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Albania

4. Industrial Policies

Investment Incentives

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 new 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 2020. 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 EUR five million 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 eight 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. Agritourism facilities are exempt from the infrastructure impact tax.

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 total 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.

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: 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: http://aida.gov.al/en/teda/ .

Foreign Trade Zones/Free Ports/Trade Facilitation

Albania has no functional duty-free import zones, although legislation exists for their creation. The May 2015 amendments to the Law on the Establishment and Operation of 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 Ministry of Finance and Economy has announced two investment opportunities that seek private sector developers to obtain, develop, and operate fully serviced areas located in Koplik (61 hectares) and Spitalle (200 hectares). Interested investors and developers can find more information for the development of TEDAs at the following link: http://aida.gov.al/en/teda/ .

Performance and Data Localization Requirements

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 do not pose an undue burden on potential investors. The February 2020 amendments to the Law on Foreigners abolished the requirement for foreign investors to prove that foreign employees constituted less than 10 percent of the investor’s total workforce before a work permit was granted. U.S. citizens do not need a visa to enter and can stay in the country for up to one year without a residency permit. For longer stays they must apply for a residency permit, which can be valid for up to five years. To work in Albania, foreigners must apply for a work permit or work registration certificate, except for U.S. citizens and citizens from EU member countries, the Schengen area, and the Western Balkans, who are exempted from such requirement and enjoy the same employment rights and benefits as Albanian citizens. The February 2020 amendments exempt from work permit requirements foreign workers needed in jobs necessary to address the damages caused by natural disasters, partly to facilitate recovery from the November 2019 earthquake. The Council of Ministers approves the 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

Investment Incentives

While the government previously required 51 percent Algerian ownership of all investments, the 2020 budget law restricted this requirement to  the hydrocarbons, mining, defense, and pharmaceuticals manufacturing sectors.

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.

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 let 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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.  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.

In 2017, the Algerian government began instituting forced localization in the auto sector.  Regulations issued in December 2017 require companies producing or assembling cars in the country to achieve a local integration rate of at least 15 percent within three years of operation.  The threshold rises to between 40 and 60 percent after a company’s fifth year of operation.  In 2020, the Algerian government announced its intention to increase the baseline local integration for automotive assembly from 15 percent to 35 percent.  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.  As the Algerian government further restricts imports, localization requirements are expected to broaden to other manufacturing industries over the next several years.  For example, a tender launched in 2018 for 150 megawatts of photovoltaic solar energy power plants mandated that bidders be Algerian legal entities.

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

Investment Incentives

Andorra is known for its favorable tax regime, which investors exploit to promote tobacco, alcohol, jewelry, cosmetic, dairy products, among others. In recent years, Andorra 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.

ACTUA provides investment incentives based on their three key priorities:

  • Economic diversification through the development of clusters oriented towards the fields of innovation; health and wellness; education and sport.
  • Attracting direct foreign investors and supporting national companies throughout their internationalization process.
  • Supporting entrepreneurs: promoting collaboration between the public and private sectors and giving support to the development of new business initiatives.

ACTUA provides grants for small and medium size companies to foster competitiveness and facilitate their internationalization. The ACTUA Tech Foundation was created in 2015, in collaboration with the Media Lab of the Massachusetts Institute of Technology, with the aim of employing Andorra’s unique economy as a “living lab” to promote innovation. Andorra, thanks to its size, recent liberalizing legislation, relative affluence, and its 8 million visitors per year offers ideal conditions to test this technology.

The Andorran Chamber of Commerce, Industry, and Services of Andorra (www.ccis.ad) is a public body that aims to promote and strengthen Andorra’s financial and business activity as well as supply services to foreign companies. The Chamber’s activities include the creation of a census of commercial, industrial and service activities; the protection of the general interests of commerce, industry, and services; promoting fair competition; and, issuing certificates of origin and other commercial documents.

The Andorran Business Confederation (CEA) provides support to national companies to navigate within the new legal, labor and fiscal national framework as well as it facilitates companies’ international projects. CEA also works to foster international investment into the country. With its Iwand project, it provides information about Andorra’s economic and fiscal environment, which makes the country attractive to business opportunities of all kinds (www.cea.ad ).

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

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

The Government does not follow a “forced localization” policy.

Angola

4. Industrial Policies

Investment Incentives

The NPIL seeks to award incentives to attract and retain investment. Investment incentives in the NPIL include:

  • Eliminates the minimum 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. There is no more limit to invest and qualify for incentives;
  • Eliminates the obligation 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. Under the new law, investors will decide on their capital structure and origin.
  • Grants foreign investors “the right and guarantee to transfer abroad” dividends or distributed profits, the proceeds of the liquidation of its investments, capital gains, the proceeds of indemnities and royalties, or other income from remuneration of indirect investments related to technology transfer after proof of implementation of the project and payment of all tax dues.

Investment incentives are granted by the AIPEX, the State’s investment agency, as opposed to by the president, as mandated in the 2015 investment law. Companies need to apply for such incentives when submitting an investment application to the newly created AIPEX and the relevant ministry. The NPIL 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 3-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.

  1. The State guarantees “non-public interference in the management of private companies” and “non-cancellation of licenses without administrative or judicial processes.”
  2. The State provides a new and simplified procedure for the approval of investment projects, along with the adoption of measures aimed at accelerating the contractual process. It also provides special rights projects (undefined), including easier access to visas for investors and priority in the repatriation of dividends, and capital.

Note: Angola is a signatory to the Agreement on Trade-Related Investment Measures (TRIMs) applicable to foreign investment.

Foreign Trade Zones/Free Ports/Trade Facilitation

Angola is a signatory to SADC but not a member of the SADC Free Trade Zone. Angola is analyzing and revising its tariff schedule to accommodate beneficial adjustments in regional trade under the SADC Free Trade Area (SFTA).

Under the NPIL, Angola is divided into three economic zones, zone A through C. Zone A offers a three-year tax exemption for capital tax and a reduction in the tax burden by 25-50 percent; Zone B a three to six-year tax exemption for capital tax with a reduction in the tax burden by 50-60 percent; and, for Zone C, an eight year tax exemption for capital tax with a with a 60-70 percent reduction in the tax burden.

Porto Caio is under construction in the province of Cabinda. The port is designated as a Free Trade Zone (FTZ) and is slated to provide numerous opportunities for warehousing, distribution, storage, lay down area and development of oil and gas related activity. The Port will also serve as a new major gateway to international markets from the west coast of Angola, and the development will facilitate exports and render them more cost-effective for companies.

Although the government has not yet established regional or international free trade zones, on March 21, 2018 the government signed an agreement to join the AfCFTA. The AfCFTA is the result of the African Free Trade Agreement among all 55 members of the African Union, and will be the largest FTZ in the world since the emergence of the WTO. The agreement’s implementation could create a market of 1.2 billion consumers. The UN Economic Commission for Africa (UNECA) has estimated a 52 percent increase in intra-African trade by 2022. Currently, intra-African trade is only 16 percent, with intra-Latin American at 19 percent, intra-Asian at 51 percent, and intra-European at 70 percent.

Performance and Data Localization Requirements

Angola widely observes a policy to restrict the number of foreign workers and the duration of their employment. The policy aims to promote local workforce recruitment and progression. Decree 6/01, of 2001 establishes that expatriate workers can only be recruited if the Labor Inspectorate gets confirmation from the employer that no Angolan personnel duly qualified to perform the job required is available in the local market. The same decree limits foreign employment to 36 months and temporary employment less than 90 days on the explicit authorization of the Labor Inspectorate. Employers must register an employment contract entered into with a foreign national within 30 days at the employment center. The registration includes submission of a copy of the job description approved by the Labor Inspectorate during registration of the employment contract and the payment of a registration fee of 5 percent of the gross salary plus all the benefits.

Companies must deregister upon termination of the contract. Deregistration equally applies to administration personnel and to the board of directors. Foreign employees require work permits, and no employment is authorized on tourist visas. The visa application procedure, though improved, remains complex, slow and inconsistent. Processes and requirements vary according to the labor market situation at the time of application, the type of work permit being applied for, the nationality of the applicant, the country of application, and personal circumstances of the assignee and any family dependents.

Through the NPIL Angola created the investor visa, granted by the immigration authority to foreign investors, representatives, or attorneys of an investing company, to carry out an approved investment proposal. It allows for multiple entries, and a stay of two years renewable for the same period. The NPIL liberalizes foreign investment, few instances translate to “forced localization,” and enforcement procedures for performance requirements are strictly observed in the labor, immigration, and petroleum sectors only. International oil companies are working with the government on a new local-content initiative that will establish more explicit sourcing requirements for the petroleum sector in staffing and material. Specific to the oil sector, because of the significance it represents to the Angolan economy, the Petroleum Activities Law requires Sonangol and its associates to acquire materials, equipment, machinery, and consumer goods produced in Angola.

Currently, local content regulations offer only guidelines that are loosely enforced, and companies lack clarity as to how much is enough to satisfy the Angolan government. While this situation may make it easier for foreign companies to comply with local content regulations, this lack of specificity challenges companies in 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 NPIL is strongly encouraged.

Data storage is not applicable; however, the Institute for Communications of Angola (INACOM) oversees and regulates data in liaison with the Ministry of Telecommunications. Regulations around data management including encryption are still at nascent stages.

Antigua and Barbuda

4. Industrial Policies

Investment Incentives

In 2018, the government of Antigua and Barbuda made a policy decision to stop granting waivers for property taxes. Foreign investors can still access other concessions, including the manufacturers’ incentive that grants exemption from the payment of import duties, revenue recovery charge, and sales tax on raw materials, packaging materials, tools, equipment, and machinery.

The government of Antigua and Barbuda has been proactively pursuing public-private partnerships (PPPs) 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

The government does not mandate employment of its citizens by foreign investors. However, the provisions of the Labor Code outline requirements for acquiring a work permit and prohibit anyone who is not a citizen of Antigua and Barbuda (or the OECS) to work without a work permit. In practice, work permits may be granted to senior managers if no qualified Antiguan nationals are available for the post. There are no excessively onerous visa or residency requirements.

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

Investment Incentives

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

The Argentine government offers a number of investment prom otion 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  http://www.inversionycomercio.org.ar/uploads/banco/archivos/1566396570-Agosto_2019-(VF).pdf , 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 

Due to the Covid-19 pandemic, the Ministry of Productive Development launched several financial assistance programs for small and medium-sized enterprises (SMEs) affected by the pandemic.

More information can be found at: https://www.argentina.gob.ar/produccion/medidas-pymes-covid .

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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 an 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 an FTZ or re-export from an 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.

Performance and Data Localization Requirements

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 provincial residents. 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

Investment Incentives

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. The government regularly signs memoranda of understanding or agreement with investors on the development of specific projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

In June 2011, Armenia adopted a Law on Free Economic Zones (FEZ), amended in October 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 August 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.

Performance and Data Localization Requirements

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

Investment Incentives

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 AusIndustry (Government agency) and the Australian Taxation Office (ATO).  The Australian Government typically does not offer guarantees on, or jointly finance projects with, foreign investors.

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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); to protect retained data through encryption; and to prevent unauthorized interference and access.  The Bill limits the range of agencies that are able to access telecommunications data and stored communications, 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.

The Government introduced legislation to Parliament in 2018 that would require encrypted messaging services to provide decrypted communications to the Government for selected national security purposes (the Telecommunications and Other Legislation Amendment (Assistance and Access) Act 2018).  This legislation is subject to review by a parliamentary committee at the time of writing.  Companies relying on secure encryption technologies have expressed concern about the impacts of this legislation on the security of the products and the lack of sufficient judicial oversight in reviewing government requests for access to encrypted data.

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.  A current government enquiry is investigating the competition impacts of digital platforms, including the market implications of the algorithms used by these platforms and options for mandating the disclosure of these algorithms to regulators.

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

Investment Incentives

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, use of cutting-edge technology, improving regional infrastructure, strengthening SMEs, revitalization of a community, and promoting startups.  Tax allowances for advanced employee training and R&D expenditures are also available, as are financing options for start-ups and cash grants.  The Austrian Labor Market Service (AMS) offers grants for job creation and personnel development training.

Austria offers financial and tax incentives within EU regional co-funding schemes to firms undertaking projects in economically underdeveloped and rural areas. In the 2014-2020 funding period, roughly EUR 536 million (USD 638 million) from the European Regional Development Fund (ERDF) is available to Austria for strengthening investments in growth and jobs.

Austria’s Wirtschaftsservice (AWS) is the governmental institution that provides financial incentives for businesses.  In April 2020, the government established a EUR 100 million (USD 112 million) COVID-19 assistance package for startups, where it matches one-to-one private (also foreign) investments in Austrian startups, and a EUR 50 million  (USD 56 million) venture capital fund (also open for foreign investors), where it guarantees 50% of the fund’s investment.

Additional information on targeted investment incentives is available at https://www.aws.at/en/ . More detailed information on investment incentives in English language is available on the ABA website (see chapter 2) at http://investinaustria.at/en/ 

Various government agencies in Austria offer incentives for research and development (R&D) activities (up to 50 percent of the investment amount).  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). The latter also provides guarantees of up to €25 million over 5 to 10 years for investments in Austria, with a focus on small and medium-sized companies.

Foreign investors in Austria can also benefit from government support measures designed for companies affected by COVID-19, including:  a hardship fund for sole proprietorships; a COVID-19 assistance fund which provides EUR 15 billion (USD$16.8 billion) in loan guarantees; banking measures to increase liquidity; and a short-time work (kurzarbeit) program which allows staff working hours to be reduced by up to 90%, with the government paying up to 90% of the salary cost. More information can be found here: https://investinaustria.at/en/blog/2020/03/covid-19-support-measures-companies.php#vier 

Foreign Trade Zones/Free Ports/Trade Facilitation

Not applicable.

Performance and Data Localization Requirements

If investors want to employ foreign workers from outside the EU in Austria, they need to apply for a work permit with the Austrian Labor Service (AMS).  The AMS only grants that permission if there is no comparable person in the pool of registered unemployed persons in Austria.  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 (such as qualified labor and registered nurses), 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 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 stay 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 2020: at least EUR 63,672 (USD 71,313); 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, in order 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 October 2019, the DPA imposed a fine of EUR 18 million (USD 20.2 million) on Austria’s postal service for illegal use of customer data, which included collecting and selling data on party affiliations.  The postal service was ordered to delete the data concerned.

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

Investment Incentives

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/diversification effort.  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.

Foreign Trade Zones/Free Ports/Trade Facilitation

A government decree established a free trade zone (FTZ) 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 Alat FTZ in June 2018.  The law exempts all businesses in the FTZ from taxes and customs; charges the FTZ’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 FTA.  While the legal framework is in place, implementing regulations are still pending, and the FTZ is not operational.

The Ministry of Transport, Communications, and High Technologies 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.

Performance and Data Localization Requirements

The Azerbaijani government does not mandate local employment, although some energy sector 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, or otherwise invest in Azerbaijan in order to maintain or expand cooperation.

Azerbaijan does not have any data localization requirements.

Bahamas

4. Industrial Policies

Investment Incentives

Tax relief is the most significant investment incentive in The Bahamas. The government does not impose taxes on income, estates, or inheritances in the country. Other incentives for investment include waivers on import duties, property tax abatement, and, in some cases, land grants or extended leases for private development at below-market rates. Certain incentives are negotiated directly with the BIA and require the approval of the NEC. In some instances, terms of the incentives are outlined in a Heads of Agreement and the size of the concessions will vary depending on the scale of a project.

Other investment incentives are outlined in concessionary legislation such as the Hotels Encouragement Act, the Bahamas Vacation Plan and Timeshare Act, the Agricultural Manufacturers Act, the Family Islands Development Encouragement Act, the Industries Encouragement Act, the Tariff Act, the International Persons Landholding Act, the Hawksbill Creek Agreement, Grand Bahama Act and the Commercial Enterprises Act. BIA either administers respective concessionary legislation or acts as the intermediary between the foreign investor and responsible government Ministry or designated authority. Further information on investment incentives is available at http://www.bahamas.gov.bs .

Foreign Trade Zones/Free Ports/Trade Facilitation

The city of Freeport on the island of Grand Bahama is a 233 square mile Free Trade Zone. The Hawksbill Creek Agreement (1955) between the Bahamian government and the Grand Bahama Port Authority guarantees that the “special economic zone” can continue to exist until 2054. Businesses operating in Freeport are exempt from most central government taxes (real property, excise, import, and business taxes) and subject to licensing by the Grand Bahama Port Authority. The Bahamian government has made several efforts to regulate business activities and extract tax revenues from the free zone. Most efforts have been litigated to the Port’s benefit and the FNM administration repealed legislation that differentiated between local and foreign licensees within the Port.

In the aftermath of Hurricane Dorian in September 2019, both Abaco and Grand Bahama were declared Special Economic Recovery Zones (SERZ), which allows residents and businesses to benefit from several tax exemptions and incentives for a period of three (3) years. Features of the SERZ include:

  1. Duty-free imports of all materials, fixtures, furniture, vehicles, and equipment for approved commercial and residential construction and rehabilitation efforts;
  2. Waived Business License fees for all operations within the SERZ for new and existing businesses that return their employment count to at least 60% of its pre-Dorian level by December 2020;
  3. Waived Real Property Tax on eligible properties that are reconstructed, restored or otherwise inhabitable by October 2020;
  4. VAT credit of up to 50% on sale of qualifying real property; $10.0 million loan guarantee and equity financing program for Bahamian SMEs to secure financing for rebuilding and restarting; An extension of the provisional Business License program to allow fast and efficient startups; and
  5. The creation of a One-Stop-Shop for business assistance in both Abaco and Grand Bahama to aid with the facilitation of regulatory requirements within five working days

In late October 2019, the government announced Abaco and Grand Bahama would be VAT-free zones until June 2020. Both residents and businesses on these islands are exempt from paying VAT on various items including, but not limited to, water, fruit and vegetable juice, clothes, shoes, unprepared food of all types, cleaning supplies, household furniture, tents, air-conditioning units, electrical generators, and office supplies.

Performance and Data Localization Requirements

The Bahamas maintains few formal performance requirements for investments. During the approvals process, an investor provides proof of adequate and legitimate sources of funding and, depending on the type of investment, produces economic and environmental impact assessments. The government negotiates requirements on a project-by-project basis, and, particularly in the case of larger developments, writes a “heads of agreement” between the government and the investor. These agreements also include government obligations to the investor. There is no official mandate for hiring local personnel, though many heads of agreement stipulate the proportion of workers who must be Bahamian.

There is no policy of forced localization or a legal requirement for technology transfers, but there is official encouragement to direct benefits to local producers and the transfer of skills to the local labor market. This engagement is a part of the negotiations with the government and it is not uncommon for an investor to gain greater concessions where there is a direct benefit to local businesses, job creation, or an investment that supports the transfer of skills and technology.

The government negotiates work permits, but generally facilitates them for key employees, as part of the investment approvals process, and particularly under the Commercial Enterprises Act. For non-essential services, the Bahamian government requires that investors document efforts to recruit local Bahamians as part of their applications for work permits, but the law does not stipulate an exact percentage. Investors in second homes can apply for permanent residency and can benefit from expedited approval for investments that exceed $500,000. Fees for work permits do not cover the administrative costs, and the government collects them as a revenue measure. Depending on the category, work permits can cost up to $15,000 annually and fees can be accessed via www.immigration.gov.bs .

Bahrain

4. Industrial Policies

Investment Incentives

The GOB offers a variety of incentives to attract FDI. The Bahrain Logistics Zone, Bahrain Economic Development Board (EDB), Bahrain Development Bank (BDB), Bahrain International Investment Park (BIIP), and Tamkeen all 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 Government of Bahrain has developed two main industrial zones, one to the north of Sitra and the other in Hidd. The Hidd location, known as the Bahrain International Investment Park (BIIP), is adjacent to a logistics zone, known as the Bahrain Logistics Zone. Foreign-owned firms have the same investment opportunities in these zones as Bahraini companies.

Bahrain’s Ministry of Industry, Commerce and Tourism (MoICT) operates the 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.

A 1999 law requires that investors in industrial or industry-related zones 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 the MoICT.

Performance and Data Localization Requirements

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 their Bahrainization rate, which differs based on the sector of the economy in which they work, or use a calculator available at http://lmra.bh/portal/en/page/show/193 . The applicable Bahrainization rate s are mandatory across the board in the company structure, applying equally to senior management and line workers. Per Cabinet Resolution Number 27 of 2016, LMRA announced that companies that are unable to comply with the Bahrainization rates would only be eligible to apply for new work permits and sponsorship transfers by paying an additional annual fee of BD 500 (roughly USD 1,329) per non-Bahraini worker. LMRA may apply fines to companies that do not comply with Bahrainization requirements.

The GOB issued Law 1/2019 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 a multiple-entry visa that lasts for five years, if required.

Bahrain has a liberal approach to foreign investment and actively seeks to attract foreign investors and businesses; no product localization is forced 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 Bilateral Investment Treaty (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 Labour and Social Development, LMRA and the MoICT supervise companies operating in Bahrain on a non-discriminatory basis.

The Central Bank of Bahrain 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

Investment Incentives

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 graduated tax exemption 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/investor_details/incentives-facilities

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

Thrust sectors subject to tax exemption 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, petro-chemicals, 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 graduated tax exemption from 90 percent to 20 percent over a period of 10 years.

Physical infrastructure projects eligible for exemptions include: deep sea ports, elevated expressways, road overpasses, toll road 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 (COD) after January 1, 2015 are granted a 100 percent tax exemption for 5 years, a 50 percent exemption for years 6-8, and a 25 percent exemption for years 9-10. For coal-fired IPPs contracting with the GOB before June 30, 2020 and COD before June 30, 2023, 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 that only export, import duties are waived for imports of capital machinery and spare parts. For companies that primarily export (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.

Special incentives are provided to encourage non-resident Bangladeshis to invest in the country. Incentives include the ability to buy newly-issued shares and debentures in Bangladeshi companies. A quota of 10 percent of primary shares has been fixed for non-resident Bangladeshis. Furthermore, 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 the GOB. Several companies have reported instances of infrastructure guarantees (ranging from electricity to gas connections) not being fully delivered or tax exemptions being delayed, either temporarily or indefinitely. These challenges are not specific to U.S. or foreign companies and reflect broader challenges in the business environment,

Foreign Trade Zones/Free Ports/Trade Facilitation

Under the Bangladesh Export Processing Zones Authority Act of 1980, the government established an 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.

Investments that are wholly foreign-owned, joint ventures, and wholly Bangladeshi-owned companies are all permitted to operate and enjoy equal treatment in the EPZs. Approximately one dozen U.S. firms – mostly textile producers – are currently operating in Bangladesh EPZs.

In 2010, Bangladesh enacted the Special Economic Zone Act that allows for the creation of privately owned SEZs that can 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.

Performance and Data Localization Requirements

Performance Requirements

BIDA has set restrictions for the employment of foreign nationals and the issuance of work permits as follows:

Nationals of countries recognized by Bangladesh are eligible for employment consideration;

Expatriate personnel will only be considered for employment in enterprises duly registered with the appropriate regulatory authority;

Employment of foreign nationals is generally limited to positions for which qualified local workers are unavailable;

Persons below 18 years of age are not eligible for employment;

The board of directors of the employing company must issue a resolution for each offer or extension of employment;

The percentage of foreign employees should not exceed 5% in industrial sectors and 20% in commercial sectors, including among senior management positions;

Initial employment of any foreign national is for a term of two years, which may be extended based on merit; and

The Ministry of Home Affairs will issue necessary security clearance certificates.

In response to the high number of expatriate workers in the ready-made garment industry, BIDA has issued informal guidance encouraging industrial units to refrain from hiring additional semi-skilled foreign experts and workers. Overall, the government looks favorably on investments that employ significant numbers of local workers and/or provide training and transfers of technical skills.

The GOB does not formally mandate that investors use domestic content in goods or technology. However, companies bidding on government procurement tenders are often informally encouraged to have a local partner and to produce or assemble a percentage of their products in country.

According to a legal overview by the Telenor Group, for reasons of national security or in times of emergency, several regulations and amendments, including the Bangladesh Telecommunication Regulatory Act, 2001 (the “BTRA”), Information and Communication Technology Act 2006 (the “ICT Act”), and the Telegraph Act 1885 (the “1885 Act”), grant law enforcement and intelligence agencies legal authority to lawfully seek disclosure of communications data and request censorship of communications. A draft Digital Security Act of 2016 (the “Digital Security Act”) was adopted by Parliament in October 2018.

On the grounds of national security and maintaining public order, the GOB can authorize relevant government authorities (intelligence agencies, national security agencies, investigation agencies, or any officer of any law enforcement agency) to suspend or prohibit the transmission of any data or any voice call and record or collect user information relating to any subscriber to a telecommunications service.

Under section 30 of the ICT Act, the GOB, through the ICT Controller, may access any computer system, any apparatus, data, or any other material connected with a computer system, for the purpose of searching for and obtaining any such information or data. The ICT Controller may, by order, direct any person in charge of, or otherwise concerned with the operation of a computer system, data apparatus, or material, to provide reasonable technical and other assistance as may be considered necessary. Under section 46 of the ICT Act, the ICT Controller can also direct any government agency to intercept any information transmitted through any computer resource, and may order any subscriber or any person in charge of computer resources to provide all necessary assistance to decrypt relevant information.

There is no direct reference in the BTRA to the storage of metadata. Under the broad powers granted to the BTRA, however, the GOB, on the grounds of national security and public order, may require telecommunications operators to keep records relating to the communications of a specific user. Telecommunications operators are also required to provide any metadata as evidence if ordered to do so by any civil court.

The ICT Controller enforces the ICT Act and the Bangladesh Telecommunication Regulatory Commission (BTRC) enforces the BTRA. The Ministry of Home Affairs grants approval for use of powers given under the BTRA. The ICT Act also established a Cyber Tribunal to adjudicate cases. The Digital Security Act of 2018 created a Digital Security Agency empowered to monitor and supervise digital content. Also under the Digital Security Act, for reasons of national security or maintenance of public order, the Director General (DG) of the DSA is authorized to block communications and to require that service providers facilitate the interception, monitoring, and decryption of a computer or other data source.

The Bangladesh Road Transport Authority’s (BRTA) Ride-sharing Service Guideline 2017 came into force on March 8, 2018. The new regulations included requirements that ride sharing companies keep data servers within Bangladesh.

Barbados

4. Industrial Policies

Investment Incentives

In 2019, Barbados repealed its Fiscal Incentives Act, bringing the country into conformity with its obligations under the WTO and, in particular, the Agreement on Subsidies and Countervailing Measures.  Manufacturers may still benefit from some concessions.  For further information, please contact 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 expenditure 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 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.

In response to concerns by the OECD and the European Union’s Tax Code of Conduct Group, the government of Barbados has reformed its international business sector regime by harmonizing the legislative and tax frameworks for domestic and international companies.  Companies conducting international business may operate with a tax rate from 1 to 5.50 percent.  Companies exporting 100 percent of their services or products can apply for a foreign currency permit, affording them similar benefits previously enjoyed by international business companies and international societies with restricted responsibility.  For fiscal years commencing on or after January 1, 2019, all corporate entities will be taxed on the sliding scale shown:

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

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

Foreign Trade Zones/Free Ports/Trade Facilitation

There are currently no foreign trade zones or free ports in Barbados.

Performance and Data Localization Requirements

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 the country, 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.

Barbados does not require that locals own shares of a foreign investor’s enterprise, but 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.  However, investors, particularly within the hospitality industry, are encouraged to use local products wherever possible.

Non-nationals, including all managerial and technical staff (but not nationals of CARICOM member states) seeking to work in Barbados must apply for work permits.  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: www.immigration.gov.bb/pages/WorkPermit.aspx .

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 turn over keys for encryption).

As a member of the WTO, Barbados is party to the Agreement to the Trade Related Investment Measures.  The government strongly encourages investments that will create jobs and increase exports and foreign exchange earnings.  Barbados does not require participation by nationals or by the government in foreign investment projects.  Barbados encourages local sourcing but does not require enterprises to purchase a fixed percentage of goods from local sources.  Foreign investors receive the same treatment as Barbadians.

Belarus

4. Industrial Policies

Investment Incentives

According to the GOB’s Strategy for Attracting FDI, priority sectors include pharmaceuticals; biotechnology; nanotechnologies and nanomaterials; metallurgy; mechanical engineering industry; production of machines, electrical equipment, home appliances and electronics; transport and related infrastructure; agriculture and food industry; information and communication technologies; creation and development of logistics systems; and tourism. NAIP maintains a database of investment proposals at: https://map.investinbelarus.by/en/investbase/offers/ .

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:

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 October 2005, the President of Belarus signed the edict that established uniform rules for all FEZs. The list of main tax benefits for FEZ residents was revised in December 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-Raton: http://www.gomelraton.com/en/ 
FEZ Vitebsk: http://www.fez-vitebsk.com/en/ 
FEZ GrondoInvest: https://grodnoinvest.by/en/ 
FEZ Brest: http://fezbrest.com/en/ 
FEZ Mogilev: http://www.fezmogilev.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 connects Moscow to Berlin. Great Stone resident companies also have access to Lithuania’s Klaipeda seaport on the Baltic Sea.  According to a master plan approved in 2013, Great Stone will 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; or 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 2017, 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.

For more information on Great Stone, please visit: https://industrialpark.by/en/home.html 

Created in 2005 to foster development of the IT and software development industry, the High Technology Park (Hi-Tech Park) 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.

HTP provides residents 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 nine percent for employees and five percent for foreign entities.

Foreign nationals who are hired on contract by an HTP resident company, or 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 a 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.

Government agencies are not allowed to inspect the operations of HTP residents without prior consent of the HTP Administration.

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

Small and medium-sized cities/town and rural areas in Belarus are defined by a 2012 presidential decree as settlements with populations under 60,000. Individual entrepreneurs and legal entities who work in rural areas, defined as settlements of less than 2,000, 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.

Performance and Data Localization Requirements

The host government 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 when it deems it appropriate.  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.

Belgium

4. Industrial Policies

Investment Incentives

Since the law of August 1980 on regional devolution in Belgium, investment incentives and subsidies have been the responsibility of Belgian’s three regions: Brussels, Flanders, and Wallonia. 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 January 2016, the European Commission ordered Belgium to reclaim up to USD 900 million in tax breaks from 36 companies (12 of whom are U.S. companies) going as far back as 2004. The Belgian Government had given these breaks to companies through a series of one-off fiscal rulings. The scheme had reduced the corporate tax base of the companies by between 50% and 90% to discount for excess profits that allegedly resulted from being part of a multinational group. However, in a February 14, 2019 ruling, the EU General Court decided that the excess profit ruling was not a State-aid scheme. Observers note that the ruling is based on a procedural defect from the European Commission, and highlight that the General Court did not per se validate the excess profit ruling. Belgium legally challenged the EC decision and won, but the EC has appealed the ruling.

In their investment policies, the regional governments emphasize innovation promotion, research and development, energy savings, environmental protection, exports, and most of all, employment. 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 established a foreign investment tax unit in 2000 to provide assistance and to make the tax administration more “user friendly” to foreign investors.

It is permitted for companies established in Belgium, foreign or domestic, to deduct from their taxable profits a percentage of their adjusted net assets linked to the rate of the Belgian long-term state bond. This permits companies to deduct the “notional” interest rate that would have been paid on their locally invested capital had it been borrowed at a rate of interest equal to the current rate the Belgian government pays on its 10-year bonds. This amount is deducted from profits, thus lowering nominal Belgian corporate taxes. Even though this system was made slightly less attractive in the recent past, it remains an important tool to stimulate investment in Belgium. More information about this system can be requested at:

More information about this system can be requested at:

Federal Public Service Finance –
Foreign Investment Cell
Parliament Corner, Wetstraat 24 B-1000 Brussel, België
Tel: 02 579 38 66 –
Fax: +32 257 951 12
e-mail: taxinvest@minfin.fed.be

Web: http://taxinvest.belgium.be 

Foreign Trade Zones/Free Ports/Trade Facilitation

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 and Data Localization Requirements

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, which were reintroduced under Prime Minister Verhofstadt in 2006. 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. At this time, there is no forced localization, but the European Parliament is currently considering legislative steps in that direction.

Belize

4. Industrial Policies       

Investment Incentives

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 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.

The Government of Belize enacted the Designated Processing Areas Act in 2018 thereby amending the incentive programs to export processing areas.  It again made amendments to incentives programs under the Fiscal Incentives Act, the Free Zones Act, the International Business Companies Act and the Retired Persons Incentives Act in 2019.  Investors seeking to take advantage of these programs should be aware of these developments when discussing investment concessions.

In exceptional circumstances, the current administration issues government guarantees from development institutions.  While government policies support public private partnership, there are no recent examples of joint financing of foreign direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 quality for various tax exemptions.  These may include exemptions from Custom and Excise duties as well as from taxes on imported goods, namely the General Sales Tax, the Environmental Tax, and the Revenue Replacement Duties.  Similarly, property and land tax may be waived on the designated area.  In addition, 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 for sale 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 amends 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 now limits the activities allowed in CFZs to the following: services, trade and investment activities such as a commercial office, warehouse, manufacturing, tourism, temporary hotel accommodation within defined areas for guests and employees, and related international services or other professional or related activities.  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 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 10 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.

Performance and Data Localization Requirements

The Government of Belize does not mandate local employment.  Several 2019 legislative amendments however, mandate companies to maintain an office, have economic presence, and maintain qualified personnel in Belize.  These provisions are included in the International Business Companies and the Economic Substance Act.  Visa, residency, work permit, or similar requirements do not inhibit the mobility of foreign investors and their employees.  All visitors must have a valid passport to enter the country, but Americans do not require visas for up to 30 days.  Any visit exceeding 30 days will require a visa and an extension to remain in Belize obtained from the Immigration Department.  Residency and work permit applications are managed by the Departments of Immigration and Labour, respectively and are frequently subject to systematic delays.

The Central Bank of Belize imposes some conditions on investments.  These conditions include Central Bank’s approval of financial transactions concerning dealings in gold and foreign currency; financial transactions between residents and non-residents involving exports and imports; transactions between residents and non-residents involving the purchase, sale, and transfer of property and shares; the borrowing and lending of funds; and the holding of certain types of bank accounts, including foreign currency accounts.

Domestic and foreign investors seeking to access incentives offered under the various incentives programs must comply with the conditions and objectives set out in the respective regimes, including performance requirements.    Investments that have been approved for incentives generally report to the authorizing agency, namely BELTRAIDE or the Investment Ministry, 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 USD $150,000 and the Small and Medium Enterprise (SME) program for investments of less than USD $150,000.  The length and extent of a development concession are determined by several factors, including: (a) the extent of local value added; (b) the projected profitability of the enterprise; (c) foreign exchange earnings or savings; (d) transfer of skills and technology; and (e) new employment opportunities.

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, with the exception of 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 overseas this program designed to benefit retired persons over 45 years of age.  To qualify, applicants need proof of income not less than USD $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.  All income generated outside of Belize is also free of taxes.  The Act was amended in 2019 denying an individual benefiting under the program to engage in employment, own a business or invest in Belize. 

The Government of Belize is currently working on legislation for Cybercrime, data protection and internet regulation for the IT Sector.  However, in the banking sector, electronic transactions are regulated under the Electronic Evidence Act and the Electronic Transaction Act.

Benin

4. Industrial Policies

Investment Incentives

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Investment Code allows for the creation of SEZs and establishes incentives such as tax reductions for investors. There are currently three SEZs in Benin, but only one, located in southeastern Benin, is active. SEZ zone 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.

Performance and Data Localization Requirements

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. 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

Investment Incentives

In an effort to attract more investment, the government enacted an investment law in 2014, which says that 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.  Also, 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 are 15 years in duration and 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.

Performance and Data Localization Requirements

Bolivian labor law requires businesses to limit foreign employees to 15 percent of their total work force and requires that such foreign hires be part of the 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 percent and 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 aggressively 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

Investment Incentives

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 state.  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 that 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 interest payable for untimely paid 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 are 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 early 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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. 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 manufactured goods leaving the free zone within the period of 12 months.

Performance and Data Localization Requirements

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 

Investment Incentives

Botswana has several mechanisms in place to attract FDI.  BITC assists local and foreign investors.  BITC is responsible for promoting FDI, investor aftercare, and the promotion of locally manufactured goods in export markets.  It assists investors with company registration, land acquisition, factory shells, utility connections, and work and residence permits for essential staff.  Investors’ requests for support from BITC and other agencies are evaluated based on the extent to which the proposed project assists in the GoB’s diversification efforts, contributes to the growth of priority sectors, and provides 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 offers a relatively low tax rate of 22 percent on corporate taxable income and 7.5 percent withholding tax on all dividends distributed.  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 be beneficial to 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).

Foreign Trade Zones/Free Ports/Trade Facilitation

Parliament established a new parastatal organization, the Special Economic Zones Authority (SEZA), with the mandate to develop and operate special economic zones around the country.  It has earmarked five geographic areas with a total of eight zones, though they are not yet fully operational.  In 2015, Parliament approved a Special Economic Zones (SEZ) law to streamline investment in sector-targeted geographic areas in the country 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 Special Economic Zones Act is available for sale in hard copy at the GoB bookshop.  SEZA has prioritized four SEZs—Lobatse (leather park), Gaborone Fairgrounds (Financial Services), Gaborone Sir Seretse Khama Airport (Diamond and Logistics) and Pandamatenga (Agriculture)—and is actively recruiting investors, private developers, and manufacturers.  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 and Data Localization Requirements

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.

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 as one of the foremost business constraints in Botswana. However, since President Masisi assumed power in April 2018, GoB reports suggest permits for foreign workers have increased with approval rates in excess of 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.  The majority of GoB loans and grants are designed specifically for citizen-owned contracting firms or for small enterprises and are therefore not available to foreign investors.

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 program to give locally based small companies a 15 percent preferential price margin in GoB procurement, with mid-sized companies receiving 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 purchasing 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 and the GoB’s PPADB registers citizen-owned companies for preference purposes. In 2020, the GoB announced new policy that all government contracts less than ~USD 900,000 were reserved for Motswana-owned businesses.

For a foreign firm to qualify with the Department of Industrial Affairs as a locally-based manufacturer or service provider to sell goods or services to the GoB, the firm must first 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.  All of these factors make it difficult to compete for tenders from outside Botswana.   

 

Brunei

4. Industrial Policies

Investment Incentives

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 .

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

The Brunei government 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

Investment Incentives  

The 2004 Investment Promotion Act (revised in 2018) stipulates equal treatment of foreign and domestic investors. The law encourages investment in manufacturing, services, and 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.  The government policy for investment promotion excludes a number of sectors classified as strategic.

Investment projects, which are deemed particularly important for the economy and meet the legal requirement for a minimum investment commitment of EUR 10 to 50 million and for creating 50 to 150 new jobs, are classified as priority projects. The exact amount of the required investment depends on the level of economic activity expected to be generated. Priority investors may receive incentives such as below-market prices when acquiring property rights (full or limited) on from the central or municipal government property, government grants for research and development (R&D) and education projects, and institutional support for establishing PPPs.

Additional 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. Corporate income tax exemption can also be granted for manufacturing projects, with no minimum investment requirement, that are implemented in high unemployment areas and create at least 10 jobs.

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

Foreign Trade Zones/Free Ports/Trade Facilitation  

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 on a proposal made by the Minister of Economy.  Located favorably on one of the main highways, the Trakia Economic Zone just outside of Plovdiv, the largest in Bulgaria, consists of two industrial parks, two industrial zones, one high- tech park and one agribusiness park. In addition, the state-owned National Industrial Zones Company  currently operates fully functioning industrial zones in Sofia, Burgas, Vidin, Ruse, Svilengrad and Varna. It assists investors in these economic zones with established infrastructure, location and transport logistics.    The common thread among all these economic zones is that they are either located in regions with plenty of available labor, in poor regions where the government provides special investment incentives, or are at important cross- border points.  The high-technology Sofia Tech Park has joined efforts with the Bulgarian Academy of Sciences, several local universities, and several clusters in what is expected to become the largest R&D center and high-tech incubator in Bulgaria.

Performance and Data Localization Requirements  

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 in the past obtaining work permits for their non-Bulgarian, non-EU employees. Non-EU workers cannot exceed 35 percent of the total workforce in Bulgarian small- and medium-sized Bulgarian companies or 20 percent in firms classified as large.  In 2017 the government simplified procedures and reduced issuance time for work visas for non-EU workers.

There are no requirements for foreign IT providers to turn over source code or provide access to surveillance, nor are there mechanisms used to enforce any rules on maintaining a certain amount of data storage within Bulgaria.

Burkina Faso

4. Industrial Policies

Investment Incentives

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.

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 scheme, 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no foreign trade zones or free ports 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. To date, 30 countries have both signed and approved ratification of the AfCFTA Agreement. Of the 55 AU member states, only Eritrea has yet to sign. The operational phase of the AfCFTA was subsequently launched during the 12th Extraordinary Session of the Assembly of the African Union in Niamey, Niger on July 7, 2019. 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 supposed to start on July 1, 2020, but as a result of the COVID-19 global pandemic, this start date has been  postponed (a new date is yet to be confirmed by the African Union Commission).

Performance and Data Localization Requirements

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.” 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

Investment Incentives

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.

The government has no established mechanism to provide joint-financing or any other type of fiscal support for infrastructure development.

Foreign Trade Zones/Free Ports/Trade Facilitation

Under the Myanmar Special Economic Zones Law, investors located in an SEZ 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 August 2015, the government issued new 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.

Performance and Data Localization Requirements

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. The investors are also required to submit a report to 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. Foreign investors have not cited onerous visa, residence, work permit, or similar requirements asa barrier to their mobility or that of their employees.

Foreign investors are not required to use domestic content in goods or technology. Burma is currently developing laws, rules and regulations on information technology (IT) and data protection standards, but does not currently have requirements for foreign IT providers to turn over source code and/or provide access to surveillance. Burma has no data localization laws.

Burundi

4. Industrial Policies

Investment Incentives

The current Investment Code grants various potential fiscal and customs benefits to investors including: three or more years of tax-free operation; exemption of charges on property transfer; exemptions from duties on raw materials, capital goods, and specialized vehicles; tax exemptions for goods used to establish new businesses; exemptions from customs duties if investment goods are made within the EAC or COMESA; a corporate tax rate of 30 percent with a reduction to 28 percent if 50-200 Burundians are employed and to 25 percent if more than 200 are employed; and free transfer of foreign assets and income after payment of taxes due.

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

Burundi already belongs to the trading blocs of the EAC (East African Community), the CEPGL (Economic Community of the Great Lakes Countries), COMESA (Common Market of Eastern and Southern Africa), the Economic Community of the States of Central Africa (CEEAC). The GoB recently adopted new laws on the free trade area to accelerate its integration into other trading blocs such as the African Continental Free Trade Area (AfCFTA), the Tripartite Free Trade Area (TFTA) between COMESA, EAC and SADC (Southern Africa Development Community). GoB also embarked on the path of harmonizing its policies and legal framework within regional regulations in order to consolidate its 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 have trade zones/free ports/trade facilitation that are operational until now.

One of the objectives on Burundi’s agenda is urgent integration into AfCTA, one of the largest free trade areas in the world since the formation of the World Trade Organization with a total of 55 member states since July 2019. The AfCFTA aims to stimulate intra-African trade (BIAT) and Burundi wants to share in these gains. Burundi and Tanzania are the only countries within the East African Community that have not yet ratified the agreement. The GoB has already set up an ad hoc committee to accelerate the process of integration within AfCTA, and negotiations are underway with a view to ratifying the instruments of this agreement in the very near future. Burundi expects tangible benefits from this large continental market (1.2 billion people with a GDP of over USD 2.5 trillion and a purchasing power of more than USD 4 trillion) due to its strategic location and resource endowment.

In addition, GoB has established its first Special Economic Zone (ZESB) in order to enhance growth and development after the breakdown of cooperation with several European countries. ZESB is still under implementation on the Warubondo site (a strategic location of 5.43 square km straddling 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 GoB and private foreign investors and its main objective is to revive the industrial sector and to promote exports. The economic model behind is that this zone must be a window for foreign investors where all the products produced within the zone will bear the label “Made in Burundi”.

Performance and Data Localization Requirements

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. Since 2015, Burundi has removed the possibility for visitors to apply for a visa upon arrival at the airport unless authorized by the PAFE (immigration authority). Travelers to Burundi must apply for visas in one of the Burundian missions abroad. A foreigner holding a residency visa is permitted to work in Burundi. A two-year residence visa (renewable) costs USD 500 and it can only be issued after making a refundable deposit of USD 1,500 in a local bank (BANCOBU). There are no government/authority-imposed conditions on permission to invest except for a minimum investment requirement of USD 50,000 applicable to foreign investors.

There are no requirements that investors purchase from local sources. However, the mining law requires a commitment from the investor to recruit staff or subcontractors of Burundian nationality as a precondition for granting a mining license, with mandatory quotas in place at this time. 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

Investment Incentives

In 2019, the Corporate Income Tax (CIT) rate applicable to entities taxed under the organized accounting regime was reduced to 22 percent from 25 percent.

In January, the National Assembly approved a law that establishes conditions for investment in the country by Cabo Verdean emigrants, including fiscal incentives. The law also establishes the framework for the establishment of a one stop shop for emigrants and special conditions to acquire specific banking products. The objective of the law is to capture foreign investment and improve the business environment of the country.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government created Special Economic Zones (SEZ) through legislative decree 1/201 (amended by decree-laws 38/2013 and 57/2017). To be eligible, a company must obtain authorization for and define its area of economic activity in industrial, commercial or financial services arenas. Commercial and industrial companies are geographically restricted while financial services are not.

The government is planning a maritime special economic zone and, although referring to special regulations (including fiscal, customs, and labor incentives), fiscal benefits and incentives will be issued on a case by case basis to also comply with guidance from the Budget Support Group and World Trade Organization. The entity responsible for assessing those investments and the incentives that apply is the International Business Center (CIN), located in Sao Vicente. The law determines that the zone will be market-oriented, with the government defining the policies, overall coordination, and organization.

Performance and Data Localization Requirements

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. The authorization process, however, is easy and affordable, and 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 between skills categories. The Labor Code regulates residence permits for foreign workers, managers, and investors. There are four categories of permits for foreigners, including investors, employees, independent professionals, and highly qualified employees.

Data protection still lacks sufficient legislative support.

Cambodia

4. Industrial Policies 

Investment Incentives 

Cambodia’s Law on Investment and Amended Law on Investment offers varying types of investment incentives for projects that meet specified criteria. Investors seeking an incentive – for examples, incentives as part of a qualified investment project (QIP) – must submit an application to the CDC. Investors who wish to apply are required to 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 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 from the Council of Ministers for investment proposals that will have a negative impact on the environment or the government’s long-term strategy.

QIPs are entitled to receive different incentives such as corporate tax holidays; special depreciation allowances; and import tax exemptions on production equipment, construction materials, and production inputs used to produce exports. Investment projects located in designated special promotion zones or export-processing zones are also entitled to the same incentives. Industry-specific investment incentives, such as three-year profit tax exemptions, may be available in the agriculture and agro-industry sectors. More information about the criteria and investment areas eligible for incentives can be found at the following link .

Foreign Trade Zones/Free Ports/Trade Facilitation 

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 23 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.

Cameroon

4. Industrial Policies

Investment Incentives

Cameroon’s 2013 investment law lists several types of investment incentives for investors and specifies the conditions that they have to meet, in order to benefit from those incentives.  This law specifies incentives available to Cameroonian or foreign legal entities, whether or not established in Cameroon, conducting business therein, or holding shares in Cameroonian companies, with a view to encouraging private investment and boosting national production.  For example, during the establishment phase (which cannot exceed five years), the new code provides for exemptions from VAT and duties on key services/assets (including an exemption from stamp duty on the lease of immovable property).  During the operation phase (which cannot exceed 10 years), further exemptions from, or reductions of, other taxes (including corporate tax), duties (such as stamp duty on loans), and other fees are granted.  Overall, the law seeks to facilitate, promote, and attract productive investment in order to develop activities geared towards strong, sustainable, and shared economic growth as well as job creation.  In a context where businesses have to 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 duty 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, and (3) develops public interest activities in rural areas.

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 duty on contracts for the supply of equipment and construction of buildings and installations, that is 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 open in Cameroon and abroad local and foreign currency accounts and to carry out transactions on such accounts;
  • The right to freely use and or keep abroad funds acquired or borrowed abroad, and to freely use such;
  • 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.

Also, with respect to foreign staff employed by the investor and resident in the Republic of  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 handicraft;
  • 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 FTZ in 1990.  Applications for an authorization to establish an industrial free zone are submitted to the National Office for Industrial Free Zones.  The authorization to establish an Industrial Free Zone is granted by the Minister in Charge of Industrial Development.  Some of the benefits of the FTZ are built into commercial, fiscal, custom, and labor codes.  The status of FTZ has not changed since the last reporting period.

Performance and Data Localization Requirements

The government of Cameroon does not mandate local employment except as an incentive to entice foreign investment.  The government of Cameroon 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 intentional 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 our interlocutors unless included as residency work permits, a different category with more complicated application procedures.  The government does not impose rules on the recruitment of senior management nor excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees

The government does not impose conditions on permission to invest in Cameroon.  The government 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. Post is 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

Investment Incentives

Federal and provincial governments in Canada offer a wide array of investment incentives that municipalities are generally prohibited from offering. The incentives are designed to advance broader policy goals, such as boosting research and development or promoting regional economies. The funds are available to any qualified Canadian or foreign investor who agrees to use the monies for the stated purpose. For example, Export Development Canada can support inbound investment under certain specific conditions (e.g., investment must be export-focused; export contracts must be in hand or companies have a track record; there is a world or regional product mandate for the product to be produced). The government also announced the US$940 million Strategic Innovation Fund in 2017, which provides repayable or non-repayable contributions to firms of all sizes across Canada’s industrial and technology sectors in an effort to grow and expand those industries. One of the explicit goals of the program is to attract new investments to Canada.

The Liberal government invested US$730 million over five years, beginning in 2018, to support five business-led supercluster projects that have the potential to accelerate economic and investment growth in Canada. The superclusters are now operational, and feature projects in digital technologies, food production, advanced manufacturing, artificial intelligence in supply chain management, and ocean industries. There are 450 businesses, 60 post-secondary institutions, and 180 other partners involved in the supercluster projects. Several U.S. firms are participants.

Several provinces offer an array of incentive programs and services aimed at attracting foreign investment that lower corporate taxes and incentivize research and development. The Province of Quebec officially re-launched its “Plan Nord” (Northern Plan) in April 2015, a 20-year sustainable development investment initiative that is intended to harness the economic, mineral, energy, and tourism potential of Quebec’s northern territory. Quebec’s government created the “Société du Plan Nord” (Northern Plan Company) to attract investors and work with local communities to implement the plan. Thus far, Plan Nord has helped finance mining projects in northern Quebec and began building the necessary infrastructure to link remote mines with ports. The provincial government is actively seeking other foreign investors who desire to take advantage of these opportunities.

Provincial incentives tend to be more investor-specific and are conditioned on applying the funds to an investment in the granting province. For example, Ontario’s Jobs and Prosperity Fund provides US$2.5 billion from 2013 to 2023 to enhance productivity, bolster innovation, and grow Ontario’s exports. To qualify, companies must have substantive operations (generally three years) and at least US$7.5 million in eligible project costs. Alberta offers companies a 10 percent refundable provincial tax credit worth up to US$300,000 annually for scientific research and experimental development encouraging research and development in Alberta, as well as Alberta Innovation Vouchers worth US$11,000 to US$37,000 to help small early-stage technology and knowledge-driven businesses in Alberta get their ideas and products to market faster. Newfoundland and Labrador provide vouchers worth 75 percent of eligible project costs up to US$11,000 for R&D, performance testing, field trials, and other projects.

Provincial incentives may also be restricted to firms established in the province or that agree to establish a facility in the province. Government officials at both the federal and provincial levels expect investors who receive investment incentives to use them for the agreed purpose, but no enforcement mechanism exists.

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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 of resident Canadian directors.

Data localization is an evolving issue in Canada. Privacy rules in two Canadian provinces, British Columbia and Nova Scotia, mandate that personal information in the custody of a public body must be stored and accessed only in Canada unless one of a few limited exceptions applies. These laws prevent public bodies such as primary and secondary schools, universities, hospitals, government-owned utilities, and public agencies from using non-Canadian hosting services. The United States–Mexico–Canada Agreement (USMCA) will help ensure cross-border data flows between Canada and the United States remain open by prohibiting any member of the agreement from requiring the use or location of computing facilities in a particular jurisdiction as a condition of business.

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 take into account current technical realities concerning data storage.

Chad

4. Industrial Policies

Investment Incentives

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). For 2020, the GOC authorized tax credits for agriculture, animal husbandry, information technology, and renewable energy investments, including solar power projects. Article 14 granted new companies numerous discounts and exemptions.

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 & Private Sector Promotion.

The GOC does not issue guarantees but jointly finances some foreign direct investments.

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

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. The GOC has enacted four laws covering cybersecurity and cyber-criminality.

Chile

4. Industrial Policies

Investment Incentives

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 USD 80,000, along with a Chilean work visa to develop a “startup” business in Chile over a period of 4 to 7 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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. Zofri is the main FTZ located in Iquique.

Performance and Data Localization Requirements

Chile mandates that 85 percent of 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

Investment Incentives

To attract foreign investment, different provinces and municipalities offer preferential packages like a temporary reduction in taxes, resources and land use benefits, reduction in import or export duties, special treatment in obtaining basic infrastructure services, streamlined government approvals, 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, and other requirements.  The Chinese government incentivizes foreign investors to participate in initiatives like MIC 2025 that seek to transform China into an innovation-based economy.  Announced in 2015, China’s MIC 2025 roadmap has prioritized the following industries:  new-generation information technology, advanced numerical-control machine tools and robotics, aerospace equipment, maritime engineering equipment and vessels, advanced rail, new-energy vehicles, energy equipment, agricultural equipment, new materials, and biopharmaceuticals and medical equipment.  While mentions of MIC 2025 have all but disappeared from public discourse, a raft of policy announcements at the national and sub-national levels indicate China’s continued commitment to developing these sectors.  Foreign investment plays an important role in helping China move up the manufacturing value chain.  However, foreign investment remains closed off to many economic sectors that China deems sensitive due to broadly defined national or economic security concerns.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 12 FTZs, launching an additional six FTZs in 2019.  China’s FTZs are in: Tianjin, Guangdong, Fujian, Chongqing, Hainan, Henan, Hubei, Liaoning, Shaanxi, Sichuan, Zhejiang, Jiangsu, Shandong, Hebei, Heilongjiang, Guanxi, and Yunnan provinces.  The goal of all of China’s FTZs 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” for the market access phase of an investment in industries and sectors not listed on the FTZ negative list, or on the list of industries and economic sectors from which foreign investment is restricted or prohibited.  However, the 2019 FTZ negative list lacked substantive changes, and many foreign firms have reported that in practice, the degree of liberalization in the FTZs is comparable to opportunities in other parts of China.  The stated purpose of FTZs is also to integrate these areas more closely with the OBOR initiative.

Performance and Data Localization Requirements

As part of China’s WTO accession agreement, the PRC government promised to revise its foreign investment laws to eliminate sections that imposed on foreign investors requirements for export performance, local content, balanced foreign exchange through trade, technology transfer, and research and development as a prerequisite to enter China’s market.  In practice, China has not completely lived up to these promises.  Some U.S. businesses report that local officials and regulators sometimes only accept investments with “voluntary” performance requirements or technology transfer that help develop certain domestic industries and support the local job market.  Provincial and municipal governments will sometimes restrict access to local markets, government procurement, and public works projects even for foreign firms that have already invested in the province or municipality.  In addition, Chinese regulators have reportedly pressured foreign firms in some sectors to disclose IP content or provide IP licenses to Chinese firms, often at below market rates.

Furthermore, China’s evolving cybersecurity and personal data protection regime includes onerous restrictions on firms that generate or process data in China, such as requirements for certain firms to store data in China.  Restrictions exist on the transfer of personal information of Chinese citizens outside of China.  These restrictions have prompted many firms to review how their networks manage data.  Foreign firms also fear that PRC laws call for the use of “secure and controllable,” “secure and trustworthy,” etc. technologies will curtail sales opportunities for foreign firms or pressure foreign companies to disclose source code and other proprietary intellectual property.  In October 2019, China adopted a Cryptography Law that includes restrictive requirements for commercial encryption products that “involve national security, the national economy and people’s lives, and public interest.”  This broad definition of commercial encryption products that must undergo a security assessment raises concerns that implementation will lead to unnecessary restrictions on foreign information and communications technology (ICT) products and services.  Further, prescriptive technology adoption requirements, often in the form of domestic standards that diverge from global norms, in effect give preference to domestic firms.  These requirements potentially jeopardize IP protection and overall competitiveness of foreign firms operating in China.

Colombia

4. Industrial Policies

Investment Incentives

The Colombian government offers investment incentives, such as income tax exemptions and deductions in specific priority sectors, including the so-called “orange economy,” which refers to the creative industries, as well as agriculture and entrepreneurship.  More recently, the government has offered additional incentives in an effort to 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. Included 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.
  • New theme parks, ecotourism and agrotourism enterprises, and boat docks put into operation through January 1, 2029 in smaller municipalities will also be taxed at nine percent for 20 years. The same facilities in municipalities greater than 200,000 population put into service until 2023 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.
  • Income from river transportation services using low-draft vessels is tax free.

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

To attract foreign investment and promote the importation of capital goods, the Colombian government uses a number of drawback and 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 and no customs value-added taxes or duties on raw material imports for use in the FTZ.  Each permanent FTZ must meet specific investment and direct job creation commitments, depending on their total assets, during the first three years.  Special FTZs are required to generate a certain number of direct jobs depending on the economic sector.

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

Performance and Data Localization Requirements

Performance requirements are not imposed on foreigners as a condition for establishing, maintaining, or expanding investments.  The Colombian government does not have performance requirements, impose local employment requirements, or require excessively difficult visa, residency, or work permit requirements for investors.  Under the CTPA, 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 and has issued a circular defining 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 requirements for security and privacy, 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

Investment Incentives

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. Costa Rica’s Foreign Trade Promotion Authority (PROCOMER) is in charge of the first three programs and companies may choose only one of the three. As of early 2020, 482 companies are in the free trade zone regime, 90 in the inward processing regime, and 10 in duty drawback.

The Costa Rican Tourism Board (ICT) administers the tourism incentives; through 2019 over 1,120 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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. See their most recent study of the benefits of FTZ regime for the broader economy at www.procomer.com. (Search for “Balance de Las Zonas Francas 2014-2018”).

Performance and Data Localization Requirements

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. Databases pay an annual registration fee.

Costa Rica does not require any IT providers to turn over source code or provide access to encryption. Costa Rica does not impose measurements that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the economy/country’s territory. The measures that do apply under the data privacy law and regulation are equally applicable to data managed within the country.

Côte d’Ivoire

4. Industrial Policies

Investment Incentives

The 2018 Investment Code offers a mix of fiscal incentives, combining tax exoneration and tax credits focusing on agriculture, agro-business, tourism, health, and education.  These 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 economic development.  The Investment Code, the Petroleum Code, and the Mining Code delineate incentives available to new investors in Côte d’Ivoire.

The government occasionally guarantees loans or jointly finances foreign direct investment projects.  This is not a common practice.

Foreign Trade Zones/Free Ports/Trade Facilitation

Created in 2008, the Ivoirian free trade zone (FTZ) for information technology and biotechnology (VITIB) is located in the town of Grand Bassam.  In 2014, VITIB established the Mahatma Gandhi Technology Park at Grand Bassam.  Bonded warehouses do 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.

An FTZ also exists at the Port of Abidjan specifically for fish processing.  In force since December 2005, this FTZ is reserved for companies which 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.

Performance and Data Localization Requirements

The government strongly encourages investors and firms to hire Ivoirian employees, but this is not a requirement.

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, work, and residency permits 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 conditions on permission to invest, including tariff and non-tariff barriers.

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 is able to do.  The government also makes use of a number of tax exemptions and customs exonerations to incentivize companies to do more value-added processing in Côte d’Ivoire.

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 Côte d’Ivoire imposes on foreign information technology firms to give the government source code or provide access to encryption.

There are no requirements that prevent or unduly impede companies from freely transmitting customer or other business related data.  Data transmission or transfer is subject to prior authorization of the telecom regulatory board Autorité de Régulation des Télécommunications (Telecommunications Regulatory Authority of Côte d’Ivoire; ART-CI).

Côte d’Ivoire’s law on data protection requests prior declaration or authorization by ART-CI for any data processing.  ART-CI is responsible for the oversight of local data storage.

Croatia

4. Industrial Policies

Investment Incentives

The Investment Promotion Act (IPA), amended in 2020, 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 per 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.

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.

All incentive measures can be used by entrepreneurs.  Entrepreneurs are defined as individuals subject to Croatian income tax or companies registered in Croatia investing the minimum amount of USD 54,000 in fixed assets, and creating at least three new jobs for microenterprises or 10 new jobs for companies investing in information computer technology (ICT) systems and software development centers, or USD 162,000 in fixed assets and creating at least five new jobs for small or medium enterprises, and large companies, and USD 540,000 in fixed assets for modernizing and increasing business process productivity.

Substantial tax cuts on profits are available depending on the size of the investment and the number of new jobs created.  A 50 percent reduction applies for up to ten years for companies that invest up to USD 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 USD 1.1-USD 3.2 million and creating at least 10 new jobs, and up to 100 percent for companies that invest over USD 3.2 million and create at least 15 new jobs.

Profit tax reductions are also available for investments modernizing the manufacturing industry.  These projects must include a minimum fixed asset investment of USD 560,000, all employees must be retained for the project duration, and the per-employee productivity after three3 years must increase at least 10 percent compared to the one-year period prior to the project.  A 50 percent profit tax rate reduction applies for companies that invest up to USD 1.1 million,75 percent for companies investing USD 1.1 to -USD 3.2 million, and up to 100 percent for companies that invest over USD 3.2 million.

Cash grants for new jobs created can be up to USD 10,100 per new position, depending on the location of the investment and category of the person employed.  Financial support of 10 percent of expenses, which is not subject to reimbursement, or up to USD 3,250 per new position can be used to create jobs in counties with unemployment levels up to 10 percent.  This support increases to 20 percent or up to USD 6,500 per position in counties with unemployment levels from 10 to 20 percent, and up to 30 percent or USD 10,000 per new position in counties with unemployment levels above 30 percent.

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 of 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. Incentives for education cannot exceed 70 percent of eligible costs of education and training.

Additional incentives for job creation are available for development and innovation activities that affect the development of new products or significantly improve existing products, production series, manufacturing processes, and/or production technologies; for business support activities such as customer support, outsourced business activities centers, or logistics and distribution centers, as well as ICT systems and software development centers; for activities such as hospitality and tourism accommodation facilities categorized  as at least four stars; support services for the above-listed types of accommodations with high value added in a range of categories; nautical tourism projects; and amusement and theme park projects; as well as for creative services, and industrial engineering services.

Additional incentives for job creation are offered for labor-intensive investment projects within the first three years of the project start date.  Cash grants for job creation are increased by 25 percent for projects creating 100 or more positions, by 50 percent for projects creating 300 or more jobs, and by up to 100 percent or the total cost (or up to the maximum allowed limit) for creating 500 or more jobs.

Cash grants for the capital costs of investment projects are approved for investments over USD 5.4 million which generate 50 new positions within 3 years of the start of the investment. They cover 10 percent of the cost of new factory construction, production facility construction, or the purchase of new equipment (up to USD 540,000) in counties where the unemployment rate is from 10-20 percent.  This incentive increases to 20 percent of the investment cost (up to USD 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 that 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 USD 540,000.

There are incentives for investment projects which revitalize inactive state-owned property and provide free land leases for investors investing USD 3.2 million and creating at least 15 new jobs. Additional information regarding the types of incentives offered by the Ministry of Economy, Entrepreneurship and Crafts can be found at investcroatia.gov.hr.

The Act on Strategic Investment Projects went into effect in November 2013 and was amended in 2018. This Act facilitates and accelerates administrative procedures for projects deemed to be of strategic interest for Croatia based on a number of conditions listed in the Act.  Strategic projects can include private, public-private, or public investments in economy, mining, energy, tourism, transport, infrastructure, electronic communication, postal services, environmental protection, public utilities, agriculture, forestry, water management, fishery, health care, culture, audio-visual activities, science, defense, judiciary, technology, construction, and education.

The minimum amount for an investment to be considered strategic is approximately USD 10.6 million, which is significantly less than the previous minimum of USD 21.2 million.  All investments over this amount may be considered strategic, and will be entitled to accelerated permitting and registration procedures.  Investments may also be treated as strategic if they are valued at USD 1.4 million or more, and are implemented in assisted areas, or if they are implemented 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 can be found at:  www.investcroatia.gov.hr.

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/ .

Foreign Trade Zones/Free Ports/Trade Facilitation

There are 10 duty free zones (called “free zones” in the EU) operating in Croatia and one that is designated, but not operational.  Contact information for each of the zones can be found at https://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/customs/procedural_aspects/imports/free_zones/list_freezones.pdf . Both domestic and foreign investors are afforded equal treatment in the zones.  After Croatia entered the European Union in 2013, many of the zones that operated throughout Croatia were slowly transitioned to industrial/business zones. Investment incentives are available in these zones.  For more information regarding these zones go to http://investcroatia.gov.hr/lokacije-za-investiranje/ ..

Performance and Data Localization Requirements

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.  In regard to 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/.

There are no government imposed conditions for investment, nor are there “forced localization” policies for investors in terms of goods and technology.  There are no performance requirements, or associated enforcement procedures.  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

Investment Incentives

REPUBLIC OF CYPRUS

The ROC offers investors one of the lowest corporate tax rates in the EU at 12.5 percent.  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 63 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 residency or citizenship through foreign investment, due to abuses of this program.  Recently, Cyprus harmonized and enhanced all its regulations regarding investment funds, becoming a more attractive jurisdiction for managing and home-basing investment funds.

The Council of Ministers approved a program in 2017 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 $58,500 (€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.  Additional info at: https://launchincyprus.com/.

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 types of such areas, namely Customs Warehouses and Free Zones, are listed below and are fully harmonized with equivalent EU norms:
http://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 being 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 with the approval of the Department of Customs.  For more information, interested parties may contact:

Department of Customs and Excise
Michali Karaoli Str.
1096 Nicosia
Tel. +357-22-601754 or 55
Fax: +357-22-302018
Email: headquarters@customs.mof.gov.cy
Website: www.mof.gov.cy/ce

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 (www.businessincyprus.gov.cy) for guidance on identifying suitable locations.

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

Cyprus Ports Authority
P.O. Box 22007
1516 Nicosia
23 Kritis Street
1061 Nicosia
Tel. +357-22-817200, X-0
Fax: +357-22-762050
Email: 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.

Information about incentives provided to businesses established there can be accessed at:
http://www.portisbi.com/

Performance and Data Localization Requirements

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/.

Czech Republic

4. Industrial Policies

Investment Incentives

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 EUStructural Funds.  The government provides investment incentives in the form of corporate income tax relief for 10 years, cash grants for job creation up to USD 8,000 per job, cash grants for training up to 50 percent of training costs, and cash grants for the purchase of fixed assets up to 20 percent of eligible costs.

The government does not have a common practice of issuing guarantees or jointly financing FDI projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 duty.  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.

Performance and Data Localization Requirements

The Czech Republic abides by EU law governing data localization and performance.  The Czech Republic strongly supported creating of 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 host government does not mandate local employment.  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 time consuming and slow, but the requirements are the same for domestic, EU, and non-EU companies.

Democratic Republic of the Congo

4. Industrial Policies

Investment Incentives

Investment incentives can range from tax breaks to duty exemptions, and are dependent upon the location and type of enterprise, the number of jobs created, the degree of training and promotion of local staff, and the export-producing potential of the operation.  Investors who wish to take advantage of customs and tax incentives in the 2002 Investment Code must apply to the National Agency for Investment Promotion (ANAPI), which submits applications to the Ministries of Finance and Planning for final approval.  The government does not have a history of providing guarantees or jointly financing FDI projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

The DRC does not have any designated free trade areas or free port zones.  President Tshisekedi has signaled that he will revive stalled efforts to join the East African Community (EAC).  In November 2019, the Presidency submitted a law authorizing the ratification of the agreement of the African continental free-zone (ZLEC).  The law is still pending approval by the Parliament.

Performance and Data Localization Requirements

Foreign investors must negotiate many of the conditions of their investments with ANAPI.  Performance requirements agreed upon with ANAPI typically include a timeframe for the investment, use of OHADA accounting procedures and periodic authorized GDRC audits, protection of the environment, periodic progress reports to ANAPI, and the maintenance of international and local norms for the provision of goods and services.  The investor must also agree that all imported equipment and capital will remain in-country for at least five years.

The Ministry of Labor controls expatriate residence and work permits.  For U.S. companies, the BIT assures the right to hire staff of their choice to fill some management positions, but companies agree to pay a special tax on expatriate salaries.  Visa, residence or work permit requirements are not discriminatory or excessively onerous, and are not designed to prevent or discourage foreigners from investing in the DRC.

The DRC does not have specific legislation on data storage or limits on the transmission of data.

Denmark

4. Industrial Policies

Investment Incentives

Performance incentives are available both to foreign and domestic investors. For instance, foreign and domestic investors in designated regional development areas may take advantage of certain grants and access to preferential financing. Investments in Greenland may be eligible for incentives as well. Foreign subsidiaries located in Denmark can participate in government-financed or subsidized research programs on a national-treatment basis.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 Malmo (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 mostly 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.

Performance and Data Localization Requirements

Performance requirements are applied only in connection with investment in hydrocarbon exploration, where concession terms normally require a fixed work program, including seismic surveys and in some cases exploratory drilling, consistent with applicable EU directives. Performance requirements are mostly designed to protect the environment, mainly through encouraging reduced use of energy and water. Several environmental and energy requirements are systematically imposed on 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 certain reimbursement schemes and subsidy measures to reduce the costs for businesses, thereby safeguarding competitiveness.

Performance requirements are governed by Danish legislation and EU regulations. Potential violations of the rules governing this area are punishable by fines or imprisonment.

Performance requirements are applied uniformly to domestic and foreign investors.

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

Djibouti

4. Industrial Policies

Investment Incentives

Tax benefits and incentives fall under two categories detailed in the investment code. Investments greater than USD 280,000 that create a number of 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. In order 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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). As of mid-2020 this free zone was partially opened. When complete it will cover 48 square kilometers 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.

Performance and Data Localization Requirements

The government mandates local employment as long as the qualifications or expertise is available locally. 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 One Stop Shop. 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. However, there are no mechanisms that are used to enforce rules on local data storage within Djibouti.

Dominica

4. Industrial Policies

Investment Incentives

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 depends on the amount of value added in Dominica. The fourth type, 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 villa 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 of Dominica does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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, 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

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.

Foreign companies are not restricted in their access to foreign exchange.  There are no requirements that foreign equity be reduced over time or that technology be transferred according to defined terms.  The government imposes no conditions on foreign investors concerning location, local ownership, local content, or export requirements.

The Renewable Energy Incentives Law No. 57-07 provides some incentives to businesses developing renewable energy technologies.  Foreign investors praise the provisions of the law, but express frustration with approval and execution of potential renewable energy projects.

Special Zones for Border Development, created by Law No. 28-01, encourage development near the economically deprived Dominican Republic-Haiti border.  A range of incentives, largely in the form of tax exemptions for a maximum period of 20 years, are available to direct investments in manufacturing projects in the Zones.  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.

Incentives for manufacturing apply principally to production in free trade zones (discussed below) or for the manufacturing of textiles, clothing, and footwear specifically under Laws 84-99 and 56-07.  Additionally, Law 392-07 encourages industrial innovation with 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.

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.

For existing projects, hotels and resort-related investments that are five years or older are granted 100 percent exemptions 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.

Finally, 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 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.  In January 2020, the government announced a special development plan to encourage high-quality investment and infrastructure development in Pedernales and the southwest region of the country, with an emphasis on inclusive and sustainable development. Also, in February 2020, the government passed a law on public-private partnerships that may encourage high-quality infrastructure projects and help catalyze private sector-led economic growth, but implementation is still pending, and it is not yet clear whether it will apply to sectors other than infrastructure.  The Dominican government does not currently offer special incentives for foreign businesses investing in women-owned or women-led projects, but the country’s development goals prioritize support for small businesses, particularly women-owned businesses, and the government offers numerous programs through CEI-RD and the Ministry of Industry and Commerce to support women entrepreneurs.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Dominican Republic’s free trade zones (FTZs) are regulated by the Promotion of Free Zones Law (No. 8-90) of January 15, 1990, which promotes the establishment of new free zones and the development and growth of existing zones.  The law also provides for 100 percent exemption from all taxes, duties, charges, and fees affecting production and export activities in the zones. These incentives are for 20 years for zones located near the Dominican-Haitian border and 15 years for those located throughout the rest of the country.  The National Council of Export Free Trade Zones (CNZFE) is the official authority that regulates compliance with Law 8-90, on Free Trade Zones and is composed of representatives from the public and private sectors, chaired by the Minister of Industry and Commerce.  This body has the objective of delineating policies for the promotion and development of Free Zones, as well as approving applications for operating licenses, with discretionary authority to extend the time limits on these incentives. Products produced in FTZs can be sold on the Dominican market, however, relevant taxes apply.

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.

According to CNZFE’s 2018 Statistical Report, the most recent available, 2018 exports from FTZs totaled $6.2 billion, comprising 3.3 percent of GDP.  There are 673 companies operating in a total of 74 FTZs.  Of the companies operating in FTZs, approximately 40 percent are from the United States.  Other major presences include companies registered in the Dominican Republic (22.4 percent), United Kingdom (8.2 percent), Canada (4.5 percent), and Germany (3.5 percent).  Companies registered in 38 other countries comprised the remaining investments.  The main productive sectors receiving investment include: medical and pharmaceutical products, tobacco and derivatives, textiles, services, agro-industrial products, footwear, and metals and plastics.

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 Address: http://www.cnzfe.gov.do 

Performance and Data Localization Requirements

The Dominican labor code establishes that 80 percent of the labor force of a foreign or national company, including free trade zone companies, be composed 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 in order 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

Investment Incentives

In August 2018 the National Assembly approved the Productive Development Law that provides income tax exemptions and VAT exemptions to attract investments, good for 12 years in all areas except the cities of Quito and Guayaquil, where it is 8 years, and 20 years in border regions. 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 to a Public-Private Partnership model to attract investments particularly in the energy and transportation sectors, but does not yet offer sovereign guarantees or joint finance on those projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

Nationally the government does not mandate local employment, however the Organic Law of the Amazon, approved by the National Assembly on May 21, 2018, mandates that any company, national or foreign, operating within the area covered by the law (the Amazon Basin) must hire at least 70% of their staff locally, unless they cannot find qualified labor from that area.

There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption. Companies can transmit data freely into and out of Ecuador, and there are no requirements to store data within the country. A draft Data Protection Law has been presented to the National Assembly, but it does not contain provisions that would affect foreign investors any more than local investors.

On October 11, 2016, Ecuador’s National Assembly passed the Code of the Social Economy of Knowledge, Creativity, and Innovation, 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.

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

Egypt

4. Industrial Policies

Investment Incentives

The Investment Law 72/2017 gives multiple incentives to investors as described below.  In August 2019, President Sisi ratified amendments to the Investment Law that allow its incentives 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, fees of the notarization, 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 will enjoy a deduction from their net profit, subject to the income tax:
    • 50 percent of the investment costs for geographical region (A) (the regions the 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);
    • 30 percent of the investment costs to geographical region (B) (which represents the rest of the republic).
  • 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 72/2017:

  • 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.
  • 100 percent foreign control of import/​export activities.
  • 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 89/1998) 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 No. 719/2007 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 LE 15,000 (approx. $850) for each job opportunity created by the project, on the condition that the investment costs of the project exceed LE 15 million (approx. $850,000). The decree can be implemented on both new and ongoing projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Public and private free trade zones are authorized under GAFI’s Investment Incentive Law. 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 9 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 83/2002 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.

Law 19/2007 authorized creation of investment zones, which require Prime Ministerial approval for establishment. 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.

The Suez Canal Economic Zone, 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. Website for the Suez Canal Development Project: http://www.sczone.com.eg/English/Pages/default.aspx 

Performance and Data Localization Requirements

Egypt has rules on national percentages of employment and difficult visa and work permit procedures.  The application of these provisions that restrict access to foreign worker visas has been inconsistent.  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 184/2013 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. In certain cases, a minister can grant tariff reductions of up to 40 percent in advance to certain companies without waiting to reach a corresponding percentage of local content.  In 2010, Egypt revised its export rebate system to provide exporters with additional subsidies if they used a greater portion of local raw materials.

Manufacturers wishing to export under trade agreements between Egypt and other countries must complete certificates of origin and local content requirements contained therein.  Oil and gas exploration concessions, which do not fall under the Investment Incentives Law, do have performance standards, which are specified in each individual agreement and 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 Data Protection Act, signed into law in July, 2020, will require licenses for cross-border data transfers but does 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 request servers to be located in Egypt and thus under the government’s control.

El Salvador

4. Industrial Policies

Investment Incentives

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;

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. 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 the Law 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 power generation based on renewable sources enjoy full exemption from income tax 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. The first PPP tender, published on September 11, 2019, is for the financing, design, expansion, construction, maintenance, and operation of expanded cargo operations of El Salvador’s primary international airport.  The project consists of two phases: improvements to the existing air cargo terminal and construction of a new air cargo terminal.  The estimated budget for the entire PPP is $55 million. The second PPP tender, released on January 31, 2020, is 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 estimated investment for the project is $17 million.

Foreign Trade Zones/Free Ports/Trade Facilitation

The 1998 Free Trade Zone Law is designed to attract investment in a wide range of activities, although the vast majority 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 153 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 78,000 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 1998 law established 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 located in the metropolitan area of San Salvador) or 20 years (if the company is located outside of the metropolitan area of San Salvador); and
  • Exemption from taxes on certain real estate transfers, e.g., the acquisition of goods to be employed in the authorized activity.

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: http://www.ciexelsalvador.gob.sv/registroSIMP/ 

Performance and Data Localization Requirements

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. Business-related data may be freely transferred outside of El Salvador.

Labor laws require that 90 percent of the workforce in plants and in clerical positions be Salvadoran citizens. Nationality restrictions are more lax for professional and technical jobs.

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

A new Immigration Law, enacted in May 2019, introduces the investment, business, or commercial representation visa for foreign nationals of countries with a visa requirement who want to conduct temporary business-related activities in El Salvador. This visa can be issued for a single entry or multiple entries with a duration of up to two years. Eligible nationals can enter El Salvador for business purposes without a visa for up to 90 days, extendable once for an additional 90 days, for a total maximum stay of 180 days.  The law institutes the Frequent Traveler Card for foreign nationals who frequently visit El Salvador for business. This card can be issued for up to three years and allows multiple entries for stays of up to 90 days per entry.

However, investors who plan to live and work in El Salvador for an extended period need to obtain temporary residency, which may be renewed periodically. Under Article 11 of the Investment Law, foreigners with investments totaling more than $1 million may obtain Investor’s Residency status, which allows them to work and remain in the country. This residency may be requested within 30 days of registering the investment. It allows residency for the investor and family members for a period of two years and may be extended thereafter.

It is customary for companies to hire local attorneys to manage the process of obtaining residency. The American Chamber of Commerce in El Salvador can also provide information regarding the process. Website: http://amchamsal.com/ 

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 no fewer than 10 permanent employees, and have at least a one-year contract. For hospital/medical services to qualify, the minimum capital investment must be $10 million, if surgical services are provided, or a minimum of $3 million, if surgical services are not provided. 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

Investment Incentives

Law No. 2/1994 of June 6, 1994 offers investment incentives in the form of deductions from taxable income: 50 percent of the amount paid to Equatoguinean staff in wages and 200 percent of the cost of training Equatoguinean staff. It also extends/maintains previous license exemptions for imports and exports, allows conversion of sales into foreign currency, and permits transfers abroad of company profits. Decree No. 67/2017 of September 2017 created the “one-stop shop” business portal to promote investment and economic activity by significantly reducing the time needed to register a new company. According to the government, registering a company through the one-stop shop – launched in January 2019 — takes approximately seven (7) days. Decree n° 72/2018 of April 2018 revised decree 127/2014 of September 2014 to foster foreign direct investments. The revised investment law eliminated the need to have a local business partner in foreign companies, except for the hydrocarbons sector. The government sometimes jointly finances foreign direct investment projects, such as construction of social housing.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are currently no known laws, policies, or practices for any areas designated as Free Trade or Duty Free Zones. Three entities have tax-free status: Luba Freeport, the Port of Bata, and the K5 Freeport Oil Centre.

Performance and Data Localization Requirements

The Government of the Republic of Equatorial Guinea used to require a minimum percentage of employees and subcontractors to be Equatoguinean, ranging from 70 to 90 percent. Presidential Decree 72/2018 of April 18, 2018 revised Presidential Decree 127/2014 of September 14, 2014, eliminating this requirement, except for the hydrocarbons sector. The decree requires that Equatoguineans hold certain management positions in the hydrocarbons sector. Foreign investors in the hydrocarbons sector are required to have a significant percentage of domestic content in goods and technology. Companies are supposed to send vacancies to the Ministry of Labor, Employment Promotion, and Social Security. If the Ministry is unable to find a qualified candidate within 30 days, the company may hire an ex-patriate worker.

Equatorial Guinea does not require U.S. citizens to obtain visas, which can be difficult for third-country nationals to obtain and generally requires a government-approved letter of invitation, which can take months to obtain. Residency and work permits can be similarly difficult to obtain and renew. In March 2018, as part of an overall effort to improve transparency and ease the conditions of entry and residence in the country, the cost of a residency permits from USD 700 to USD 343 per year. In December 2019, the government agreed to lower the cost of residency permits to conform with the cost of a business visa (H1B) to the United States (USD 160). Some companies have reported delays in the residency permit process. Work permits, often a pre-requisite for a residency permit, are also difficult and time consuming to obtain. Some businesses report that they have been unable to obtain the annual permits for over five years. There are some reports that certain officials have asked for “expediting” fees that are beyond established government fees and occasionally ask for bribes directly. This is especially problematic at the airport and at customs, according to various accounts.

The Ministries of Mines and Hydrocarbons and of Labor, Employment Promotion, and Social Security, among others, make regular inspections of companies and may apply fines. The Ministry of Mines and Hydrocarbons has fined, suspended, and expelled companies that it perceived did not comply with regulations or laws, especially on local content.

The Government of the Republic of Equatorial Guinea requires internet service providers, whether local or foreign, to turn over source code or provide access to surveillance. According to article 15 of the Telecommunication law (Law 7, dated November 7, 2015), Equatoguinean government offices are supposed to report to the Regulating Organ of Telecommunications (ORTEL) any information concerning official communications lines and networks. The Government of the Republic of Equatorial Guinea has no requirements pertaining to maintaining data storage within the country. The Ministry of Transports, Telecommunications, and Mail reduced the cost of internet in 2019 and 2020 as part of a strategy towards openness and increased access, and both the Telecommunications Regulator (ORTEL) and the Telecommunications Infrastructure Administrator (GITGE) are promoting implementation of the new strategy. The government had announced that internet would be available in all public places, such as airports, banks, and cultural centers, by 2020, though this will likely be delayed by the COVID-19 pandemic. It is already available in some locations, such as the new boardwalk (Paseo Maritimo) in Malabo. Although the government claims that 95 percent of municipalities have access to a fiber optic network, according to the International Telecommunication Union, only 26.2 percent of the population used the internet in 2017.

Estonia

4. Industrial Policies

Investment Incentives

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

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 Inspectorate
39 Tatari St., 10134 Tallinn
Tel: (+372) 627 4135.
https://www.aki.ee/en 

Eswatini

4. Industrial Policies

Investment Incentives

SEZ investors have access to numerous investment incentives more fully described above in “Laws and Regulations on Foreign Direct Investment” and below in “Foreign Trade Zones/Free Ports/Trade Facilitation.” For non-SEZ investors, the Minister of Finance has the discretion to apply a reduced tax rate of 10 percent for the first ten-year period of operation, which is available for businesses that qualify under the Development Approval Order. Capital goods imported into the country for productive investments are exempt from import duties. Raw materials imported into the country to manufacture products to be exported outside the SACU area are also exempt from import duties. The law allows for repatriation of profits and dividends including salaries for expatriate staff and capital repayments. The Central Bank of Eswatini guarantees loans raised by investors for export markets. There is also provision of loss cover that a company can carry over in case it incurs a loss in the year of assessment. Eswatini has a human resources training rebate that offers a tax credit for 150 percent of the cost of training.

The GKoE issues guarantees for key sectors like transportation and energy. There have been no reports of government jointly financing FDI projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

In February 2018, the GKoE enacted the Special Economic Zones (SEZ) Act in an effort to attract foreign direct investment. The Act establishes two designated SEZs: the Royal Science and Technology Park and King Mswati III International Airport. According to the Act, investors may establish additional SEZs outside of these designated areas by satisfying the minimum requirements and submitting an application to the Minister of Commerce. Under the Act, foreign-owned firms have the same investment opportunities as Swati entities.

To operate within an SEZ, a beneficiary company must meet the following minimum requirements (among others): at least 90 percent of its employees must be paid at or above the threshold for income taxation (approximately USD 330/month); at least two thirds of its employees must be Swati citizens; and the minimum capital investment must be E30 million (USD 2.1 million) for sole companies and E70 million (USD 5 million) for joint ventures. The benefits for an SEZ investor include: a 20-year exemption from all corporate taxation, followed by taxation at the rate of 5 percent; full refunds of customs duties, value-added tax, and all other taxes payable in respect of goods purchased for use as raw material, equipment, machinery, and manufacturing; unrestricted repatriation of profits; and full exemption from foreign exchange controls for all operations conducted within the SEZ.

Performance and Data Localization Requirements

The Ministry of Labor and Social Security’s Training and Localization Unit requires the hiring of qualified Swati workers where possible, even at executive positions. The mandate of the Unit is to ensure the maximum utilization of local manpower resources and to formulate training plans in conjunction with industries so as to maximize employment. It also facilitates and provides information on the process of obtaining work permits. Foreign investors are required to apply for residence and work permits. Although they are generally awarded, business people complain that the process is cumbersome.

There are no government-imposed conditions on permission to invest. The government does not follow a “forced localization” policy. However, in the manufacturing sector, if a company plans to label a product for export as “Made in Eswatini,” the government requires that the local content of such export be at least 25 percent.

There are no requirements for foreign IT providers to turn over source code or provide access to encryption. The technology industry in Eswatini is still in its infancy.

Ethiopia

4. Industrial Policies

Investment Incentives

Ethiopia is currently drafting updated investment regulations that are expected to outline detailed incentives for investors. According to the Investment Regulation 270/2012 and the 2014 amendment, however, new investors in manufacturing, agro-processing, and selected agricultural products are entitled to income tax exemptions ranging from two to five years, depending on the location of the investment. Any investor who produces for export or supplies to an exporter, or who exports at least 60 percent of his products or services, is entitled to an additional two years of income tax exemption.

An investor who establishes a new enterprise in less prosperous areas shall be entitled to an income tax deduction of 30 percent for three consecutive years after the expiry of the regular income tax exemption period. These areas include Gambella Region; Benishangul/Gumuz Region; Afar Region (except in areas within 15 kilometers from each bank of the Awash River); Somali Region; Guji and Borena Zones of Oromia; South Omo Zone, Segen Zone, Bench Maji Zone, Sheka Zone, Dawro Zone, Kaffa Zone, Basketo Woreda, and Konta Special Woreda, all of the Southern Nations, Nationalities and Peoples Region.

Foreign Trade Zones/Free Ports/Trade Facilitation

The 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 Ethiopian government with Chinese financing. The government has announced plans to construct a total of 17 industrial parks in various locations around the country. As of April, operational industrial parks include Hawassa Industrial Park, Bole Lemi Indusrtial Park, Eastern Industrial Zone, George Shoe Ethiopia, Mekele Industrial Park, Kombolcha Industrial Park, Adama Industrial Park, and Debre Berhan Industrial Park. The government also has plans for four agro-industrial processing parks to be located at strategic sites across the country, though none have yet been completed.

Performance and Data Localization Requirements

Ethiopia does not formally impose performance requirements on foreign investors, though investors in Ethiopia routinely encounter business visa delays and onerous paperwork requirements. In addition, investors are required to allocate a minimum of 200,000 U.S. dollars per investment project, with the requirement being lowered to 100,000 U.S. dollars for architectural or engineering projects. For most joint investments with a domestic partner, the investment requirement is lowered to 150,000 U.S. dollars.

The minimum capital requirement is waived if the foreign investor reinvests profits or dividends generated from an existing enterprise in any investment area open for 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. The EIC, in collaboration with the Immigration, Nationality and Vital Events Agency, facilitates visas and work permits for investors and expatriate workers. The government typically issues three to five year multiple entry visas for foreign investors, senior management, and board members.

In the absence of qualified local personnel, an investor can employ foreigners in positions of higher management (chief executive officer, chief operation officer, and chief financial officer), supervisor, trainers, and other technical professionals. While the investor is in theory supposed to replace expatriates with Ethiopian employees within a limited period of time, in practice many qualified expatriates have worked in Ethiopia for years. Although not a legal requirement, in joint ventures with state-owned enterprises investors report informal requirements of up to 30 percent domestic content in goods and/or technology.

EthioTelecom is the sole telecommunications service provider in Ethiopia. The government in 2018 announced plans to liberalize the telecommunications sector and open the market to foreign service providers and foreign telecom infrastructure companies. Ethiopia approved a bill in August of 2019 which established a regulatory agency for communication services that will regulate the telecommunications sector and develop rules and guidelines for foreign investment. The communications regulator has also released three of 12 planned telecommunications directives, which provide detailed regulatory guidance for the liberalization. Proclamation No. 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

Investment Incentives

Fiji offers incentives to encourage investment in multi-story residential housing development, and retirement village/ aged care facilities. For residential housing developments, incentives include income tax exemptions on developer profits for the entire project, while incentives for retirement villages include tax holidays between 5-13 years, dependent on the level of capital investment. Incentives to encourage investment in the setting up of electric vehicle charging stations include a seven year tax holiday, subsidies ranging from five to seven percent of the total capital outlay incurred in the development of charging stations for investments between USD 1.3-4.7 million (FJD 3-10 million), and loss carried forward for eight years. Other environmental incentives are available for investments in bio-fuel production and renewable energy projects.

Tourism incentives include tax-related investment allowances for approved expenditures on tourist boats/ships and approved building and expansion projects. The tourism incentive package provides a ten-year tax holiday for approved large tourism development projects with capital investments of more than USD 3.0 million (FJD 7 million) to be completed within two years from the date when the provisional approval was granted. Filmmaking and audio-visual incentives include a 47 percent tax rebate on production costs spent in Fiji up to USD 12 million, which is a maximum allowable tax rebate of USD 5.64 million. There are various incentives to encourage investment in the agriculture, fisheries, and forestry industry including zero-rated fiscal duty on imported agricultural machineries, equipment and inputs, and specialized equipment and machinery for forestry and fisheries. The benefits, which can include up to a ten-year tax holiday, vary by industry and nature of the investment.

The income of any business setting up private hospitals with a minimum capital investment of USD 3.0 million (FJD 7 million), is exempt from taxation for a period of ten years. A 60 percent investment allowance applies for refurbishments, renovations and extensions with a minimum capital investment of USD 0.43million (FJD 1 million). The income of any business setting up ancillary medical services such as pathology lab, MRI, or other diagnostics is exempt from taxation for a period of four years with a minimum capital investment level of USD 0.86 million (FJD 2 million). A 60 percent investment allowance applies for refurbishments, renovations and extensions with a minimum capital investment of USD 214,826 (FJD 500,000). There is a duty concession (free fiscal duty, free import excise and free VAT) on medical, hospital, surgical, and dental goods that are used and imported by the business. Recipients of provisional approvals for setting up private hospitals should complete the project within two years from the date the provisional approval was granted. Losses on private hospitals may be carried forward for eight years.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 Korovou-Tailevu area in the east of Viti Levu. Businesses established in these regions which meet the prescribed requirements enjoy a corporate tax holiday for up to 13 years and import duty exemption on raw materials, machinery, and equipment.

Performance and Data Localization Requirements

Many jobs are reserved for Fijian citizens, and work permit applications for expatriate employees may face delays or denials. Potential employers and employees should consult Fiji Immigration for further information prior to making any binding commitments as it can be difficult to secure employment visas for non-Fijians.

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 USD 1.1 million (FJD 2.5 million) or within 18 months of the date of approval of the project for investments above USD 1.1 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.

Finland

4. Industrial Policies

Investment Incentives

Foreign-owned companies are eligible for government 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. http://www.ely-keskus.fi/en/web/ely-en/business-and-industry;jsessionid=0B09A1B237B74FAC485AAD7C8E068DBF .

Tekes, the Finnish Funding Agency for Technology and Innovation, 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, Tekes emphasizes also service-related, design, business, and social innovations. Startups and both SMEs and large companies can benefit from Tekes 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?source=3165 . 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: https://www.investinfinland.fi/our-services . Support for innovative business ventures can also be obtained from the Foundation for Finnish Inventions: http://www.wipo.int/sme/en/best_practices/finland.htm .

Foreign Trade Zones/Free Ports/Trade Facilitation

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. The Code also allows the processing of non-Union goods without import duties and other charges. New regulations for customs declarations have been applied to customs warehousing since June 1, 2019. According to the current schedule, new declarations will be introduced for import and temporary storage at the end of 2020, and for export and transit in 2021–2023.

Performance and Data Localization Requirements

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.

Finland participates actively in the development of the EU’s Digital Single Market 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 March 2020, the Ministry of Transport and Communications appointed a data economy implementation and monitoring group, with task of continue exerting influence and to coordinate the work of different administrative sectors. The working group is also tasked with exerting influence both internationally and at the EU level. The objective is for Finland’s view on the principles and development of the data economy will be noted internationally.

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 .

France and Monaco

4. Industrial Policies

Investment Incentives

France offers financial incentives, generally equally available to both French and foreign investors.  The government provides incentives for capital investment in small companies. For instance, a French company or a subsidiary of a foreign firm that would invest in a minority shareholding (less than 20 percent) of a small, innovative SME would benefit from a five-year, linear amortization of their investment.  To qualify, SMEs must allocate at least 15 percent of their spending on research.

Incentivizing research and development (R&D) and innovation is a high priority for the French government.  Business France, the country’s export and investment promotion agency, reported that R&D operations accounted for 10 percent of foreign investment projects in 2018 and created or maintained 2,793 jobs, up 23 percent from the prior year.  The United States is the leading foreign investor in R&D in France, accounting for 26 percent of 2018 investment decisions. International companies may join France’s 71 innovation clusters, increasing access to both production inputs and technical benefits of geographical proximity. Other components of this policy include: the Innovative New Company (Jeune Enterprise Innovante) and the French Young Entrepreneurs Initiative.

In response to the COVID-19 crisis, the government implemented an emergency fiscal package on March 24, 2020 totaling €410 billion ($447 billion), comprised of: 1) Loan guarantees: €300 billion ($330 billion); 2) Deferral of corporate tax and social security payments: €50 billion ($55 billion); 3) Partial unemployment scheme to avoid layoffs: €24 billion ($26 billion); 4) Recapitalizations, bailouts, or nationalizations if needed: €20 billion ($22 billion); 5) Solidarity Fund for very small companies, the self-employed and micro-entrepreneurs: €7 billion ($7.6 billion); 6) system of repayable advances of €500 million ($546 million) for SMEs to purchase inputs; 7) Late penalties cancelled for all State and local government procurement contracts.  The purpose of the emergency package is to fiscally absorb the economic impact of COVID-19.

Foreign Trade Zones/Free Ports/Trade Facilitation

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  ($16.5 million) a year in State funds.

Performance and Data Localization Requirements

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).

Gabon

4. Industrial Policies

Investment Incentives

Some of Gabon’s main industries (oil and gas, mining, and timber) enjoy investment preferences through customs and tax incentives.  For example, oil and mining companies are exempt from customs duties on imported working equipment.  The government has implemented a new tourism code passed in February 2019 that provides tax exemptions to foreign tourism investors during the first eight years of operation.

President Ali Bongo Ondimba outlawed the export of unprocessed wood in 2009 to boost Gabon’s value-added wood products and increase domestic consumption.  The government and Singaporean-based firm Olam partnered to set up the SEZ at Nkok to process timber, and later expanded the mandate of the SEZ to open it to a broader range of businesses.  The SEZ provides a single-window business service to participants and provides new investors with beneficial fiscal incentives, including tax-free operation for 25 years, no customs duties on imported machinery and parts, and 100 percent repatriation of funds.

Gabon’s agriculture code of 2008 gives tax and customs incentives to agricultural operators, with a particular focus on small and medium-sized enterprises.  Land used for agriculture and farm exploitation is exonerated from fiscal tax.  All imported fertilizers and food for ranch exploitation are additionally exempt from customs duties.

As a member of CEMAC, Gabon’s trade with other member countries (Cameroon, Central African Republic, Chad, Republic of Congo, and Equatorial Guinea) is subject to low or no customs duties.

Foreign Trade Zones/Free Ports/Trade Facilitation

Inaugurated in 2011, the special economic zone “SEZ” at Nkok is a public-private partnership between the government of Gabon and Arise, a recently formed company that plans to operate multiple similar industrial facilitation zones in the region based on expected success in Gabon  Singapore-based Olam completed the infrastructure phase for the Nkok SEZ, and multiple companies are actively operating there.  All SEZs offer tax and customs incentives to attract foreign investors.  In 2017, the Gabon Special Economic Zone (GSEZ) inaugurated the New Owendo International Port.  With a surface area of 18 hectares, the terminal has annual capacity of three million tons.  Gabon has plans to expand the number of SEZ facilities.

Performance and Data Localization Requirements

Employment and Investor Requirements

Firms are required to obtain authorization from the Ministry of Labor before hiring foreigners.  Foreign workers must obtain permits before working in Gabon, and the availability of a permit for a job depends on the availability of Gabonese nationals to fill the job in question.  The government may set quotas for the number of foreign workers.  When hiring workers, firms must give priority to Gabonese nationals.  If no Gabonese worker with the appropriate qualifications can be found, a firm is expected to hire a Gabonese to work along with the foreigner and, within a reasonable time, the Gabonese worker should replace that foreigner.  In late 2010, the Gabonese government agreed to National Organization of Petroleum Workers demands to limit foreign workers in the oil sector to 10 percent of a company’s workforce and to require that Gabonese occupy all executive posts.  Foreign firms maintain there is a lack of qualified Gabonese workers, requiring companies to often request authorization to hire foreigners.  Non-Gabonese Africans find it increasingly difficult to obtain employment authorization; non-African expatriates have less difficulty.  Chinese industry in Gabon historically imports its labor force and management.  However, these rules do not apply in Gabon’s SEZ at Nkok, a free trade zone, where investors can bring foreign workers.

Goods, Technology, and Data Treatment

There is no known policy requiring foreign investors to use domestic content.  There is no specific performance requirement imposed as a condition for establishing, maintaining, or expanding investment.  There are no performance requirements for investors, nor are there any requirements for foreign IT providers to turn over source code and/or provide access to encryption.  There are no measurements that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the economy/country’s territory.  No mechanisms exist to enforce rules on local data storage.

Performance Requirements

There is no performance requirement imposed as a condition for establishing, maintaining, or expanding investment.  There is no requirement for investors to buy local products, to export a certain percentage of output, or to invest in a specific geographical area.  There is no blanket requirement that nationals own shares in foreign investments in Gabon or that the share of foreign equity be reduced over time, or that technology be transferred on certain terms.  Nonetheless, many investors find it useful to have a local partner who can help navigate the business environment.

Gambia

4. Industrial Policies

Investment Incentives

With a minimum investment threshold of US$100,000 and US$250,000, the following incentives are offered to domestic investors and foreign investors respectively:

Tax Holiday: A newly established investment enterprise that falls within any priority investment category is granted a tax holiday with respect to its corporate or turnover tax and depreciation allowance.

Tariff and Import VAT Incentives: A newly established investment enterprise that falls within any priority investment category is granted an import VAT waiver on imported specific goods as per the agreed list of items.

Export Promotion Incentives: An investment enterprise located outside the export processing zone that exports at least 30% of its output is entitled to the following: 10% corporate or turnover tax concession for 5 years.

  • 10% corporate or turnover tax concession for 5 years.
  • Financial planning services and advice.
  • Participation in training courses, seminars, and workshops.
  • Export market research.
  • Advertisement and publicity campaigns in foreign markets.
  • Product design and consultancy

Zone Investor Incentives: An investor operating in an Export Processing Zone and exports at least 80% of its outputs is exempt from payment of numerous duties and taxes, including import VAT waiver on imported goods/items, excise duty, import duty on capital equipment, corporate or turnover tax, municipal tax and depreciation allocation.

SME Support: SMEs are entitled to the following facilities:

  • Support for research and development.
  • Income tax deposit waiver.
  • Matching grants.
  • Market survey and research support.

Foreign Trade Zones/Free Ports/Trade Facilitation

The GIEPA Act provides for Export Processing Zones (EPZ) to be established in separate selected areas to which special customs territory status shall be conferred as well as for the establishment of single factory EPZs for which GIEPA will be the regulator.

An investor operating within an export processing zone that exports at least eighty percent of its output is exempted from the payment of:

  • Import or excise duty and sales tax on goods produced within or imported into an export processing zone unless the goods are entered for consumption into the customs territory;
  • Import duty on capital equipment;
  • Corporate or turnover tax; and
  • Municipal tax.

An investment enterprise located outside an export-processing zone that exports at least thirty percent of its output is entitled to the following incentives: a ten percent corporate or turnover tax concession for five years;

  • a ten percent corporate or turnover tax concession for five years;
  • participation in training courses, symposia, seminars and workshops on export promotion;
  • financial planning services and advice;
  • export market research;
  • advertisement and publicity campaigns in foreign markets; and
  • product design and consultancy.

Incentives for investors in the EPZ are valid for maximum period of ten years. Foreign-owned firms have the same investment opportunities as local companies.

Performance and Data Localization Requirements

The government mandates local employment. There is no legislation that applies this scheme to senior management and boards of directors. Foreigners can only represent up to 20 percent of the total number of employees of a company, with no distinction between management personnel and workers.

It is not difficult to obtain visas, residence and work permits or other requirements inhibiting mobility of foreign investors and their employees. The recruitment of foreigners is subject to annually renewed applications and payment of an expatriate quota tax, which varies for West African and non-West African employees. The Government of The Gambia restricts the ability of foreigners to invest in The Gambia to the extent that the GIEPA Act states that “a person shall not invest in or operate an investment enterprise which is prejudicial to national security, detrimental to the natural environment, public health, or public morality, or which contravenes the laws of The Gambia.”

There is no known legislation in the investment policy of The Gambia that follows “forced localization” production methods. There are no enforcement procedures for performance requirements. The Consumer Protection Act of 2014 prevents companies from freely transmitting customer or other business-related data outside The Gambia.

There are no known laws that require foreign IT providers to turn over source code and/or provide access to encryption to the local government. As mandated by the Competition Act of 2007 and the Consumer Protection Act of 2014, the GCCPC is the agency responsible for the enforcement of rules on local data storage within the country/economy. It also undertakes critical review of the Competition Act; subsidiary legislation and the GCCPC guidelines; performs all in-house legal advisory work required in the execution of GCCPC’s functions and represents GCCPC in all court and appeal proceedings. The GCCPC Enforcement Committee provides the agency with all the legal and enforcement expertise necessary for it to fulfill its mission of championing competition for growth and choice. Specifically, the Legal Committee Division takes the lead in enforcement action and applies rigorous legal analysis in all investigations and notifications under the Competition Act.

Georgia

4. Industrial Policies

Investment Incentives

The Georgian government has created several tools to support investment in the country’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 six billion USD 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 )

The government’s “Produce in Georgia” program is another tool for jointly financing foreign investment under which investors establish limited liability companies in Georgia. 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 its Entrepreneurship Development Agency, National Agency of State Property, and Technology and Innovation Agency of Georgia, the project provides access to finance, access to real property, and technical assistant to entrepreneurs

For more information please visit: http://enterprisegeorgia.gov.ge/en/home 

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

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 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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, and the Georgian government holds the remaining 25 percent. Poti FIZ, a 300-hectare area, benefits from its close proximity to the Poti Sea Port. www.potifreezone.ge .

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 USD two 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 and Data Localization Requirements

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 period of time. Performance requirements such as the scope and time limit on licenses to extract natural resources or production sharing agreements have triggered complaints from some companies that transactions lacked transparency. The U.S.-Georgia BIT prohibits certain performance requirements.

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. The government is aware of this oversight and Parliament plans to address this issue summer 2020. 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.dea.gov.ge ).

Germany

4. Industrial Policies

Investment Incentives

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 Trade & Invest, 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 .

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

In general, there are 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.

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 localization requirements for data storage in Germany.  However, in recent years German and European cloud providers have sought to market the domestic location of their servers as a competitive advantage.

Greece

4. Industrial Policies

Investment Incentives

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 modernize and 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:

  1. General Entrepreneurship
  2. Regional Cohesion
  3. Technological development
  4. Youth Entrepreneurship (18-40 years old)
  5. Large Investment Plans (above €50 million)
  6. Integrated, Multi-Annual Business Plans
  7. Partnership & Networking

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

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 to 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.

Research and Development

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

Investment Incentives

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.

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

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no foreign trade zones or free ports in Grenada.  However, there are various companies which offer duty free shopping for travelling customers.

Performance and Data Localization Requirements

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 $37 (100 Eastern Caribbean dollars) 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 $1,111 (3,000 Eastern Caribbean dollars) per year for renewal.

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

Investment Incentives

Guatemala’s main investment incentive programs are specified in law and are available countrywide 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 – 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.  Taxes are waived when the goods are re-exported.  The Free Trade Zone Law provides similar incentives to the incentive program described above, but its beneficiaries include only some services providers and a limited number of manufacturing activities such as apparel manufacturers and motorcycle assemblers.  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.

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 and a VAT exemption on all taxable transactions carried out within the free trade zone.  Incentives are available to local and foreign investors engaged on manufacturing and commercial activities as well as on the provision of services.

Foreign Trade Zones/Free Ports/Trade Facilitation

Decree 65-89, Guatemala’s Free Trade Zones Law and its amendments approved through Decree 19-2016, Law for Conservation of Employment, 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 November 2019, there were seven authorized FTZs operating in Guatemala.  Currently, services and a limited number of manufacturing activities are the only beneficiaries of Guatemala’s Free Trade Zones Law.  The Guatemalan Congress is considering amendments to the Free Trade Zones Law to reinstate tax incentives to some of the activities removed during the previous reform.

Performance and Data Localization Requirements

Guatemala does not impose performance, purchase, or export requirements, other than those normally associated with free trade zones and duty drawback programs.  The Labor Code requires that at least 90 percent of employees must be Guatemalan, but the requirement does not apply to high-level positions such as managers and directors.  Companies are not required to include local content in production.

Guatemalan companies do not require foreign IT providers to turn over source code and/or provide access to surveillance.  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 in the software license contract.

Guinea

4. Industrial Policies

Investment Incentives

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 are: 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 

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

Under the 2011 Mining Code, mining companies are required to have 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. The Development Center 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.

Guyana

4. Industrial Policies

Investment Incentives 

Investment Incentives are designed to advance broader policy goals, such as boosting research and development or promoting regional economies. Guyana’s economy is undergoing economic transformation. The current administration identified a green agenda through its Green State Development Strategy which seeks to develop a “green economy” through supporting sustainable sectors such as renewable energy, agriculture, and manufacturing. The GoG provides tax concessions for these priority sectors.

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 the Guyana Office for Investment (GO-INVEST). The purpose of GO-INVEST is to promote and encourage investment in Guyana. The GoG encourages investment in the following industries: agriculture and agro-processing, light manufacturing, and services.   Guyana was awarded the “Best Eco-Tourism Award at the ITB global travel fair in Berlin, Germany. Conde Nast Traveller magazine listed Guyana as one of its suggested 20 destinations to visit in 2020.  Research and Development

Research and Development

The GoG’s research and development is decentralized. For the rice industry, the Guyana Rice Development Board creates new variants of rice and the Guyana Sugar Corporation has an extensive program to create various variations of sugar cane. The Ministry of business has a business incubator program which supports the development of new entrepreneurs. University of Guyana is widely viewed as a major stakeholder in research and development. Foreign firms are encouraged to initiate research and development initiatives. ExxonMobil has developed partnerships with the University of Guyana and Conservation International for research and development.

Opportunities can be found on the following websites:

Guyana Office for Investment:  http://goinvest.gov.gy/investment/investment-guide/

The National Procurement & Tender Administration (NPTA):  http://www.npta.gov.gy/

National Industrial & Commercial Investment Limited: http://www.privatisation.gov.gy/

Ministry of Finance : https://finance.gov.gy/procurements/

Foreign Trade Zones/Free Ports/Trade Facilitation

Guyana does not operate free trade zones. However, consideration is ongoing for establishing such zones in Lethem, a Guyanese town on the Brazilian border that relies heavily on commerce in both countries. The GoG announced plans to build a road from Lethem to Georgetown to provide a cheaper and faster method for transporting goods from Brazil to the Guyanese coast.

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

Performance and Data Localization Requirements

There are no data localization requirements.  Foreign investors are not required to establish or maintain a certain amount of data storage within the country.

A requirement to hire locally at least 80 percent of employees is applied equally to domestic and foreign investment projects.  Although no explicit government policy regarding performance requirements exists, 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.

Haiti

4. Industrial Policies

Investment Incentives

In order to attract investment to certain industries, the Investment Code created a privileged status for some manufacturers. Foreign and Haitian investors enjoy equal protection under the Law. Under the Investment Code, eligible firms can benefit from 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 allows for a five- to ten-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.

For investments that match one or more of the criteria described above, the Haitian government provides customs duty and tax incentives. 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 a period of partial exemption that gradually decreases;
  • 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 fixed occupancy tax) for a period not exceeding 15 years;
  • Registration and transfer of the balance due for all deeds relating to purchase, mortgages, and collateral.

A FTZ has been established 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 American apparel companies lease factory space in this free zone. All the factories at CODEVI combined employ over 13,000 Haitians as of February 2020.

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 located near the town of Caracol in Haiti’s northeastern region. As of 2020, five companies are operating in the park: S&H Global, a South Korean company; MAS Holdings, a Sri Lankan company; Everest, a Taiwanese factory; and two Haitian companies, Peintures Caraibes and Sisalco. Altogether, these companies employ over 13,000 Haitians. S&H Global is the single largest private sector employer in Haiti.

In 2015, three major FTZ’s were added to the list: Agritrans, the first agricultural free trade zone in Haiti; Digneron, an entity of the Palm Apparel Group which also owns and operates the Palmiers free trade zone; and Lafito, a USD 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. The Lafito economic zone currently includes a cement plant, but the industrial park portion of the project is not yet operational.

Performance and Data Localization Requirements

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

Investment Incentives

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 and 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.

In October 2018 President Hernandez introduced legislation creating a number of new tax incentives to promote job growth for small and medium enterprises. The new laws entered into effect in November 2018 following publication in the official Gazette. The legislation provides access to credit and tax relief to encourage existing businesses to go through the formal registration process as well as encourage the creation of new companies. The legislation includes provisions granting tax exemptions on national and municipal taxes and reduced permitting and licensing fees for new businesses.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Honduran government does not provide direct export subsidies, but does offer tax exemptions to firms operating in a free trade zone. The Temporary Import Law 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). The government allows the establishment of export processing zones anywhere in the country. Companies operating in export processing zones are exempt from paying import duties and other charges on goods and capital equipment. In addition, the production and sale of goods within export processing zones are exempt from state and municipal income taxes for the first 10 years of operation. The government permits companies operating in an export processing zone unrestricted repatriation of profits and capital. Companies are required, however, to purchase the Lempiras needed for their local operations from Honduran commercial banks or from foreign exchange trading houses registered with the Central Bank.

Most industrial parks and export processing zones are located in the northern Department of Cortes, with close access to Puerto Cortes, Honduras’ major Caribbean port, and San Pedro Sula, Honduras’ largest commercial city. The government treats industrial parks and export processing zones as offshore operations, requiring companies to pay customs duties on products manufactured in the parks and sold in Honduras. In addition, the government treats Honduran inputs as exports, which companies must pay for in U.S. dollars. Most companies operating in these parks are involved in apparel assembly, though the government and park operators have begun to diversify into other types of light industry, including automotive parts and electronics assembly. Additional information on Honduran free trade zones and export processing zones is available from the Honduran Manufacturers Association (http://www.ahm-honduras.com/ ).

In 2013, the Government of Honduras signed a law to allow establishment of Economic Development and Employment Zones (ZEDEs) to boost job growth and attract foreign investment. Following a backlash from local and international NGOs concerned about labor rights, land issues, and environmental protection, the push for ZEDEs remained dormant until August 2017, when President Hernández revived the concept as a key job creation tool in conjunction with his reelection campaign.  In 2019, two companies received Government of Honduras (GOH) approval to move forward with ZEDE planning and development.

Performance and Data Localization Requirements

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. However, 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

Investment Incentives

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 that Hong Kong residents own shares, that foreign equity is reduced over time, or that technology is transferred on certain terms. The HKG does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

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.

The HKG offers an effective tax rate of around three to four percent to attract aircraft leasing companies to develop business in Hong Kong.

The HKG has set up multiple programs to assist enterprises in securing trade finance and business capital, expanding markets, and enhancing overall competitiveness. These support measures are available to any enterprise in Hong Kong, irrespective of origin.

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 120 billion (USD 15.3 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, Science Park, and Cyberport.

HKD 20 billion (USD 2.6 billion) has been earmarked for the Research Endowment Fund, which provides research grants to academics and universities.  Another HKD 10 billion (USD 1.3 billion) has been set aside to provide financial incentives to foreign universities to partner with Hong Kong universities and establish joint research projects housed in two research clusters in Science Park, one specializing in artificial intelligence and robotics and the other specializing in biotechnology.  Another HKD 20 billion (USD 2.6 billion) has been appropriated to begin construction on a second, larger Science Park, located on the border with Shenzhen, which is intended to provide a much larger number of subsidized-rent facilities for R&D which are also expected to have special rules allowing mainland residents to work onsite without satisfying normal immigration procedures.

In September 2018, the HKG launched the Technology Talent Admission Scheme (TechTAS) and the Postdoctoral Hub Program (PHP) to attract non-local talent and nurture local talent. The TechTAS provides a fast-track arrangement for eligible technology companies/institutes to admit overseas and mainland technology talent to undertake R&D for them in the areas of biotechnology, artificial intelligence, cybersecurity, robotics, data analytics, financial technologies, and material science are eligible for application. The PHP provides funding support to recipients of the ITF as well as incubatees and tenants of Science Park and Cyberport to recruit up to two postdoctoral talents for R&D. Applicants must possess a doctoral degree in a science, technology, engineering and mathematics-related discipline from either a local university or a well-recognized non-local institution.

The HKG will set up a USD 256.4 million Re-industrialization Funding Scheme in 2020 to subsidize manufacturers, on a matching basis, setting up smart production lines in Hong Kong.

In May 2018, the Hong Kong Monetary Authority (HKMA) launched the Pilot Bond Grant Scheme with enhanced tax concessions for qualifying debt instruments in order to enhance Hong Kong’s competitiveness in the international bond market.

In February 2020, the Financial Secretary announced that the HKG will inject USD 44 million for a pilot subsidy scheme to encourage the logistics industry to enhance productivity through the application of technology.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 is scheduled for completion by 2023.

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, Iceland, India, 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 CEPA has established principles of trade facilitation, including simplifying customs procedures, enhancing transparency, and strengthening cooperation.

Performance and Data Localization Requirements

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 demonstrate that a prospective employee has special skills, knowledge, or experience not readily available in Hong Kong.

Hong Kong allows free and uncensored flow of information.  The freedom and privacy of communication is enshrined in Basic Law Article 30. The HKG is required to follow due process and warrant requirements to engage in electronic surveillance or demand most communications records from telecoms providers. The HKG has no requirements for foreign IT providers to turn over source code and does not interfere with data center operations.

Hong Kong does not currently restrict transfer of personal data outside the SAR, but the dormant 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. Hong Kong’sSecurities and Futures Commission is considering new data storage rules for financial institutions.

Hungary

4. Industrial Policies

Investment Incentives

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 10 million Euro, or USD 11 million).  The incentives are designed to benefit investors who establish manufacturing facilities, logistics facilities, regional service centers, R&D facilities, 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 National Development (MND).  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.   For more information please see: https://hipa.hu/tovabbi-kedvezo-modositasok-a-vissza-nem-teritendo-tamogatasi-rendszerben .

Foreign Trade Zones/Free Ports/Trade Facilitation

Foreign trade zones were eliminated as a result of EU accession.

Performance and Data Localization Requirements

Hungary does not mandate local employment.  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 2019, for investments in certain strategic sectors including the military, intelligence, public utilities, financial services and electronic information systems, the Ministry of Interior issues investments 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 as regards transfer of personal data outside the economy. Storage of personal data is regulated by a data protection law and it is 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) rules 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

Investment Incentives

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.”  For information on incentives for foreign investors see Invest in Iceland’s website: (https://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.stjornarradid.is/library/01–Frettatengt—myndir-og-skrar/ANR/Act-on-incentives-for-initial-investments-in-Iceland-English-2015.pdf ).

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 ).

Foreign Trade Zones/Free Ports/Trade Facilitation

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

Performance and Data Localization Requirements

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/ ).

Iceland is a member of the EEA, allowing residents from any EEA country to work in Iceland.  For residents of third countries, a resident permit is required for anyone staying in Iceland for more than three months.  Please see the Icelandic Directory of Immigration web page for further information:  (http://www.utl.is/index.php/en/ ).

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 are directed to open new sectors for foreign direct investment, increase the sectoral limit of existing sectors and simplifying other conditions of the FDI policy.  The Indian government does issue guarantees to investments but only in case of strategic industries.

Foreign Trade Zones/Free Ports/Trade Facilitation

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).  In 2018, the Indian government 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 headed by a government official.  So far, three NIMZs have been accorded final approval and 13 have been accorded in-principle approval.  In addition, eight investment regions along the Delhi-Mumbai Industrial Corridor (DIMC) have also been 12 established as NIMZs.  SEZs are treated as foreign territory; businesses operating within SEZs are not subject to customs regulations, nor have FDI equity caps.  They also receive exemptions from industrial licensing requirements and enjoy tax holidays and other tax breaks.  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 the following: 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. 

Performance and Data Localization Requirements

Preferential Market Access (PMA) for government procurement has created substantial challenges for foreign firms operating in India.  State-owned “Public Sector Undertakings” and the government accord 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 complaint procedure. There would be a complaint fee of INR 200,000 ($3000) or one percent of the value of the Domestically Manufactured Electronic Product being procured, subject to a maximum of INR 500,000 ($7500), 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. 

Research and Development

The Government of India allows for 100 percent FDI in research and development through the automatic route.

Data Storage & Localization

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 the 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 affects 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.  U.S. payments companies have been able to implement the mandate for the most part, though at great cost and potential damage to the long-term security of their Indian customer base, which will receive fewer services and no longer benefit from global fraud detection and AML/CFT protocols.  Similarly, U.S. banks have been able to comply with RBI’s expanded mandate, though incurring significant compliance costs and increased risk of cybersecurity vulnerabilities.

In addition to the RBI data localization directive for payments companies and banks, the government formally introduced its draft Data Protection Bill in December 2019, which contains restrictions on all cross-border transfers of personal data in India.  The Bill is currently under review by a Joint Parliamentary Committee and stipulates that personal data that is considered “critical” can only be stored in India.  The Bill is based on the conclusions of a ten-person Committee of Experts, established by MeitY in July 2017.

Indonesia

4. Industrial Policies

Investment Incentives

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. As part of the Economic Policy Package XVI, Indonesia issued a modified tax holiday scheme in November 2018 through Ministry of Finance (MOF) Regulation 150/2018, which revokes MOF Regulation 35/2018.  This regulation is intended to attract more direct investment in pioneer industries and simplify the application process through the OSS. The period of the tax holiday is extended up to 20 years; the minimum investment threshold is IDR 100 billion (USD 6.6 million), a significant reduction from the previous regulation at IDR 500 billion (USD 33 million). In addition to the tax holiday, depending on the investment amount, this regulation also provides either 25 or 50 percent income tax reduction for the two years after the end of the tax holiday. The following table explains the parameters of the new scheme:

Provision New Capital Investment IDR 100 billion to less than IDR 500 billion New Capital Investment IDR more  than IDR 500 billion
Reduction in Corporate Income Tax Rate 50% 100%
Concession Period 5 years 5-20 years
Transition Period 25% Corporate Income Tax Reduction for the next 2 years 50% Corporate Income Tax Reduction for the next 2 years

Based on BKPM Regulation 1/2019 as amended by BKPM Regulation 8/2019, the coverage of pioneer sectors was expanded to the digital economy, agricultural, plantation, and forestry, bringing the total to eighteen industries:

  1. Upstream basic metals;
  2. Oil and gas refineries;
  3. Petrochemicals derived from petroleum, natural gas, and coal;
  4. Inorganic basic chemicals;
  5. Organic basic chemicals;
  6. Pharmaceutical raw materials;
  7. Semi-conductors and other primary computer components;
  8. Primary medical device components;
  9. Primary industrial machinery components;
  10. Primary engine components for transport equipment;
  11. Robotic components for manufacturing machines;
  12. Primary ship components for the shipbuilding industry;
  13. Primary aircraft components;
  14. Primary train components;
  15. Power generation including waste-to-energy power plants;
  16. Economic infrastructure;
  17. Digital economy including data processing; and
  18. Agriculture, plantation, and forestry-based processing

Government Regulation No. 9/2016 expanded regional tax incentives for certain business categories in 2016. Apparel, leather goods, and footwear industries in all regions are now eligible for the tax incentives. In this regulation, existing tax facilities are maintained, including:

  • Deduction of 30 percent from taxable income over a six-year period
  • Accelerated depreciation and amortization
  • Ten percent of withholding tax on dividend paid by foreign taxpayer or a lower rate according to the avoidance of double taxation agreement
  • Compensation losses extended from 5 to 10 years with certain conditions for companies that are:
    1. Located in industrial or bonded zone;
    2. Developing infrastructure;
    3. Using at least 70 percent domestic raw material;
    4. Absorbing 500 to 1000 laborers;
    5. Doing research and development (R&D) worth at least 5 percent of the total investment over 5 years;
    6. Reinvesting capital; or,
    7. Exporting at least 30 percent of their product.

On March 31, 2020, Indonesia issued Government Regulation in Lieu of Law No. 1 of 2020 on State Financial Policy and the Stability of Financial Systems for the Handling of the Coronavirus Disease 2019 Pandemic (Perppu 1/2020). Among its provisions are plans to regulate electronic based trading activity (e-trading) and to charge value-added taxes (VAT) on taxable intangible goods and services from foreign e-commerce parties and other highly-digitalized businesses. Income tax will also be imposed upon foreign e-commerce parties that are judged to meet a “significant economic presence” threshhold, based on consolidated gross circulation of a business group, total sales value, or active Indonesian users. The regulation also introduces an electronic transaction tax (ETT) that will be imposed on foreign entities that are subject to income tax obligations under the aformentioned threshhold but would not otherwise be subject to corporate income tax in Indonesia in the absence of a permanent establishment, where taxing such transactions is prohibited by bilateral tax treaties.  Industry representatives have expressed concern that such provisions seek to circumvent bilateral tax treaties intended to avoid double taxation, including the tax treaty between Indonesia and the United States.  They have also noted a lack of clarity over the Perppu’s implementation and concerns over administrative sanctions and the high cost to comply with new measures.  The new regulation will also also cut the corporate income tax rate, lowering it to 22 percent for 2020 and 2021, and to 20 percent for 2022. 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.

The government provides the facility of Government-Borne Import Duty (Bea Masuk Ditanggung Pemerintah /BMDTP) with zero percent import duty to improve industrial competitiveness and public goods procurement in high value added, labor intensive, and high growth sectors. MOF Regulation 12/2020 provides zero import duty for imported raw materials in 36 sectors including plastics, cosmetics, polyester, resins, other chemical materials, machinery for agriculture, electricity, toys, vehicle components including for electric vehicles, telecommunications, fertilizers, and pharmaceuticals until December 2020.

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 86/2020 streamlined licensing requirement 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.

 At present, Indonesia does not have formal regulations granting national treatment to U.S. and other foreign firms participating in government-financed or subsidized research and development programs. The Ministry of Research and Technology handles applications on a case-by-case basis.

Indonesia’s vast natural resources have attracted significant foreign investment over the last century and continues to offer significant prospects. However, some companies report that a variety of government regulations have made doing business in the resources sector increasingly difficult, and Indonesia now ranks 64th of 76 jurisdictions in the Fraser Institute’s 2019 Mining Policy Perception Index. In 2012, Indonesia banned the export of raw minerals, dramatically increased the divestment requirements for foreign mining companies, and required major mining companies to renegotiate their contracts of work with the government. A ban on the export of raw minerals went into effect in January 2014. However, in July 2014, the government issued regulations that allowed, until January 2017, the temporary export of copper and several other mineral concentrates with export duties and other conditions imposed. When the full export ban came back into effect in January 2017, the government again issued new regulations that allowed exports of copper concentrate and other specified minerals, but imposed more onerous requirements. Of note for foreign investors, provisions of the regulations require that to be able to export non-smelted mineral ores, companies with contracts of work must convert to mining business licenses—and thus be subject to prevailing regulations—and must commit to build smelters within the next five years. Also, foreign-owned mining companies must gradually divest 51 percent of shares to Indonesian interests over ten years, with the price of divested shares determined based on a “fair market value” determination that does not take into account existing reserves. In January 2020, the government banned the export of  nickel ore for all mining companies, foreign and domestic, in the hopes of encouraging construction of domestic nickel smelters. The 2009 mining law devolved the authority to issue mining licenses to local governments, who have responded by issuing more than 10,000 licenses, many of which have been reported to overlap or be unclearly mapped. In the oil and gas sector, Indonesia’s Constitutional Court disbanded the upstream regulator in 2012, injecting confusion and more uncertainty into the natural resources sector. Until a new oil and gas law is enacted, upstream activities are supervised by the Special Working Unit on Upstream Oil and Gas (SKK Migas).

During President Jokowi’s first term, the Indonesian government invested more than  USD 350 billion in infrastructure to connect Indonesia’s more than 17,000 islands. The investments included toll roads, seaports, airports, power generation, telecommunications, and upgrades to Indonesia’s social infrastructure, such as, clean water and sanitation, and housing projects.  President Jokowi has emphasized that he will continue this infrastructure program during his second five-year term, aiming to increase Indonesia’s infrastructure stock from 43 percent of GDP in 2019 to 50 percent in 2024.

Despite high-level attention from Indonesian policymakers, many U.S. companies and investors report that the current institutional arrangement for infrastructure development still suffers from functional overlap, lack of capacity for public-private partnership (PPP) projects in regional governments, lack of solid value-for-money methodologies, crowding out of the private sector by state-owned enterprises (SOEs), legal uncertainty, lack of a solid land-acquisition framework, long-term operational risks for the private sector, unwillingness from stakeholders to be the first ones to test a new policy approach, corruption, and a relatively small Indonesian private sector. As a result of these challenges, the World Bank estimates that Indonesia faces a USD 1.5 trillion infrastructure gap in comparison to other emerging market economies.

Foreign Trade Zones/Free Trade/ Trade Facilitation

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, located just south of Singapore. Neighboring Bintan Island and Karimun Island also enjoy FTZ status. 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 of the zone for a maximum two-year period.

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 a reduction of corporate income taxes for a period of years (depending on the size of the investment), income tax allowances, luxury tax, customs duty and excise, and expedited or simplified administrative processes for import/export, expatriate employment, immigration, and licensing. As of  February 2020, Indonesia has identified fifteen SEZs in manufacturing and tourism centers that are operational or under construction. Eleven SEZs are operational (though development is sometimes limited) at: 1) Sei Mangkei, North Sumatera; 2) Tanjung Lesung, Banten; 3) Palu, Central Sulawesi; 4) Mandalika, West Nusa Tenggara; 5) Arun Lhokseumawe, Aceh; 6) Galang Batang, Bintan, Riau Islands; 7) Tanjung Kelayang, Pulau Bangka, Bangka Belitung Islands; 8) Bitung, North Sulawesi; 9) Morotai, North Maluku; 10) Maloy Batuta Trans Kalimantan, East Kalimantan; and 11) Sorong, Papua. Four more SEZs are under construction: Tanjung Api-Api, South Sumatera; Singhasari, East Java; Kendal, Central Java; and Likupang, North Sulawesi. In 2016, the government began the process of transitioning Batam from an FTZ to SEZ in order to provide further investment incentives. The Indonesian government announced in December 2018 that it plans to transition management of the Batam FTZ to the local government, creating a single regulatory authority on the island. The conversion to an SEZ is still ongoing  and will not affect the status of the neighboring FTZs on Bintan and Karimun islands.

Indonesian law also provides for several other types of zones that enjoy special tax and administrative treatment.  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 103 industrial estates that host thousands of industrial and manufacturing companies.  Ministry of Finance Regulation No. 105/2016 provides several different tax and customs facilities 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 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 designate more in eastern Indonesia.  In 2018, Ministry of Finance and the Directorate General for Customs and Excise (DGCE) issued regulations (MOF Regulation No. 131/2018 and DGCE Regulation No. 19/2018) 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.  Under MOF Regulation 120/2013, bonded zones have a domestic sales quota of 50 percent of the preceding 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 areas are only allowed for further processing to become capital goods, and to companies which have a license from the economic area organizer for the goods relevant to their business.

Performance and Data Localization Requirements

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 management of foreign companies. 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. Under Presidential Regulation No. 20/2018, issued in March 2018, the Ministry of Manpower now has two days to approve a complete RPTKA application, and an RPTKA is not required for commissioners or executives. An RPTKA’s validity is now based on the duration of a worker’s contract (previously it was valid for a maximum of five years). The new regulation no longer requires expatriate workers to go through the intermediate step of obtaining a Foreign Worker Permit (IMTA). Instead, 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. Regulation No. 20/2018 also abolished the requirement for all expatriates to receive a technical recommendation from a relevant ministry. However, ministries may still establish technical competencies or qualifications for certain jobs, or prohibit the use of foreign worker 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.

Regulation No. 20/2018 provides for short-term working permits (maximum six months) for activities such as conducting audits, quality control, inspections, and installation of machinery and electrical equipment. Ministry of Manpower issued Regulation No.10/2018 to implement Regulation 20/2018, revoking its Regulation No. 16/2015 and No. 35/2015. Regulation 10/2018 provides additional details about 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 a fund for local manpower training at regional manpower offices. The Ministry of Manpower issued Decree 228/2019 to widen the number of jobs open for foreign workers across 18 sectors, ranging from construction, transportation, education, telecommunication, and professionals. Foreign workers  have to obtain approval from Manpower Minister or designated officials for applying positions not listed in the decree. Some U.S. firms report difficulty in renewing KITASs for their foreign executives. In February 2017, the Ministry of Energy and Natural resources abolished regulations specific to the oil and gas industry, bringing that sector in line with rules set by the Ministry of Manpower.

With the passage of a defense law in 2012 and subsequent implementing regulations in 2014, Indonesia established a policy that imposes offset requirements for procurements from foreign defense suppliers. Current laws authorize Indonesian end users to procure defense articles from foreign suppliers if those articles cannot be produced within Indonesia, subject to Indonesian local content and offset policy requirements. On that basis, U.S. defense equipment suppliers are competing for contracts with local partners. The 2014 implementing regulations still require substantial clarification regarding how offsets and local content are determined. According to the legislation and subsequent implementing regulations, an initial 35 percent of any foreign defense procurement or contract must include local content, and this 35 percent local content threshold will increase by 10 percent every five years following the 2014 release of the implementing regulations until a local content requirement of 85 percent is achieved. The law also requires a variety of offsets such as counter-trade agreements, transfer of technology agreements, or a variety of other mechanisms, all of which are negotiated on a per-transaction basis. The implementing regulations also refer to a “multiplier factor” that can be applied to increase a given offset valuation depending on “the impact on the development of the national economy.” Decisions regarding multiplier values, authorized local content, and other key aspects of the new law are in the hands of the Defense Industry Policy Committee (KKIP), an entity comprising Indonesian interagency representatives and defense industry leadership. KKIP leadership indicates that they still determine multiplier values on a case-by-case basis, but have said that once they conclude an industry-wide gap analysis study, they will publish a standardized multiplier value schedule. According to government officials, rules for offsets and local content apply to major new acquisitions only, and do not apply to routine or recurring procurements such as those required for maintenance and sustainment.

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 October 10, 2019, Indonesia issued Government Regulation No. 71 (GR71) to replace Regulation No. 82/2012 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 supervision authority. Private ESOs are individuals, businesses and communities that operate electronic system. Public ESOs are required to manage, process, and store their data in Indonesia, unless the storing 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 choose to process data outside of Indonesia, they are required to provide access to their systems and data for government supervision and law enforcement purposes. For private financial sector ESOs, GR71 provides  that such firms are “further regulated” by Indonesia’s financial sector supervisory authorities with regards to the private sector’s ESO systems, data processing, and data storage.

In March 2020, the Ministry of Communication and Information Technology (MCIT) published a proposed draft implementing regulation of GR 71 for private ESOs. Article 6 of the draft requires private ESOs to obtain approval from MCIT before they can manage, process, and store their data outside of Indonesia. This provision has been widely criticized by foreign firms and is more restrictive than the original government regulation (GR71) which allows offshore data storage. Post continues to monitor this issue.

Additionally, pursuant to GR71, the Financial Services Authority (OJK) issued Regulation 13/2020, an amendment to Regulation 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.  Furthermore, OJK will evaluate whether the arrangement for offshore data could diminish its supervisory efficiency, negatively affect the bank’s performance, and if the data center complies with Indonesia’s laws and regulations. The regulation became effective March 31, 2020.

Iraq

4. Industrial Policies

Investment Incentives

The Iraqi Investment Law offers foreign investors several exemptions for qualified investments, including a ten-year exemption from taxes, exemptions from import duties for the 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 are able to 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, the GCT. Foreign and domestic companies that have registered businesses in order 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 is included in GOI petroleum contracts with the Ministry of Oil and applies to each consortium and its partners. The Council of Ministers ratified the contract language, which supersedes the Tax Code. Secondary contracts that a consortium issued are treated differently. The consortium is required to withhold 7 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. Additionally, the law allows an investor to transfer his investment totally or partially to another foreign investor with the approval of the BOI.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 into 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.

In the IKR, there are currently no FZs. The KRG has approved plans for zones in all IKR provinces.

Performance and Data Localization Requirements

Iraqi labor law describes two categories of workers: local Iraqis and foreign workers whom the GOI other Iraqi entities employ. The Investment Law stipulates that 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 Ministry of Interior, 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. The appointment of foreign nationals as managers of foreign-owned limited liability companies requires additional clearances.

Foreign investors can apply for a visa at Iraqi embassies, or in some cases, through the NIC. In other cases, investors can apply for and receive visa approval letters from the Ministry of Interior, which grants visa upon arrival to one of Iraq’s airports. An Iraqi government entity must sponsor a foreign investor and provide him/her with an official invitation letter. Obtaining visas for foreign contractors regularly takes several months and allegations of corruption are commonplace. Business travelers are supposed to be granted a one-year, multiple-entry visa, although sometimes Iraqi embassies outside of the United States grant shorter visa duration to U.S. citizen applicants.

Once in Iraq, foreign investors and employees must obtain work permits, the process for which is often lengthy and unpredictable. There are frequent instances when work or business travel is delayed because foreign employees are unable to receive a visa.

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 the travel is shorter than 15 days.

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

Investment Incentives

Three Irish organizations – IDA Ireland, 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 that seek 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 kept 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 will 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 period of time 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 current EU Regional Aid Guidelines (RAGs) that apply to Ireland operate through 2020.  The RAGs govern the maximum grant aid the Irish government can provide to firms/businesses, which are graded based on their location.  The differences in the various aid ceilings reflect the less developed status of business/infrastructure in regions outside the greater Dublin area.

While investors are free, subject to planning permission, to choose the location of their investment, IDA Ireland has actively encouraged investment in regions outside Dublin since the 1990s.  Investment regionalization became Irish government policy in 2001, officially seeking to spread investment more evenly around the country.  The IDA Ireland’s strategy targets locating over 50 percent of all new FDI investments outside the two main urban centers of Dublin and Cork.  In an effort to encourage the location of firms outside Dublin, IDA Ireland has developed “magnets of attraction”, providing cluster areas of activity around the country and supported construction of business parks in counties Galway and Louth, especially for the biotechnology sector.

There are no restrictions, de jure or de facto, 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 is investing over USD 200 million annually in R&D activities.  SFI is targeting 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 Ireland’s universities 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 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.  A number of 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government established Shannon duty-free Processing Zone under legislation in 1957.  Back then, firms operating in the area were entitled to a number of taxation and duty-free benefits not available elsewhere in Ireland.  Nowadays, all firms in Ireland are now treated equally and the Shannon Free Zone (SFZ) as it is now called, continues to operate albeit without any additional taxation 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.  The following U.S. companies are located in SFZ:  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, Molex, 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.

The Shannon Group currently operates the SFZ, as well as Shannon Airport.

Performance and Data Localization Requirements

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 follow forced 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 data centers in Ireland.

Israel

4. Industrial Policies

Investment Incentives

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. Israel’s Ministry of Economy places a priority on investments in hi-tech companies and R&D activities.

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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: http://economy.gov.il/English/InternationalAffairs/ForeignTradeAdministration/Pages/RegionalCooperation.aspx

Israel has one free trade zone, the Red Sea port city of Eilat. More information on the Eilat Free Zone is available at: http://economy.gov.il/English/Industry/DevelopmentZoneIndustryPromotion/ZoneIndustryInfo/Pages/EilatNShachoret.aspx

Performance and Data Localization Requirements

There are no universal performance requirements on investments, but “offset” requirements are often included in sales contracts with the government. In some sectors, there is a requirement that Israelis own a percentage of a company. 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

Investment Incentives

The GOI offers modest incentives to encourage private sector investment in targeted sectors (e.g., innovative companies) and economically depressed regions, particularly in southern Italy. The incentives are available to eligible foreign investors as well.  Incentives include grants, low-interest loans, 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 that 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.

In January 2018, the GOI also provided “super amortization” and “hyper amortization” (essentially, generous tax deductions) on investments in special areas of the economy.  Of these only “hyper amortization” was renewed in the 2019 budget law.  The GOI has been considering reintroducing the “super amortization” by decree law  in order to stimulate investment.  The GOI has not yet renewed the broader “Industry 4.0” initiative launched by the previous government in 2017 to improve the Italian industrial sector’s competitiveness through a combination of policy measures and research and infrastructure funding.

The Italian tax system does not generally discriminate between foreign and domestic investors, though the digital services tax implemented by Parliament in December 2019 and now accruing on companies subject to the tax, likely will have a significant impact on certain U.S. companies, and affect some Italian media companies, as well.  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.

Foreign Trade Zones/Free Ports/Trade Facilitation

The main free trade zone in Italy is located in Trieste, in the northeast.  The goods brought into the zone may undergo transformation free of any customs restraints.  An absolute exemption is granted from any duties on products coming from a third country and re-exported to a non-EU country.  Legislation to create other FTZs in Genoa and Naples exists, but has yet to be enacted.  A free trade zone operated in Venice for a period but is currently being restructured.

Italy’s “for the South” law (Laws 91of 2017 and amended by Law 123 of 2017) allowed for the creation of eight Special Economic Zones (ZES – Zone Economica Speciale) managed by port authorities in Italy’s less-developed south and islands (the regions of Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily).  Investors will be able to access up to EUR 50 million in tax breaks, hiring incentives, reduced bureaucracy, and reimbursement of the IRAP regional business tax, covered by national allotments of EUR 250 million annually through 2022.  The GOI announced plans to increase the allotment to EUR 300 million, but the increase has not passed into law yet.  The Region of Campania was the first ZES to become operational. The Naples ZES 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 are not automatic as investments must be approved by local government bodies in a procedure governed by the Port Authority of the Central Tyrrhenian Sea.  The Campania Region forecasts that the ZES will create and/or save between 15 and 30 thousand jobs.  A ZES encompassing the port cities of Bari and Brindisi on the Adriatic finished its approval procedure in late 2019, followed by a ZES based around the transshipment port of Gioia Tauro in Calabria.  The zones of the remaining five regions: eastern Sicily (Augusta, Catania, and Siracusa); western Sicily (Palermo); Sardinia (Cagliari); ZES Ionica (Taranto in Puglia and the region of Basilicata); and a ZES to be shared between the ports in Abruzzo and Molise received local approval in 2020.

A special free trade zone was established in late 2015 in the areas within the Emilia-Romagna region that were hit by a May 2012 earthquake and by a January 2014 flood.  The measure aimed to assist the recovery of these areas through tax exemptions amounting to EUR 39.6 million for the years 2015 and 2016 for small enterprises headquartered in these areas.

Currently, goods of foreign origin may be brought into Italy without payment of taxes or duties, as long as 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.

Performance and Data Localization Requirements

Italy does not mandate local employment.  Non-EU nationals who would like to establish a business in Italy must have a valid residency permit or be nationals of a country with reciprocal arrangements, such as a bilateral investment agreement, as described at: https://www.esteri.it/mae/en/servizi/stranieri/ .

Work permits and visas are readily available and do not inhibit the mobility of foreign investors.  As a member of the Schengen Area, Italy typically allows short-term visits (up to 90 days) without a visa.  The Italian Ministry of Foreign Affairs has specific information about visa requirements:  http://vistoperitalia.esteri.it/home/en .

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.  Companies transmitting customer or other business-related data within or outside of the EU must comply with relevant EU privacy regulations.

Jamaica

4. Industrial Policies

Investment Incentives

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.

(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.

(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.

(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.

(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.

Research and Development

Foreign firms are allowed to participate in GOJ-financed or subsidized research and development, however, few opportunities exist for such programs.

Government Guarantee and Private-Public Partnership

The GOJ, through the PDMA of 2012, reduced the tendency of government to provide sovereign guarantees on loans, which often had to be converted into public debt. The debt reduction imperatives built into successive IMF programs further stymied this propensity.

The GOJ, however, continues to actively encourage FDI utilizing the Public-Private Partnership (PPP or P3) model, to attract private financing. Jamaica has successfully implemented a number of PPP projects to include the divestiture of the Kingston Freeport Terminal, the Sangster International Airport in Montego Bay, and Norman Manley International Airport in Kingston. Jamaica seeks to expedite the divestment of government assets through PPPs and public listings in order to drive private capital to otherwise stagnant government assets.

Foreign Trade Zones/Free Ports/Trade Facilitation

As of February 2020, there were 131 entities in Jamaica’s Special Economic Zones (SEZ), most of which transitioned from Free Trade Zones. Free Zone companies which have not transitioned fully into the SEZ regime have until June 2020 to submit applications. Operations in Jamaica’s SEZs include business process outsourcing (BPO); warehousing and distribution; manufacturing; logistics; and merchandising. 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.

Performance and Data Localization Requirements

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

Investment Incentives

The Japan External Trade Organization (JETRO) maintains an English-language list of national and local investment incentives available to foreign investors on their website: https://www.jetro.go.jp/en/invest/incentive_programs/ .

Foreign Trade Zones/Free Ports/Trade Facilitation

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.  Any exceptions approved by the central government can be implemented by other NSSZs in addition to the requesting zone.   A revision that would add “advanced data technologies” as one of targeted growth areas for NSSZs is pending Diet approval as of May 1, 2020.   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.

Performance and Data Localization Requirements

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

Investment Incentives

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. JIC can provide investors with further information on these exemptions (https://www.jic.gov.jo/en/incentives-outside-the-dz-and-fz/ ). 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 Jordan Investment Commission 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 in the Kingdom. Under this article, the cabinet granted additional incentives to the ICT, tourism, and transport sectors in 2016, as published in the Official Gazette.

Net profits generated from most exports were exempt from income tax until December 2018. The new Income Tax Law No. 38 (2018) imposed taxes on income generated from exports, in accordance with WTO agreements.

In October 2019, the government announced an economic stimulus package granting direct incentives to investors in industrial and commercial sectors, offering cash incentives for companies that replace foreign laborer with Jordanian staff, and covering health insurance for employees and their families.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 2014 investment law merged the Development and Free Zones Commission (DFZC) into the newly formed Jordan Investment Commission, an independent 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.

As part of Jordan’s efforts to foster economic development and enhance its investment climate, the government has created four industrial estates in Amman, Irbid, Karak, 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 private 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 has announced plans for new specialized development zones in a number of governorates including two solar parks in Ma’an and Ajloun, and four new industrial parks in Salt, Madaba, Tafileh, and Jarash.

Under Investment Law No. 30 of 2014, establishments operating within Development Zones are subject to a unified tax rate of 5 percent. However, Income Tax Law No. 38 of 2018 modifies 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 ny activities 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 (ASEZ) 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, ASEZ has attracted projects, mainly in hotel and property development sectors, valued at over USD 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, initiated in 2010, became operational November 2018, reaching design capacity in 2019. The new port, 20 km 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, either 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.

For further details, please visit:

  • Jordan Investment Commission (http://www.jic.gov.jo/)
  • Jordan Industrial Estate Corporation (http://www.jiec.com)
  • Aqaba Special Economic Zone (http://www.aqabazone.com/)

Performance and Data Localization Requirements

Jordan has a well-educated and trained labor force of 2.5 million people, of which approximately 700,000 are registered foreign workers. Unregistered foreign workers may be nearly double this number. Most foreign laborers are employed in construction, agriculture, and domestic housekeeping sectors. Approximately 70,000 also work in the QIZs as textile workers.

The Ministry of Labor regulates foreign worker licensing, licensing fees, prohibited sectors, and employer liability. Along with the Ministry of Interior, the Ministry of Labor is responsible for approving the hiring of professional foreign workers by private businesses.

Official unemployment reached 20 percent at the end of 2019, leading the Ministry of Labor to announce new labor regulations aimed at creating jobs for Jordanian youth through the dismissal of foreign labor by 2024. New regulations stipulate increases in permit fees for non-Jordanians and closure of certain jobs to foreign employment altogether.

In February 2020, the government issued Industrial Sector Incentives Bylaw No. 18 granting incentives to industries that employ female Jordanian laborersg and whose finished products contain at least 30 percent local content.

Jordan does not have requirements for foreign IT providers to turn over source code or provide access to surveillance.

Kazakhstan

4. Industrial Policies

Investment Incentives

The government’s primary industrial development strategies, such as the Concepts for Industrial and Innovative Development  2020-2025 and the National Investment Strategy for 2018-2022, aim to diversify the economy from its overdependence on extractive industries.  The Entrepreneurial Code and Tax Code provide tax preferences, customs duty exemptions, investment subsidies, and in-kind grants as incentives for foreign and domestic investment in priority sectors.  Priority sectors include agriculture, metallurgy, extraction of metallic ore, chemical and petrochemical industry, oil processing, food production, machine manufacturing, and renewable energy.  Firms in priority sectors receive tax and customs duty waivers, in-kind grants, investment subsidies, and simplified procedures for work permits.  The government’s preference system applies to new and existing enterprises.  The duration and scope of preferences depends on the priority sector and the size of investment.  All information on priority sectors and preferences is available at: https://invest.gov.kz/doing-business-here/regulated-sectors/ .

The Investment Committee at the Ministry of Foreign Affairs makes decisions on each incentive on a case-by-case basis.  The law also allows the government to rescind incentives, collect back payments, and revoke an investor’s operating license if an investor fails to fulfill contractual obligations.

Potential investors can apply for preferences through the government’s single window portal; these are special offices for serving investors, located in the capital and at district service centers in every region of Kazakhstan.  Submission for investment preferences requires a number of documents, including a comprehensive state appraisal of a proposed investment project.  More information is available here:  https://invest.gov.kz/invest-guide/  and at https://irm.invest.gov.kz/en/support/ 

A governmental guarantee or joint government financing are normally used for large infrastructure projects.

To facilitate the work of foreign investors, especially in targeted, non-extractive industries, the government has approved visa-free travel for citizens of 73 countries, including the United States, Germany, Japan, United Arab Emirates, France, Italy, and Spain.  Residents of these countries may stay in Kazakhstan without visas for up to 30 days.  The government has temporary suspended these rules due to the COVID-19 pandemic.

Since January 2019, foreigners may obtain business, tourist, and medical treatment visas to Kazakhstan online at: www.vmp.gov.kz . Electronic tourist visas are available for citizens of 117 counties; business and medical treatment visas can be issued electronically for citizens of 23 countries.  This system is applicable only for visitors who have letters of invitation and enter Kazakhstan through the Nur-Sultan or Almaty airports.  Businesses registered in the AIFC have a relaxed entry visa regime, allowing them to obtain entry visas upon arrival at the airport and to obtain five-year visas for employees.

Starting from 2020, the government introduced a more liberal regime for visa regulation violations.  Now, foreign visitors are permitted to only pay administrative fines for first and second violations.  The government is currently considering a bill on changes to tax legislation and further improvement of the investment climate.  The bill is expected to introduce new measures to facilitate business activity, including expanded access to investment tax credits, lowered thresholds for tax preferences for investments in the textile industry,  measures designed to stimulate public-private partnership development, and procedures for non-resident foreign investors to register businesses in Kazakhstan remotely.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 Eurasian Economic Union rules.  A system of tax preferences exists for foreign and domestic enterprises engaged in prescribed economic activities in Kazakhstan’s thirteen SEZs.  In April 2019, President Tokayev signed amendments which extend the rights of SEZ managing companies and set up a single center to coordinate the activities of all SEZs and industrial zones in Kazakhstan.

Performance and Data Localization Requirements

The government requires businesses to employ local labor and use domestic content, though the country’s WTO accession commitments provide for abolition of most local content requirements over time.  In 2015, Kazakhstan adopted legislative amendments to alter existing local content requirements to meet accession requirements.  Pursuant to these amendments, subsoil use contracts concluded after January 1, 2015 no longer contain local content requirements, and any local content requirements in contracts signed before 2015 will phase out on January 1, 2021.

Kazakhstan’s WTO accession terms require that Kazakhstan relax limits on foreign nationals by increasing the “quota” for foreign nationals to 50 percent (from 30 percent for company executives and from 10 percent for engineering and technical personnel) by January 1, 2021.

Despite these commitments, the government, particularly at the regional level, continues to advocate for international businesses to increase their use of local content.  The USD 36.8 billion investment into the Tengiz oilfield by Tengizchevroil includes an agreement that 32 percent of total investment will be used to procure local content.  The Ministry of Energy announced in March 2017 that foreign companies providing services for the oil and gas sector would need to create joint ventures with local companies to continue to receive contracts at the country’s largest oilfields.  Although these recommendations are not legally binding, companies report feeling obliged to abide by them.  Some companies reported these forced joint ventures or consortia led to the creation of domestic monopolies, rather than to the stimulation of a healthy domestic market of oil service providers.  For example, the Ministry of Energy and the Karachaganak Petroleum Operating Consortium reportedly agreed that a Kazakhstani design research company would carry out at least 50 percent of the design work at the Karachaganak expansion project.

The government regulates foreign labor at the macro and micro levels.  Foreign workers must obtain work permits, which have historically been difficult and expensive to obtain.  Amendments to the Expatriate Workforce Quota and Work Permit Rules: (a) eliminate special conditions for obtaining a work permit for foreign labor (e.g. requirements to train local personnel or create additional vacancies); (b) eliminate the requirement that companies conduct a search for candidates on the internal market prior to applying for a work permit; (c) reduce the timeframe for issuance or denial of work permit from 15 to 7 days; (d) eliminate the required permission of local authorities for the appointment of CEOs and deputies of Kazakhstani legal entities that are 100 percent owned by foreign companies; and (e) expand the list of individuals requiring no permission from local authorities (including non-Kazakhstani citizens working in national holding companies as heads of structural divisions and non-Kazakhstani citizens who are members of the board of directors of national holding companies).

The Ministry of Energy, Ministry of Industry and Infrastructure Development, and Sovereign Welfare Fund Samruk-Kazyna monitor firms compliance with local content obligations, and there are various enforcement tools for companies that do not meet performance requirements.

Following the June 2019 violence at Chevron-operated Tengiz oilfield that reportedly resulted from discontent with wage discrepancy between local and foreign workers with similar qualifications, the Ministry of Labor and Social Protection has sought to revisit the definition of administrative liability and administrative violation to make state control over employers with foreign workers more effective.

The foreign labor quota approved by the government for 2020 reduced the number of work permits for employees of category 3 (specialists) by 37 percent and for category 4 (qualified workers) by 23 percent.  The largest decreases are in administration; real estate; wholesale and retail; construction; professional, scientific and technological activities; and accommodation and catering.  To replace the gap in the foreign workforce, the government is introducing an obligation to replace foreign workers with skilled Kazakhstani labor.

Foreign investors may in theory participate in government and quasi-government procurement tenders, however, they should have production facilities in Kazakhstan and should go through a process of being recognized as a pre-qualified bidder.  In 2019, the government enacted new procurement rules by which only pre-qualified suppliers will be allowed to bid for government contracts.  A key requirement for being recognized as pre-qualified bidder is that the company’s product should be made in Kazakhstan and be added to a register of trusted products.  While this requirement is applied to some selected sectors at the government procurement (e.g. construction, IT, textile), it has been practiced since 2016 for procurement at quasi-sovereign companies under the National Welfare Fund Samruk-Kazyna.

In addition, the National Chamber of Entrepreneurs Atameken introduced in 2018 an industrial certificate which serves as an extra (and costly) tool to prove a company’s financial and production capabilities to participate in tenders.  The industrial certificate also acts as an indirect confirmation of a company’s status as a local producer.  Thus, a foreign investor who plans to bid for government and quasi-government contracts should obtain an industrial certificate.

In 2019, the government introduced significant recycling fees on the importation of combines and tractors.  Although major Western brands were granted a waiver for the fees, the government is expected to revisit the exception.  The government has suggested that foreign producers start local production of their equipment and become eligible for preferential treatment.

Kenya

4. Industrial Policies

Investment Incentives

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, a potential deterrent to foreign small and medium enterprise investment, especially in the services sector. Investment Certificate benefits, including entry permits for expatriates, are outlined in the Investment Promotion Act (2004).

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. The 2015 amendments to Kenya’s VAT rules clarified some items that are VAT exempt. 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 government’s Manufacturing Under Bond (MUB) program encourages manufacturing for export. The program provides a 100 percent tax deduction on plant machinery and equipment and raw materials imported for production of goods for export. The program is also open to Kenyan companies producing goods that can be imported duty-free or goods for supply to the armed forces or to an approved aid-funded project. Investors in metal manufacturing and products and the hospitality services sectors are able to deduct from their taxes a large portion of the cost of buildings and capital machinery.

The Finance Act (2014) amended the Income Tax Act (1974) to reintroduce capital gains tax on transfer of property located in Kenya. Under this provision, gains derived on the sale or transfer of property by an individual or company are subject to tax at rates of at least five percent. Sales and transfer of property related to the oil and gas industry are taxed up to 37.5 percent. 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); and the United Nations or its agencies.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 designated EPZs, with 137 companies and 60,383 workers contributing KSH 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 all firms in the zones are fully-owned by foreigners – mainly from India – while the rest are locally owned or joint ventures with foreigners.

While EPZs are focused on encouraging production for export, SEZs are designed to boost local economies by offering benefits for goods that are consumed both internally and externally. SEZs will 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) must maintain an open investment environment to facilitate and encourage business by the establishment of simple, flexible, and transparent procedures for investor registration. In 2019 Kenya developed the revised draft SEZ regulations with simplified and improved incentives structure. The 2019 draft regulations include customs duty exemptions to goods and services in the SEZ and no trade related restrictions including quantitative ones in import of goods and services into the SEZ. The rules also empower county governments to set aside public land for establishment of industrial zones.

Companies operating in the SEZs will receive the following benefits: all SEZ supplies of goods and services to companies and developers will be exempted from VAT; the corporate tax rate for enterprises, developers, and operators will be 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), and Kisumu (700 sq. km), Naivasha, Machakos (100 acres) and private developments designated as SEZ include Tatu City in Kiambu. The Third Medium Term Plan of Kenya’s Vision 2030 economic development agenda calls for a study for an SEZ at Dongo Kundu, and an SEZ was also under consideration at a location near the Olkaria geothermal power plant.

Performance and Data Localization Requirements

The GOK mandates local employment in the category of unskilled labor. The Kenyan government regularly issues permits for key senior managers and personnel with special skills not available locally. For other skilled labor, any enterprise whether local or foreign may recruit from outside if the skills are not available in Kenya. Firms seeking to hire expatriates must demonstrate that the requisite skills are not available locally through an exhaustive search. The Ministry of EAC and Regional Development, however, has noted plans to replace this requirement with an official inventory of skills that are not available in Kenya. A work permit can cost up to KSH 400,000 (approximately USD 4,000).

The Public Procurement and Asset Disposal Act (2015) offers preferences to firms owned by Kenyan citizens and to products manufactured or mined in Kenya in a GOK strategy called “Buy Kenya Build Kenya” which mandates 40 percent of GOK procurement be locally produced goods and services. Tenders funded entirely by the government with a value of less than KSH 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 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 certain circumstances. Procuring entities will be 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.

Kenya passed the Data Protection Act (2019) which imposes restrictions on the transfer of data in and out of Kenya without consent of the Data Protection Commissioner and the subject, functionally requiring data localization. The Act is similar to the European General Data Protection Regulation requirements on data processing.

Kosovo

4. Industrial Policies

Investment Incentives

Kosovo has established a flat corporate tax of 10 percent.  The Law on Strategic Investment allows the government to make available state-owned immovable property for the purposes of developing and executing strategic investment projects, as well as to support access to basic infrastructure.  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.

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).

Foreign Trade Zones/Free Ports/Trade Facilitation

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.  Three business parks and one business incubator are operational.  Kosovo announced its intention to establish an American Special Economic Zone in January 2018, but operational details are still undetermined.

Performance and Data Localization Requirements

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

Investment Incentives

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.

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; the government is preparing legislation to implement a value added tax and certain excise taxes.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 planning to utilize existing legislation to develop two new free trade zones at Al-Abdali and Al-Nuwaiseeb. The Council of Ministers issued a resolution dissolving the Free Trade Zone status at Shuwaikh port because that area will be used for other purposes.

Performance and Data Localization Requirements

The government requires foreign firms to hire a percentage of Kuwaitis that varies according to sector.  The percentages are as follows: banking: 75 percent

  • 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 does not require that foreign companies store data locally, or that foreign investors use Kuwaiti domestic content 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.

Kyrgyz Republic

4. Industrial Policies

Investment Incentives

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 IPPA often express the government’s willingness to discuss potential incentives, including access to land, with specific foreign investors.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 http://invest.gov.kg/en/why-kyrgyzstan/free-economic-zones/ 

Performance and Data Localization Requirements

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. 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 does not enforce any “forced localization” policies. 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

Investment Incentives

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 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 China-Laos 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 it relies upon trade across its neighboring countries in order to reach seaports.  Nonetheless, Laos has struggled to harmonize its own internal processes.   For example, customs practices vary widely at different ports of entry.  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 has been a significant improvement, and in early 2019 the Department of Customs introduced electronic customs payments at the Lao – Thai Friendship Bridge for passengers.  On several border crossings with Vietnam, Lao and Vietnamese officials jointly conduct inspections to facilitate movement of goods.

Performance and Data Localization Requirements

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

Investment 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/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 (http://liaa.gov.lv/contacts/representative-offices ).

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: http://www.liaa.gov.lv/en/invest-latvia/investor-business-guide/business-incentives .

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

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, together with the Office of Citizenship and Migration Affairs, has created a guide to help third-country nationals interested in working in Latvia obtain work permits: http://workinlatvia.liaa.gov.lv/ 

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: http://www.liaa.gov.lv/en/trade-latvia/market-entry/working-and-living .

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

Investment Incentives

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.  IDAL is working on several amendments to Investment Law 360 that would expand incentives to sectors, including ICT.  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-subsidized loans covering housing, investment in productive sectors, energy efficiency and renewable energy, and financing projects.  The Central Bank continues, in cooperation with the European Investment Bank (EIB) (Euro 50 million) and AFD (Agence Francaise de Developpement, the French USAID counterpart) to subsidize loans for energy efficiency projects.  The Central Bank has made preparations to launch “The Oxygen Fund” to support the import of raw materials to Lebanese industries and has pledged USD 100 million to this fund; it has also committed an additional USD100 million as a bridge loan for industrialists to import raw materials until this fund becomes operational.  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 Trade Zones/Free Ports/Trade Facilitation

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, efforts are underway with the International Finance Corporation to build and develop the zone.  The TSEZ Authority has completed an interim licensing regime to grant licenses for logistics activities, and is working with the IFC towards a full-fledge licensing regime, expected to be ready by the end of 2020 or early 2021.  The master plan for the industrial and logistics site next to Tripoli Port is completed 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 2021.

Performance and Data Localization Requirements

The government mandates local employment, and the Ministry of Labor publishes annually a list of jobs restricted to Lebanese nationals.  Foreign and local participation on the board of directors is contingent upon the firm’s structure as defined in Lebanese commercial law.  Foreign investors enjoy the same incentives as local investors.

Foreigners doing business in Lebanon through a company, factory, or office must hold work and residency permits.  There are no discriminatory or excessively onerous visa, residence, or work permit requirements.  Travelers who hold passports that contain visas or entry/exit stamps for Israel will likely be denied entry into Lebanon and may be subject to arrest or detention.  Even if travel documents contain no Israeli stamps or visas, persons who have previously traveled to Israel may still face arrest and/or detention if prior travel is disclosed.

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.

Liberia

4. Industrial Policies

Investment Incentives

The government provides tax deductions for equipment, machinery, cost of buildings and fixtures used in manufacturing, as well as import duties, and goods and services tax exemptions as investment incentives for the following sectors: tourism, manufacturing, energy, hospitals and medical, housing, transportation, information technology, banking, poultry, horticulture, exportation, agricultural (food crop cultivation and processing), and rubber and oil palm cultivation and processing.

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

Foreign Trade Zones/Free Ports/Trade Facilitation

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 (Buchanan Special Economic Zone); feasibility studies are underway.

Performance and Data Localization Requirements

The Decent Work Act gives preference to employing Liberians; the act states that the Ministry of Labor “shall not issue a permit to work in Liberia unless it is satisfied that no suitably qualified Liberian is available to carry out the work required by the employer and the applicant satisfies the requirements for foreign residence in Liberia.” However, these requirements are not always strictly enforced.

Visa, residence, and work permit procedures do not generally inhibit mobility of foreign investors and their employees.

Libya

4. Industrial Policies

Investment Incentives

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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.”

Performance and Data Localization Requirements

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.  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

Investment Incentives

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/ 

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

Lithuania has seven Free Economic Zones (FEZs) located near the cities of Kaunas,

Klaipeda, Siauliai, Kedainiai, Panevezys, Akmene, and Marijampole. The FEZs in Kaunas and Klaipeda have attracted the most business; there are more than one hundred companies from 17 countries operating in the Klaipeda FEZ, and 34 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

  • 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.

Performance and Data Localization Requirements

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: http://www.startuplithuania.lt/en/news/lithuanias-startup-visa-scheme-explained .

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: http://www.migracija.lt/index.php?-1488882078 .

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 invest $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

Investment Incentives

Luxembourg is considered to have a very attractive tax profile 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. 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. 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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).

Performance and Data Localization Requirements

The host Government does not mandate local employment.  The Government has attempted to  improve the work visa process in past years, in response to input from companies, embassies, and visa applicants.  If the application is in order, a work visa should normally take only two months to clear.  The difficulty in obtaining a Residence permit is on par with other western European countries once the applicant has provided all pertinent information to the authorities and the local district of residence.

These incentives are applied uniformly to both domestic and foreign investors.

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

Investment Incentives

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.

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 Macau Economic Services (MES) 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 MES 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.

Performance and Data Localization Requirements

Macau does not follow a forced localization policy in which foreign investors must use domestic content in goods or technology.

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 such destination ensures an adequate level of protection.

In December 2019, Macau’s Cybersecurity Law came into force. With this law, public and private network operators in certain industries have to 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.

One major U.S. cloud computing company reported that Macau’s Gaming Inspection and Coordination Bureau had refused permission for potential clients in the gaming sector to export personal data-to-data centers located outside of Macau.

Madagascar

4. Industrial Policies

Investment Incentives

Madagascar extends certain incentives for investment, outlined in domestic legislation, particularly in the Export Processing Zones (EPZ), in large mining investment (LGIM), and recently in the law on Special Economic Zones (SEZ), and the law on Industrial Investment Zones (ZII).

Madagascar’s investment law, which encourages private investment, is based on the principle of freedom – freedom of investment for all nationalities and all sectors; freedom to transfer profits, dividends, salaries and savings; and freedom to recruit and dismiss foreign employees.  Foreign investors may freely hold up to 100 percent of the shares (except for telecommunications where foreign shares are limited to 66 percent) in the company.  Free zones and companies exporting at least 95 percent of production are exempt from customs duties and VAT for a 2 to 15-year period depending on the sector and then pay a 10 percent rate on inputs.  An amendment to the investment law is expected to address questions about access to land for foreigners, environmental protections, sustainability, and corporate social responsibility, while strengthening sanctions against those who break the rules.

Other regulations provide more indirect incentives for FDI, such as the one governing self-generation of electricity.  All companies which carry out self-generation of electricity, and use at least 70 percent of the electricity produced for their own purposes, can sell the remainder subject to conditions determined by the regulator.  The General Tax Code (CGI) provides exemptions from taxes for the import and sale of inputs for exclusively agricultural use, agricultural materials and equipment and materials and equipment for the production of renewable energy.  The law on Large Mining Investments (LGIM) governs investments exceeding USD 25 million and complements the mining code.

As part of the PEM, the Rajoelina government is committed to infrastructure projects, with the aid of public-private partnerships (PPPs).  It includes several ambitious infrastructure projects in the telecommunications sector, with the installation of more than 12,000 km of fiber optic network and more than 14,000 km of Hertzian networks.  In the energy sector, the PEM includes four projects for the construction of hydroelectric power plants, which would generate more than 700 MW in total over the next five years.  The PEM also envisions the creation of special economic zones, including a zone specializing in the textile industry (an integrated industrial zone of + 1600 acres); other multi-sector industrial and service zones; and exclusive agricultural promotion zones.  The special economic zones provide a secure mechanism for access to land.

The GOM does not normally issue guarantees or jointly finance foreign direct investment projects.  Usually, for infrastructure projects, the government generally offers incentives in the form of provision of land, establishment of leases, tax incentives, transfer of benefits and revenues, and social integration of the project.

Foreign Trade Zones/Free Ports/Trade Facilitation

The 2008 Law on Free Zone Companies established an Export Processing Zone regime to incentivize investment in three categories: (1) investment in export-oriented manufacturing industries; (2) development or management of industrial free zones; and (3) provision of services to EPZ companies.  The EPZ regime provides certain tax advantages and incentives to EPZ companies, to include: temporary tax exemptions of two to fifteen years (depending on the category of enterprise); no VAT or customs duties on imports of raw materials; no registration taxes; no customs tax on exported goods; income tax on repatriation not exceeding 30 percent of the taxable basis; and free access to foreign currency deposited in the company’s foreign currency bank account.  Free zone companies are exempted from income tax in the first five years of operation.  From the sixth year of operation, the income tax rate is 10 percent.  These incentives are conditioned upon a performance guarantee and require 95 percent of an EPZ company’s output be exported.  More than 225 companies currently benefit from this incentive regime, 46 percent of which are in the textile sector.

Madagascar ratified the trade facilitation agreement (TFA) in June 2016.  It has established its trade facilitation roadmap, a short but comprehensive document laying down a strategic vision for implementing trade facilitation reforms within a defined period (3 to 5 years).  Donors have funded several capacity building and technical assistance workshops for Malagasy government officials to enable the effective implementation and enforcement of the TFA.  Implementation is in its early stages at this point.

Performance and Data Localization Requirements

The government encourages local employment and capacity building but does not mandate it.  EDBM has enhanced the mobility of foreign investors and their employees by streamlining processes for business visas, residency, and work permits.

Some regulations, including the LGIM, prioritize the hiring of local staff over foreigners at the senior management level so long as they have equivalent skills.

Obtaining an official approval (“agrément”) is mandatory for any FDI.  EDBM assists the investor with the application process and Madagascar’s Council of Ministers decides on the grant of “agrément” based on EDBM’s written guidance.  The Council’s assent must then be signed off by the President.

Madagascar has no “forced localization” policy which would force foreign investors to use domestic content or technology.  However, the government recommends transfer of technology and continuous capacity building to enhance business competitiveness.  There are no measures in place that prevent or unduly impede companies from freely transmitting customer or business-related data outside Madagascar’s territory. There is no requirement for foreign IT providers to turn over source code and/or provide access to encryption.  Post is not aware of any mechanism to enforce rules on local data storage within the country.

Madagascar does not enforce performance requirements but there are investment incentives (described earlier) that apply uniformly and systematically to both domestic and foreign investors.

Malawi

4. Industrial Policies

Investment Incentives

The GOM offers a wide range of tax and non-tax incentives which apply equally to domestic and foreign investors.  These incentives apply to several sectors including manufacturing, agriculture, mining, and business more generally.  Specific incentives tend to vary from year to year.  A detailed list of investment incentives can be found at the MITC website: www.mitc.mw  and Malawi Revenue Authority website: https://www.mra.mw/business/incentives .  Generally speaking, the incentives offered to investors are applied consistently, but many companies complain about long delays in accessing the accrued benefits.  Additionally, firms must negotiate their eligibility for these incentives with the responsible government entities.  The GOM occasionally issues guarantees and joint financing on foreign direct investment projects especially on projects that are of national importance.

Foreign Trade Zones/Free Ports/Trade Facilitation

Legislation for the establishment of export processing zones (EPZs) came into force in 1995.  Companies engaged exclusively in manufacture for export may apply for EPZ status.  As of March 2020, 14 companies (down from 30 in 2000) were operating under the EPZ scheme.  Almost all of these are foreign owned companies, though the law does not discriminate on ownership.  To resuscitate the EPZs, the GOM has revised EPZ regulations to allow export processing firms to sell 20 percent of their product on the local market.  The government is also in the process of establishing Special Economic Zones, which will have broader coverage than EPZs, allowing a mix of commercial activities including services. The GOM is holding consultations on a draft Special Economic Zones bill and regulations.

Performance and Data Localization Requirements

Malawi employment and immigration laws and regulations require that local or foreign investors prioritize the hiring of nationals except in cases where skills are not locally available.  The appointment of at least two Malawian residents as directors is also required.  These laws and regulations are to a large extent enforced by the Department of Immigration when issuing TEPs to foreign nationals.  The process to obtain employment permits can sometimes discourage investors.  Expatriate employees who reside and work in Malawi must obtain a TEP.  The government desires to make TEPs readily available, and mandates that processing times for TEP applications shall not exceed 40 working days.  In practice, TEPs take significantly longer and face bureaucratic delays (anecdotal reports of several months to a year are common).

There are a few legal restrictions on foreign investment based on environmental, health, biosafety, and national security concerns.  Affected sectors are firearms and ammunition; chemical and biological weapons; explosives; and manufacturing involving hazardous waste treatment/disposal or radioactive material.  Since industrial licensing in Malawi applies to both domestic and foreign investment and is only restricted to a short list of products, it does not limit competition, protect domestic interests, or discriminate against foreign investors at any stage of investment.  Additionally, retail operations in rural areas are limited to only Malawian citizens, although enforcement is weak.

Malawi does not place requirements on source of financing or geographic location nor does it set performance requirements for establishing, maintaining, or expanding an investment.  While not discriminatory to foreign investors, investments in Malawi require multiple bureaucratic processes, which may include obtaining a business license, a tax registration number, and a land use permit.  These procedures can be time consuming, particularly when it comes to land permits, and may constitute an impediment to investment.  Investors may also face bureaucratic hurdles in obtaining TEP and business residency permits.  Furthermore, there have not been reports of 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 to enforce local data storage within the country. Malawi Communications Regulatory Authority (MACRA) and the Ministry of Information and Communication Technology are the government agencies responsible for IT issues.

Malaysia

4. Industrial Policies

Investment Incentives

The Malaysian Government has codified the incentives available for investments in qualifying projects in target sectors and regions.  Tax holidays, financing, and special deductions are among the measures generally available for domestic as well as foreign investors in the following sectors and geographic areas: information and communications technologies (ICT); biotechnology; halal products (e.g., food, cosmetics, pharmaceuticals); oil and gas storage and trading; Islamic finance; Kuala Lumpur; Labuan Island (off Eastern Malaysia); East Coast of Peninsular Malaysia; Sabah and Sarawak (Eastern Malaysia); Northern Corridor.

The lists of application procedures and incentives available to investors in these sectors and regions can be found at: http://www.mida.gov.my/home/invest-in-malaysia/posts/ .

Foreign Trade Zones/Free Ports/Trade Facilitation

The Free Zone Act of 1990 authorized the Minister of Finance to designate any suitable area as either a Free Industrial Zone (FIZ), where manufacturing and assembly takes place, or a Free Commercial Zone (FCZ), generally for warehousing commercial stock.  The Minister of Finance may appoint any federal, state, or local government agency or entity as an authority to administer, maintain and operate any free trade zone.  Currently there are 13 FIZs and 12 FCZs in Malaysia.  In June 2006, the Port Klang Free Zone opened as the nation’s first fully integrated FIZ and FCZ, although the project has been dogged by corruption allegations related to the land acquisition for the site.  The government launched a prosecution in 2009 of the former Transport Minister involved in the land purchase process, though he was later acquitted in October 2013.

The Digital Free Trade Zone (DFTZ) is an initiative by the Malaysian Government, implemented through MDEC, launched in November 2017 with the participation of China’s Alibaba.  DFTZ aims to facilitate seamless cross-border trading and eCommerce and enable Malaysian SMEs to export their goods internationally. According to the Malaysian government, the DFTZ consists of an eFulfilment Hub to help Malaysian SMEs export their goods with the help of leading fulfilment service providers; and an eServices Platform to efficiently manage cargo clearance and other processes needed for cross-border trade.

For more information, please visit https://mydftz.com 

Raw materials, products and equipment may be imported duty-free into these zones with minimum customs formalities. Companies that export not less than 80 percent of their output and depend on imported goods, raw materials, and components may be located in these FZs.  Ports, shipping and maritime-related services play an important role in Malaysia since 90 percent of its international trade by volume is seaborne.  Malaysia is also a major transshipment center.

Goods sold into the Malaysian economy by companies within the FZs must pay import duties.  If a company wants to enjoy Common External Preferential Tariff (CEPT) rates within the ASEAN Free Trade Area, 40 percent of a product’s content must be ASEAN-sourced.  In addition to the FZs, Malaysia permits the establishment of licensed manufacturing warehouses outside of free zones, which give companies greater freedom of location while allowing them to enjoy privileges similar to firms operating in an FZ. Companies operating in these zones require approval/license for each activity. The time needed to obtain licenses depends on the type of approval and ranges from two to eight weeks.

Performance and Data Localization Requirements

Fiscal incentives granted to both foreign and domestic investors historically have been subject to performance requirements, usually in the form of export targets, local content requirements and technology transfer requirements.  Performance requirements are usually written into the individual manufacturing licenses of local and foreign investors.

The Malaysian government extends a full tax exemption incentive of fifteen years for firms with “Pioneer Status” (companies promoting products or activities in industries or parts of Malaysia to which the government places a high priority), and ten years for companies with “Investment Tax Allowance” status (those on which the government places a priority, but not as high as Pioneer Status).  However, the government appears to have some flexibility with respect to the expiry of these periods, and some firms reportedly have had their pioneer status renewed. Government priorities generally include the levels of value-added, technology used, and industrial linkages.  If a firm (foreign or domestic) fails to meet the terms of its license, it risks losing any tax benefits it may have been awarded.  Potentially, a firm could lose its manufacturing license.  The New Economic Model stated that in the long term, the government intends gradually to eliminate most of the fiscal incentives now offered to foreign and domestic manufacturing investors.  More information on specific incentives for various sectors can be found at www.mida.gov.my.

Malaysia also seeks to attract foreign investment in the information technology industry, particularly in the Multimedia Super Corridor (MSC), a government scheme to foster the growth of research, development, and other high technology activities in Malaysia.  However, since July 1, 2018, the Government decided to put on hold the granting of MSC Malaysia Status and its incentives, including extension of income tax exemption period, or adding new MSC Malaysia Qualifying Activities in order to review and amend Malaysia’s tax incentives.  While the MSC Malaysia Status Services Incentive was published on December 31, 2018, the MSC Malaysia Status IP Incentive policy is still under review.  For further details on incentives, see www.mdec.my.  The Malaysia Digital Economy Corporation (MDEC) approves all applications for MSC status.  For more information please visit: https://www.mdec.my/msc-malaysia .

In the services sector, the government’s stated goal is to attract foreign investment in regional distribution centers, international procurement centers, operational headquarter research and development, university and graduate education, integrated market and logistics support services, cold chain facilities, central utility facilities, industrial training, and environmental management.  To date, Malaysia has had some success in attracting regional distribution centers, global shared services offices, and local campuses of foreign universities.  For example, GE and Honeywell maintain regional offices for ASEAN in Malaysia.  In 2016, McDermott moved its regional headquarters to Malaysia and Boston Scientific broke ground on a medical device manufacturing facility.

Malaysia seeks to attract foreign investment in biotechnology but sends a mixed message on agricultural and food biotechnology.  On July 8, 2010, the Malaysian Ministry of Health posted amendments to the Food Regulations 1985 [P.U. (A) 437/1985] that require strict mandatory labeling of food and food ingredients obtained through modern biotechnology.  The amendments also included a requirement that no person shall import, prepare, or advertise for sale, or sell any food or food ingredients obtained through modern biotechnology without the prior written approval of the Director.  There is no ‘threshold’ level on the labeling requirement.  Labeling of “GMO Free” or “Non-GMO” is not permitted.  The labeling requirements only apply to foods and food ingredients obtained through modern biotechnology but not to food produced with GMO feed.  The labeling regulation was supposed to go into force in 2014, but remains to date with no date announced.  A copy of the law and regulations respectively can be found at: http://www.biosafety.nre.gov.my/BiosafetyAct2007.html , and http://www.biosafety.nre.gov.my/BIOSAFETY percent20REGULATIONS percent202010.pdf .

Malaysia has not implemented measures amounting to “forced localization” for data storage.  Bank Negara Malaysia has amended its recent Outsourcing Guidelines to remove the original data localization requirement and shared that it will similarly remove the data localization elements in its upcoming Risk Management in Technology framework.  The government has provided inducements to attract foreign and domestic investors to the Multimedia Super Corridor but does not mandate use of onshore providers.  Companies in the information and communications technology sector are not required to hand over source code.

Maldives

4. Industrial Policies

Investment Incentives

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 depend on the business area of the investment and the scale of the investment.

As of April 2020, no companies have invested in Maldives under the SEZ law.

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

Performance and Data Localization Requirements

In an attempt to boost local employment, 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 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

Investment Incentives

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 (domestic or foreign) 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.  The Government of Mali encourages investment in the cultural sector by reducing taxes on imports of cultural goods.  In March 2020, the Government of Mali adopted an order exempting renewable energy equipment from VAT and import taxes.  The Government of 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.

The Government of Mali has identified several priority sectors for furthering economic development.  Special incentives are offered for investment in the following areas:  agribusiness, fishing and fish processing, livestock and forestry, mining and metallurgical industries, water and energy, tourism and hospitality industries, communications, housing development, transportation, human and animal health, vocational and technical training, and cultural promotion.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 Government of Mali is currently drafting a law to create special economic zones in the regions of Sikasso, Segou, and Mopti, as well as an inland port in Kayes.  The investment code states that 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.

Performance and Data Localization Requirements

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

Investment Incentives

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 domestic and non-Maltese 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.

Investment Tax Credits:  Companies in a targeted sector are entitled to a tax credit calculated as follows:

  • As a percentage of qualifying capital expenditure (currently granting 10 percent for a large enterprise, 20 percent for a medium enterprise, and 30 percent for a small to micro enterprise); or
  • As a percentage of the wage cost for the first 24 months of a newly created job (currently, 15 percent for a large enterprise; 25 percent for a medium enterprise, and 35 percent for a small and micro enterprise).

Access to Finance:

  • Soft Loans:  Malta Enterprise supports enterprise though loans at low interest rates for partial financing of investments in qualifying expenditure.
  • Loan Guarantees:  Malta Enterprise may guarantee bank loans taken by a company to finance acquisition of additional assets to be employed in the company’s business.
  • Loan Interest Subsidies:  Malta Enterprise may subsidize the rate of interest payable on bank loans.  Loan interest subsidies are not in addition to loan guarantees and applicable to loans provided by banks or other financial institutions.
  • Micro Guarantee Scheme:  Malta Enterprise aims to accelerate the growth of enterprises by facilitating access to debt finance for smaller business undertakings.

Employment and Training:  Malta’s employment corporation JobsPlus, formerly known as ETC, supports enterprises in recruiting new employees and training their staff.

SME Development:  Incentives through the Micro Invest Scheme assist SMEs in investing, innovating and expanding, or developing their operations.  The Ministry for the Economy, Investment and Small Business can also facilitate access to newly developed crowd-funding platforms.

Enterprise Support:  Malta Enterprise provides assistance to businesses to support development of international competitiveness, improve processes, and network with other businesses.  Trade Malta, Malta’s export and trade promotion agency, offers support for trade promotion activities focused on exports.

Research and Development:  Malta Enterprise offers incentives to support and encourage businesses to engage in industrial research and experimental development, including through the licensing of intellectual property rights.

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 foreign firms and local firms regarding participation in incentive programs.

U.S. companies also can partner with local firms to participate in Horizon 2020, the EU Framework program for funding research and innovation.  Horizon 2020 will run until the end of 2020 and has a budget of €80 billion.

COVID-19 measures:  The government announced several measures as part of financial packages to help the Maltese economy during the COVID-19 outbreak.  The financial aid packages mainly aimed to protect jobs and businesses by injecting liquidity into the market through measures including subsidies for partial payment of salaries, deferring certain tax deadlines, and guarantees allowing banks to continue offering loans, grant moratoria, and low interest rates for customers.  It has also introduced schemes to encourage teleworking for companies and an RDI fund for COVID-19 related projects.

More information on incentives offered by Malta Enterprise can be found at: https://www.maltaenterprise.com/support  and https://covid19.maltaenterprise.com/ 

Other Tax Benefits: 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 it half of shares in Malta Freeport Terminals Ltd. to the Yilidirim Group of Turkey in November 2011, and sold a 49% 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.  In late 2016, the government issued a call for expressions of interest for the development of a logistics hub – government still has not published a final decision on this call.  The aim of the project is to attract local or international operators to submit their proposals for the concession of the design, construction, financing, operation, and maintenance of an international logistics center on 45,000 square meters of land in Ħal Far.  The Government of Malta’s vision is to have a strategic hub for international trade, serving as a Free Zone or as a Custom Warehouse.

Performance and Data Localization Requirements

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, 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.

Marshall Islands

4. Industrial Policies

Investment Incentives

The Republic of the Marshall Islands offers a range of investment incentives, many of which can be found at https://www.rmiocit.org.

The Marshall Islands offers tax and duty exemptions for investments in certain private sector industries. These investment incentives apply uniformly to both domestic and foreign investors through submission of a letter to the Minister of Finance. Tax incentives are specified by law, but have been rarely awarded, given the relative lack of large-scale investment.

All imports are subject to import duties, and the only current duty exemptions are for renewable and alternative energy items. Import duties are generally low ad valorem rates on cost, insurance, and freight (CIF), and the number of tariff categories is small to facilitate administration. Goods in transit are exempt from the import tax, and the import tax on re-exported goods is refundable.  The Marshall Islands has no taxes on exports. Due to weak infrastructure and enforcement, tax and revenue continue to seep through the economy at a loss of about USD 60 million.

Under the terms of the Compact of Free Association, as amended, all items grown, made or produced in the Marshall Islands are exempt from U.S. duties with the following exceptions:

  • Watches, clocks, and timing apparatus provided for in Chapter 91, excluding heading 9113, of the Harmonized Tariff Schedule of the United States;
  • Buttons (whether finished or not finished) provided for in items 9606.21.40 and 9606.29.20 of such schedule;
  • Textile and apparel articles which are subject to textile agreements; and
  • Footwear, handbags, luggage, flat goods, work gloves, and leather wearing apparel which were not eligible for the generalized system of preferences in the Trade Act of 1974.

Tuna in airtight containers exported to the U.S. is duty-free, provided it does not exceed 10 percent of total U.S. tuna consumption during the previous calendar year. The Compact also stipulates that U.S. products imported to the Marshall Islands receive Most-Favorable Nation status, and the country must consult with the U.S. should they enter into a Free Trade Agreement with another country or customs territory.

Investors who invest a minimum of USD 1 million or provide employment and wages in excess of USD 150,000 annually to Marshallese citizens are exempt from paying gross revenue tax for a five-year period in the following sectors:

  • Off-shore or deep-sea fishing
  • Manufacturing for export, or for both export and local use
  • Agriculture
  • Hotel and resort facilities

Investors in seabed hard mineral mining are exempt from paying all taxes, duties, and other charges (except taxes on wages and salaries, individual income tax, and social security contributions). In return, investors are required to pay the Government of the Marshall Islands a share of net proceeds accruing from the investment in the form of royalties, production charge, or some combination thereof as agreed to between the government and investor.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no geographic foreign trade zones or free ports in the Marshall Islands.

Performance and Data Localization Requirements

The RMI 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,
  • Pay a levy of USD 0.25 per hour for every hour of work performed by non-resident worker, to be paid to the Resident Workers Training Account for the purposes of training citizen workers, and repatriating non-resident workers should the need arise.

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 the Marshall Islands, and may be employed in the Marshall Islands without obtaining a work permit or a visa.  They must register as an alien with the Department of Immigration on an annual basis.  Though use of local products is encouraged, the government does not follow “forced localization.”

The RMI does not currently have laws or regulations on domestic storage or localization requirements.

Mauritania

4. Industrial Policies

Investment Incentives

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 and some companies in priority sectors throughout the country.  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. The 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Investment Code creates Special Economic Zones (Free Export Zone or Cluster of Development in the Interior) by decree.  SEZ 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.

Performance and Data Localization Requirements

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 in excess of 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.  However, this does not apply to 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 that 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 the good or service is available locally 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 enforced on local data storage.

Mauritius

4. Industrial Policies

Investment Incentives

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.  In the 2018-2019 national budget, a number of incentives were 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; (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 USD 500,000 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.  More details on the PDS and other investment schemes are available via http://www.edbmauritius.org/schemes.  

The Regulatory Sandbox License (RSL), announced in the 2016-2017 national budget, is intended 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 http://www.edbmauritius.org/schemes/regulatory-sandbox-license/ .

Foreign Trade Zones/Free Ports/Trade Facilitation

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 has increased from 5,000 square meters in 1993 to over 300,000 square meters in 2018.  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 USD 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.  Approximately 3,800 people are employed at the Freeport.

In 2019, trade value at the Freeport was 29.7 billion rupees (approximately USD 825 million) and volume was 517,000 metric tons.  This is a decrease from 2018, when trade value was 44 billion rupees and volume was 542,000 metric tons.  Top trading partners for import in 2019 were the United Kingdom, India, Taiwan, Malaysia, and China.  Top trading partners for export in 2019 were Reunion (France), South Africa, Kenya, Seychelles, and United Arab Emirates.  Top goods traded through the Freeport included mineral products, live animals, foodstuffs and beverages, and plastic and metal products.

Per the 2019 Finance Act, a Freeport operator engaged in manufacturing inside the Freeport is allowed to apply as a private Freeport developer to build, develop, and manage its own infrastructural activities, provided that it carries out the same manufacturing activity.  A Freeport operator or private Freeport developer engaged in the manufacture of goods pays a 3 percent tax rate on profits derived from the sale of goods on the local market.

Existing manufacturing companies with a Freeport certificate must employ a minimum of five employees and incur an annual expenditure exceeding 3.5 million rupees (USD 880,000).  Freeport operators must pay Corporate Social Responsibility tax on the sale of goods on the local market.

Performance and Data Localization Requirements

The GoM does not impose local employment requirements on foreign investors.  A foreign national can apply for an Occupation Permit (OP), which is a combined work and residence permit, subject to certain conditions such as minimum investment, salary, and/or business turnover.  The OP allows foreign nationals to work and reside in Mauritius under three specific categories, namely: (i) investor, (ii) professional, or (iii) self-employed.  Also, foreign nationals above the age of 50 years may choose to retire in Mauritius under a Residence Permit (RP).  An OP or an RP is issued for a maximum period of three years and the permit holder may submit a new application upon expiry of the permit.  Dependents of an OP or RP holder may also apply for residence permits for a duration not exceeding that of the OP or RP holder.  Details on the minimum investment, salary, and turnover amounts required to qualify for an OP or RP are available via http://www.edbmauritius.org/work-and-live-in-mauritius/occupation-permitresidence-permit.  

The 2017 Data Protection Act (DPA) is the law that governs the protection of personal data in Mauritius.  Effective January 15, 2018, the DPA aimed to align with the European Union’s General Data Protection Regulation (GDPR).  The GoM established the Data Protection Office (http://dataprotection.govmu.org/English/Pages/default.aspx ) 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 with regard to 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.  The Ministry of Information Technology, Communication and Innovation has started the ratification process of Convention 108 with the Council of Europe.

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.

Micronesia

4. Industrial Policies

Investment Incentives

There were currently no government programs or incentives to attract foreign investment.

There was no government agency tasked with developing an industrial strategy; however, the FSM government made recommendations for growth in all sectors without substantive measures to realize those goals.  The telecommunications sector recently opened up in order to meet the World Bank conditions for a new fiber optic cable project. The largest state-owned enterprise, the FSM Petroleum Corporation (FSMPC), planned to expand into renewable energy technologies like solar power, and coconut oil for export.

Politicians called for expansion of the tourism sector, but have created no tax, licensing, or leasing incentives to encourage investment.  Although there was 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, growth in the tourism sector was likely to limit the ability of the sector to meet local expectations.  Recent data shows that growth had fallen in the areas of scuba diving, boating, and fishing. Disagreements over land issues caused the 2013 closure of the most successful hotel in Pohnpei. 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 was working towards other designations in Yap, Kosrae, and Chuuk.  Other efforts, including by the U.S. Embassy and National Geographic, were underway to highlight the considerable cultural heritage extant in the FSM.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are no Foreign Trade Zones, Free Trade Zones, or Free Ports in the FSM.

Performance and Data Localization Requirements

The FSM government mandated 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. There were no defined performance requirements for investments.

Moldova

4. Industrial Policies

Investment Incentives

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 2021, 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 7 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 10 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 ten 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.

Similar to the FEZs, the Giurgiulesti Free International Port, Moldova’s only port accessible to sea-going vessels, was established in 2005, to be sunsetted in 2030. Commercial residents of the port enjoy the following advantages: 25 percent exemption from income tax for the first 10 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.

Performance and Data Localization Requirements

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 have to comply with cumbersome domestic procedures related to protection of personally identifiable information. 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 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

Investment Incentives

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 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 a period of years.  While in theory the government can issue guarantees or jointly finance foreign direct investment projects, it seldom does so in practice.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Mongolian government launched a free-trade zone program in 2004.  Two free-trade zones are along the Mongolian spurs of the Trans-Siberian 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 that the New Ulaanbaatar International Airport may host a free-trade zone.

Performance and Data-Localization Requirements

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.

Investors may locate and hire workers without using hiring agencies so long as hiring practices follow the Labor Law.  This law requires companies to employ Mongolian workers in certain labor categories where the government determines Mongolians can perform the task as well as foreigners.  This law generally applies to unskilled-labor categories and not fields in which a high degree of technical expertise not existing in Mongolia is required.

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 slow 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.  The government had allowed companies to pay for waivers for domestic hiring requirements for expatriate expert labor and senior management staff but in 2019 suspended the waiver process and imposed a requirement that companies hire five Mongolians for every non-Mongolian.  This requirement does 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 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 to Mongolian nationals.  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 does not generally require localized data storage; or legally compel IT providers to turn over source code or provide access for surveillance, except for criminal investigations.  Businesses may freely transmit customer or other business-related data abroad.  However, the government bars firms from storing customer financial data outside of Mongolia.

Montenegro

4. Industrial Policies

Investment Incentives

The Montenegrin government offers financial incentives to investors based on the value of their investment. Both Montenegrin and foreign entities or investors can benefit from these investment incentives.

As part of its efforts to attract investment, the government adopted the Decree on Direct Investment Incentives, with a goal to improve the business climate in Montenegro and stimulate economic growth through increased inflow of direct investments and job creation. For investments greater than EUR 500,000 (approximately USD 617,280) that create at least 20 new jobs within three years from the date of signing the incentive agreement, both domestic and foreign investors can apply for cash grants in the amount of EUR 3,000-10,000 (approximately USD 3,700-12,345) per every new job created. For investments in the North and Central region (except for the capital Podgorica), the minimum investment is EUR 250,000 (approximately USD 380,640) with a threshold of creating 10 new jobs. For capital investments greater than EUR 10 million (approximately USD 12.3 million) that create at least 50 new jobs, incentives can be awarded in the amount of up to 17 percent of the investment value. The Decree also provides for refunds on infrastructure development costs incurred in the process of completing the investment project. The exact amount of the incentives is determined in accordance with the criteria defined in the Decree. The decision on the incentive award is approved by the government and the funds are payable in three equal installments.

The incentive program was administered by the Secretariat for Development Projects and after establishment of MIA they will take oved and continue with the incentive program implementation. More information will be available soon on the Agency’s website.

The government also offers, in the partnership with local municipalities, some incentives through business zones, which exist in several cities outside the capital.

Foreign Trade Zones/Free Ports/Trade Facilitation

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.

AD Luka Bar (Port of Bar Holding)
Obala 13. Jula bb
85000 Bar, Montenegro
+382 30 312 666
Website: http://www.lukabar.me/ ; Email: lukabar@t-com.me

Performance and Data Localization Requirements

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

Investment Incentives

As set out in the Investment Code (Section 2.4), Morocco offers incentives designed to encourage foreign and local investment.  Morocco’s 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).  With respect to agricultural incentives, Morocco launched the Plan Maroc Vert  (Green Morocco Plan) in 2008 to improve the competitiveness of the agribusiness industry.  This plan offers technical and financial support to federations in the citrus and olive sectors to boost agribusiness value chains.

Morocco has several free zones offering companies incentives such as tax breaks, subsidies, and reduced customs duties. Free 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 . Morocco is on the European Union’s tax “grey list ” for pursuing a harmful tax policy based on the tax advantages offered to export companies, companies operating in free zones, and CFC.  In response to EU pressure and the desire to avoid negative consequences for investment, Morocco’s 2020 budget law transforms 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.  Similarly, companies holding CFC status will be taxed 15 percent both on their local and export activities as of 2021, after a five-year tax exoneration.  The new measures adopted pertain to both Moroccan and foreign companies already established in these zones.

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.  AMDIE’s website  has more details on investment incentives, but generally these incentives are based on sectoral priorities (i.e. aerospace).  Morocco does not issue guarantees or jointly finance FDI projects, except for some public-private partnerships in fields such as utilities.

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 provided that 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 n°12/98, and exemption from the Value Added Tax (VAT) on imports and domestic sales.

More information on specific incentives can be found at the Invest in Morocco website .

Foreign Trade Zones/Free Ports/Trade Facilitation

The government maintains several “free zones” in which companies enjoy lower tax rates in exchange for an obligation to export at least 85 percent of their production.  In some cases, the government provides generous incentives for companies to locate production facilities in the country.  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.  This incentive lasts for a period of 36 months from the start of the business.  Due in part to an ongoing dispute with the European Union, the 2020 budget law will transform the country’s free zones into “Industrial Acceleration Zones” with a corporate tax of 15 percent after an initial five years of tax exemption.  Previously, companies in free zones paid a corporate tax rate of 8.75 percent.

Performance and Data Localization Requirements

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.

The government does not require the use of domestic content in goods or technologies.  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 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 provide surveillance or backdoor access to their source-code or systems.

Mozambique

4. Industrial Policies

Investment Incentives

The Code of Fiscal Benefits contains specific incentives for entities that intend to invest in certain geographical areas within Mozambique that have natural resource potential but which lack infrastructure and have low levels of economic activity. Rapid Development Zones (RDZ) were also created to facilitate investment. Investments in these zones are exempt from import duties on certain goods and are granted an investment tax credit equal to 20 percent of the total investment (with a right to carry the credit forward for five years). Additional modest incentives are available for professional training and the construction and rehabilitation of public infrastructure, including, but not limited to roads, railways, water supply, schools, and hospitals.

The Code of Fiscal Benefits, Law No. 4/2009, passed in 2009, is available at: https://investmentpolicyhubold.unctad.org/InvestmentLaws/laws/108 . The Regulations for the Code of Fiscal Benefits are set forth in Decree No. 56/2009, which was approved in October 2009. APIEX can assist companies with the investment incentives stipulated in the Code of

Fiscal Benefits

With the exception of sectors like oil and gas where government participation is mandatory, the government does not issue joint guarantees or jointly finance foreign direct investment projects.

Foreign Trade Zones/Free Ports/Trade Facilitation

Mozambique has seven free trade zones in the country, which provide a variety of fiscal exemptions depending on the sector of investment as well as the project location. Investors should pay close attention to documents and procedures requested in order to establish a business locally or to request fiscal and customs incentives if investing in an industrial free zone. Information regarding business registration and administrative practices are available at: http://www.portaldogoverno.gov.mz/por/Empresas/Registos .

Performance and Data Localization Requirements

The government generally does not require investors to purchase from local sources, nor does it require technology or proprietary business information to be transferred to a local company. Within certain sectors, however, the government has implemented sector specific local content requirements. A proposed “Local Content” law could create additional requirements in this realm and consolidate the various requirements into a single law. This proposed law has been drafted and presented at the Council of Ministers, and is likely to be approved before the end of 2020.

Regulations for new mining and petroleum laws may require investors to give preference to local sources available in Mozambique if the goods or services are of an internationally comparable quality and competitively priced.

Companies may hire foreign workers only when there are not sufficient Mozambican workers available that meet specific job qualifications. The Ministry of Labor enforces quotas for foreign workers as a percentage of the workforce within companies that varies based on the size of the company. Per the 2007 Labor Law (23/2007) companies with 10 employees or fewer can employ no more than 10 percent expatriates (effectively 1 person in a 10 person company), companies with 11-100 employees may employ up to 8 percent expatriates, and large companies with over 100 employees may employ no more than 10 percent expatriates. Many companies use foreigners as outside consultants, which allows them to get around the quota system by hiring a “company” instead of a foreigner who would be subject to the quota requirement. Work permits for foreigners cost approximately USD370 and take at least one month to be issued. All investments must specify the number and category of Mozambican and foreign workers.

There are currently no data localization policies in effect in Mozambique. The government agency responsible for enforcing IT policies and rules is:

UTICT – Unidade Tecnica de Implementacao da Politica de Informatica
Technical Implementation Unit for IT Policy
Tel: (258) 21 309 398; 21 302 241
Mobile (258) 305 3450
Email: cpinfo@infopol.gov.mz

Namibia

4. Industrial Policies

Investment Incentives

Incentives are mainly aimed at stimulating manufacturing, attracting foreign investment to Namibia, and promoting exports.  To take advantage of the 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 and Promotion Board.

The Namibian Government aims to stimulate economic growth and employment and to establish Namibia as a gateway location in the Southern African region.  To this end, the government has introduced numerous incentives that are largely concentrated on stimulating manufacturing in Namibia and prompting 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;
  • Plant, 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,
  • Preferential market access to EU, USA, and other markets for manufacturers is provided.

The government does issue guarantees, but reluctantly.  Joint financing for foreign direct investment is occasionally implemented through the Namibia Development Corporation or another, sector-relevant state-owned enterprise.

Foreign Trade Zones/Free Ports/Trade Facilitation

Namibia has an Export Processing Zone (EPZ) regime that offers favorable conditions for companies wishing to manufacture and export products.  The government of Namibia has announced plans to repeal the EPZ Act and replace it with Special Economic Zones.  Existing EPZ users will be accommodated, but there is a moratorium on new applications under the current regime.  The Minister of Finance tabled a proposal for the Special Economic Zones on 19 February 2020, which is due to be debated in Parliament.

There are 19 EPZ companies in operation, most of which were closely linked to minerals beneficiation, including Namzinc (which produces Special High Grade zinc at the Skorpion zinc mine), Namibia Custom Smelters (which produces blister copper from imported copper concentrates), and a variety of diamond cutting and polishing operations (which cut and polish locally and internationally sourced rough diamonds).

Under the EPZ regime, the government offered a package of tax and non-tax special incentives, applicable to both existing and new manufacturing enterprises, exporters, and EPZ enterprises. Companies operating under the EPZ regime are free to locate their operations anywhere in Namibia. Through the Offshore Development Company (ODC), EPZ enterprises also have access to factory facilities rented at economical rates.

Current EPZ incentives are:

  • Corporate tax holiday;
  • Exemption from import duties on imported intermediate and capital goods;
  • Exemption from sales tax, stamp and transfer duties on goods and services required for EPZ activities;
  • Reduction in foreign exchange controls;
  • Guarantee of free repatriation of capital and profits;
  • Permission for EPZ investors to hold foreign currency accounts locally;
  • Access to streamlined regulatory service (‘one stop shop’);
  • Refund of up to 75% of costs of pre-approved training of Namibian citizens;
  • No strike or lock-outs allowed in EPZs;
  • Provision of factory facilities for rent at economical rates.

Performance and Data Localization Requirements

The government actively encourages partnerships with historically disadvantaged Namibians.  The Equity Commission requires all firms to develop an affirmative action plan for management positions and to report annually on its implementation.  Namibia’s Affirmative Action Act strives to create equal employment opportunities, improve conditions for the historically disadvantaged, and eliminate discrimination.  The Equity Commission facilitates training programs, provides technical and other assistance, and offers expert advice, information, and guidance on implementing affirmative action in the work place.

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.

The lengthy and administratively burdensome process of obtaining and renewing work permits in Namibia is among investors’ greatest complaints.  Although the government cites the country’s high unemployment rate as its motivation for a strict policy on work permits, Namibia’s labor force does not yet meet many of the skills needed to fill jobs that foreigners currently hold.

Economic empowerment legislation for previously disadvantaged groups, called the New Equitable Economic Empowerment Framework (NEEEF), is under consideration in the legislature.  A bill is expected to be introduced in 2020 and is expected to contain provisions relating to ownership, management, value addition, human resource capacity building, job creation, and corporate social responsibility.

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

Investment Incentives

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.

The GoN is keen to undertake projects under the Public Private Partnership (PPP) model. An agreement was recently signed between the IFC and GoN agencies, including IBN and the SEZ Authority, to jointly develop the Simara Special Economic Zone (SEZ). Post is unaware of the GoN issuing guarantees for FDI projects, but it has been open to joint financing arrangements.

Foreign Trade Zones/Free Ports/Trade Facilitation

In August 2016, Nepal’s Parliament approved the 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 recent revision to the SEZ Act in 2019 has apparently 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. Both are located in southern Nepal near the border with India.  Construction of factories at the Bhairahawa site began in mid-2018 after the Nepal Electricity Authority established electricity supply to the site.  Prior to the COVID pandemic, the SEZ in Simara was expected to come into operation within the fiscal year, mostly focused on garment production. China and Nepal have signed a memorandum of understanding to build an SEZ in Rasuwagadhi near the primary Nepal-China border crossing and the two countries are also working together to develop an “econ-industrial” park in Jhapa district in eastern Nepal, though it is not clear whether it will operate as an SEZ.

Performance and Data Localization Requirements

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.”

Netherlands

4. Industrial Policies

Investment Incentives

General requirements to qualify for investment subsidy schemes apply equally to domestic and foreign investors.  Industry-specific, targeted investment incentives have long been a tool of Dutch economic policy to facilitate economic restructuring and to promote economic priorities.  Such subsidies and incentives are spelled out in detailed regulations.  Subsidies are in the form of tax credits disbursed through corporate tax rebates or direct cash payments if there is no tax liability.  For an overview of government subsidies and investment programs, see:  http://english.rvo.nl/subsidies-programmes .

FDI tends to be concentrated in growth sectors including information and communications technology (ICT), biotechnology, medical technology, electronic components, and machinery and equipment.  Investment projects are predominantly in value-added logistics, machinery and equipment, and food.

Since 2010, the government has shifted from traditional industrial support policies to a comprehensive approach to public/private financing agreements in areas where investment is deemed of strategic value.  Government, academia, and industry work together to determine recipient sectors for co-financed (public and private) R&D.  The government’s industrial policy focuses on nine “Top Sectors”:  creative industries, logistics, horticulture, agriculture and food, life sciences, energy, water, chemical industry, and high tech.  (For more information, see https://www.government.nl/topics/enterprise-and-innovation/contents/encouraging-innovation .)

Foreign Trade Zones/Free Ports/Trade Facilitation

The Netherlands has no free trade zones (FTZs) or free ports where commodities can be processed or reprocessed tax-free.  However, FTZs exist for bonded storage, cargo consolidation, and reconfiguration of non-EU goods.  This reflects the key role that transport, transit, logistics, and distribution play in the Dutch economy.  Dutch Customs oversee a large number of customs warehouses, free warehouses, and free zones along many of the Netherlands trade routes and entry points.

Schiphol Airport handles nearly 1.75 million tons of goods per year for distribution, making it the third largest cargo airport in Europe.  Specific parts of Schiphol are designated customs-free zones.  The Port of Rotterdam is Europe’s largest seaport by volume, handling over 37 percent of all cargo shipping on Europe’s Le Havre-Hamburg coastline and processing nearly 470 million tons of goods in 2018.  Many agents operate customs warehouses under varying customs regimes on the premises of the Port of Rotterdam.

Performance and Data Localization Requirements

There are no trade-related investment performance requirements in the Netherlands and no requirements for employment of local capital or managerial personnel.

The Dutch government does not follow a “forced localization” policy and does not require foreign information technology (IT) providers to turn over source code or provide access to surveillance.  The Dutch Data Protection Authority (DPA) monitors and enforces Dutch legislation on the protection of personal data (https://autoriteitpersoonsgegevens.nl/en ).  The Dutch DPA is active in the EU’s Article 29 Working Party, the collective of EU national DPAs.  The primary law on protection of personal data in the Netherlands is the Dutch law implementing EU directive 95/46/EC.  The new European General Data Protection Regulation (GDPR), which is directly applicable in member states, entered into force May 25, 2018, as part of the EU’s comprehensive reform on data protection.

The Dutch DPA recognized U.S. firms that registered and self-certified with the U.S.-EU Safe Harbor program that began in 2000 and focused on safe transfer of personal data between the European Union and the United States.  On July 12, 2016, the European Commission issued an adequacy decision on the EU-U.S. Privacy Shield framework (https://www.privacyshield.gov/welcome ), which replaced the Safe Harbor program, providing a legal mechanism for companies to transfer personal data from the EU to the United States.  In an October 2019 report, the European Commission confirmed that the EU-US Privacy Shield framework continues to ensure an adequate level of protection for personal data transferred from the EU to companies participating in the Privacy Shield program in the United States.  The Dutch government strongly supports Privacy Shield.

New Zealand

4. Industrial Policies

Investment Incentives

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 foreign direct investment projects.

In the Media and Entertainment sector, the New Zealand Film Commission administers a grant for international film and television productions on behalf of the Ministry for Culture and Heritage and MBIE.  Established in 2014, the New Zealand Screen Production Grant provides rebates for international productions of 20 percent on specified goods and services purchased in New Zealand. An additional five percent is available for productions that meet a significant economic benefit points test for New Zealand.

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.

The government does not have a state policy on issuing guarantees on foreign direct investment projects.  It provides some opportunities and initiatives for overseas investors to apply for joint financing mainly if the projects involve R&D, science and innovation that will ultimately benefit the New Zealand economy.

Foreign Trade Zones/Free Ports/Trade Facilitation

New Zealand does not have any foreign trade zones or duty-free ports.

Performance and Data Localization Requirements

The government of New Zealand does not maintain any measures that are alleged to 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 including: satisfying the benefit to New Zealand test through local employment, using domestic content in goods, or promising the introduction of a new technology to New Zealand.

Investors requiring OIO approval also must maintain “good character”, and reporting requirements.  Investors are generally required to report annually to the OIO for up to five years following approval, 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.  A government-commissioned independent review in 2016 found the good character test to be robust after questions were asked whether it was being used consistently and accurately

In 2019 the New Zealand High Court imposed civil penalties on a director for breaching the good character conditions of his company’s consent when it bought a controlling interest (50.2 percent) in New Zealand’s largest agricultural services company in 2011.  The breach arose because the director was investigated by the United States Securities and Exchange Commission (SEC) and found to have violated United States securities law.  As part of the settlement reached with the OIO, the director’s company agreed to divest its interest in the company below 50 percent (to 46.5 percent).

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.  These conditions include providing evidence the business is up and running, have the support of NZTE, and provide a letter from the business CEO.  Immigration New Zealand may grant temporary work visas to key employees to get the business established and resident visas once the business is operating.  Applicants must provide evidence the business is up and running, such as a certificate of incorporation, tax records, and documents showing a business site has been purchased or leased.  Immigration New Zealand also considers if the relocation benefits New Zealand, if the business is trading profitably (or has the potential to do so in the next 12 months), and contributing to economic growth by, for example introducing new technology, management or technical skills; enhancing existing technology, management or technical skills; introducing new products or services; enhancing existing products or services; creating new export markets;  expanding existing export markets; creating at least one full-time job for a New Zealander.  Visa holders can bring family, and after meeting conditions of the visa may be eligible to live and work in New Zealand indefinitely.

As part of the KIWI Act U.S. Public Law 115-226, enacted on August 1, 2018, accorded nationals of New Zealand to E-1 and E-2 status for treaty trader/treaty investor purposes if the Government of New Zealand provides similar nonimmigrant status to nationals of the United States. The State Department confirmed that New Zealand offers similar nonimmigrant status to U.S. nationals and E visas may be issued to nationals of New Zealand beginning on June 10, 2019. https://travel.state.gov/content/travel/en/us-visas/visa-information-resources/fees/treaty.html#16

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.”  Under certain circumstances, however, 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.

Under CPTPP 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”, which 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.

New Zealand is considering e-commerce issues in trade agreements beyond CPTPP, including upgrades of existing FTAs, and in January 2019 joined other WTO members to launch negotiations on E-Commerce.

The Digital Economy Partnership Agreement (DEPA) which is yet to enter into force 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.

The Customs and Excise Act 2018 allows customers who are required to keep Customs-related records to apply to Customs New Zealand, to store their business records outside of New Zealand.  Under the repealed 1996 Act it was an offence for businesses to not store physical records in New Zealand or their electronic records with a New Zealand-based cloud storage provider.  Under the Act, a business can apply for permission to keep their Customs-related business records outside New Zealand, including in a cloud storage facility that is not based in New Zealand.  Businesses denied permission must still be required to store business records in New Zealand, including with New Zealand-based cloud providers.

In March 2018, the government introduced the Privacy Bill to repeal and replace the Privacy Act 1993.  The bill which passed its second reading in August 2019, aims to strengthen the protection of confidential and personal information and modernize privacy regulations.  It also aims to incorporate provisions included in the European General Data Protection Regulation (GDPR), however the select committee report on the bill released in March 2019 advised against strict alignment with the GDPR.

In its current form, the Bill would apply to all actions by a New Zealand agency regardless of where that agency is located, and would apply to all personal information collected or held by a New Zealand agency regardless of where that information is collected or held, or where the relevant individual is located.

The bill extends the current law to apply to agencies located outside of New Zealand as long as that agency is “carrying on business in New Zealand.” It would apply to personal information collected in the course of such business, again regardless of where the agency is located and where the information is held.  Additionally, it will apply regardless of whether that agency charges monetary payment or makes a profit from its business in New Zealand. The intent is to ensure that global businesses doing business in New Zealand, irrespective of where the individual or the agency is located, comply with the new Privacy Act.

For most businesses, the most notable change in the new Act will be the introduction of a requirement to report serious privacy breaches. Notifiable privacy breaches will require organizations to notify the Privacy Commissioner and any affected individuals if there is a breach that has caused serious harm or poses a risk of causing someone serious harm. In March 2020, an amendment to the bill was proposed to all the new legislation apply from November 1, 2020.

A provision affecting cloud service providers places the onus of liability for privacy breaches on the customer, as long as the provider is not using or disclosing that customer’s information for its own purposes.  The Search and Surveillance Act 2012 includes powers to search and notification requirements of search power in connection to a “remote access search” defined in the Act as a search of a thing such as an Internet data storage facility that does not have a physical address that a person can enter and search.  Such mandatory demands as mentioned are legal obligations that must be complied with and are made under a search warrant.  The Privacy Act permits disclosure in such a case. The organization can only disclose the information requested and any excess information provided will be in breach of the Privacy Act unless it is able to be provided as part of a voluntary request.

New Zealand does not have any requirements for foreign information technology (IT) providers to turn over source code or provide access to encryption.  There may be obligations on individuals to assist authorities under Section 130 of the Search and Surveillance Act 2012. An agency with search authority in terms of data held in a computer system or other data storage device may require a specified person to provide access information that is reasonable to allow the agency exercising the search power to access that data.  This could include a requirement that they decrypt information which is necessary to access a particular device. The search power cannot be used to require the specified person to give information intending to incriminate them. Failure to assist a person exercising a search power under section 130(1), without reasonable excuse, is a criminal offence punishable with imprisonment for up to three months.

The Customs and Excise Act 2018 sets specific legal thresholds for Customs officers to search passengers’ electronic devices and imposes a fine of NZD 5,000 (USD 3,250) if they refuse to hand over passwords, pins, or encryption keys to access the device.  The officer must have “reasonable cause to suspect,” that the passenger has been or is about to be involved in the commission of relevant offending.

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.

Nicaragua

4. Industrial Policies

Investment Incentives

The Social Housing Construction Law (2009/ 677) provides incentives for the construction of housing units 36–60m2 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.  Additional tax breaks are also available.

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 income and property tax exemptions.  Regulatory concerns limit investment despite these incentives (see Transparency of the Regulatory System).  Private investment in hydroelectric dams is banned from the Asturias, Apanás, and Río Viejo Rivers, and the approval of the National Assembly is required for projects larger than 30 megawatts on all other rivers.

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 infrastructure projects in the past.  Nicaragua mandates joint ventures with government agencies in the energy sector.

Foreign Trade Zones/Free Ports/Trade Facilitation

Nicaragua’s FTZ has historically been a key driver of the Nicaraguan economy.  It employs 123,000 people, of which textile companies employ 68.6 percent.  The FTZ formerly enjoyed a good relationship with the government.  During the crisis, however, investors report fewer interactions with the FTZ Commission, which regulates the FTZ.  Due to political uncertainty, many FTZ investors delayed capital investments, while some have moved production lines and operations to other countries.

The Free Zones Incentive Law (Decree 46-91 and amendments) and Law 917 – Free Zone Export Law passed in 2015 (including Decree 12-2016) grants FTZ companies:  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.  The majority of FTZ companies are foreign investors.

Performance and Data Localization Requirements

Article 14 of the Nicaraguan Labor Code states that 90 percent of any company’s employees must be Nicaraguan. The Ministry of Labor may make exceptions when justified for technical reasons.  The Nicaraguan Labor Code does not explicitly mention mandated local employment for senior management and boards of directors.

Visas and work permit procedures are not excessively onerous for foreign investors and their employees, but Nicaraguan authorities have denied entry to or expelled foreigners, including U.S. government officials, NGO workers, academics, journalists, and others for reasons not clearly defined.  The Embassy has received reports of government officials reviewing social media posts to justify refusing entry.  Residency permit applications can take 18 months or longer to receive final approval.

The government does not impose performance requirements, conditions on permission to invest, or force foreign investors to use domestic content in goods or technology.  Nicaraguan tax and customs incentives apply equally to foreign and domestic investors.

There are no requirements for foreign IT providers to turn over source code or provide access to encryption.  However, some contacts have reported that since the start of the political crisis in 2018 the government applied significant pressure to telecom providers to cooperate in the government’s surveillance activities.  Nicaragua does not impose measures that prevent or unduly impede freely transmitting customer or other business-related data outside the country, and there are no rules on local data storage.

Niger

4. Industrial Policies

Investment Incentives

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 USD40,000) or above.
  • Tier 2: Priority tier, for investments of 50 million CFA francs (about USD81,000) or above.
  • Tier 3: Conventional tier, for large businesses with investments of at least 2 billion CFA (about USD3.25 million)

In practice, tier three investors can negotiate possible additional concessions directly with the government if warranted.

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 n° 2018-40 of 05 June 2018 regulating contracts public-private partnership stated for example in the 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

In 2016, the GON approved a new Customs Code to replace the one which had been in place for 55 years. The new code is supposed to reflect the aspirations of actors within the international supply chain and is in conformity 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 efficient in Niamey and was still expanding to other regions of Niger through 2019.  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.  Although work in the zone had not commenced, the GoN anticipates that future infrastructure will permit Niger to have a demarcated space in which the State confers tax advantages on companies operating there. The creation of this free zone is dedicated to export focused companies.  In July 2019, the government also created in a second industrial zone of Niamey located on the Bougoum plateau.  This project’s stated aim is to reduce difficulties linked to the quality of infrastructure and production factors, which promoters of industrial projects cite as investment impediments.  The complaints include 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.

In July 2019, the African Continental Free Trade Area (ZLECAF) draft flagship of AU Agenda 2063 entered into force and its implementation was scheduled to start in July 2020.  Niger is active proponent and member of the treaty.

Performance and Data Localization Requirements

While Niger requires 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 no localization requirements for senior management or boards of directors.  There are no excessively onerous visa, residence, work permit, or similar requirements inhibiting mobility of foreign investors and their employees.  In principal, 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.  There are no performance requirements or investment incentives for investors.

Niger does not require foreign IT providers to turn over source code and/or provide access to surveillance.  There are no measures that prevent companies from freely transmitting customer or other business-related data outside of Niger.

Nigeria

4. Industrial Policies

Investment Incentives

The Nigerian government maintains different and overlapping incentive programs.  The Industrial Development/Income Tax Relief Act, Cap 17, Laws of the Federation of Nigeria, 2004 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 added 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 percent tax holiday for seven years and an additional five percent 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 LGAs deemed disadvantaged, for local value-added processing, for investments in solid minerals and oil and gas, and for several other investment scenarios.  For a full list of incentives, refer to the NIPC website at https://www.nipc.gov.ng/investment-incentives/ .

The NEPC administers an 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 federal government set aside 5.12 billion naira (roughly USD 14.2 million) in the 2019 budget for the EEG scheme.  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 percent 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 percent of expenses are allowed.  Long-term research will be regarded as a capital expenditure and written off against profit.

Foreign Trade Zones/Free Ports/Trade Facilitation

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 percent 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.  The Nigerian government also encourages private sector participation and partnership with state and local governments under the free trade zones (FTZ) program, resulting in the establishment of the Lekki FTZ (owned by Lagos State), and the Olokola FTZ (which straddles Ogun and Ondo States and is owned by those two states, the federal government, and private oil companies).  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 )

Performance and Data Localization Requirements

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, 2010 restricts the number of expatriate managers to five percent 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 percent 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 approval process for TTAs 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/sites/default/files/stages_involved.pdf .

The Nigerian Oil and Gas Content Development Act of 2010 has technology-transfer requirements that may violate a company’s intellectual property rights.

The Guidelines for Nigerian Content Development in the ICT sector issued by the NITDA in 2013, require ICT companies to host all consumer and subscriber data locally to ensure the security of government data and promote development of the ICT sector by mandating all government ministries, departments, and agencies to source and procure software from only local and indigenous software development companies.  Enforcement of the guidelines is largely absent as the Nigerian government lacks capacity and resources to monitor digital data flows.  Federal government data is hosted locally in data centers that meet international standards.  In 2019, NITDA updated the 2013 Guidelines for Data Protection (https://nitda.gov.ng/wp-content/uploads/2019/01/Nigeria%20Data%20Protection%20Regulation.pdf ) and rolled out the regulatory framework for providers of public internet access services such that only registered, verified and vetted providers can provide public internet access service in Nigeria.

The 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.  Others ship their goods to ports in neighboring countries, primarily Benin, after which they transport overland legally or smuggle into the country.  The Nigerian government began closing land borders to trade in August 2019, reportedly to stem the tide of smuggled goods entering from neighboring countries and has not reopened borders as this year’s report.  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 percent cargo examinations, and shipments take more than 20 days to clear through the process.

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 percent of Nigeria’s legal trade, to run a 24-hour operation and achieve 48-hour cargo clearance is not effective.  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.  Freight forwarders usually resort to bribery of customs agents and port officials to avoid long delays clearing imported goods through the NPA and NCS.  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 but not expected to be finished before 2021.  Smuggled goods routinely enter Nigeria’s seaports and cross its land borders.

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.  Visa-on-arrival is not valid for employment or residence.  Investors report that the residency permit process is cumbersome and can take from two to 24 months and cost USD 1,000 to USD 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

Investment Incentives

Both the Law on Technological Industrial Development Zones (TIDZs) and the Law on Financial Support of Investments offer incentives to investors. Investors in the TIDZs 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 TIDZs are exempt from paying duties for equipment and machines as well as municipality tax for construction. The land lease rate is 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

North Macedonia currently has 15 free economic zones in various stages of development throughout the country. The Directorate for Technological Industrial Development Zones (TIDZ) (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 TIDZs throughout North Macedonia, including automotive components manufacturer ARC Automotive (Skopje 1), Adient (Stip and Strumica), Aptiv (Skopje 1), Gentherm (Prilep), Lear (Tetovo), Dura Automotive (Skopje 2), and electronic component manufacturer Kemet (Skopje 1).

Performance and Data Localization Requirements

North Macedonia does not 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 and/or provide access to encryption. Furthermore, there are no measures that prevent or unduly impede companies from freely transmitting customer or other business-related data outside the country. 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 is amending 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 FDIs. Government entities include the Agency for Foreign Investments and Export Promotion (Invest North Macedonia), Directorate for Technological Industrial Development Zones (TIDZs), 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, http://www.customs.gov.mk/index.php/en/ .

Norway

4. Industrial Policies

Investment Incentives

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 

Foreign Trade Zones/Free Ports/Trade Facilitation

Norway has no foreign trade zones and does not contemplate establishing any.

Performance and Data Localization Requirements

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 impose requirements on data storage.

Oman

4. Industrial Policies 

Investment Incentives

Oman’s 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 established an independent tax authority under a royal decree issued in April. Oman has no personal income or capital gains tax.

However, some of Oman’s investment incentives have diminished in recent years.  Most industrial and commercial consumers now pay cost-reflective tariffs for utilities. Oman’s overhaul of its corporate tax law in 2017 eliminated many tax exemptions for foreign investors. Oman taxes corporate earnings at 15 percent.

Foreign Trade Zones/Free Ports/Trade Facilitation

The government has established free trade zones 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.

Performance and Data Localization Requirements

Since 1988, the GoO has had a labor market policy of Omanization, which includes 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, for example, 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 Manpower (MoM), which has the authority to reduce the requirements for some businesses and to adjust required Omanization percentages accordingly.  In response to the economic fallout from the COVID-19 pandemic, the MoM adopted stronger measures to force companies to increase their employment of Omanis and also to ensure that Omanis are not terminated from their jobs.

Employers seeking to hire expatriate workers must seek a visa allotment from the MoM and Royal Oman Police (ROP).  The MoM and ROP scrutinize specific visas allocations, and they often use opaque criteria.  Foreign investors complain of the difficulty in hiring expatriates to the point that it frustrates or deters companies from investing in Oman.  The ROP still requires expatriate workers to leave and remain outside the country for two years between changing employers (unless the initial employer agrees otherwise).  Persons may seek exemptions to this rule from the ROP on a case-by-case basis.

In January 2018, the MoM issued a decree that imposed a six-month ban on visas for expatriates in 87 job categories across 10 private sector industries.  The MoM has extended the dates for this ban several times and has added additional job categories to the visa ban.  The decree does not apply to business owners registered with the Public Authority for Small and Medium Enterprise Development (Riyada) or to the owners insured by the Public Authority for Social Insurance.

Currently, Oman does not have any 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

Investment Incentives

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 currently does not provide any formal investment incentives such as grants, tax credits or deferrals, access to subsidized loans, or reduced cost of land to individual foreign investors.

In general, the government does not issue guarantees or 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

Providing unique fiscal and institutional incentives exclusively for export-oriented industries, the government established the first Export Processing Zone (EPZ) in Karachi in 1989.  Subsequently, EPZs were established in Risalpur, Gujranwala, Sialkot, Saindak, Gwadar, Reko Diq, and Duddar; today, only Karachi, Risalpur, Sialkot, and Saindak remain operational.  EPZs 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 Act, amended in 2016, allows both domestically focused and export-oriented enterprises to establish companies and public-private partnerships within SEZs.  According to the country’s 2013 Investment Policy, manufacturers introducing new technologies that are unavailable in Pakistan receive the same incentives available to companies operating in Pakistan’s SEZs.

Pakistan has a total of 23 designated special economic zones (SEZs); 10 of these were recently established by the government.  All potential investors in SEZs are provided with a  basket of incentives, including a ten-year tax holiday, one-time waiver of import duties on plant materials and machinery, and streamlined utilities connections.  Despite offering substantial financial, investor service, and infrastructure benefits to reduce the cost of doing business, Pakistan’s SEZs have struggled to attract investment due to lack of basic infrastructure.  None of the identified SEZs are fully developed, but they have attracted some investment and are available to any company, domestic or foreign.  KP’s Peshawar Economic Zone Office, in an attempt to attract additional foreign investor interest, opened an Industrial Facilitation Center to provide potential investors with timely services and a one-stop shop for existing and new foreign investors.  Pakistan intends to establish nine SEZs under CPEC’s second phase, which is focused on promoting Pakistan’s industrial growth and exports.  The government plans to open the first CPEC SEZs in Rashakai, Khyber Pakhtunkhwa (KP); Faisalabad, Punjab; and Dhabeji, Sindh in 2020.  Most CPEC 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.

Performance and Data Localization Requirements

Foreign business officials have struggled to get business visas for travel to Pakistan.  When permitted, business people typically receive single-entry visas with short-duration validity.  Technical and managerial personnel working in sectors that are open to foreign investment are typically not required to obtain special work permits.  In 2019 Pakistan announced updates to its visa and no objection certification (NOC) policies to attract foreign tourists and businesspeople; however, the new visa policies do not apply to U.S. passport holders.  The new NOC policy implemented in May 2019 permits visitor travel throughout Pakistan, though travel near Pakistan’s borders still requires a NOC.

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.  Likewise, 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 obtaining security clearance from the Ministry of Interior.  Such requirements discourage foreign nationals from becoming board members of  Pakistani companies.

Companies operating in Pakistan have not registered complaints with the embassy regarding encryption issues.  Officially, accreditation from the Electronic Certification Accreditation Council (under the Ministry of Information Technology) is required for entities using encryption and cryptography services, though it is not consistently enforced.  The Pakistan Telecommunication Authority (PTA) initially demanded unfettered access to Research in Motion’s BlackBerry customer information, but the issue was resolved in 2016 when the company agreed to assist law enforcement agencies in the investigation of criminal activities.  PTA and SBP prohibit telecom and financial companies from transferring customer data overseas.  Other data, including emails, can be legally transmitted and stored outside the country.  Recent draft regulations requiring social media companies to maintain local servers in Pakistan received significant criticism in the press and from service providers.  The government subsequently allowed for additional comment and revisions to draft data protection legislation; the comment and revision process remains ongoing.

Panama

4. Industrial Policies

Investment Incentives

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 IPC’s provide up to 35 percent in tax reimbursements, and preferential import tariffs of 3 percent. It is also considering a law to provide incentives for the manufacturing sector.

Law 1 (2017) modifies Law 28 (1995) by exempting exports from income tax and provides a zero percent import duty for machinery for those companies that export 100 percent of their products.  Producers to sell a portion of their products into the domestic market will pay a three percent import tariff for machinery and supplies.

Public-private partnership law incentive includes for private investment, social development, and job creation.  The law will establish a clear institutional framework for developing, improving, operating and/or maintaining public infrastructure for the provision of public services.

Foreign Trade Zones/Free Ports/Trade Facilitation

Panama is home to the Colon Free Trade Zone, the Panama Pacifico Special Economic Zone, and 16 other “free zones” (11 actives zones and five in development).  The Colon Free Trade Zone has more than 2,500 businesses, while the Panama Pacifico Special Economic Zone has more than 340 businesses, and the remaining free zones host 126 companies.  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.

Performance and Data Localization Requirements

There are no legal performance requirements such as minimum export percentages, significant local requirements of local equity interest, or mandatory technology transfers.  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. Companies are required to have 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 staff large projects fully.  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.  According to the Panamanian Authority for Government Innovation (AIG, http://www.innovacion.gob.pa/noticia/2834 ), the majority of these firms offer services to banking and telephone companies in Central America and the Caribbean.  Panama boasts exceptional international connectivity, with seven undersea fiber optic cables.

Panama’s data protection law (Law 81, March 26, 2019) establishes the principles, rights, obligations, and procedures that regulate the protection of personal data.  The National Authority for Transparency and Access to Information will oversee enforcement of the law that will go into effect in March 2021.  The National Authority for Government Innovation is working closely with large private sector companies to draft specific data protection regulations.  The concept of 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

Investment Incentives

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 and are as follows.

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.  For more details, see Price Waterhouse Cooper’s Global Tax Solutions page (http://www.pwc.com/gx/en/tax/index.jhtml).

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:

  • Agricultural production of any kind;
  • Manufacturing of any kind;
  • Construction;
  • Transport, storage and communications;
  • Real estate;
  • Business services; and
  • Provision of accommodation, motels or hotels.

The following have been specified as rural development areas:

  • Central province – Goilala;
  • Enga province – Kandep, Lagalp, Wabag, Wapenamunda;
  • Gulf province – Kaintiba, Kikori;
  • Eastern Highlands province – Henganofi, Lufa, Okapa, Wonenave;
  • Southern Highlands province – Jimi, Tambal;
  • Madang province – Bogia, Rai Coast, Ramu;
  • Milne Bay province – Losula, Rabaraba;
  • Morobe province – Finschaffen, Kabwum, Kaiapit, Menyamya, Mumeng;
  • East New Britain province – Pomio;
  • West New Britain province – Kandrian;
  • East Sepik province – Ambuti, Angoram, Lumi, Maprik;
  • West Sepik province – Amanab, Nuku, Telefomin; and
  • Simbu province – Gumine, Karimui.

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 include, 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.

The relevant percentages are as follows:

  • Year 1 – 40 percent
  • Year 2 – 30 percent
  • Year 3 – 20 percent
  • Year 4 – 15 percent
  • Year 5 – 10 percent

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.

Foreign Trade Zones/Free Ports/Trade Facilitation

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. SEZs remain only a concept.

Performance and Data Localization Requirements

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 government/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 K100, 000.00 or 10 years in prison.

Paraguay

4. Industrial Policies

Investment Incentives

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.

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). 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 three-fourths 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.

Performance and Data Localization Requirements

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.

Paraguay’s Public Contracting Law (4558/11) gives preference in government bids to locally produced goods in public procurements open to foreign suppliers, even if the domestic good is up to 20 percent more expensive than the imported good. Foreign firms can bid on tenders deemed “international” and on “national” tenders through the foreign firm’s local agent or representative. The government is making efforts to enhance transparency and accountability, including through the use of an internet-based government procurement system. Paraguay is not a signatory to the World Trade Organization (WTO) Agreement on Government Procurement.

Peru

4. Industrial Policies

Investment Incentives

Peru offers both 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 company’s shares in the 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.

Foreign Trade Zones/Free Ports/Trade Facilitation

MINCETUR Minister Edgar Vásquez announced in June 2019 that 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). Peru has seven Special Economic Zones (SEZ): a Free Zone in Tacna and Special Development Zones (SDZ) in Ilo, Matarani, Paita, Tumbes, Loreto and Puno (the last three are not in operation). Companies can become SEZ users through public auctions. This condition gives them access to tax benefits and customs advantages promoting entry, permanence, and exit facilitation procedures for goods and tax exemptions in the development of their activities.

Specific benefits are as follows:

Taxes

  • Income Tax exemption (rate outside of the EEZ is 29.5 percent)
  • General Sales Tax (IGV) exemption (rate outside of the EEZ is 16 percent)
  • Municipal Promotion Tax exemption (rate outside of the EEZ is 2 percent)
  • Excise Tax (ISC) exemption (rate outside of the EEZ goes from 2 to 30 percent depending on the product)
  • Ad Valorem tariff exemption when importing products from overseas (rates outside of the EEZ 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 to 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

MINCETUR Supreme Decree 005-2019 published in August 2019, implemented regulations for the SDZ of Tumbes, Ilo, Matarani and Paita. SDZ businesses can perform activities in seven economic sectors: industrial, logistics, repair/overhaul, telecommunications, information technology, scientific, 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. The general function of the office is the application of effective foreign trade facilitation mechanisms to promote infrastructure development and to allow access and provision of services in improved quality and price conditions. The MINCETUR Foreign Trade Facilitation Office Director is Mr. Francisco Ruiz Zamudio fruiz@mincetur.gob.pe, +51 1 5136100 Annex 1650.

Performance and Data Localization Requirements

The PTPA has greatly reduced burdensome investor requirements in Peru. Under the PTPA, Peru made concessions beyond its commitments to the World Trade Organization (WTO), eliminating investment barriers such as the requirement for U.S. firms to hire nationals rather than U.S. professionals, and measures requiring the purchase of local goods. Peru does not maintain any measures that are inconsistent with Trade-Related Investment Measure (TRIM) requirements, according to a WTO Committee on Trade-Related Investment Measure notification dated August 19, 2010.

Current law limits foreign employees to 20 percent of the total number of employees in a local company (whether owned by foreign or national interests). However, under the PTPA, Peru has agreed not to apply most of its nationality-based hiring requirements to U.S. professionals and specialty personnel. The combined salaries of foreign employees are limited to no more than 30 percent of the total company payroll. However, DL 689 from November 1991 provides a variety of exceptions to these limits. For example, a foreigner is not counted against a company’s total if he or she holds an immigrant visa, has a certain amount invested in the company (approximately $4,000), or is a national of a country that has a reciprocal labor or dual nationality agreement with Peru. The United States and Peru recognize dual nationality, but do not have a formal agreement. Furthermore, the law exempts foreign banks, and international transportation companies from these hiring limits, as well as all firms located in free trade zones. Companies may apply for exemptions from the limitations for managerial or technical personnel. Sector-specific regulating bodies enforce performance requirements.

Although there are no discriminatory or onerous visa requirements, residence, or work permit requirements that inhibit foreign investors’ mobility, the application and approval process can be cumbersome and lengthy.

There are no performance requirements that apply exclusively to foreign investors. Peruvian civil law applies to legal stability agreements, which means the GOP cannot unilaterally alter agreements. Notwithstanding these protections, investors should be aware that government officials have delivered negative remarks to the press regarding companies exercising their contractual rights and obligations.

Peru does not follow a policy in which foreign investors must use domestic content in goods or technology.

Data Storage

A data controller who processes personal data must notify the National Authority for Personal Data Protection (ANPDP for its Spanish acronym), which keeps a public register of data processors and the type of data they collect. Personal data is defined by the Law as any information on an individual which identifies or makes him/her identifiable through means that may be reasonably used. Sensitive personal data means any of the following: 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 their personal data. Consent must be prior, informed, expressed, and unequivocal. In the case of sensitive personal data, consent must also be given in writing, which may be done digitally. Even without the consent of the subject, sensitive data may be processed when authorized by law, provided it is in the public interest.Data controllers may process personal data without consent:

  • When the personal data are compiled or transferred for public entities in control of the personal data and in the performance of its duties;
  • When personal data is accessible to the public or is intended to be accessible to the public;
  • To comply with other laws related to financial solvency and credit;
  • In the case of a law for the promotion of competition in regulated markets under certain circumstances;
  • When necessary to perform a contract to which the data subject is a party;
  • For personal data related to health, under certain circumstances;
  • When processing is carried out by non-profit organizations with political, religious or union purposes, under certain circumstances; or
  • In an anonymization or disassociation procedure.

A data controller may transfer personal data to places outside of Peru only if the recipients have adequate protection measures. The ANPDP supervises compliance with this requirement. That provision does not apply in the following cases:

  • When the data subject has given his/her prior, informed, express and unequivocal consent;
  • Agreements under international treaties to which Peru is a party;
  • International judicial cooperation;
  • International cooperation between intelligence agencies for the fight against terrorism, illegal drug trafficking, money laundering, corruption, human trafficking and other forms of organized crime;
  • When necessary to implement a contract to which the data subject is a party;
  • To comply with laws concerning the transfer of bank or stock exchanges; or
  • When the transfer is for the prevention, diagnosis or medical or surgical treatment of the data subject; or when necessary to carry out epidemiological or similar studies (provided that adequate disassociation procedures are applied).

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 mandate special regulations be enacted for the processing of personal data of minors. The ANPDP is responsible for enforcement and can issue the following 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” stating that any data subject must have the administrative and/or jurisdictional channel necessary to claim and enforce his/her rights when they are violated by the processing of his/her personal data. There are no requirements for foreign IT providers to turn over source code and/or provide access to encryption.

Peru adopted the Personal Data Protection Law (N° 29733) in July 2011 and went into effect on March 22, 2013. The Law is available here in English: https://www.huntonprivacyblog.com/wp-content/uploads/sites/28/migrated/Peru percent20Data percent20Protection percent20Law percent20July percent2028_EN percent20_2_.pdf 

The implementing regulations are available in Spanish here: http://spij.minjus.gob.pe/normas/textos/220313T.pdf  (page 28)

http://spij.minjus.gob.pe/normas/textos/220313T.pdf  (page 28)

A GOP Executive Order (Urgency Decree 007-2020) published in January 2020 establishes the Digital Trust Framework for the country encompassing a) personal data protection and transparency, b) consumer protection, and c) digital security. The Order establishes the National Digital Secretariat (SEGDI) under the Prime Minister’s Office as the overall coordinator and digital trust governing body but places data protection and transparency under the Ministry of Justice and Human Rights MINJUS (The ANPDP falls under MINJUS). The Order also establishes that all personal data processing must comply with applicable legislation issued by the ANPDP. The Order creates the National Data Center, run by SEGDI, as a digital platform to manage, direct, articulate, and supervise the operation, education, promotion, collaboration and cooperation of data nationwide. A separate Executive Order (Urgency Decree 006-2020) also published in January 2020 creates Peru’s National Transformation System including personal data protection and security preservation as one of its guiding principles. The system aims to foster and encourage digital transformation in public entities, private sector, and society; drive digital innovation, promote the digital economy, and strengthen access to digital technology in the country.

Philippines

4. Industrial Policies

Investment Incentives

The Philippines’ Investment Priorities Plan (IPP) enumerates investment activities entitled to incentives facilitated by BOI, such as an income tax holiday. Non-fiscal incentives include the following: employment of foreign nationals, simplified customs procedures, duty exemption on imported capital equipment and spare parts, importation of consigned equipment, and operation of a bonded manufacturing warehouse.

The 2017 IPP, updated every three years, provides incentives to the following activities: manufacturing (e.g. agro-processing, modular housing components, machinery, and equipment); agriculture, fishery, and forestry; integrated circuit design, creative industries, and knowledge-based services (e.g. IT-Business Process Management services for the domestic market, repair/maintenance of aircraft, telecommunications, etc.); healthcare (e.g. hospitals and drug rehabilitation centers); mass housing; infrastructure and logistics (e.g. airports, seaports, and PPP projects); energy (development of energy sources, power generation plants, and ancillary services); innovation drivers (e.g. fabrication laboratories); and environment (e.g. climate change-related projects). Further details of the 2017 IPP are available on the BOI website (http://boi.gov.ph/ ). The BOI was tasked to update the investment priorities and formulate a Strategic Investment Priorities Plan to replace the IPP in light of the planned amendments in the tax incentive scheme of the Philippines under the Comprehensive Tax Reform Program (CITIRA).

In the current set-up, BOI-registered enterprises that locate in less-developed areas are entitled to pioneer incentives and can deduct 100 percent of the cost of necessary infrastructure work and labor expenses from taxable income. Pioneer status can be granted to enterprises producing new products or using new methods, goods deemed highly essential to the country’s agricultural self-sufficiency program, or goods utilizing non-conventional fuel sources. Furthermore, an enterprise with more than 40 percent foreign equity that exports at least 70 percent of its production may be entitled to incentives even if the activity is not listed in the IPP. Export-oriented firms with at least 50 percent of revenues derived from exports may register for additional incentives under the 1994 Export Development Act.

Multinational entities that establish regional warehouses for the supply of spare parts, manufactured components, or raw materials for foreign markets also enjoy incentives on imports that are re-exported, including exemption from customs duties, internal revenue taxes, and local taxes. The first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law which took effect January 1, 2018, removed the 15 percent special tax rate on gross income of employees of multinational enterprises’ regional headquarters (RHQ) and regional operating headquarters (ROHQ) located in the Philippines. RHQ and ROHQ employees are now subjected to regular income tax rates, usually at higher and less competitive rates.

Foreign Trade Zones/Free Ports/Trade Facilitation

Export-related businesses enjoy preferential tax treatment when located in export processing zones, free trade zones, and certain industrial estates, collectively known as economic zones, or ecozones. Businesses located in ecozones are considered outside customs territory and are allowed to import capital equipment and raw material free of customs duties, taxes, and other import restrictions. Goods imported into ecozones may be stored, repacked, mixed, or otherwise manipulated without being subject to import duties and are exempt from the Bureau of Customs’ Selective Pre-shipment Advance Classification Scheme. While some ecozones are designated as both export processing zones and free trade zones, individual businesses within them are only permitted to receive incentives under a single category.

PEZA operates 379 ecozones, primarily in manufacturing, IT, tourism, medical tourism, logistics/warehousing, and agro-industrial sectors. PEZA manages four government-owned export-processing zones (Mactan, Baguio, Cavite, and Pampanga) and administers incentives to enterprises in other privately owned and operated ecozones. Any person, partnership, corporation, or business organization, regardless of nationality, control and/or ownership, may register as an export, IT, tourism, medical tourism, or agro-industrial enterprise with PEZA, provided the enterprise physically locates its activity inside any of the ecozones. PEZA administrators have earned a reputation for maintaining a clear and predictable investment environment within the zones of their authority (http://www.peza.gov.ph/index.php/economic-zones/list-of-economic-zones/operating-economic-zones ).

The ecozones located inside former U.S. military bases were established under the 1992 Bases Conversion and Development Act. The BCDA (http://www.bcda.gov.ph/ ) operates Clark Freeport Zone (Angeles City, Pampanga), John Hay Special Economic Zone (Baguio), Poro Point Freeport Zone (La Union), and Bataan Technology Park (Morong, Bataan). The SBMA operates the Subic Bay Freeport Zone (Subic Bay, Zambales). Clark and Subic have their own international airports, power plants, telecommunications networks, housing complexes, and tourist facilities. These ecozones offer comparable incentives to PEZA. Enterprises already receiving incentives under the BCDA law are disqualified to receive incentives and benefits offered by other laws.

The Phividec Industrial Estate (Misamis Oriental Province, Mindanao) is governed by Phividec Industrial Authority (PIA) (http://www.piamo.gov.ph/), a government-owned and controlled corporation. Other ecozones are Zamboanga City Economic Zone and Freeport (Zamboanga City, Mindanao) (http://www.zfa.gov.ph/ ) and Cagayan Special Economic Zone (CEZA) and Freeport (Santa Ana, Cagayan Province) (http://ceza.gov.ph/ ). CEZA grants gaming licenses in addition to offering export incentives. The Regional Economic Zone Authority (Cotabato City, Mindanao) (https://reza.bangsamoro.gov.ph/) has been operated by the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM). The incentives available to investors in these zones are similar to PEZA but administered independently.

Performance and Data Localization Requirements

The BOI imposes a higher export performance requirement on foreign-owned enterprises (70 percent of production) than on Philippine-owned companies (50 percent of production) when providing incentives under IPP.

Companies registered with BOI and PEZA may employ foreign nationals in supervisory, technical, or advisory positions for five years from date of registration (possibly extendable upon request). Top positions and elective officers of majority foreign-owned BOI-registered enterprises (such as president, general manager, and treasurer, or their equivalents) are exempt from employment term limitation. Foreigners intending to work locally must secure an Alien Employment Permit from the Department of Labor and Employment (DOLE ), renewable every year with the duration of employment (which in no case shall exceed five years). The BOI and PEZA facilitate special investor’s resident visas with multiple entry privileges and extend visa facilitation assistance to foreign nationals, their spouses, and dependents.

The 2006 Biofuels Act establishes local content requirements for diesel and gasoline. Regarding diesel, only locally produced biodiesel is permitted. For gasoline, all local ethanol must be bought off the market before imports are allowed to meet the blend requirement, and the local ethanol production may only be sourced from locally-produced sugar/molasses feedstock.

The Philippines does not impose restrictions on cross-border data transfers. Sensitive personal information is protected under the 2012 Data Privacy Act, which provides penalties for unauthorized processing and improper disposal of data even if processed outside the Philippines.

Poland

4. Industrial Policies

Poland’s Plan for Responsible Development identifies eight industries for development and 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, outlined in the November 2018 published draft report “Polish Energy Policy to 2040” and updated and expanded in 2019.  While this strategy has not yet been finalized, the government has generally followed the directions of development in the policy.  The updated draft policy can be found at:  https://www.gov.pl/web/aktywa-panstwowe/zaktualizowany-projekt-polityki-energetycznej-polski-do-2040-r .  The draft 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, but may revise the time frame for reaching landmarks in these areas.  The draft policy remains skeptical of onshore wind.  Poland’s National Energy and Climate Plan for years 2021-2030 (NECP PL) has been developed in line with the EU Regulation on the Governance of the Energy and Climate Action and was submitted to the European Commission https://ec.europa.eu/energy/topics/energy-strategy/national-energy-climate-plans_en#the-process .

A government strategy aims for a commercial 5G network to be operational in all cities by 2025.

Investment Incentives

A company investing in Poland, either foreign or domestic, may receive assistance from the Polish government.  Foreign investors have the potential to access certain incentives such as:  income tax and real estate tax exemptions; investment grants of up to 50 percent of investment costs (70 percent for small and medium-sized enterprises); grants for research and development; grants for other activities such as environmental protection, training, logistics, or use of renewable energy sources.

Large priority-sector investments may qualify for the “Program for Supporting Investment of Considerable Importance for the Polish Economy for 2011-2030.”  The program, amended in October 2019, is one of the instruments enabling support for new investment projects, particularly relevant for the Polish economy.  Its main goal is to increase innovation and the competitiveness of the Polish economy.  Under the amended program, it is possible to co-finance large strategic investments as well as medium-sized innovative projects.  Projects that adapt modern technologies and provide for research and development activities are awarded.  The program is also conducive to establishing cooperation between the economic sector and academic centers.  The support is granted in the form of a subsidy, based on an agreement concluded between the Minister of Development and the investor.  The agreement regulates the conditions for the payment of subsidies and the investment implementation schedule.  Under the program, investment support may be granted in two categories: eligible costs for creating new jobs and investment costs in tangible and intangible assets.  Companies can learn more at: https://www.paih.gov.pl/why_poland/investment_incentives/programme_for_supporting_investments_of_major_importance_to_the_polish_economy_for_2011_-_2030 

https://www.gov.pl/web/rozwoj/program-wspierania-inwestycji-o-istotnym-znaczeniu-dla-gospodarki-polskiej-na-lata-2011-2030 

The Polish Investment Zone (PSI), the new system of tax incentives for investors which replaced the previous system of special economic zones (SEZ), was launched September 5, 2018.  Under the new law on the PSI, companies can apply for a corporate income tax (CIT) exemption for a new investment to be placed anywhere in Poland.  The CIT exemption is calculated based on the value of the investment multiplied by the percentage of public aid allocated for a given region based on its level of development (set percentage).  The CIT exemption is for 10-15 years, depending on the location of the investment.  Special treatment is available for investment in new business services and research and development (R&D).  A point system determines eligibility for the incentives.

The deadline for utilizing available tax credits from the previous SEZ system is the end of 2026 (extended from 2020).  The new regulations also contain important changes for entities already operating in SEZs, even if they do not plan new investment projects.  This includes the possibility of losing the right to tax incentives in the event of fraud or tax evasion.  Investors should consider carefully the potential benefits of the CIT exemption in assessing new investments or expansion of existing investments in Poland.

More information on government financial support:

https://www.paih.gov.pl/why_poland/investment_incentives 

The Polish government is seeking to increase Poland’s economic competitiveness by shifting toward a knowledge-based economy.  The government has targeted public and private sector investment in R&D to increase to 1.7 percent of GDP by 2020.  During the seven year period of 2014 to 2020, Poland will receive approximately USD 88.85 billion in EU Structural and Cohesion funds dedicated to R&D.  Businesses may also take advantage of the EU primary research funding program, Horizon 2020.

More information:

Ministry of Funds and Regional Development:

https://www.gov.pl/web/fundusze-regiony/otwarte-konkursy-nabory-dotacje-i-dofinansowania 

Ministry of Economic Development:

https://www.gov.pl/web/rozwoj/programy-i-projekty 

Ministry of Science and Higher Education:

http://www.nauka.gov.pl/horyzont-2020/ 

As of January 1, 2019, the Innovation Box, or IP Box, reduces the tax rate applicable to income derived from intellectual property rights to 5 percent.  Taxpayers applying the IP Box shall be entitled to benefit from the tax preference until a given right expires (in case of a patented invention – 20 years).  In order to benefit from the program, taxpayers will be obliged to separately account for the relevant income.  Foreign investors may take advantage of this benefit as long as the relevant  is registered in Poland.

The Polish government does not issue sovereign guarantees for FDI projects.  Co-financing may be possible for partnering on large FDI projects, such as the planned central airport project or a nuclear project.  For example, the state-owned Polish Development Fund (along with Singaporean and Australian partners) purchased 30 percent of the Gdansk Deepwater Container Terminal.

Foreign Trade Zones/Free Ports/Trade Facilitation

Foreign-owned firms have the same opportunities as Polish firms to benefit from foreign trade zones (FTZs), free ports, and special economic zones (since January 2019, they make up the Polish Investment Zone).  The 2004 Customs Law (with later amendments) regulates operation of FTZs in Poland.  The Minister of Finance establishes duty-free zones.  The Ministers designate the zone’s managing authorities, usually provincial governors, who issue operating permits to interested companies for a given zone.

Most activity in FTZs involves storage, packaging, and repackaging.  As of April 2019, there were seven FTZs: Gliwice, near Poland’s southern border; Terespol, near Poland’s border with Belarus; Mszczonow, near Warsaw; Warsaw’s Frederic Chopin International Airport; Szczecin; Swinoujscie; and Gdansk.  Duty-free shops are available only for travelers to non-EU countries.

There are bonded warehouses in:  Bydgoszcz-Szwederowo; Krakow-Balice; Wroclaw-Strachowice; Katowice-Pyrzowice; Gdansk-Trojmiasto; Lodz -Lublinek; Poznan-Lawica; Rzeszow-Jasionka, Warszawa-Modlin, Lublin, Szczecin-Goleniow; Radom-Sadkow, Olsztyn-Mazury.  Commercial companies can operate bonded warehouses.  Customs and storage facilities must operate pursuant to custom authorities’ permission.  Only legal persons established in the EU can receive authorization to operate a customs warehouse.

Performance and Data Localization Requirements

Poland has no policy of “forced localization” designed to force foreign investors to use domestic content in goods or technology.  Investment incentives apply equally to foreign and domestic firms.  Over 40 percent of firms in Special Economic Zones are Polish.  There is little data on localization requirements in Poland and there are no requirements for foreign information technology (IT) providers to turn over source code and/or provide access to surveillance (backdoors into hardware and software or turn over keys for encryption).  Exceptions exist in sectors where data are important for national security such as critical telecommunications infrastructure and in gambling.  The cross-border transfer rules in Poland are reasonable and follow international best practices, although some companies have criticized registration requirements as cumbersome.  In Poland, the Telecommunications Law (Act of 16 July 2004 – unified text, Journal of Laws 2018, item 1954) includes data retention provisions.  The data retention period is 12 months.

In the telecommunication sector, the Office of Electronic Communication (UKE) ensures telecommunication operators fulfill their obligations.  In radio and television, the National Broadcasting Council (KRRiT) acts as the regulator.  Polish regulations protect an individual’s personal data that are collected in Poland regardless of where the data are physically stored.  The Personal Data Protection Office (UODO) enforces personal data regulations.

Post is not aware of excessively onerous visa, residence permit or similar requirements inhibiting mobility of foreign investors and their employees, though investors regularly note long processing times due to understaffing at regional employment offices.  U.S. companies have reported difficulties obtaining work permits for their non-EU citizen employees.  Both regulatory challenges and administrative delays result in permit processing times of 3 to 12 months.  This affects the hiring of new employees as well as the transfer of existing employees from outside Poland.  U.S. companies have complained they are losing highly-qualified employees to other destinations, such as Germany, where labor markets are more accessible.  The proble