Key Takeaways:
- Demography and Business Environment of Egypt
- Business Structures and Investment Incentives
- Regulations and Reforms
- Relevant Numbers
3. Legends Used in the Presentation
CBE Central Bank of Egypt
CIT Corporate Income Tax
DOR Date of Registration
DTAA Double Taxation Avoidance Agreement
EODB Ease of Doing Business
FDI Foreign Direct Investment
GDP Gross Domestic Product
MAT Minimum Alternate Tax
MOI Memorandum of Incorporation
PCP GDP Per Ca Pita GDP
PIT Personal Income Tax
SSC Social Security Contribution
WHT Withholding Tax
VAT Value Added Tax
6. Demography and Wealth
• 102.33 Million People (2020)
• 3rd largest in Africa
• 14th in World
• Real GDP: $ 361.86 Billion (33rd in world)
• PCP GDP- $3561 (114th in world)
• 43% urbanized
• Approximately 95% of the population lives within 20 km of the Nile
River and its delta
.
• Petroleum, natural gas, phosphates, and iron ore
• Currency Unit: Egyptian pound (EGP, E£): $1= E£ 15.70
• Annual CPI: 5.9%
Currency
Population
GDP
Urbanisation
Real Wealth
L
7. Business Environment
Sectoral contribution to GDP
Industry – 16.7%
Retail – 14.0%
Mining – 12.1%
Agriculture – 11.6%
Realstate – 10.6%
Construction – 6.4%
Employment
Distribution (2015)
Services- 49.1%
Agriculture- 25.8%
Industry- 25.1%
Ease of Trading Across
Borders (World Bank)
171st rank
EODB (World Bank)
Overall: 114th rank
For starting business:
90th rank
As of 2018-19
8. Popular Locations for Setting Up Business
CAIRO
Cairo, the capital of Egypt Cairo is the country’s primary centre for
economic production and financial control. The city has large-scale
industrialization in textiles and food processing.
SUEZ
Modern Suez remains a naval and trade centre, linked to Cairo by road
and rail. Mainly a transit port, it has petroleum refineries (connected to
Cairo by pipeline), canal workshops, and an artificial-fertilizer plant.
PORT SAID
Port Said is a port city located in northeastern Egypt, at the northern
end of the Suez Canal. The city has several gas-fired electrical generating
plants, as well as computer, construction, and publishing industries
ALEXANDRIA
Alexandria is the second-largest city in Egypt and a major economic
centre. Alexandria has an outstanding rank in terms of the production of
vegetables and fruits. Its industrial production represents about 40% of
Egypt's total industrial production Many international corporations such
as Unilever, Ezzsteel, Vodafone, etc. operate here.
10. Poverty Metric
16.7
19.6
21.6
25.2 26.3
27.8
32.5
2000 2005 2009 2011 2013 2015 2018
Income poverty rate
Income poverty rate
Linear (Income poverty rate)
Linear (Income poverty rate)
Extreme poverty is estimated to have reached 6.2% by
2018, indicating that about 6 million of the population
cannot satisfy their basic needs of food and thus they
suffer from food insecurity
66.8
52.1
58.9
41.2
31.3
35.8
Urban Rural Total
Average Annual Income of households
in 2018 (by thousands Egyptian
pounds)
Current prices 2018 With constant prices of 2015
- Rural Upper Egypt is the only region where real
consumption increased, however, it still has the
highest percentage of poor (52% are poor in rural
Upper Egypt in 2018).
- Upper Egypt includes cities of Aswan, Esna, Edfu,
Kom Ombo, Luxor, Sohag, Asyut, Minya, etc.
12. Regulatory Agencies
General Authority for Investment and Free Zones
(GAFI)
Egyptian Tax Authority (ETA)
National Authority of Social Insurance (NASI)
Central Bank of Egypt (CBE)
Principal government body
regulating and facilitating
investment in Egypt.
Tax Collecting Authority
Provides compensation for
disability, retirement
pension, unemployment,
and work-related injuries
Overseas Exchange Control
Policy
13. Types of Business Structure
Types of
Business
Structure
Joint
Stock
Company
(JSC)
Limited
Liability
Company
(LLC)
Single
Member
Company
Partnership
Companies
Sole
proprietorship
Inc.
Branch of
Foreign
Entity
Representative
Office
• All the above entities have to be registered only with the GAFI either through the GAFI e-portal or through
Investment Services Centre (ISC).
• LLC and Branches are the most common structures.
• Foreign entities can setup representative or liaison offices for carrying out market surveys, studying
production feasibilities, without entering into commercial operations.
14. Procedure for Registration/Docs Required
Obtain registration from GAFI (3-4 days/ EGP 25000-30000)
•Certificate of Name Reservation.
•Powers of attorney from minimum 2 partners in respect of LLC.
•Copies of valid personal ID of founders or partners.
•Original certificate indicating that the company's auditor is listed at the Registry of accountants and auditors.
•The application provided by GAFI.
•Stamped AOA.
Notarize Company Contracts (1 day/ no charge)
•AOA to be signed by owners of company and notarized
Register Employees with NASI (7 days/ no charge)
•Founding documents (AOA, MOI etc.)
•Deed or Lease agreement for company premises
•Employees’ ID proof, graduation certificate.
•Form No 1 (NASI) filled by employer and Form no 2 (NASI) filled by employee
Obtain VAT registration from ETA (can be applied along with NASI registration/ no charge)
•Founding Documents
•POA issued by employer
•lease contract valid for at least one year with a date certain from the Notary Public
•Tax Card
Open Company’s Bank Account
15. Other Conditions
•Shareholders and Directors: Minimum 3 shareholders and 3 directors
•Min. Capital requirement: EGP 250,000 (10% paid upon incorporation)
•Foreign Ownership: Can be 100% owned by foreign investors. However
51% local ownership is required if JSC wants to import goods for trading.
Joint Stock Company
•No of Partners: Minimum 2 and maximum 50
•Min. Capital Requirement: EGP 2 Mn for LLCs importing goods; NA
otherwise
•Foreign ownership: Can be 100% foreign owned. “51% condition”
mentioned supra is applicable for LLC as well.
•Resident directors: At least one director
Limited Liability Company
•No of shareholder: 2;
•Min Capital requirements: EGP 50,000
•Foreign Ownership: Can be 100% foreign owned
Single Member Company
•No of partners: Minimum 2
•Min Capital requirements: EGP 300000
•Foreign Ownership: Can be 100% foreign owned
Partnership Companies
16. •No. of members: One
•No capital requirements and can be foreign owned
Sole Proprietorship Inc
•No. of partners: No requirement. A manager is appointed for
carrying out administrative work
•Minimum Capital requirements: Not applicable; A deposit of EGP
5000 in the branch’s bank account
Branch
•All conditions as applicable to branch. However, a Representative
Office cannot undertake commercial activities.
Representative Office
Contd..
17. Free Zone Entity
Exemption from customs
duties and all taxes
Imports and exports not
subject to customs
procedures or regular
importation rules
Project supplies from the
local market are exempt
from VAT
Goods in transit, with a
fixed destination, are
exempt from the
payment of any fees
imposed therein subject
to certain conditions
Legal action may not be
initiated against projects
operating in free zones
until GAFI is first
consulted
Free transfer of invested
capital and profits
abroad
Free pricing of products
and profit margin
Foreign investor can be
the sole owner of the
capital or can have any
share in the investment
(excluding projects set up
in Sinai)
- A free zone is part of the State’s territory, located within its borders, which falls under the rule of the
state administration and are governed by special provisions on taxation, customs and finance.
- All types of investment activities are allowed to be exercised inside free zones in accordance with the
policy set by GAFI, mainly export-oriented industries, with the exception of few.
Specific Investment Incentives in Free Zones
Free zones are of two types namely Private Free Zones and Public Free Zones
18. Procedures for Setting Up a Private Free Zone
Application to set up a
private free zone
The committee inspects
the site and submit its
findings to the technical
committee to issue its
recommendations
Submit the application to the attention
of GAFI’s CEO and the minister
overseeing investment affairs
Submit the application to the Cabinet to
approve the establishment of a private
free zone for one or more projects
Cabinet’s Approval
Submit application to the
concerned public free
zone’s board of directors to
issue the final approval to
set up the private free zone
19. Tax Profile
PersonalTax
10% - 22.5%;
5 progressive
slabs ranging
from EGP
8,000-200,000
and above.
Up to EGP
8000: Nil
CorporateTax
22.5%
For Branch
22.5%+5%
branch
remittance tax
No MAT or
Surtax
DTAAs with 50+
jurisdictions
CapitalGainsTax
For corporates:
22.5%
For Individuals:
Applicable slab
rate
VAT
General VAT
rate: 14%
Lower rates
specified
activities
Threshold for
registration:
EGP 500,000
WHT
Interest, FTS &
Royalties: 20%
Dividends:
10%; 5% if 25%
stake in
company is
held
continuously by
recipient for at
least 2 years
Return Due Date
VAT return Monthly returns to be filed within 2 months from the end of the relevant month.
PIT return Before 1st April following the end of the tax year (calendar year)
CIT return Within 4 months from end of financial year (Accounting year) of the company
Thin Capitalisation Rules: A 4:1 debt to equity ratio applies. Any interest on debt exceeding this ratio
will be disallowed.
20. Tax Snippets
12.2 12.5 13 13.3
14.2 13.8 13.9
1.4
Tax Revenues to GDP (%)
Egypt
37%
44%
7%
8%
4%
Composition of tax revenues (%)
(5 years Average: 2013-14 to 2018-19 )
Income tax Taxes on goods and services
Taxes on international tradde Property taxes
Other taxes on goods & services
Data for 2020-21 is of July-Aug 2020
21. General Investment/Tax Incentives
Companies shareholders’ & founders & establishment owners are granted investors’ residency for a period of
one year at least (to be renewed for five years) and not exceeding the project duration.
The AOA of the companies established under the new Investment Law of 2017* are exempted from the stamp
tax and authentication and publishing fees for 5 years from the DOR, moreover the land contracts of the
project are exempted from the registration fees.
The foreign employees in the investment project can reach up to 20% of the total workforce.
A fixed custom rate (2%) will be collected on any imported equipment necessary for establishing the project.
30% or 50% discount (according to the geographical area of the project) on the investment costs, for a period
not exceeding 7 years from the date of initiating the activity and discount value shall not exceed 80% of the paid
up capital of the project at the date of initiating the activity
Prior year losses can be used to reduce the taxable profit of a company in a subsequent year. Losses can be
carried forward for up to 5 years.
*Conducting an investment activity in the industry, agriculture, trade, education, health, transport, tourism,
housing, construction and building, sports, electricity, energy, natural resources, water, communications, and
technology sectors. (Not an exclusive list)
22. Specific Investment/Tax Initiatives
Eligible investment projects investing under the new
Investment law may have the following additional incentives
by virtue of Board Ministers resolution
• Permit opening special custom windows for the
importations and exportations of the project.
• The government bears all or part of the utilities cost for the
project land, after operating the project.
• The government bears some of the employees’ technical
training costs.
• Returning half of the land price with regards to industrial
projects that has started it activity within 2 years from the
date of receiving the land.
• Providing free lands for some strategic projects.
Egypt offers no specific tax incentives unless a company is a free zone entity, which is considered tax
exempt for the permitted and licensed activities.
- Projects that initiated its activity, based on
research undertaken in Egypt
- Has Egypt one of its principle places of
business
- The main source of its funds is the foreign
currency transferred from abroad
- Is exporting 50% at least of its production
- Its activity transfers an advanced technology
to Egypt
Eligible investment projects
25. Types of Visas
Work visa
• Once a foreign
national gets a work
permit, their visa,
such as a
temporary/tourist
visa, will get
converted into a
work visa.
Temporary/tourist visa
• This option is a
renewable single-
entry 30-day tourist
visa that individuals
can get when arriving
at Egyptian airports.
It’s also the visa
individuals obtain for
a job.
Ordinary visa
• An ordinary visa is
valid for three to five
years and allows an
employee’s spouse to
have a resident
permit for the
amount of time
identified on their
work permit.
Special visa
• The special visa is for
expats born in Egypt
before May 26, 1952
or individuals who
have lived in Egypt
for more than 20
years from that date.
It’s valid for 10 years
and can be renewed.
- The first step for acquiring a work permit is obtaining a temporary or tourist visa and converting it into a work
visa. This process can lead to a work permit as long as the employee applies with the Ministry of Manpower
and Immigration.
- Before applying for a work permit, each employee must get a security clearance from the National Security
Agency in Egypt.
27. FDI and Repatriation Norms
Egypt remains the largest FDI recipient in Africa
100% FDI allowed in almost all sectors (except for few legislative restrictions in sectors such as tour guiding, LLC
or joint stock companies incorporated to import for the purpose of trade, commercial agents, travel agencies,
civil aviation)
Profits/ Dividends can be freely repatriated
Total FDI in Egypt by Economic Sector - 2019/2020* *As of December 2019
Main Investing Countries: UK, USA, UAE,
Kuwait, Netherlands, France, Germany,
Switzerland, Bahrain and Saudi Arabia
accounting for more than 70%
FDI in Services Sector – Financial sector
(12.1%), Real estate (3%), Communication &
IT (2%), Tourism (0.9%) and Other services
(4.7%)
52.40%
22.70%
5.80%
Agriculture, 0.20%
13.60%
5.30%
Petroleum Services Construction
Agriculture Manufacuring Undistributed sectors
28. FDI and ODI Snippets
7932.8 7719.5
4184.7
4958.5
15985.3
12094.8
-5890.1
273.6
-175.1
-271.2
-184.1
-215.3
208.4
-20.8
-50.7
106.4
-300
-200
-100
0
100
200
300
-10000
-5000
0
5000
10000
15000
20000
2016/17 2017/18 2018/19 2019/20
Balance of Payments (US $ million)
FDI (Net) FPI (Net) ODI Portfolio investment abroad (Net)
*Data for 2019-20 as of December 2019
30. Covid-19 Impact
• Decline from 5.6%
in fiscal year 2019
to 3.5% in fiscal
year 2020
• Contraction in real
GDP growth to 2%
in 2019/20 and
2.8% in 2020/21 is
projected
Decline in
GDP
• The Purchasing
Managers’ Index
declined to 38.3
during April— June
2020 (Q4-FY2020),
its lowest level on
record, indicating a
large contraction in
non-oil private
sector activity.
Business
disruption
• Around 2.7
million jobs were
lost during Q4-
FY2020, pushing
unemployment
to 9.6% (from 7.7
percent in the
previous quarter)
Unemployment
• Private consumption in the
near-term is expected to
remain constrained as
households’ incomes are
affected by increased
joblessness and salary cuts
• Government debt is projected
to increase from 90.2% of GDP
in end-FY2019 to 93.8% of
GDP in end-FY2020.
Post-Covid Scenario
31. Covid-19 Reforms
Fiscal
measures
• The government allocated an emergency response package worth LE100 billion (1.7% of GDP)
to augment health expenditure, scale-up social protection, and provide financial relief for
individuals and businesses.
• Key measures included a one-off monetary grant to irregular workers and the expansion of
existing cash transfer programs
• The one-off cancellation of the debt owed by the government to the Social Insurance Funds
(SIF) worth LE371 billion, being 6.4% of GDP (if cancelled duly) is estimated to bring down
government debt to 87.4% of GDP in end-FY2020
Monetary
measures
• With inflation easing and expectations anchored within the CBE’s target (of 9+/- 3
percent), the CBE reduced the policy interest rate by 300 basis points to 9.25 percent
in mid-March to help support economic activity and alleviate pressures in domestic
financial markets
• Forbearance measures were introduced in the form of delayed tax filing
and loan repayments, in addition to subsidized credit to targeted sectors
Other
measures
32. Conclusion
Egypt’s strategic geographic location with the Suez Canal (the main transport route between Asia and
Europe), makes it a hub for international trade between Europe, the Middle East, Africa and the Far East
Egypt’s labour pool is the largest in the region, consisting of a well-trained, highly-educated and
competitive workforce in a variety of sectors
A competitive tax rate of 22.5% and the existence of various multilateral and trade agreements and DTAAs
implies a favourable business environment
However, the fact that 32.5% of Egypt’s population lives in poverty is a cause for concern
Few other things to be considered are a political situation that remains tense and arouses uncertainty for
foreign investors, a fragile banking sector, cumbersome customs procedures and non-tariff trade barriers
