible for the governance of all gaming activities, does require gaming companies to hold their data in Malta.

Foreign IT providers incorporated in Malta that process personal data in the context of the activities of an establishment, qualifying as data controllers within the Data Protection Act, and fall within the jurisdiction of the Office of the Data Protection Commissioner. The Data Protection Commissioner stated there has never been an instance where, during an investigation, the Commissioner has requested access to source code or to encryption functions.

Any transfer of personal data by a controller established in Malta to a third country that does not ensure an adequate level of data protection is subject to the authorization of the Data Protection Commissioner as required by the Data Protection Act. In an attempt to facilitate and harmonize the implementation of this requirement, the European Commission adopted model clauses (Standard Contractual Clauses and Binding Corporate Rules – the latter used for sharing of personal data within a group of companies) which controllers may use for this purpose. No authorization is required for transfers made to EU Member States, members of the EEA, third countries which are, from time to time, recognized by the European Commission to have an adequate level of protection, and to companies that are certified under the EU-U.S. Privacy Shield. Furthermore, any personal data shared (rather than transferred) between data controllers in Malta must rely on a legal basis.

The European Union’s General Data Protection Regulation (GDPR), enacted in 2016, entered into force on May 25, 2018. The GDPR, which succeeds the Data Protection Directive of 1995, aims to protect EU citizens’ personal data, harmonize data privacy laws across the EU, and provide for better coordination among EU Member State data protection authorities. U.S. companies wishing to operate in Malta or to do business with Maltese individuals or entities should ensure compliance with the regulation.

Data controllers processing personal data are subject to the rules emanating from the General Data Protection Regulation (GDPR). These rules must be observed to ensure that the processing activities are carried out fairly and lawfully and with respect to the data subjects’ fundamental rights and freedoms. The competent authority in Malta that regulates and monitors observance with this law is the Office of the Information and Data Protection Commissioner.

Mauritania

4. Industrial Policies

Investment incentives such as free land, deferred and reduced taxes, and tax-free importation of materials and equipment are available to encourage foreign investors. The Ministry of

Economy offers tax benefits, including exemptions in some instances, to enterprises in Special Economic Zones (SEZs) and some companies in priority sectors throughout the country (e.g., mining, hydrocarbons, and fishing). The Investment Code outlines standard investment incentives, but foreign investors may negotiate other incentives directly with the government. In 2018, the government adopted the Public-Private Partnerships (PPPs) law. This law supports the 2017 budget diversification agenda through increased private sector participation in non-extractives sectors. The law provides legal and regulatory framework for PPPs participation in the national economy. It also addresses land tenure and property rights issues to facilitate credit access. According to World Bank and IMF analysis, the PPP law will enable the country to reduce reliance on commodities and raises long-term growth prospects in a more sustained and inclusive manner.

Although Mauritania has high energy potential, the government does not offer any incentives, such as feed-in tariffs, discounts on electricity rates, or tax incentives, for clean energy investments (including renewable energy, energy storage, energy efficiency, clean hydrogen).

The Investment Code creates Special Economic Zones (Free Export Zone or Cluster of Development in the Interior https://www.ndbfreezone.mr/en/home/ ) by decree. SEZs are subject to continuous monitoring by the Customs Service in a manner specified in the decree. Nouadhibou, the commercial capital of Mauritania, is designated as a Free Trade Zone by the government. The Nouadhibou Free Trade Zone has its own regulatory structure. As of January 2020, the Nouadhibou Free Trade Zone has granted 750 authorizations for companies, primarily in the tourism, services, and fisheries sectors.

The Investment Code provides three main preferential tax regimes: Small and Medium Enterprises Regimes, which apply to any investment between USD 167,000 and USD 667,000; Free Export Zones/Clusters of Development; and Targeted Industries, which includes agriculture, artisanal fishing, tourism, renewable energy, and raw material processing. Land concessions allocated to companies located in Free Economic Zones will follow a rental rate determined by joint decision of the relevant Minister and the Minister of Economy, which sets land allocation prices. As for tax advantages, companies will be exempt from taxes, excluding personnel taxes such as for retirement and social security, if they have invested at least USD 1.6 million and generated at least 50 permanent jobs, and show a potential to export at least 80 percent of their goods or services.

Additionally, under the provisions in the revised Investment Code, companies will not be taxed on patents, licenses, property, or land, but rather assessed a single municipal tax that cannot exceed an annual amount of USD 16,000. Companies established in free zones are exempt from taxes on profits for the first five years. Additionally, companies established in free zones benefit from a total exemption of customs duties and taxes on the importation and export of goods and services.

The government mandates that companies may employ expatriate staff in no more than 10 percent of key managerial staff positions, in accordance with the Labor Code and are required to have a plan in place to “Mauritanize” expatriate staff positions. Expatriate staff may be hired more than 10 percent with authorization from the appropriate industry authority by establishing that no competent Mauritanian national is available for the vacancy. Foreign companies are required to transfer skills to local employees by providing training for lower-skilled jobs. The law is specifically geared toward extractive companies to encourage recruitment of Mauritanian Nationals. It is important to note that this law has not yet been enforced with companies operating within the Nouadhibou Free Trade Zone Authority.

Current immigration laws do not discriminate nor are they considered to apply excessively onerous visa, residence, or work permit requirements inhibiting foreign investors’ mobility. However, some U.S. companies have expressed frustration with the difficulty in obtaining or renewing work and residency permits for their employees who are not Mauritanians.

The government imposes performance requirements as a condition for establishing, maintaining, or expanding an investment, or for access to tax and investment incentives. Foreign investors consistently report that government-sponsored requests for tenders lack coherence and transparency. The revised Investment Code requires investors to purchase from local sources if it is available and is of the same quality and price as could be purchased abroad. There is no requirement for investors to export a certain percentage of output or have access to foreign exchange only in relation to their exports. If imported “dumped” goods are deemed to be competing unfairly with a priority enterprise, the government will respond to industry requests for tariff surcharges, thus providing some potential protection from competition.

Expatriate staff members working for companies in accordance with the Labor Code are eligible to import, free of customs duties and taxes, their personal belongings and one passenger vehicle per household, under the regime of exceptional temporary admission (Admission Temporaire Exceptionelle or ATE). All sales, transfers, or withdrawals are subject to permission of customs officials.

The Mauritanian government does not have any requirements or a mechanism that impedes companies from transmitting data freely outside the country. There are no laws in place on local data storage.

Mauritius

4. Industrial Policies

Mauritius applies investment incentives uniformly to both domestic and foreign investors. The incentives are outlined in the Income Tax Act, the Customs Act, and the Value Added Tax Act. A number of incentives have been implemented to attract investors to Mauritius. These include: (i) reduced corporate tax rate of three percent for companies engaged in global trading activities; (ii) investment tax credit of five percent over three years on the cost of new plant and machinery excluding motor vehicles; (iii) five year tax holiday for Mauritian companies collaborating with the Mauritius Africa Fund with respect to investment in the development of infrastructure in Special Economic Zones, and; (iv) five year tax holiday on income derived from smart parking solutions or other green initiatives.

Mauritius offers prospective investors a low-tax jurisdiction and a number of other fiscal incentives, including the following: (i) flat corporate and income tax rate of 15 percent or lower depending on business activity; (ii) 100 percent foreign ownership permitted; (iii) no minimum foreign capital required; (iv) no tax on dividends or capital gains; (v) free repatriation of profits, dividends, and capital; (vi) accelerated depreciation on acquisition of plant, machinery, and equipment; (vii) exemption from customs duty on imported equipment; and (viii) access to an extensive network of double taxation avoidance treaties.

Additionally, the government has established a Property Development Scheme (PDS) to attract high net worth non-citizens who want to acquire residences in Mauritius. Buyers of a residential unit valued over $375,000 in certain projects are eligible to apply for a residence permit in Mauritius. The residential unit can be leased or rented out by the owner.

The Regulatory Sandbox License (RSL) was implemented to promote innovation by eliminating barriers to investment in cutting-edge technology. An RSL gives an investor fast-track authorization to conduct business activity in a sector even if there is not yet a legal or regulatory framework in place for the sector. Further details on the RSL can be accessed via the following link: https://www.edbmauritius.org/schemes .

The government offers tax incentives to companies that make clean energy investments through provisions in the 1995 Income Tax Act, the Customs Act, and the Value Added Tax Act. The tax incentives for a company include (i) double deduction of the expenditure of a fast charger for an electric car; (ii) an annual allowance of 100 percent on the capital expenditure for the acquisition of a solar energy unit; (iii) an annual allowance of 50 percent each year for a maximum two years on the capital expenditure for the acquisition of green technology equipment; (iv) tax exemption on interest earned by a company that invests in renewable energy projects through debentures and bonds; (v) eight-year tax holiday for a company that used deep ocean water for providing air conditioning services; (vi) customs duty and value-added tax exemption on any purchase of photovoltaic systems and chargers for electric vehicles.

The Mauritius Freeport, a free trade zone, was established in 1992 and is a customs-free zone for goods destined for re-export. The freeport has grown dramatically in its 26-year history: developed space of cold and dry warehouses, processing units, open air storage facilities, and offices increased from 5,000 square meters in 1993 to over 400,000 square meters in 2021. Due to the pandemic, trade volume decreased to 258,972 metric tons in 2021 from 268,930 metric in 2020, and trade value increased to $816 million from $607 million during the same period.

As of 2022, there were nine third-party freeport developers, three private freeport developers, and more than 200 freeport operators, representing over 3,500 jobs. Top trading partners for import in 2021 were Taiwan, China, India, Singapore and South Africa. Top trading partners for export in 2021 were South Africa, Madagascar, Reunion, United States and Taiwan. Top goods traded through the freeport included live animals, foodstuffs and beverages, plastic, and metal products.

The government’s objective is to promote the country as a regional warehousing, distribution, marketing, and logistics center for eastern and southern Africa and the Indian Ocean rim. Through its membership in COMESA, SADC, and the IOC, Mauritius offers preferential access to a market of over 600 million consumers, representing an import potential of $100 billion. Companies operating in the freeport are exempt from corporate tax. Foreign-owned firms operating in the freeport have the same investment incentives and opportunities as local entities.

Activities carried out in the freeport include warehousing and storage, breaking bulk, sorting, grading, cleaning and mixing, labeling, packing, repacking and repackaging, minor processing and light assembly, manufacturing activity, ship building, repairs and maintenance of ships, aircrafts, and heavy-duty equipment, storage, maintenance and repairs of empty containers, export-oriented seaport and airport based activities, freight forwarding services, quality control and inspection services, and vault activity for storing precious stones and metals, works of art, and the like.

The Data Protection Act (DPA) of 2017 governs the protection of personal data in Mauritius. The GoM established the Data Protection Office in 2009. The Data Protection Commissioner is responsible for upholding the rights of individuals set forth in the DPA and for enforcing the obligations imposed on data controllers and processors. In 2016, Mauritius ratified the Council of Europe’s Convention for Protection of Individuals regarding Automatic Processing of Personal Data (Convention 108). Mauritius is the second non-European country and the first African country to sign the convention. The agreement gives individuals the right to protection of their personal data. In September 2020, Mauritius signed the Amending Protocol to the Convention for the Protection of Individuals regarding the Processing of Personal Data and, at the same time, deposited the instrument of ratification, becoming the sixth state to ratify the modernized Convention 108.

Mauritian data protection law tracks the European Union’s Regulation on the Protection of Natural Persons with regards to the Processing of Personal Data and on the Free Movement of such Data, commonly known as the General Data Protection Regulation. Mauritius’ DPA applies only when processing of personal data is concerned. Failure to comply with Section 28 of the DPA, which establishes the lawful purposes for which personal data may be processed, can result in a fine and up to five years imprisonment. Section 29 sets requirements for processing special categories of data, such as ethnic origin, political adherence, and mental health condition.

There are no enforcement procedures for investment performance requirements.

Mexico

4. Industrial Policies

Land grants or discounts, tax deductions, and technology, innovation, and workforce development funding are commonly used incentives.  Additional federal foreign trade incentives include: (1) IMMEX:  a promotion which allows manufacturing sector companies to temporarily import inputs without paying general import tax and value added tax (VAT); (2) Import tax rebates on goods incorporated into products destined for export; and (3) Sectoral promotion programs allowing for preferential ad-valorem tariffs on imports of selected inputs.  Industries typically receiving sectoral promotion benefits are footwear, mining, chemicals, steel, textiles, apparel, and electronics.  Manufacturing and other companies report it is becoming increasingly difficult to request and receive reimbursements from SAT of the VAT paid on inputs for the export sector, with significant reimbursement delays and arrears reaching tens of millions USD for some companies.

The administration renewed until December 31, 2024 a program launched in January 2019 that established a border economic zone (BEZ) in 43 municipalities in six northern border states within 15.5 miles from the U.S. border.  The BEZ program entails: 1) a fiscal stimulus decree reducing the Value Added Tax (VAT) from 16 percent to 8 percent and the Income Tax (ISR) from 30 percent to 20 percent; 2) a minimum wage increase to MXN 176.72 (USD 8.75) per day; and 3) the gradual harmonization of gasoline, diesel, natural gas, and electricity rates with neighboring U.S. states.  The purpose of the BEZ program was to boost investment, promote productivity, and create more jobs in the region.  Sectors excluded from the preferential ISR rate include financial institutions, the agricultural sector, and export manufacturing companies (maquilas).

On December 30, 2020, President Lopez Obrador launched a similar program for 22 municipalities in Mexico’s southern states of Campeche, Tabasco, and Chiapas, reducing VAT from 16 to 8 percent and ISR from 30 to 20 percent and harmonizing excise taxes on fuel with neighboring states in Central America.  Chetumal in Quintana Roo will also enjoy duty-free status.  The benefits extend from January 1, 2021 to December 31, 2024.

Mexico does not follow a “forced localization” policy—foreign investors are not required by law to use domestic content in goods or technology.  However, investors intending to produce goods in Mexico for export to the United States should take note of the rules of origin prescriptions contained within USMCA if they wish to benefit from USMCA treatment.  Chapter four of the USMCA introduced new rules of origin and labor content rules, which entered into force on July 1, 2020.

In 2020, the Central Bank of Mexico (or Banxico) and the National Banking and Securities Commissions (CNBV – Mexico’s principal bank regulator) drafted regulations mandating the largest financial technology companies operating in Mexico to either host data on a back-up server outside of the United States—if their primary is in the United States—or on physical servers in Mexico.  As of March 2022, the draft regulations remain pending public comment.  The financial services industry is concerned they could violate provisions of the USMCA financial services chapter prohibiting data localization.

Mexico’s government is increasingly choosing its military for the construction and management of economic infrastructure.  In the past two years, the government entrusted the Army (SEDENA) with building the new airport in Mexico City, and sections 6, 7, and part of section 5 of the Maya Train railway project in Yucatan state.  SEDENA created a state-owned company to operate and manage the newly completed Mexico City airport.  SEDENA is also issuing contracts for the construction of over 300 social development bank branches throughout Mexico.  The government announced plans to give to the Navy (SEMAR) the rights for construction, management, and operations of the Trans-Isthmic Train project to connect the ports of Coatzacoalcos in Veracruz state with the Salina Cruz port in Oaxaca state.  The government is in the process of transferring administration of land and sea ports from the Secretariat of Communications and Transportation (SCT) to SEDENA and SEMAR respectively and has appointed retired military personnel to port administrator positions at most ports.

Micronesia

4. Industrial Policies

There are currently no government programs or incentives to attract foreign investment.

There is no government agency tasked with developing an industrial strategy; however, the FSM government has made recommendations for growth in several sectors, most notably tourism, fishing, and aquaculture, without substantive measures to realize those goals.  The telecommunications sector was opened to meet World Bank conditions for broadband development.  However, rivalries between the state-owned telecom operator and the state-owned infrastructure operator have held back the development of broadband infrastructure to meet the needs of both businesses and consumers.  The largest state-owned enterprise, Vital Energy, the parent of FSM Petroleum Corporation (FSMPC), built its first solar power plant in Guam in 2013 and plans to expand its renewable energy capacity into FSM in the future.

Politicians have called for expansion of the tourism sector, but have created no tax, licensing, or leasing incentives to encourage investment.  Although there is considerable potential for growth in the tourism sector, the remoteness of the FSM, land ownership prohibitions, business ownership restrictions, and the current lack of hotel facilities and tourism services mean growth in the tourism sector is unlikely to meet local expectations.  Data prior to the onset of the COVID-19 pandemic show that growth fell in the areas of scuba diving, boating, and fishing.  The March 2020 FSM border closure brought the sector to a standstill, where it currently remains due to onerous quarantine restrictions.

The United Nations Educational, Scientific and Cultural Organization (UNESCO) adopted the significant archaeological site of Nan Madol as a World Heritage Site in 2016 and has been working toward designating other sites in Yap, Kosrae, and Chuuk.  Other efforts, including those by the U.S. Embassy and National Geographic Society, are underway to highlight the considerable cultural heritage extant in the FSM.

The government currently does not offer incentives for green energy investments.

There are no Foreign Trade Zones, Free Trade Zones, Special Economic Zones, or Free Ports in the FSM.

The FSM government mandates local employment when qualified individuals are available. U.S. citizens may reside in and work in the FSM indefinitely.  Citizens of other countries must apply for the appropriate permits. (Note: The Philippine government in 2017 imposed restrictions on the entry of new Filipino workers into the FSM under the Philippines Overseas Worker Program.  Filipinos make up the vast majority of foreign workers in the FSM).  There are no defined performance requirements for investments.

Moldova

4. Industrial Policies

Investment incentives are applicable for all Moldovan-registered businesses, irrespective of the country of origin of the investment. Certain incentives apply only in specially designated areas such as free economic zones and industrial parks. Until 2024, Moldovan legislation allows employees of IT companies to benefit from incentives on personal income tax and social security contributions. Also, a 2017 law on information technology parks established a single tax for residents of the digital IT parks, calculated as the maximum between seven percent from sales and 30 percent from the national average forecasted salary multiplied by the number of employees. There is also a range of tax incentives applicable if businesses meet certain requirements. Among those incentives are the following: value-added tax (VAT) and customs exemptions on long-term assets included in share capital; deferment of VAT liabilities on imports of materials used in manufacturing export-bound products; lower VAT rates for the hospitality and restaurant businesses; and lower social contributions and VAT rates for agricultural businesses.

The Organization for SME Development (ODIMM) manages several business support programs for underrepresented investors such as Women in Business, Start for the Youth, and Attraction of Remittances in the Economy PARE 1+1. However, the government’s budget allocations to these programs is limited and ODIMM relies on funding from international donors.

At present, seven free economic zones (FEZs), one international free port – Giurgiulesti – and one international free airport – Marculesti – are registered in Moldova. According to Moldovan law, these zones support job creation, attraction of foreign and domestic investments, and export-oriented production. The Law on Free Economic Zones regulates FEZ activity. Foreigners have the same investment opportunities as local entities. FEZ commercial entities enjoy the following advantages: 25 percent exemption from income tax; 50 percent exemption from tax on income from exports; for investments of more than USD 1 million, a three-year exemption from tax on income resulting from exports; and for investments of more than USD 5 million, a five-year exemption from tax on income from exports; zero value-added tax; exemption from excises; and a stand-still guarantee against any new changes in the law for ten years. In addition, residents investing at least USD 200 million in the FEZ are afforded a stand-still guarantee regarding new regulatory changes for the entire period of operation in the FEZ, but such protection cannot extend beyond 20 years.

The government also passed a 2008 law creating eight industrial parks with the aim of attracting investments in industrial projects. Businesses operating in those parks do not receive any special tax treatment, but typically have access to ready-to-use production facilities, offices and lower office rents for 25 to 30 years. Typically, these are idle premises of former industrial State-owned enterprises.

The government also recently set up 18 multifunctional industrial platforms throughout the country. These platforms represent plots of land accommodating technical and manufacturing infrastructure for economic – mostly manufacturing – activity that capitalize on regional resources.

Similar to the FEZs, the Giurgiulesti Free International Port, Moldova’s only port accessible to sea-going vessels, was established in 2005. Commercial residents of the port enjoy the following advantages: 25 percent exemption from income tax for the first ten years following the first year when taxable income is reported; 50 percent exemption from tax on income for the remaining years; exemption from value-added tax and excises on imports and exports outside Moldova’s customs territory; zero valued-added tax on imports from Moldova; and a stand-still guarantee for commercial residents regarding any regulatory changes until February 17, 2030.

The Marculesti International Free Airport, a former military air base, was established in 2008 as a free enterprise zone for a 25-year period to develop cargo air transport. Airport management is also interested in turning Marculesti into a regional hub for low-cost passenger airlines.

IT parks are another area of special tax treatment with opportunities of virtual residence status, simplified tax payments and tax incentives for IT companies registered in Moldova.

All incentives are applied uniformly to domestic and foreign investors. The Law on Investment in Entrepreneurship, in effect since 2004, does not protect new investors from legislative changes.

No requirements exist for investors to purchase from local sources or to export a certain percentage of their output.

The Embassy is not aware of any reports of forced data localization or special requirements targeting foreign IT providers. However, companies maintaining servers with customer databases outside Moldova must comply with cumbersome domestic procedures related to protection of personally identifiable information. Cross-border transfer of personal data requires prior authorization by the supervisory body for personal data processing. The Ministry of Economy and Infrastructure is responsible for developing strategies and policies on electronic communication. The National Regulatory Agency for Electronic Communications and Information Technology (ANRCETI) is responsible for regulations and oversight. The National Center for Personal Data Protection (NCPDP) is the supervisory body for personal data processing.

No limitations exist on access to foreign exchange in relation to a company’s exports. There are no special requirements that Moldovan nationals own shares of a company. Both joint ventures and wholly foreign-owned companies may be set up in Moldova.

In fact, while not an official policy, in sectors of the economy that require large investments, experienced management, and technical expertise such as energy or telecommunications, the government has shown preference for experienced foreign investors over local investors. In other sectors, foreign and local investors formally receive equal treatment.

Moldovan law allows investments in any area of the country, in any sector, provided that national security interests, anti-monopoly legislation, environmental protection, public health, and public order are respected.

Some performance requirements are connected to tax incentives but are enforced equitably and described in the Tax Code and related governmental decisions and instructions. Foreign investors are required to disclose the same information as local investors. Moldova has no discriminatory visa, residence, or work-permit requirements inhibiting foreign investors’ mobility in Moldova. The government has set up a one-stop shop for foreigners applying for Moldovan residence and work permits in an effort to streamline a complicated procedure.

Moldova has a liberal commercial regime with more than 100 countries. According to the Tax Code, Moldovan exports are exempt from value added tax. Although there are no formal import price controls, there are reports that Moldovan Customs Service may make arbitrary price assessments on certain types of imported goods for revenue-enhancing purposes.

Mongolia

4. Industrial Policies 

The government generally offers the same tax preferences to foreign and domestic investors; and occasionally waives tariffs for imports of essential fuel and food products or for imports in such targeted sectors as agriculture or energy.  Exemptions may apply to Mongolia’s 5-percent import duty and 10-percent value-added tax (VAT).  The government may offer traditional and green energy sector investments such incentives as feed-in tariffs, discounts on electricity rates, or tax incentives.  The government may also extend tax credits on a case-by-case basis to investments in such sectors as minerals processing, agriculture, and infrastructure.   Under the Investment Law, foreign-invested companies, properly registered and paying taxes in Mongolia, qualify as domestic Mongolian entities for investment incentive packages that, among other benefits, offer tax stabilization for up to 27 years.  While in theory the government can issue guarantees or jointly finance foreign direct investment projects, it seldom does so in practice.

The Mongolian government has had a free-trade zone program since 2004.  Two free-trade zones are along the Trans-Mongolian Highway and Railroad: (1) the northern Mongolia-Russia border town of Altanbulag; and (2) the southern Mongolia-China border town of Zamiin-Uud.  Both free-trade zones are relatively inactive, requiring development.  A third free-trade zone is located at the port-of-entry of Tsagaannuur in the far western province of Bayan-Olgii bordering Russia. Mongolian officials also suggest the new Ulaanbaatar International Airport may host a Special Economic Zone that may have some of the characteristics of existing free-trade zones but may also offer a broader range of yet-to-be-determined incentives.

Mongolia does not generally require foreign investors to use local goods, services, or equity; or to engage in import substitution.  Neither foreign nor domestic businesses need to export a certain percentage of output or use foreign exchange to cover exports.  The government applies the same geographical restrictions to foreign and domestic investors, involving border security, environmental concerns, and local-use rights.  The government does not impose onerous or discriminatory visa, residence, or work permit requirements on U.S. investors—although foreign and domestic firms must meet certain industry-specific, local-hire requirements.

The Mongolian government strongly encourages but does not legally compel domestic sourcing of inputs, especially for firms engaged in natural-resource extraction.  The Minerals Law states that holders of exploration and mining licenses should preferentially supply extracted minerals at market prices to Mongolian processing facilities and should procure goods and services and hire subcontractors from business entities registered in Mongolia.  Although facing no legal requirement to source locally, investors occasionally report that central, provincial, or municipal governments will delay permitting and licensing until domestic and foreign enterprises make some effort to source locally.  Hiring Mongolians is often a de facto necessity because the government sometimes issues work visas for foreign employees only if employers have attempted to hire domestically.  These requirements do not apply to members of boards of directors.

Despite pressure to source locally, foreign investors generally set their own export and production targets without concern for government-imposed quotas or requirements.  Mongolia does not require (but often encourages) technology transfers.  The government generally imposes no offset requirements for major procurements.  Investors, not the government, generally decide on technology, intellectual property, and finance as they see fit.  Except for an unenforced provision of the Minerals Law requiring mining companies to list 10 percent of the shares of the Mongolian-registered mining company on the Mongolian Stock Exchange, foreign-invested businesses are not required to sell shares into the Mongolian market.  Equity stakes are generally at the discretion of investors, Mongolian or foreign.  In cases where investments may have national economic, political, security, or social impacts, the government has, without a clear statutory basis, restricted the type of financing foreign investors may use, their choice of partners, or to whom they sell shares or equity stakes.

The government generally requires neither data localization nor compels IT providers to turn over source code or provide surveillance access, except for criminal investigations.  Businesses may freely transmit customer or other business-related data abroad, except for financial data, which is subject to data localization requirements.

Montenegro

4. Industrial Policies

The Ministry of Economic Development, in cooperation with the World Bank Group (WBG), has created an Investment Incentives Inventory, which provides a comprehensive list of available financial and non-financial support programs for the private sector as well as domestic and foreign investors offered by the Government of Montenegro. This initiative is part of the WBG-supported Regional Investment Reform Agenda, whose objective is the development of commonly accepted investment standards for the Western Balkans region in order to improve the attractiveness of the region for regional and other foreign investors. Montenegro’s goals are to leverage this program to spur a higher inflow of investments and achieve a higher level of entrepreneurship, trade and job creation. The inventory contains data on 40 incentive measures that are available to domestic and foreign investors through various support programs intended for the private sector. The MIA overseas the incentive program implementation. More information is available on the Agency’s website ( https://mia.gov.me/investment-incentive-inventory ).

In 2004, Montenegro adopted the Law on Free Zones, which offers businesses benefits and exemptions from custom duties, taxes, and other duties in specified free trade zones. The Port of Bar is currently the only free trade zone in Montenegro.  All free zone users have many benefits provided by the law and other regulations (import free of customs duties, customs fees and VAT; storage of goods in a duty-free regime for an unlimited period of time; low corporate tax, simplified procedures) in addition to the use of infrastructure, port handling services, and telecommunication services. All regulations relating to free trade zones are in compliance with EU legal standards. Complete equality has been guaranteed to foreign investors in reference to ownership rights, organizing economic activities in the zone, complete free transfer of profit and deposit, and the security of investments. More info is available at http://www.lukabar.me/  

The government does not impose any performance requirements as a condition for establishing, maintaining, or expanding an investment. There is a defined package of incentives offered to foreign investors, including duty exemptions for imported equipment.

AmCham Montenegro and the Foreign Investors’ Council announced that Montenegro has improved and liberalized its business environment due to amendments to the Law on Foreigners.  This law addressed previous requirements placed on hiring practices. According to revisions to the law, businesses no longer need to prove that there are no local citizens of the required vocational profile that are available for a particular job before the company decides to hire a foreigner.

The government does not use “forced localization,” the policy in which foreign investors must use domestic content in goods or technology. The only exception is an agreement with a Chinese company that is constructing the country’s first national highway. The agreement for this project, which is currently the largest infrastructure project in Montenegro, requires that 30 percent of the labor contract be engaged locally.

Morocco

4. Industrial Policies

As set out in the Investment Code, Morocco offers incentives designed to encourage foreign and local investment. Morocco’s exisiting Investment Charter gives the same benefits to all investors regardless of the industry in which they operate (except agriculture and phosphates, which remain outside the scope of the Charter). Post is unaware of any special incentives designated for businesses owned by underrepresented investors. With respect to agricultural incentives, Morocco’s Green Generation 2020-2030   plan aims to improve the competitiveness of the agribusiness industry by supporting value chains and making the industry more resilient and environmentally sound. Agricultural companies with revenues exceeding $500,000 qualify for a lower corporate tax rate of 20 percent.

The Moroccan government launched its “investment reform plan” in 2016 to create a favorable environment for the private sector to drive growth. The plan includes the adoption of investment incentives to support the industrial ecosystem, tax and customs advantages to support investors and new investment projects, import duty exemptions, and a value added tax (VAT) exemption. Special VAT exemptions are available for medical products and vaccines and products/materials related to solar panel production. AMDIE’s website  has more details on investment incentives, but generally these incentives are based on sectoral priorities (automotive, aerospace, textile, agro-food industry, pharmaceuticals, outsourcing). Investments of $5 million or above qualify for government subsidies of land cost (20 percent), external infrastructure costs (5 percent), and training costs (20 percent).

The Moroccan Government offers several guarantee funds and sources of financing for investment projects to both Moroccan and foreign investors. For example, the Caisse Centrale de Garantie (CCG), a public finance institution, offers co-financing, equity financing, and guarantees.

Beyond tax exemptions granted under ordinary law, Moroccan regulations provide specific advantages for investors with investment agreements or contracts with the Moroccan Government if they meet the required criteria. These advantages include subsidies for certain expenses related to investment through the Industrial Development and Investment Fund subsidies of certain expenses for the promotion of investment in specific industrial sectors and the development of new technologies through the Hassan II Fund for Economic and Social Development, exemption from customs duties within the framework of Article 7.I of the Finance Law 12-98, and exemption from the Value Added Tax (VAT) on imports and domestic sales.

Morocco has several free zones offering companies incentives such as tax breaks, subsidies, and reduced customs duties. These zones aim to attract investment by companies seeking to export products from Morocco. As part of a government-wide strategy to strengthen its position as an African financial hub, Morocco offers incentives for firms that locate their regional headquarters in Morocco at Casablanca Finance City (CFC), Morocco’s flagship financial and business hub launched in 2010. For details on CFC eligibility, see CFC’s website .

In 2021, Morocco was removed from the European Union’s list of non-cooperative jurisdictions for tax purposes (the so-called “EU Tax Haven Grey List”, not to be confused with FATF AML/CFT grey list), after amending some tax policy measures deemed as potentially harmful based on the tax advantages offered to export companies, companies operating in free zones, and CFC. To enhance its competitiveness and investment attractiveness and to be aligned with international best practices, Morocco’s 2020 budget law transformed the country’s free zones into “Industrial Acceleration Zones” with a 15 percent corporate tax rate following an initial five years of exemption, compared to a previous corporate tax rate of 8.75 percent over 20 years. The zones also allow for flat 20 percent income tax applicable for all employees working within the zone, much lower than the graduated income tax which can reach up to 38 percent. Additionally, the Moroccan government also offers a VAT exemption for investors using and importing equipment goods, materials, and tools needed to achieve investment projects whose value is at least $20 million. Similarly, the CFC regime provides companies holding CFC status a tax benefit exemption for five years followed by a reduced rate of 15 percent (compared to a rate of 31 percent). It applies to financial services (such as investment services and holding companies) and non-financial services activities (such as advisory and regional headquarters and distribution centers). The CFC regime is open to both Moroccan and foreign companies and provides the same tax benefits.

The Moroccan government views foreign investment as an important vehicle for creating local employment. Visa issuance for foreign employees is contingent upon a company’s inability to find a qualified local employee for a specific position and can only be issued after the company has verified the unavailability of such an employee with the National Agency for the Promotion of Employment and Competency (ANAPEC). If these conditions are met, the Moroccan government allows the hiring of foreign employees, including for senior management. The process for obtaining and renewing visas and work permits can be onerous and may take up to six months, except for CFC members, where the processing time is reportedly one week.

Although there is no formal requirement to use domestic content in goods or technology, the government has announced its intent to pursue an import-substitution policy as part of its COVID-19-related industrial recovery plan and has amended its finance law to increase custom duties on finished products coming from non-FTA countries. Additionally, the plan established a special industrial project bank with the goal of supporting projects in 11 target sectors.

The WTO Trade Related Investment Measures’ (TRIMs) database does not indicate any reported Moroccan measures that are inconsistent with TRIMs requirements. Though not required, tenders in some industries, including solar and wind energy, are written with targets for local content percentages. Both performance requirements and investment incentives are uniformly applied to both domestic and foreign investors depending on the size of the investment.

The Moroccan Data Protection Act (Act 09-08 ) stipulates that data controllers may only transfer data if a foreign nation ensures an adequate level of protection of privacy and fundamental rights and freedoms of individuals with regard to the treatment of their personal data. Morocco’s National Data Protection Commission (CNDP) defines the exceptions according to Moroccan law. Local regulation requires the release of source code for certain telecommunications hardware products. However, the U.S. Mission is not aware of any Moroccan government requirement that foreign IT companies should allow the Moroccan government to review or have backdoor access to their source-code or systems.

Namibia

4. Industrial Policies

Incentives are mainly aimed at stimulating manufacturing, attracting foreign investment to Namibia, and promoting exports. To take advantage of Namibia’s incentives, companies must be registered with MIT and the Ministry of Finance. Tax and non-tax incentives are accessible to both existing and new manufacturers. MIT has produced a brochure on Special Incentives for Manufacturers and Exporters that is available from the Namibia Investment Promotion and Development Board (NIPDB). Post is not aware of any special incentives for businesses owned by underrepresented investors, such as women.

Namibia aims to become a renewable energy hub of Africa. The country therefore offers favorable import incentives on renewable energy technologies, exempting solar panels, wind turbines, and batteries from import duties.

The Namibian Government aims to stimulate economic growth and employment and to establish Namibia as a gateway location to the Southern African region. To this end, the government has introduced numerous incentives that are largely concentrated on stimulating manufacturing in Namibia and promoting exports into the region and to the rest of the world. General tax regulations that are indicative of the government’s commitment are:

  • Non–resident Shareholders’ Tax is only 10%;
  • Dividends accruing to Namibian companies or resident shareholders are tax-exempt;
  • Machinery and equipment can be fully written off over a period of three years;
  • Buildings of non-manufacturing operations can be written off: 20% in the first year and the balance at 4% over the ensuing 20 years;
  • Import or purchase of manufacturing machinery and equipment is exempted from Value Added Tax (VAT); and,
  • Through trade agreements, preferential market access to the European Union (EU), United States, and other markets for manufacturers is provided.

The government does sometimes issue guarantees, but reluctantly. Joint financing for foreign direct investment is occasionally implemented through the Namibia Industrial Development Agency (NIDA) or another, sector-relevant state-owned enterprise.

In March 2021, the EU removed Namibia from its list of tax havens after Namibia successfully implemented reforms to bring its tax systems up to the EU’s required standards.  The EU had identified the preferential treatment and tax incentives to manufacturers and export processing zones (EPZ) as harmful tax regimes and allowed Namibia until December 2021 to adapt existing legislation. In June 2020, the Namibian government repealed the EPZ that had offered tax incentives to companies located in Namibia to manufacture and export products. Namibia is in the process of creating an improved Special Economic Zone (SEZ) policy which aims to increase responsiveness to investors’ needs and address the weaknesses of the EPZ regime. This process is ongoing, and the government aims to complete it in 2022.

The government actively encourages partnerships with historically disadvantaged Namibians. Namibia’s Affirmative Action Act of 1998 strives to create equal employment opportunities, improve conditions for the historically disadvantaged, and eliminate discrimination. The Equity Commission requires all firms to develop an affirmative action plan for management positions and to report annually on its implementation. The Equity Commission also facilitates training programs, provides technical and other assistance, and offers expert advice, information, and guidance on implementing affirmative action in the workplace.

In certain industries, the government has employed specific techniques to increase Namibian participation. In the fishing sector, for example, companies pay lower quota fees if they operate Namibian-flagged vessels based in Namibia with crews that are predominantly Namibian.

Economic empowerment legislation for previously disadvantaged groups, called the New Equitable Economic Empowerment Bill (NEEEB) is under consideration in the legislature. The bill is being reviewed and could be reintroduced in Parliament during 2022. The bill is likely to contain provisions relating to ownership, management, value addition, human resource capacity building, job creation, and corporate social responsibility that aim to help previously disadvantaged Namibians. While not yet legally bound to do so, many companies in Namibia are already implementing aspects of NEEEB.

The Namibian government does not have “forced localization” requirements for data storage. Domestic content is encouraged. State-owned enterprises are including local ownership/ participation.

Nepal

4. Industrial Policies

The Nepal Laws Revision Act of 2000 eliminated most tax incentives, however, exports are still favored, as is investment in certain “priority” sectors, such as agriculture, tourism, and hydropower.  Incentives for these sectors usually take the form of reduced or subsidized interest rates on bank loans.  There is no discrimination against foreign investors with respect to export/import policies or non-tariff barriers.  The GoN also offers tax incentives to encourage industries to locate outside the Kathmandu Valley.  Newly formed provincial governments are likely to consider offering their own investment incentives in the future. Post is unaware of the GoN issuing guarantees for FDI projects, but it has been open to joint financing arrangements.

In August 2016, Nepal’s Parliament approved the Special Economic Zone (SEZ) Act, which provides numerous incentives for investors in SEZs, including exemptions on customs duties for raw materials, streamlined registration processes, guaranteed access to electricity, and prohibition of labor strikes.  A revision to the SEZ Act in 2019 provided more incentives, including reducing to 60 percent the requirement that industries within an SEZ export 75 percent of their production.  The GoN maintains plans to have a network of up to 15 SEZs throughout the country and is currently developing the country’s first two special economic zones in Bhairahawa and Simara, which are partly operational.  Both are located in southern Nepal near the border with India.

There are no mandates for local employment.  However, numerous foreign investors and foreign workers have complained that obtaining work visas is an extremely onerous process, requiring the approval of multiple GoN agencies and instances of demands for bribes when obtaining and renewing visas.  (For information on work visas, http://www.nepalimmigration.gov.np.  A recommendation letter from the relevant ministry overseeing the investment has become a de facto requirement.  The GoN limits the number of expatriate employees permitted to work at a company, expressing concern that foreign workers are “taking jobs” from Nepali citizens.  Representatives of foreign companies have told Post that these attitudes and extremely inflexible immigration laws make it difficult to legally get a visa for short-term employees or consultants.  There are no mandates for local employees in senior management and on boards of directors.

There are no government-imposed conditions on permission to invest, other than those already discussed above, such as the list of sectors from which foreign investment is restricted.  The GoN does not use “forced localization” policies designed to compel companies to relocate all or part of their global business operations within its borders.

Nepal also does not have any requirements for IT providers to turn over source code or provide access to encryption.  In late 2018, parliament passed the Privacy Act and implementing regulations are being drafted.  While the new regulations may clarify restrictions and responsibilities of companies around personal data management, Nepal has not previously had any regulations that would impede companies from freely transmitting customer or other business-related data outside Nepal.  Similarly, there are no laws related to storage of data for law enforcement or privacy purposes.

Post is unaware of any Nepali laws regarding performance requirement, defined by the United Nations Conference on Trade and Development as “stipulations, imposed on investors, requiring them to meet certain specified goals with respect to their operations in the host country.”

New Zealand

4. Industrial Policies

New Zealand has no specific economic incentive regime because of its free trade policy. The New Zealand government, through its bodies such as Tourism New Zealand and NZTE, assists certain sectors such as tourism and the export of locally manufactured goods. The government generally does not have a practice of jointly financing—or issuing guarantees—for foreign direct investment projects. It does provide some opportunities and initiatives for foreign investors to apply for joint financing if the projects involve R&D, science, or innovation that will benefit the economy.

Callaghan Innovation is a stand-alone Crown Entity established in February 2013. It connects businesses with research organizations offering services, and the opportunity to apply for government funding and grants that support business innovation and capability building. Callaghan Innovation requires businesses applying for any of their research and development grants to have at least one director who is resident in New Zealand and to have been incorporated in New Zealand, have a center of management in New Zealand, or have a head office in New Zealand. For more information see: http://www.business.govt.nz/support-and-advice/grants-incentives .

Through Business.Govt.NZ, an agency in association with MBIE, NZTE, and Callaghan Innovation, targeted support is offered for underrepresented investors such as Māori. For more information about grants and funding or mentoring, see: https://www.business.govt.nz/how-to-grow/getting-government-grants/grants-and-help-for-your-new-business/ 

New Zealand does not have any foreign trade zones or duty-free ports. New Zealand does not have any Special Economic Zones, although the government asked MBIE to investigate the possibility in 2017.

The government of New Zealand does not maintain any measures that violate the Trade Related Investment Measures text in the WTO. There are no government mandated requirements for company performance or local employment, and foreign investors that do not require OIO approval are treated equally with domestic investors. Overseas investors that require OIO approval must comply with legal obligations governing the OIO and the conditions of its approval.

Investors are generally required to report annually to the OIO for up to five years from consent, but if benefits are expected to occur after that five-year period, monitoring will reflect the time span within which benefits will occur. Failure to meet obligations under the investors’ consent can result in fines, court orders, or forced disposal of their investment.

Businesses wanting to establish in New Zealand and seeking to relocate their employees to New Zealand will need to apply for and satisfy the conditions of the Employees of Relocating Business Resident Visa: https://www.immigration.govt.nz/new-zealand-visas/apply-for-a-visa/about-visa/relocating-with-an-employer-resident-visa .

New Zealand supports the ability to transfer data across borders, and to not force businesses to store their data within any particular jurisdiction. While data localization and cloud computing is not specifically legislated for, all businesses must comply with the Privacy Act 1993 to protect customers’ “personal information.” However, under certain circumstances, approval is required from the Commissioner of Inland Revenue to store electronic business and tax records outside of New Zealand, and under Section 23 of the Tax Administration Act 1994. Alternatively, taxpayers can use an IRD-authorized third party to store their information without having to seek individual approval. It remains the taxpayer’s responsibility to meet their obligations to retain business records for the retention period (usually seven years) required under the Act.

Indigenous data sovereignty is highly topical in New Zealand. The principles of Māori data sovereignty refer to the inherent rights that the indigenous peoples of New Zealand have in relation to the collection, storage, and usage of Māori data. This is particularly relevant for those public and private sector entities sharing data via cloud applications across borders. In November 2021, the Waitangi Tribunal in Wai 2522 determined that CPTPP breaches the Crown’s obligations to Māori by failing to protect Māori rights and interests in data sovereignty and in the digital domain. The Waitangi Tribunal is a permanent commission of inquiry established under the Treaty of Waitangi Act of 1975 that makes recommendations on claims brought by Māori to the courts around issues relating to Māori rights that are in breach of the original Treaty of Waitangi. The Tribunal opted to refrain from making formal recommendations and is planning to put processes in place after mediation between claimants and the Crown. Going forward, free trade agreements will be subject to greater scrutiny as they pertain to the rights of the indigenous.

Under the CPTPP trade agreement, the New Zealand government has retained the ability to maintain and amend regulations related to data flows with CPTPP countries, but in such a way that does not create barriers to trade. These rules come with a “public policy safeguard” that gives CPTPP governments the discretion to control the movement and storage of data for legitimate public policy objectives to ensure governments can respond to the changing technology in areas such as privacy, data protection, and cybersecurity. As part of CPTPP, New Zealand has committed not to impose ‘localization requirements’ that would force businesses to build data storage centers or use local computing facilities in CPTPP markets in order to provide certainty to businesses considering their investment choices. Another provision requires CPTPP countries not to impede companies delivering cloud computing and data storage services.

The Digital Economy Partnership Agreement (DEPA), which came into effect on January 7, 2021 for Singapore, New Zealand and Chile, includes a series of modules covering measures that affect the digital economy. Module 4 on Data Issues includes binding provisions on personal data protection and cross-border data flows that build on the CPTPP. In addition to the CPTPP obligations, DEPA encourages the adoption of data protection trust-marks for businesses to verify conformance with privacy standards. The agreement is an open plurilateral one that allows other countries to join the agreement as a whole, select specific modules to join, or replicate the modules in other trade agreements.

In March 2018, the government introduced the Privacy Bill that replaced the Privacy Act 1993. The bill aims to modernize privacy regulations and came into effect on June 30, 2020. It incorporates provisions in the European General Data Protection Regulation (GDPR). The provisions of the bill extend the law’s reach to apply to agencies located outside of New Zealand if that agency is doing business in New Zealand. The bill also introduces a requirement to report serious privacy breaches.

New Zealand does not have any requirements for foreign information technology (IT) providers to turn over source code or provide access to encryption, although there may be obligations on individuals to assist authorities under Section 130 of the Search and Surveillance Act 2012. This Act will be reviewed in 2022 as part of the Government’s response to Royal Commission of Inquiry into the 2019 terror attack on the Christchurch mosques.

There is not a particular government agency that enforces all privacy law, however the Office of the Privacy Commissioner is empowered through the Privacy Act 1993 and has a wide ability to consider developments or actions that affect personal privacy. Separately, New Zealand courts have developed a privacy tort allowing individuals to sue another for breach of privacy.

The government encourages businesses to switch from fossil fuels to cleaner power to fuel their industry.  In October 2021, the government announced 23 new projects that will receive government co-investment from Round Two of the Government Investment in Decarbonizing Industry (GIDI) Fund.  The recipients will receive NZD 28.7 million (USD 20 million) and will match this with NZD 54.5 million (USD 38.2 million) of their own funding.  The approved projects cover a range of sectors including meat, dairy, and other food production, as well as timber, energy supply, and chemical manufacturing. All applicants had to demonstrate significant economic and employment impact from their projects, have carbon reduction plans, and be ready to complete projects by October 2023.  The first two rounds of the GIDI Fund supported projects that will deliver lifetime emissions cuts of 6.6 million tons.  This equates to 14-18 percent of the gross long-lived emission reductions required from the Climate Commission’s first carbon budget for the period 2022-2025.

Nicaragua

4. Industrial Policies

Nicaragua has several investment incentives available to foreign investors. The government has also occasionally issued sweeping tax incentives to promote large one-time investments, such as for a foreign-owned power plant in 2020.

The Social Housing Construction Law (2009/677) provides incentives for the construction of housing units 36-60 m2 in size with construction costs less than $30,000 per unit. Developers are exempt from paying local taxes on the construction, purchase of materials, equipment, or tools.

The Hydroelectric Promotion Law (amended 2005/531) and the Law to Promote Renewable Resource Electricity Generation (2005/532) provide incentives to invest in electricity generation, including duty-free imports of capital goods and exemptions for income and property taxes. Regulatory concerns limit investment despite these incentives (see Transparency of the Regulatory System). The National Assembly must approve all projects larger than 30 megawatts.

The law promoting renewable energy provides tax exemptions to investors in the renewable energy sector. The government has amended the law several times to extend the exemptions, most recently in September 2020. The law includes exemptions, each valid from two to five years, from the following taxes: import duty; value added tax; income tax; municipal tax; natural resources exploitation tax; and tax stamp.

Amendments made in February 2022 to the Energy Stability law (2005/554) authorize tax exemptions for the import and purchase of any electric vehicle intended for public or private use.

The Tourism Incentive Law (amended 2005/575) includes the following incentives for investments of $30,000 or more outside Managua and $100,000 or more within Managua: income tax exemption of 80 to 90 percent for up to 10 years; property tax exemption for up to 10 years; exoneration from import duties on vehicles; and value added tax exemption on the purchase of equipment and construction materials.

The Fishing and Fish Farming Law (2004/489) exempts gasoline used in fishing and fish farming from taxes. The Forestry Sector Law (2003/462) provides income, property, and municipal tax incentives for plantation investments and tax exemptions on importing wood processing machinery and equipment. The Special Law on Mining, Prospecting and Exploitation (2001/387) exempts mining concessionaires from import duties on capital inputs (see Transparency of the Regulatory System for additional information on the mining sector).

Nicaragua does not have a practice of issuing guarantees for foreign direct investment. It has jointly financed some foreign infrastructure projects. Nicaraguan law mandates joint ventures with government agencies in the energy sector.

The Free Zones Incentive Law (Decree 46-91 and amendments) and the Free Zone Export Law passed in 2015 (including Decree 12-2016) grant free trade zone (FTZ) companies special tax treatment, including: a permanent exemption from all import duties and taxes for raw materials, equipment, and other materials necessary to operate the business, provided all products are exported; 100 percent income tax exemption for the first 10 years of operation, and 60 percent income tax exemption thereafter; and exemptions from all export, value added, consumption, municipal, transportation, and property transfer taxes. FTZ companies must pay a deposit to guarantee final salaries and other expenses if a company goes out of business. FTZ salaries are negotiated separately from other wage negotiations and are set for five-year periods. FTZ companies may employ foreign employees with the permission of the FTZ Commission. Foreign-owned firms have the same investment opportunities as local firms. The majority of FTZ companies are foreign owned, and most production is aimed at the U.S. market.

Nicaragua’s FTZs have historically been a key driver of the Nicaraguan economy. FTZ exports fell 15 percent in 2020 due to reduced demand caused by the pandemic. Exports rebounded in 2021, increasing 37 percent. Companies in the FTZ currently employ more than 131,000 workers, surpassing a previous 2019 high. Prior to the ongoing crisis, companies in the FTZ reported good relations with the government and frequent interaction with the FTZ Commission, which regulates the FTZ. Companies in the FTZ report few interactions with the government and less interference than companies operating outside the FTZs in the Nicaraguan economy.

The government does not impose performance requirements, conditions on permission to invest, or minimum levels of domestic content for foreign investors to use in goods or technology. Nicaraguan tax and customs incentives apply equally to foreign and domestic investors. Nicaragua does not impose measures that prevent or unduly impede freely transmitting customer or other business-related data outside the country.

Nicaraguan authorities may electronically monitor individuals’ activities. Under Nicaragua’s 2020 Cybercrimes Law, telecom providers must retain one year’s worth of data for all users. A local judge may issue an order, at the National Police or Prosecutor General’s request, to force internet providers to release specific information about an individual customer, as well as collect, extract, or record data about this customer, such as real time data traffic.

Niger

4. Industrial Policies

Niger offers incentives that are dependent on the size of the investment and number of jobs that will be created. The Investment Code offers VAT-inclusive tax exemptions depending on the size of the business. Potential tax exemptions include start-up costs, property, industrial and commercial profits, services and materials required for production, and energy use. Exemption periods range from ten to fifteen years and include waivers of duties and license fees. There are no restrictions on foreign companies opening a local office in Niger, though they must obtain a business certificate from the Ministry of Trade.

The Investment Code has established three different tiers of incentives for investors, based on minimum investment amounts, listed below:

Tier 1: Promotional tier, for investments of 25 million CFA francs (about $40,000) or above.

Tier 2: Priority tier, for investments of 50 million CFA francs (about $81,000) or above.

Tier 3: Conventional tier, for investments of at least 2 billion CFA (about $3.25 million).

During the investment phase, the approved investments are exempt from import duties and taxes on material and equipment needed for the project that are not available locally. The advantages provided during the operational phase include exemption from profit tax (35 percent). Apart from these regimes, two additional incentive schemes are part of the investment code. These apply to companies operating in remote regions, energy, agro-industry, and low-cost housing sectors.

The government of Niger has a practice of jointly financing foreign direct investment projects through the Public-Private Partnership law. This enacted law no. 2018-40 (June 2018) regulating contracts public-private partnership stated for example in Article 59: In the design and/or development phase implementation, public-private partnership type projects benefit for their operations of a total exemption from duties and taxes collected by the State with the exception of VAT on the services of services.

In 2016, the GON updated its antiquated Customs Code to conform with the requirements of Community Customs Codes of the West African Economic and Monetary Union (WAEMU) and the Economic Community of West African States (ECOWAS).

In 2017, the GON modernized the customs procedures with the electronic payment tax which is in pace in in Niamey and is being implemented through Niger’s seven other regions. In 2016, internal customs procedures migrated to SYDONIAWORLD, a system designed to improve efficiency and permit centralized oversight and control. In 2015, Niger was the first Least Developed Country (LDC) to ratify the World Trade Organization’s Trade Facilitation Agreement (TFA). The country seeks to implement the trade policy of the West African Economic and Monetary Union (WAEMU) and has joined the Generalized System of Preferences (GSP) of the European Union.

Niger is landlocked and relies on the ports of Cotonou in Benin and Lomé in Togo as its primary seaports. Importers also use the ports of Tema, in Ghana and sometimes Lagos, Nigeria. Delivery can take months due to delays at borders and internal control points along the route. The relatively low number of commercial flights to Niger means that transport costs are high. The country’s main trade partners are Nigeria, the European Union, the United States, China, Cote d’Ivoire, and Algeria. In July 2019, Niger created a free industrial export zone, permitting a logistics zone allowing certain tax advantages for the companies with established transportation operations. The government also created in July 2019 the second industrial zone of Niamey, which aimed to reduce the difficulties linked to the quality of infrastructure and production factors, including the high cost of construction, lack of urbanized areas, roads and various networks and the lack of space in the current industrial area of Niamey which no longer meets national and international environmental and safety standards. The construction of an oil pipeline in the country will also attenuate the pressure on roads as the flux of oil trucks will be reduced considerably.

The African Continental Free Trade Area (ZLECAF) entered into force on January 1, 2021. Niger is active member of the treaty.

While Niger does require that companies attempt to hire a Nigerien before applying for a work visa for a foreign national, in practice the rule is not enforced. In addition, it allows for a company to appeal to the Ministry of Labor, if a foreigner is refused a work visa. There are also no localization requirements for senior management or boards of directors.

There are no excessively onerous visa, residence, worik permit, or similar requirements inhibiting mobility of foreign investors and their employees. In principle, there are no government/authority imposed conditions restricting investments beyond limited sectors for national security as cited in the section on “Limits on Foreign Control.”

There are no forced localization policies requiring investors to use domestic goods in content. Performance requirements are not imposed as a condition for establishing, maintaining, or expanding foreign direct investments. Niger does not require foreign IT providers to turn over source code and/or provide access to surveillance. Niger has no regulations regarding data storage.

Nigeria

4. Industrial Policies

The Nigerian government maintains different and overlapping incentive programs.  The Industrial Development/Income Tax Relief Act provides incentives to pioneer industries deemed beneficial to Nigeria’s economic development and to labor-intensive industries, such as apparel.  There are currently 99 industries and products that qualify for the pioneer status incentive through the NIPC, following the addition of 27 industries and products to the list in 2017.  The government has added a stipulation calling for a review of the qualifying industries and products to occur every two years.  Companies that receive pioneer status may benefit from a tax holiday from payment of company income tax for an initial period of three years, extendable for one or two additional years.  A pioneer industry sited in an economically disadvantaged area is entitled to a 100% tax holiday for seven years and an additional 5% depreciation allowance over and above the initial capital depreciation allowance.  Additional tax incentives are available for investments in domestic research and development, for companies that invest in local government areas deemed disadvantaged, for local value-added processing, for investments in solid minerals and oil and gas, and for several other investment scenarios.  The NIPC in conjunction with FIRS published a compendium of investment which houses all fiscal incentives backed by Nigerian law as well as sectoral fiscal concessions approved by the government.  The compendium is available at https://www.nipc.gov.ng/compendium/preface/.

The Nigerian Export Promotion Council (NEPC) administers an Export Expansion Grant (EEG) scheme to improve non-oil export performance.  The program was suspended in 2014 due to concerns about corruption on the part of companies that collected grants but did not actually export.  It was revised and relaunched in 2018.  The NEXIM Bank provides commercial bank guarantees and direct lending to facilitate export sector growth, although these services are underused.  NEXIM’s Foreign Input Facility provides normal commercial terms for the importation of machinery and raw materials used for generating exports.  Repayment terms are typically up to seven years, including a moratorium period of up to two years depending on the loan amount and the project being finance.  Agencies created to promote industrial exports remain burdened by uneven management, vaguely defined policy guidelines, and corruption.

The NIPC states that up to 120% of expenses on research and development (R&D) are tax deductible, provided that such R&D activities are carried out in Nigeria and relate to the business from which income or profits are derived.  Also, for the purpose of R&D on local raw materials, 140% of expenses are allowed.  Long-term research will be regarded as a capital expenditure and written off against profit.

The government similarly offers incentives for the importation of equipment, parts, and machinery used in renewable energy generation, transmission, and/or storage.  Solar cells in modules or panels attract zero import duty and are exempt from paying value added tax (VAT).  Solar-powered coolers, solar-powered generators, wind-powered generators, battery-manufacturing inputs, and nuclear reactors are subject to a relatively low duty rate of 5% and are exempt from paying VAT.

The Nigerian Export Processing Zone Authority (NEPZA) allows duty-free import of all equipment and raw materials into its export processing zones.  Up to 100% of production in an export processing zone may be sold domestically based on valid permits and upon payment of applicable duties.  Investors in the zones are exempt from foreign exchange regulations and taxes and may freely repatriate capital.  Foreign investors still face challenges with unreliable implementation of the regulations applied to export processing zones and are sometimes asked to pay import duties or restricted from accessing foreign exchange.  The Nigerian government also encourages private sector participation and partnership with state and local governments under the free trade zones (FTZ) program.  There are three types of FTZs in Nigeria:  federal or state government-owned, private sector-owned, and public-private partnerships.  NEPZA regulates Nigeria’s FTZs regardless of the ownership structure.  Workers in FTZs may unionize but may not strike for an initial ten-year period. 

Nigeria ratified the WTO Trade Facilitation Agreement (TFA) in 2016 and the Agreement entered into force in 2017.  Nigeria already implements items in Category A under the TFA and has identified, but not yet implemented, its Category B and C commitments.  In 2016, Nigeria requested additional technical assistance to implement and enforce its Category C commitments.  (See https://www.wto.org/english/tratop_e/tradfa_e/tradfa_e.htm)

Foreign investors must register with the NIPC, incorporate as a limited liability company (private or public) with the CAC, procure appropriate business permits, and register with the Securities and Exchange Commission (when applicable) to conduct business in Nigeria.  Manufacturing companies sometimes must meet local content requirements.  Long-term expatriate personnel do not require work permits but are subject to needs quotas requiring them to obtain residence permits that allow salary remittances abroad.  Expatriates looking to work in Nigeria on a short-term basis can either request a temporary work permit, which is usually granted for a two-month period and extendable to six months, or a business visa, if only traveling to Nigeria for the purpose of meetings, conferences, seminars, trainings, or other brief business activities.  Authorities permit larger quotas for professions deemed in short supply, such as deep-water oilfield divers.  U.S. companies often report problems in obtaining quota permits.  The Nigerian government’s Immigration Regulations 2017 introduced additional means by which foreigners can obtain residence in Nigeria.  Foreign nationals who have imported an annual minimum threshold of capital over a certain period may be issued a permanent residence permit if the investment is not withdrawn.  The Nigerian Oil and Gas Content Development Act of 2010 restricts the number of expatriate managers to 5% of the total number of personnel for companies in the oil and gas sector.

The National Office of Industrial Property Act of 1979 established the National Office for Technology Acquisition and Promotion (NOTAP) to regulate the international acquisition of technology while creating an environment conducive to developing local technology.  NOTAP recommends local technical partners to Nigerian users in a bid to reduce the level of imported technology, which currently accounts for over 90% of technology in use in Nigeria.  NOTAP reviews the Technology Transfer Agreements (TTAs) required to import technology into Nigeria and for companies operating in Nigeria to access foreign currency.  NOTAP reviews three major aspects prior to approval of TTAs and subsequent issuance of a certificate: 

  • Legal – ensuring that the clauses in the agreement are in accordance with Nigerian laws and legal frameworks within which NOTAP operates; 
  • Economic – ensuring prices are fair for the technology offered; and 
  • Technical – ensuring transfer of technical knowledge. 

U.S. firms complain that the TTA approval process is lengthy and can routinely take three months or more.  NOTAP took steps to automate the TTA process to reduce processing time to one month or less; however, from the date of filing the application to the issuance of confirmation of reasonableness, TTA processing still requires 60 business days. 

https://notap.gov.ng/new_dev/register-a-technology-transfer-agreement/

The Nigerian Oil and Gas Content Development Act of 2010 contains certain technology-transfer requirements that may violate a company’s intellectual property rights.  

In 2013, the National Information Technology Development Agency (NITDA), under the auspices of the Ministry of Communication, issued the Guidelines for Nigerian Content Development in the ICT sector.  NITDA re-issued an updated version of the Guidelines in 2019.  The Guidelines require telecommunications companies to ensure that at least 80% of network infrastructure value and volume be locally sourced, use indigenous companies to build network infrastructure, and use locally developed or manufactured software components.  The Guidelines also require multinational ICT equipment manufacturers operating in Nigeria to provide a detailed local content development plan for the creation of jobs, recruitment of Nigerians, human capital development, use of indigenous ICT products and services for value creation; all government agencies to procure at least 40% computer hardware and associated devices from NITDA-approved original equipment manufacturers; and ICT companies to host all consumer and subscriber data locally.  Enforcement of the Guidelines is largely inconsistent.  The government generally lacks capacity and resources to monitor labor practices, technology compliancy, and digital data flows.  There are reports that individual Nigerian companies periodically lobby the National Assembly and/or NITDA to address allegations (warranted or not) against foreign firms that they are in non-compliance with the guidelines.

The goal of the Guidelines is to promote development of domestic production of ICT products and services for the Nigerian and global markets, but some assessments indicate they pose risks to foreign investment and U.S. companies by interrupting their global supply chain, increasing costs, disrupting global flow of data, and stifling innovative products and services.  Industry representatives remain concerned about whether the guidelines would be implemented in a fair and transparent way toward all Nigerian and foreign companies.  All ICT companies, including Nigerian companies, use foreign manufactured equipment as Nigeria does not have the capacity to supply ICT hardware that meets international standards.

The Nigerian Customs Service (NCS) and the Nigerian Ports Authority (NPA) exercise exclusive jurisdiction over customs services and port operations respectively.  Nigerian law allows importers to clear goods on their own, but most importers employ clearing and forwarding agents to minimize tariffs and lower landed costs.  The Nigerian government closed land borders to trade in August 2019, purportedly to stem the tide of smuggled goods entering from neighboring countries.  Nigeria reopened land borders to trade in December 2020, but it continues to restrict the import of items such as rice and vehicles through its land borders.  The NCS maintains a wider import prohibition list available at https://customs.gov.ng/?page_id=3075, while the CBN continues to restrict access to foreign exchange for the importation of 44 classes of goods.  The initial list that contained 41 items (https://www.cbn.gov.ng/out/2015/ted/ted.fem.fpc.gen.01.011.pdf ) has since been expanded to include fertilizer, maize, dairy products, and sugar (except for three companies that the CBN exempts from the lack of access to foreign exchange for sugar imports) with the CBN adding items in an ongoing basis as part of its “backward integration” strategy.  

The Nigerian government implements a destination inspection scheme whereby all inspections occur upon arrival into Nigeria, rather than at the ports of origin.  In 2013, the NCS regained the authority to conduct destination inspections, which had previously been contracted to private companies.  NCS also introduced the Nigeria Integrated Customs Information System (NICIS) platform and an online system for filing customs documentation via a Pre-Arrival Assessment Report (PAAR) process.  The NCS still carries out 100% cargo examinations, and shipments take more (sometimes significantly more) than 20 days to clear through the process.  In addition to creating significant delays and additional fees for security and storage for items awaiting customs clearance, NCS’s continued reliance on largely manual customs processes creates opportunities for significant variation, individual discretion, and corruption in the application of customs regulations.  At the time of this report, a growing number of companies were engaged in disputes with the customs agency due to NCS arbitrarily reclassifying their imports into new classification categories with higher import tariffs.  

Shippers report that efforts to modernize and professionalize the NCS and the NPA have largely been unsuccessful – port congestion persists and clearance times are long.  A presidential directive in 2017 for the Apapa Port, which handles over 40% of Nigeria’s legal trade, to run a 24-hour operation and achieve 48-hour cargo clearance has not met its stated goals.  The port is congested, inefficient and the proliferation of customs units incentivizes corruption from official and unofficial middlemen who complicate and extend the clearance process.  Delays for goods entering the country via the Apapa Port were exacerbated under COVID; U.S. companies have reported wait times to berth ships at the port of up to 90 daysFreight forwarders usually resort to bribery of customs agents and port officials to avoid long delays clearing imported goods through the NPA and NCS.  The NPA set up an Electronic Truck Call-up System in January 2021 to increase efficiency in the management of cargo movement across the Apapa Port.  However, the impact made by this initiative remains to be felt.  Other ports face logistical and security challenges leaving most operating well below capacity.  Nigeria does not currently have a true deep-sea port although one is under construction near Lagos and expected to be operational by 2023.    

Investors sometimes encounter difficulties acquiring entry visas and residency permits. Foreigners must obtain entry visas from Nigerian embassies or consulates abroad, seek expatriate position authorization from the NIPC, and request residency permits from the Nigerian Immigration Service.  In 2018, Nigeria instituted a visa-on-arrival system, which works relatively well but still requires lengthy processing at an embassy or consulate abroad before an authorization is issued.  Some U.S. businesses have reported being solicited for bribes in the visa-on-arrival program.  The visa-on-arrival system is not an option  for employment or residence.  Investors report that the residency permit process is cumbersome and can take from two to 24 months and cost $1,000 to $3,000 in facilitation fees.  The Nigerian government announced a visa rule in 2011 to encourage foreign investment, under which legitimate investors can obtain multiple-entry visas at points of entry.  Obtaining a visa prior to traveling to Nigeria is strongly encouraged.

North Macedonia

4. Industrial Policies

Both the Law on Technological Industrial Development Zones (TIDZ) and the Law on Financial Support of Investments offer incentives to investors. Investors in the TIDZ are eligible for tax exemptions for a period of up to 10 years of operation in proportion to the size of investment and number of employees. Investors in the TIDZ are exempt from paying duties for equipment and machines as well as from municipality construction taxes. The land lease rate is so low as to be merely symbolic, and investors are eligible for a grant equal to 10 percent of the cost of plant construction and new machinery, as well as a grant for improving competitiveness. North Macedonia’s legislative framework for FDI is generally harmonized with EU state aid regulations.

The salaries of employees working for TIDZ employers are exempt from personal income tax for a period of up to ten years after the first month in which the employer starts paying out salaries.

The government does not issue guarantees or jointly finance foreign direct investment projects. Depending on the industry and size of the investment, the government may decide to cover up to 50 percent of eligible investment costs over a period of 10 years.

To date, the government has not announced any incentives to stimulate clean energy investments.

North Macedonia currently has 15 free economic zones in various stages of development throughout the country. The Directorate for Technological Industrial Development Zones ( HYPERLINK “http://fez.gov.mk/” h http://fez.gov.mk/) is responsible for establishing, developing, and supervising 14 of them, including seven fully operational TIDZ: Skopje 1 and 2, Prilep, Stip, Kicevo, Struga, and Strumica. The Tetovo TIDZ is a public-private partnership. U.S. companies operate in TIDZ throughout North Macedonia, including automotive components manufacturers ARC Automotive (Skopje 1), Adient (Stip and Strumica), Aptiv (Skopje 1), Gentherm (Prilep), Lear (Tetovo), and Dura Automotive and Dura Structures & Extrusion (Skopje 2), and electronic component manufacturer Kemet (Skopje 1).

North Macedonia does not normally impose performance requirements, such as mandating local employment (working level or management level) or domestic content in goods or technology, as a condition for establishing, maintaining, or expanding an investment. Foreign investors in the TIDZ may employ staff from any country. In 2016, North Macedonia simplified the procedure for expatriates to obtain permission to live and work in the country.

North Macedonia does not impose a “forced localization” policy for data. The government does not prevent or unduly impede companies from freely transmitting customer or other business-related data outside the country. Post is not aware of any requirements for foreign IT providers to turn over source code or provide access to encryption. However, based on the new EU General Data Protection Regulation (GDPR), which came into force in May 2018, North Macedonia’s Directorate for Personal Data Protection adopted in February 2020 amendments to the Law on Personal Data Protection to harmonize North Macedonia’s laws with the new EU regulations.

Depending on the sector and type of investment, various government authorities oversee and assess the fulfillment of investment promises made by foreign investors. Government entities include the Agency for Foreign Investments and Export Promotion (Invest North Macedonia), the Directorate for Technological Industrial Development Zones , and the Ministry of Economy.

There is no discriminatory export or import policy affecting foreign investors. Almost 96 percent of total foreign trade is unrestricted. Current tariffs and other customs-related information are published on the website of the Customs Administration ( https://customs.gov.mk/index.php/en/ ).

Norway

4. Industrial Policies

Norway’s SkatteFUNN research and development (R&D) tax incentive scheme is a government program designed to stimulate R&D in Norwegian trade and industry. Businesses and enterprises that are subject to taxation in Norway are eligible to apply for tax relief.

For more information, see: https://www.oecd.org/sti/RDTax%20Country%20Profiles%20-%20NOR.pdf

Norway has no foreign trade zones and does not contemplate establishing any.

Norway generally does not impose performance requirements on foreign investors, nor offer significant general tax incentives for either domestic or foreign investors. There is an exception, however, for investments in sparsely settled northern Norway where reduced payroll taxes and other incentives apply. There are no free-trade zones, although taxes are minimal on Svalbard, a remote Arctic archipelago which is subject to special treaty provisions but administered by Norway. A state industry and regional development fund provides support (e.g., investment grants and financial assistance) for industrial development in areas with special employment difficulties or with low levels of economic activity.

Norway does not require “forced localization” nor imposes requirements on data storage.

Oman

4. Industrial Policies 

Oman offers several incentives to attract foreign investors such as competitive lease rates for certain types of companies established in recognized industrial estates, free zones, and specific locations, but only on a case-by-case basis.  Oman has no personal income tax or capital gains tax. However, some of Oman’s investment incentives, such as for reductions in utility rates, have diminished in recent years.  Most industrial and commercial consumers now pay cost-reflective tariffs for utilities. Oman in recent years has also eliminated many tax exemptions for foreign investors. Oman taxes corporate earnings at 15 percent.

The Public Authority for Special Economic Zones and Free Zones (OPAZ) oversees the Special Economic Zone at Duqm, Almazuna Free Zone, Salalah Free Zone, Sohar Free Zone, and any other special zone or free zone in Oman to complement its port development projects in Duqm, Salalah, and Sohar.  These areas include strategically located ports and are well connected with modern infrastructure and facilities.  An incentive package for investors includes a tax holiday, duty-free treatment of all imports and exports, and tax-free repatriation of profits.  Additional benefits include streamlined business registration, processing of labor and immigration permits, assistance with utility connections, and lower “Omanization” employment quota requirements.  Foreign-owned firms have the same investment opportunities as Omani entities.

Oman’s labor market policy of Omanization includes minimum employment quotas for Omani nationals.  These quota targets vary depending on the sector; they can be as low as 10 percent in the Special Economic Zone at Duqm (SEZAD) and as high as 90 percent in the banking sector.  Most government ministries have achieved Omanization rates at or near 100 percent.

Omanization targets are prevalent throughout the private sector, but the government enforces them inconsistently.  In practice, each company in Oman submits an Omanization plan to the Ministry of Labor (MoL), which has the authority to adjust required Omanization percentages.  In response to the economic fallout from the COVID-19 pandemic, the MoL adopted stronger measures to force companies to increase their employment of Omanis and to retain their Omani employees.

Employers seeking to hire expatriate workers must seek a visa allotment from the MoL and Royal Oman Police (ROP).  The MoL and ROP scrutinize visa allocations, often using opaque criteria.  Foreign investors complain of the difficulty in hiring expatriates to the point that it deters companies from investing or expanding in Oman.  The ROP allows expatriate workers to switch employers upon completion or termination of their employment contracts without the need to obtain a “no-objection” certificate (NOC) from their current employers.

The MoL imposes a six-month ban on visas for expatriates in 87 job categories across 10 private sector industries.  The MoL has extended the dates for this ban several times and periodically adds job categories to the visa ban.

Oman has no requirements for companies to turn over source code or to provide access to surveillance.  However, the Telecommunications Regulatory Authority (TRA) requires service providers to house servers in Oman if they are to provide services in Oman.  The TRA is the lead agency on establishing data quotas in Oman.

Pakistan

4. Industrial Policies

The government’s investment policy provides both domestic and foreign investors the same incentives, concessions, and facilities for industrial development. Though some incentives are included in the federal budget, the government relies on Statutory Regulatory Orders (SROs) – ad hoc arrangements implemented through executive order – for industry specific taxes or incentives. The government does not offer research and development incentives. Nonetheless, certain technology-focused industries, including information technology and solar energy, benefit from a wide range of fiscal incentives. Pakistan does not currently provide formal investment incentives such as grants, tax credits or deferrals, access to subsidized loans, nor reduced cost of land to individual foreign investors, including underrepresented groups such as women.

In general, the government does not issue guarantees nor jointly finance foreign direct investment projects. The government made an exception for CPEC-related projects and provided sovereign guarantees for the investment and returns, along with joint financing for specific projects.

To encourage use of electrical vehicles (EV), the Government of Pakistan incentivized imports of EVs via the Electric Vehicles Policy 2020-2025 as completely built up (CBU)/finished vehicles and EV specific parts in complete knock down (CKD)/unassembled vehicles. Incentives include rebates on customs duties, regulatory duties, exemptions from sales tax, and lower tariff rates. (Note: The Electric Vehicles Policy has been implemented following the Cabinet approval on December 21, 2021. End Note.)

The government issued the Alternative and Renewable Energy Policy (2019) to boost the share of electricity generated from renewable sources from around 5 percent to 20 percent by 2025 and to 30 percent by 2030 (60 percent, including hydropower). The policy aims to achieve these targets by offering fiscal incentives to alternative and renewable energy projects. Key features of the policy include waiving import duties for imported plants and machinery by an existing or new industrial concern for manufacturing. The policy also exempts renewable energy projects from corporate income taxes to incentivize new projects. Interest in establishing solar and wind projects in Pakistan remains domestic driven. Feed-in-tariffs were used under the old renewable energy policy of 2006 to attract renewable energy projects; under the new policy the government must announce competitive auctions. Domestic companies remain keen to participate in future auctions to develop greenfield solar and wind power projects.

In addition, the State Bank of Pakistan (SBP) has a Green Banking initiative aimed at including environmental considerations in banking products, services, and operations. As part of this initiative, the SBP issued the Financing Scheme for Renewable Energy on June 20, 2016, with a view to promote renewable energy projects in the country. The scheme can be financed by all commercial banks and development finance institutions (DFIs). Prospective sponsors wanting to set up renewable energy power projects with a capacity up to 50MW – provided the projects are approved by the Alternative Energy Development Board (AEDB) – can borrow up to PKR 6 billion (about $33 million) for a single renewable energy project for 12 years. The mark-up rate on this scheme is capped and fixed at 6 percent per annum. Despite the SBP program, commercial banks remain risk averse to financing smaller residential and commercial business loans as they find the process cumbersome, not very profitable, and lacking guarantees.

To boost exports, the government established fiscal and institutional incentives for export-oriented industries who located operations in Export Processing Zones (EPZ), the first of which was established in Karachi in 1989. Subsequently, EPZs were established in Risalpur, Gujranwala, Sialkot, Saindak, Gwadar, Reko Diq, and Duddar. However, today, only Karachi, Risalpur, Sialkot, and Saindak EPZs remain operational. These zones offer investors tax and duty exemptions on equipment, machinery, and materials (including components, spare parts, and packing material); indefinite loss carry-forward; and access to the EPZ Authority (EPZA) “Single Window,” which facilitates import and export authorizations.

The 2012 Special Economic Zones (SEZ) Act, amended in 2016, allows both domestically focused and export-oriented enterprises to establish companies and public-private partnerships within SEZs. According to the Pakistan’s 2013 Investment Policy, any manufacturer that introduces technologies that are unavailable in Pakistan can receive the same incentives available to companies operating in Pakistan’s SEZs.

Pakistan has a total of 23 designated SEZs. All investors in SEZs are offered a number of incentives, including a ten-year tax holiday, one-time waiver of import duties on plant materials and machinery, and streamlined utilities connections. Despite these benefits to both foreign and domestic firms, Pakistan’s SEZs have struggled to attract investment due their lack of basic infrastructure. Khyber Pakhtunkhwa’s Peshawar Economic Zone Office opened in 2020 an Industrial Facilitation Center to provide potential investors with a one-stop shop for existing and new foreign investors. Pakistan also intends to establish nine SEZs under CPEC; those SEZs remain in nascent stages of development and currently lack basic infrastructure.

Apart from SEZ-related incentives, the government offers special incentives for Export-Oriented Units (EOUs) – a stand-alone industrial entity exporting 100 percent of its production. EOU incentives include duty and tax exemptions for imported machinery and raw materials, as well as the duty-free import of vehicles. EOUs are allowed to operate anywhere in the country. Pakistan provides the same investment opportunities to foreign investors and local investors.

Foreign investors are allowed to sign technical agreements with local investors without disclosing proprietary information. Foreign investors are not required to use domestic content in goods or technology or hire Pakistani nationals, either as laborers or as representatives on the company’s board of directors.

There are no specific performance requirements for foreign entities operating in the country. Similarly, there are no special performance requirements on the basis of origin of the investment. However, onerous requirements exist for foreign citizen board members of Pakistani companies, including additional documents required by the SECP as well as vetting by the Ministry of Interior. Such requirements discourage foreign nationals from becoming board members of Pakistani companies.

There are no specific performance requirements and/or investment incentives.

In the ICT sector, there are currently no requirements for foreign providers to disclose source code or provide access to encryption. However, the Government of Pakistan has plans to introduce regulations requiring such disclosure.

Currently Pakistan does not restrict data transfer outside of the economy or country’s territory except when involving the banking industry. State Bank of Pakistan (SBP) requires financial institutions to have local data storage and any transfer of data outside of Pakistan requires formal approval from SBP.

Currently, Pakistan is in the process of approving a “personal data protection” bill, and in 2020 approved and in 2021 began implementing the “Removal and Blocking of Unlawful Content Rules.” Each requires data localization and requires platforms with more than 500,000 Pakistani users to register with the Pakistan Telecommunication Authority (PTA) and establish a physical office in Pakistan within nine months of the implementation of the rules. Within three months of the local office’s establishment, a person must be appointed for coordination, and a data server system must be set up within 18 months. The rules are also slated to be applied to internet service providers. All companies and providers are instructed to restrict content contrary to the “security, prestige, and defense of the country.”

The government agencies involved are: the State Bank of Pakistan, the Ministry of Information Technology and Telecommunications, and the Pakistan Telecommunication Authority.

Palau

4. Industrial Policies

The Government of Palau does not offer incentives to domestic or foreign investors.

The Free Trade Zone Act of 2003 established the Ngardmau Free Trade Zone Authority. Another “Tax Free Zone” was established in the state of Melekeok, covering a one-mile radius around the Federal capitol building.

Palau does not currently have laws or regulations on domestic storage or localization requirements.

The Palau government requires all investors employing non-resident workers to agree to:

Cover the cost of repatriating non-resident workers to the place hired.

Train one or more citizen workers to perform the work for which the non-resident worker is employed.

This requirement is set and evaluated on a case-by-case basis and is usually included as part of a whole package that also includes investment incentives such as favorable taxation statuses. U.S. Citizens do not require a visa to enter Palau and may be employed in Palau without obtaining a work permit or a visa. They must register as a non-resident worker with the Bureau of Immigration annually.

Panama

4. Industrial Policies

Panama provides Industrial Promotion Certificates (IPCs) to incentivize industrial development in high-value-added sectors. Targeted sectors include research and development, management and quality assurance systems, environmental management, utilities, and human resources. Approved IPCs provide up to 35 percent in tax reimbursements and preferential import tariffs of 3 percent. Panama does not have a practice of issuing guarantees or jointly financing FDI projects.

Law 1 (2017) modified Law 28 (1995) by exempting exports from income tax and exempting from import duty machinery for companies that export 100 percent of their products. Producers that sell any portion of their products in the domestic market pay only a three percent import tariff on machinery and supplies.

Law 41, the Special Regime for the Establishment and Operation of Multinational Company Headquarters (SEM), was enacted in 2007 to encourage multinational investment in Panama. The law focuses on administrative back-office operations, such as payroll, accounting, and other functions. Any company that is licensed under SEM will automatically qualify for MSM.

The GoP enacted Law 159 on Manufacturing Services for Multinational Companies (EMMA) in 2020 as a special incentive law to attract Foreign Direct Investment in manufacturing, remanufacturing, maintenance and product repair, assembly, logistics services, and refurbishing. The EMMA law is a complement to the SEM law and offers tax and employee incentives, reducing import duties and fees for equipment and supplies used in the manufacturing process, to companies that qualify.

In 2012, Panama introduced a tourism incentive law to promote foreign investment in tourism and the hospitality industry. The incentives are available outside the district of Panama to companies registered through the National Tourism Registry of the Panama Tourism Authority (ATP) and provide tax incentives and exemptions on real estate, imported good, construction materials, appliances, furniture, and equipment. Panama further modified the law in 2019 to provide additional tax credits for new projects and extensions on existing projects. These tax credits must be used within ten years from the start of a project.

Law 186 of December 2, 2020, facilitates entrepreneurship through a simplified registration system and tax incentives for entrepreneurs.

Panama has enacted a list of laws that provide attractive incentives for domestic and foreign investment in the energy sector. These laws encourage all-source energy projects such as hydroelectric plants, LNG plants, biofuel and biomass plants, wind, and solar. Some of the incentives include a 5 percent discount on income tax. For biofuel and biomass projects, incentives include a 10-year exemption from income taxes, a total exemption from entry fee costs, and a 10-year exemption from distribution or transmission rights for spot market operations.

Law No. 37 of June 10, 2013, establishes incentives for the construction, operation, and maintenance of solar power plants and/or installations.

Executive Decree No. 45 of June 10, 2009, provides incentives for hydroelectric generation systems and other new renewable and clean sources listed in Law No.45 of August 4, 2004, which establishes incentives for hydroelectric plants and other renewable and clean energy sources, as well as other favorable provisions.

Law No. 44 of April 25, 2011, establishes incentives for the construction and operation of wind power plants for the public electricity sector/service.

Panama is home to the Colon Free Trade Zone, the Panama Pacifico Special Economic Zone, and 18 other “free zones,” (12 active and six in development). The Colon Free Trade Zone has more than 2,500 businesses, the Panama Pacifico Special Economic Zone has more than 345 businesses, and the remaining free zones host 126 companies in total. These zones provide special tax and other incentives for manufacturers, back-office operations, and call centers. Additionally, the Colon Free Zone offers companies preferential tax and duty rates that are levied in exchange for basic user fees and a five percent dividend tax (or two percent of net profits if there are no dividends). Banks and individuals in Panama pay no tax on interest or other income earned outside Panama. No taxes are withheld on savings or fixed time deposits in Panama. Individual depositors do not pay taxes on time deposits. Free zones offer tax-free status, special immigration privileges, and license and customs exemptions to manufacturers who locate within them. Investment incentives offered by the Panamanian government apply equally to Panamanian and foreign investors.

There are no legal performance requirements such as minimum export percentages, significant requirements of local equity interest, or mandatory technology transfers. There are no requirements that host country nationals be chosen to serve in roles of senior management or on boards of directors. There are no established general requirements that foreign investors invest in local companies, purchase goods or services from local vendors, or invest in research and development (R&D) or other facilities. Depending on the sector, companies may be required to have 85-90 percent Panamanian employees. There are exceptions to this policy, but the government must approve these on a case-by-case basis. Fields dominated by strong unions, such as construction, have opposed issuing work permits to foreign laborers and some investors have struggled to fully staff large projects. Visas are available and the procedures to obtain work permits are generally not considered onerous.

As part of its effort to become a hub for finance, logistics, and communications, Panama has endeavored to become a data storage center for companies (see data protection law below). According to the Panamanian Authority for Government Innovation (AIG, http://www.innovacion.gob.pa/noticia/2834 ), most of these firms offer services to banking and telephone companies in Central America and the Caribbean. Panama boasts strong international connectivity, with seven undersea fiber optic cables and an eighth currently under construction.

Panama’s data protection law (Law 81 of 2019) established the principles, rights, obligations, and procedures that regulate the protection of personal data. The National Authority for Transparency and Access to Information (ANTAI) oversees the law’s enforcement, which began in March 2021. For extra-territorial transfer of data, the implementing regulation allows for contractual clauses or adequacy findings. An adequacy finding for the United States is still pending.

In September 2021, AIG issued a resolution requiring government entities with mission-critical or sensitive data in the cloud to transition such data to in-country storage facilities by December 2022. This would have an impact on foreign companies offering cloud services to the public sector in Panama. AIG is developing a data classification scheme to accompany this requirement and clarify which data can be held in data centers outside Panama.

The personal privacy of communications and documents is provided for in the Panamanian Constitution as a fundamental right (Political Constitution, article 29). The Constitution also provides for a right to keep personal data confidential (article 44). The Criminal Code imposes an obligation on businesses to maintain the confidentiality of information stored in databases or elsewhere and establishes several crimes for the misuse of such information (Criminal Code, articles 164, 283, 284, 285, 286). Panama’s electronic commerce legislation also states that providers of electronic document storage must guarantee the protection, reliability, and proper use of information and data stored on behalf of their customers (Law 51, July 22, 2008, article 55).

Papua New Guinea

4. Industrial Policies

Performance requirements/incentives are applied uniformly to both domestic and foreign investors. The investment incentives currently available are designed primarily to encourage the development of industries that are considered desirable for the long-term economic development of Papua New Guinea or specific underdeveloped regions within the country.

A 10-year exemption from tax is available where certain new businesses are established in specified rural development areas. Businesses, resident, or non-resident, engaged in the following activities qualify for this exemption:

  1. Agricultural production of any kind;
  2. Manufacturing of any kind;
  3. Construction;
  4. Transport, storage, and communications;
  5. Real estate;
  6. Business services; and
  7. Provision of accommodation, motels, or hotels.

The following have been specified as rural development areas:

  1. Central province – Goilala;
  2. Enga province – Kandep, Lagalp, Wabag, Wapenamunda;
  3. Gulf province – Kaintiba, Kikori;
  4. Eastern Highlands province – Henganofi, Lufa, Okapa, Wonenave;
  5. Southern Highlands province – Jimi, Tambal;
  6. Madang province – Bogia, Rai Coast, Ramu;
  7. Milne Bay province – Losula, Rabaraba;
  8. Morobe province – Finschaffen, Kabwum, Kaiapit, Menyamya, Mumeng;
  9. East New Britain province – Pomio;
  10. West New Britain province – Kandrian;
  11. East Sepik province – Ambuti, Angoram, Lumi, Maprik;
  12. West Sepik province – Amanab, Nuku, Telefomin; and
  13. Simbu province – Gumine, Karimui.

The Investment Promotion Act contains guarantees that there will be no nationalization or expropriation of foreign investors’ property except in accordance with law, for public purposes defined by law, or in payment of compensation as defined by law.

Accelerated depreciation rates are available for new manufacturing and agricultural plants, generous deductions are available for capital expenditure on land used for primary production, and accelerated deductions are available for mining and petroleum companies. A 10-year exemption from tax is available where certain new businesses are established in specified rural development areas. The exemption does not apply to businesses in areas in which a special mining lease or a petroleum development license is granted.

Businesses that commence exporting qualifying goods manufactured by them in Papua New Guinea are exempt from income tax on the profits derived from those sales for the first three complete years. For the following four years, the profit derived from the excess of export sales over the average export sales of the three previous years is exempt from income tax. The list of qualifying goods includes, among other items: motor vehicles, matches, paint, refined petroleum, soaps, wooden furniture, dairy products, flour, chopsticks, artifacts, clothing and manufactured textiles, and jewelry.

A wage subsidy is payable to new businesses that manufacture new manufactured products. The business will receive a prescribed percentage of the value of the minimum wage paid by the business, multiplied by the number of Papua New Guineans permanently employed by the business.

Eligible products are, broadly, all products listed under division D of the International Standard Classification of All Economic Activities (Third Revision), provided the products are not subject to quota pricing without import pricing or to tariff protection.

Registered foreign companies must file an annual certification with the Registrar of Companies accompanied by audited financial statements. A foreign company must apply for Certification under the Investment Promotion Act 1992 within 14 days of registering. Any foreign company automatically falls under this category and therefore must complete the same process.

However, a company may apply to be exempted from certain requirements. A company which chooses to conduct business through a branch registered in Papua New Guinea can repatriate its profits without being subject to withholding tax. On the other hand, the dividends of a Papua New Guinea incorporated subsidiary may attract dividend withholding tax. A higher rate of income tax is imposed on non-resident companies. If a foreign company merely wishes to have a representative office in Papua New Guinea, it may be exempt from lodging tax returns if it derives no income in Papua New Guinea. The Companies Act adopts similar principles and standards of corporate regulation to those in place in New Zealand. Companies registered in Papua New Guinea must lodge an annual return every year with the Registrar of Companies within six months of the end of its financial year. Currently, the Papua New Guinea government is reviewing its structure.

There are no discriminatory or preferential export and import policies affecting foreign investors, and there are low levels of import taxes.

The government is removing import taxes on electric vehicles, effective in 2022 to support green energy investments; there are no other tax incentives for green investments.

The creation of Special Economic Zones (SEZs) in PNG have been a policy initiative by the past two administrations but continue to lack appropriate legislative framework. The following geographical areas have been designated for SEZs:

  1. Ihu SEZs in Gulf Province
  2. Vanimo Free Trade Zone
  3. Sepik Special Economic Zone
  4. Manus Special Economic Zone
  5. Bana (AROB) SEZ
  6. Agriculture Province in EHP, WHP, Morobe, Sepik and others
  7. Paga Hill Special Tourism Economic Zone, NCD
  8. Nadzab Industrial SEZ
  9. Western Province SEZ
  10. Pacific Marine Industrial Zone (PMIZ)

For each SEZ, the government plans to operate Gold and Regional Value Chain Industries, maintain one-stop shop regimes, and grant fiscal and customs and operational incentives up to ten years. The government is progressing the IHU SEZ, and PMIZ, allocating US $28.5 million for the PMIZ in 2022, and received a loan of US $28.5 million from PRC to develop the IHU SEZ.

All non-citizens seeking employment in PNG must have a valid work permit before they can be hired. The work permit must be granted by the Secretary of the Department of Labor and Industrial Relations (DLIR) in accordance with the Employment of Non-Citizens Act of 2007. It can take weeks or even months to obtain both a work permit and visa for non-citizens to work in Papua New Guinea, and delays are common due to a lengthy bureaucratic clearance process. In the past, the government has used its immigration powers to block visas for personnel coming to Papua New Guinea to fill positions that it believes can be filled by Papua New Guineans.

There are no governmental authority-imposed conditions on permission to invest, nor forced localization imposed on foreign investors.

NICTA (National Information & Communication Technology Authority) Data Integrity Act called CCE (Controlled Customer Equipment) is strictly enforced. Only illegal transmission of state/military data will be charged against the state or military. These are the two Acts that enforce data integrity (Data Interference and System Interference). In any case the fine is an amount not exceeding US $28,500 or 10 years in prison.

Paraguay

4. Industrial Policies

Paraguay grants investors a number of tax breaks under Law 60/90, including exemptions from corporate income tax and value-added tax. Paraguay also has a temporary entry system, which allows duty free admission of capital goods such as machinery, tools, equipment, and vehicles to carry out public and private construction work. The government also allows temporary entry of equipment for scientific research, exhibitions, training or testing, competitive sports, and traveler or tourist items.

In addition to Law 60/90, Paraguay has an industrial parks law (4903/13) that offers several tax breaks and a 50 percent reduction in the cost of industrial patents. Law 4427/12 also provides incentives for the production, development or assembly of high technology goods in the form of tax breaks and import tariff exemptions on inputs and raw materials.

The Paraguay government seeks increased investment in the maquila sector, and Paraguayan law grants investors a number of incentives. The maquila program entitles a company to foreign investment participation of up to 100 percent and to special tax and customs treatment. In addition to tax exemptions, inputs are allowed to enter Paraguay tax free, and up to 10 percent of production is allowed for local consumption after paying import taxes and duties. Companies are also exempted from paying remittance taxes over incomes and dividends. However, Paraguayan maquiladoras must comply with all Paraguayan labor laws. There are few restrictions on the type of product that can be produced under the maquila system and operations are not restricted geographically. Ordinarily, all maquila products are exported.

The government of Paraguay does not offer specific incentives to clean energy investments, however it does publicly support them. Paraguay offers a preferential energy tariff for energy intensive industries through law 7406/11.

Further details of all investment incentives regulations can be found at REDIEX´s website: http://www.rediex.gov.py/leyes-normativas-y-tramites/Foreign Trade Zones/Free Ports/Trade Facilitation 

Paraguayan Law 523/95 (which entered into force in 2002) permits the establishment of free trade zones (FTZs) granting several tax exceptions, including payments of VAT and corporate taxes, to companies operating in the commercial, industry, and services sector. Companies established under this law, which export over 90 percent of their sales in monetary values, must only pay 0.5 percent of their income in sales. As a result of the COVID-19 pandemic, in December 2020, the Ministry of Finance issued a decree to expand the services covered under the FTZ Law, incorporating financial services and companies working in the biotechnology and pharmaceutical sector.

Paraguay has two FTZs in Ciudad del Este – one that operates largely as a manufacturing center and a second that focuses on warehouse storage. Paraguay is a landlocked country with no seaports but has numerous private and public inland river ports. About 80 percent of commercial goods are transported by barge on the Paraguay-Parana river system that connects Paraguay with Buenos Aires, Argentina, and Montevideo, Uruguay. Paraguay has agreements with Uruguay, Argentina, Brazil, and Chile on free trade ports and warehouses for the reception, storage, handling, and trans-shipment of merchandise. Low water levels caused by prolonged drought has made shipping on Paraguay’s waterways increasing difficult, and barges are frequently forced to travel at 50 percent capacity.

Paraguay does not mandate local employment or have excessively onerous visa, residence, work permit or similar requirements inhibiting mobility of foreign investors and their employees. However, the bureaucratic process to comply with these requirements can be lengthy. Voting board members of any company incorporated in Paraguay must have legal residence, which takes a minimum of 90 days to establish, posing a potential obstacle to foreign investors.

Paraguay does not have a “forced localization” policy requiring foreign investors to use domestic content in goods or technology. There are no requirements for maintaining a certain amount of data storage within Paraguay or for foreign IT providers to turn over source code and/or provide access to surveillance. Paraguayan law requires internet service providers to retain IP address for six months for certain commercial transactions.

Under the argument of incentivizing domestic production during the COVID-19 pandemic, on September 10, 2020 the Paraguayan Congress overrode a presidential veto to pass a modification to Paraguay’s Public Contracting Law (4558/11), increasing the preference in government bids to locally produced goods in public procurements open to foreign suppliers from 20 to 40 percent. Foreign firms can bid on tenders deemed “international” and on “national” tenders through the foreign firm’s local agent or representative. Opponents question the constitutionality of the new legislation.

The government continues to make efforts to enhance transparency and accountability, including through the use of an internet-based government procurement system. The country’s National Public Procurement Directorate (DNCP, in Spanish) is generally well regarded, but does not have legal authority to impose sanctions on companies or public entities found to have engaged in procurement irregularities.

Paraguay is not a signatory to the World Trade Organization (WTO) Agreement on Government Procurement.

Peru

4. Industrial Policies

Peru offers foreign and national investors legal and tax stability agreements to stimulate private investment. These agreements guarantee that the statutes on income taxes, remittances, export promotion regimes (such as drawbacks, or refunds of duties), administrative procedures, and labor hiring regimes in effect at the time of the investment contract will remain unchanged for that investment for 10 years. To qualify, an investment must exceed $10 million in the mining and hydrocarbons sectors or $5 million within two years in other sectors. An agreement to acquire more than 50 percent of a state-owned company’s shares in a privatization process may also qualify an investor for a legal or tax stability agreement, provided that the added investment will expand the installed capacity of the company or enhance its technological development. The government does not currently offer any incentives for clean energy investments.

Peru was accepted as a member of the Association of Free Zones of the Americas (AZFA) as well as the World Free Zone Organization (WFZO) in 2019. Peru has nine Special Economic Zones (SEZ): Free Zones in Tacna, Cajamarca, Chimbote; and Special Development Zones (SDZ) in Ilo, Matarani, Paita, Tumbes, Loreto, and Puno (the last three are currently not in operation).

MINCETUR Supreme Decree 005-2019 published in August 2019 implemented regulations for the SDZ of Ilo, Matarani, Paita, and Tumbes. SDZ businesses can perform activities in seven economic sectors: industry, logistics, repair/overhaul, telecommunications, information technology, science, technological research, and development. SDZs enjoy the same economic benefits as the SEZs. The MINCETUR Foreign Trade Facilitation Office oversees Peru’s free trade zones.

Companies can become SEZ users through public auctions. This condition grants access to tax benefits and customs advantages promoting entry, permanence, and exit facilitation procedures for goods. Benefits include:

Taxes

  • Income Tax exemption (rate outside of the SEZ is 29.5 percent)
  • General Sales Tax (IGV) exemption (rate outside of the SEZ is 16 percent)
  • Municipal Promotion Tax exemption (rate outside of the SEZ is 2 percent)
  • Excise Tax (ISC) exemption (rate outside of the SEZ ranges from 2 to 30 percent depending on the product)
  • Ad Valorem tariff exemption when importing products from overseas (rates outside of the SEZ are 0, 6, and 11 percent)
  • Exemption from all central, regional, or municipal government taxes created in the future, except for social security (EsSalud) contributions and fees

Customs

  • Entry of machinery, equipment, raw materials and supplies from abroad is eligible for the suspension of import duties and taxes payments
  • Indefinite permanence of goods within the SEZ, as long as company maintains user status
  • Products manufactured in the SEZ can be exported directly without having to undergo a nationalization customs regime
  • Products manufactured in the SEZ can be entered into national territory under international agreements and conventions
  • Entry of goods into the SEZ is direct and does not require prior storage

Peru adopted the Personal Data Protection Law (Law Number 29733) in 2011, and it went into effect in 2013. A data controller who processes personal data must notify the National Authority for Personal Data Protection (ANPDP), which maintains a public register. Personal data is defined as any information on an individual which identifies or makes him/her identifiable through reasonable means, including: biometric data; data on racial and ethnic origin; political, religious, philosophical or moral opinions or convictions; personal habits; union membership; and information related to health or sexual preference. Unless otherwise exempted by statute, data controllers are generally required to obtain the consent of data subjects for the processing of personal data. Consent must be prior, informed, expressed, and unequivocal. A data controller may transfer personal data to places outside of Peru only if the recipients have adequate protection measures.

Data controllers must adopt technical, organizational, and legal measures to guarantee the security of personal data and avoid their alteration, loss, unauthorized processing or access. Peru’s law does not require any notifications to any data subject or any other entity upon a breach. Peru does not have special regulations related to the processing of the personal data of minors. The ANPDP is responsible for enforcement and can issue administrative sanctions/fines based upon whether the violation is mild, serious, or very serious. The law provides a “principle for availability of recourse for the data subject [i.e., the actual person to which to the identifiable personal data refers],” stating that any data subject must have the administrative and/or jurisdictional channel necessary to claim and enforce their rights when they are violated by the processing of their personal data. There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption.

In January 2020, Peru established the Digital Trust Framework (Urgency Decree 007-2020) which provides for personal data protection and transparency, consumer protection, and digital security. The law established the National Digital Secretariat (SEGDI) under the Prime Minister’s Office as the overall coordinator and governing body for digital security, but it placed data protection and transparency under the Ministry of Justice and Human Rights MINJUS. The order created a national data center as a digital platform to manage, direct, articulate, and supervise the operation, education, promotion, collaboration, and cooperation of data nationwide.

Poland

4. Industrial Policies

Poland’s Plan for Responsible Development identified eight industries for development and investment incentives: aviation, defense, automotive parts manufacturing, ship building, information technology, chemicals, furniture manufacturing, and food processing. More information about the plan can be found at this link: https://www.gov.pl/web/fundusze-regiony/plan-na-rzecz-odpowiedzialnego-rozwoju . Poland encourages energy sector development through its energy policy adopted by the government in February 2021. The policy can be found at: https://www.gov.pl/web/klimat/polityka-energetyczna-polski . On March 29, 2022, the government adopted an update to “Poland’s Energy Policy until 2040” (PEP2040) According to the update, Poland will strengthen its energy sovereignty through faster development of renewable energy sources, including hydroelectric plants, photovoltaics, and offshore windmills. By 2040, these energy sources should account for nearly half of the national electricity production, an increase from 34 percent assumed in the previous plan.  On March 30, 2022, the government also confirmed its intention to loosen the rules for building onshore wind farms. The assumptions can be found here: https://www.gov.pl/web/klimat/zalozenia-do-aktualizacji-polityki-energetycznej-polski-do-2040-r

The policy foresees a primary role for fossil fuels until 2040 as well as strong growth in electricity production. The government will continue to pursue developing nuclear energy and offshore wind power generation, as well as distributed generation. Poland’s National Energy and Climate Plan for years 2021-2030 (NECP PL) developed in line with the EU Regulation on the Governance of the Energy and Climate Action, together with PEP2040, pave the road to the new European Green Deal. Poland may spend approximately $420 billion on the transformation of its energy sector in 2021-2040, according to the energy policy. These investments would include about $230 billion in the fuel and energy sectors and about $90 billion in the generation segment, of which 80 percent will be spent on nuclear energy and renewables investments.A new economic program called the “Polish Deal” includes significant changes to the tax system including incentives to attract capital to Poland. The program is undergoing additional amendments after implementation in January 2022. The program consists of support schemes for enterprises, new investment and development projects, and incentives for innovators, as well as reforms of the healthcare system and social welfare, education, environmental, and energy policies.

Incentives for innovators include the IP Box, tax relief for R&D costs, innovative employers, robotization and prototype development. Other incentives include tax relief for expansion, consolidation, IPO, and CSR activities.

More information on the changes that may affect international business can be found at: