Tax cuts to stimulate science research at universities

Higher education institutions and scientific research centres in Egypt will be exempt from tax and customs duties as part of new measures aimed at stimulating research and innovation in the country.

Egypt’s Parliament approved the exemption of higher education and scientific research entities from taxation and tariffs, including value-added tax on equipment and materials imported from abroad to implement research projects.

The measures are outlined in a new law detailing the incentives for science, technology and innovation (STI), approved by parliament in the House of Representatives earlier this month.

Higher education STI performance levels are low in Egypt, according to the Global Competitiveness Report 2017-2018.

Out of 137 countries, Egypt ranked 100th in higher education and training, 130th in the quality of education system, 121st in scientific research institutions, 122nd in mathematics and science education, 123rd in capacity for innovation, and 117th in university-industry collaboration in research and development.

According to a local news report, the state budget draft for the financial year 2017-18 allocates over EGP68 billion (US$3.87 billion) for higher education and EGP35 billion (US$1.99 billion) for scientific research.

Egypt’s draft constitution in 2014 made provision for the allocation of a percentage of the national budget for higher education and scientific research, amounting to 2% and 1% respectively, which was to gradually increase to meet international standards. The majority of these allocations are used for salaries.

The regulations on incentives for STI aim to enhance the development, transfer and commercialisation of technology. They also aim to support the setting up of innovation-based companies at universities and research centres through incubation and spin-off processes, supporting universities-private sector cooperation to transform creative scientific ideas into products and processes.

The following commitments are among the key features of the regulations:
  • • The exemption of higher education and scientific research entities from taxation and tariffs, including the 14% value-added tax on equipment and materials imported from abroad to implement research projects.

  • • Foreign funds granted to researchers at universities and research centres to conduct projects are exempt from tax.

  • • The remuneration of the research teams for research or development projects shall be exempted from all types of taxes and fees if the project is financed from external grants.

  • • Companies and individuals can finance scientific research projects within universities and technological centres. These finances will be deducted from industrial and commercial profits tax for companies, and from net taxable income for individuals.

  • • Higher education and research authorities can use scientific research as a tool for getting financial support and to enhance societal and community development.

  • • Universities and research centres could establish spin-off companies individually or jointly with others in research specialisation, to benefit from scientific research.

  • • Universities and research centres could build start-up incubators to provide facilities and infrastructure and set up ‘valleys’ for science and technology to link industry with universities.
The regulations on incentives for STI are in line with the Cairo Declaration approved in February 2018 at the third Africa Science, Technology and Innovation Forum held in Cairo.

The law has been welcomed as a step in the right direction.

“The law on incentives for STI is a first step towards creating environments that foster the transformation of Egyptian universities from teaching model universities to research intensive and entrepreneurial model universities, that focus on innovation, creativity and societal and industrial impact for driving the knowledge-based economy,” said Abdallah Daar, a member of the Independent Strategic and Scientific Advisory Board of the Alliance for Accelerating Excellence in Science in Africa (AESA), an initiative of the African Academy of Sciences and the New Partnership for Africa’s Development agency.

Daar told University World News the incentives could become a model for universities and research centres in Arab North African countries to emulate.