DOING BUSINESS IN EGYPT IN 2024
Since 2003, Healy Consultants Group assists multi-national companies establish an Egyptian presence including i) company registration and ii) multi-currency corporate bank account opening and iii) regulatory license approval and iv) accounting and tax support and v) employee recruitment and visas and vi) finding office premises.
Compare different Egypt entities | LLC | Nominee Fast Solution | Free Zone | JSC | Branch | Representative Office |
---|---|---|---|---|---|---|
Best use of company? | All products and services | Fast business set up | Manufacturing and export trading | Medium to large company | Government projects | Market research |
How soon can you invoice Clients/sign sales contracts? | 2 months | 1 month | 3 months | 3 months | 3 months | NA |
How soon can you hire staff? | 2 months | 1 month | 3 months | 3 months | 3 months | 2 months |
How soon can you sign a lease agreement? | 3 weeks | 1 week | 1 week | 3 weeks | 3 weeks | 3 weeks |
How long to supply corporate bank account numbers? | 3 months | 1 month | 4 months | 4 months | 4 months | 3 months |
How long to supply company registration/tax numbers? | 2 months | 1 month | 3 months | 3 months | 3 months | 2 months |
Corporate tax rate on annual net profits? | 22.5% | 22.5% | 0% | 22.5% | NA | NA |
Limited liability entity? | Yes | Yes | Yes | Yes | No | No |
Government grants available? | Yes | Yes | Yes | Yes | Yes | No |
Government approval required for foreign owners? | Yes | Yes | Yes | Yes | Yes | Yes |
Resident director/partner/manager/ legal representative required? | No | No | No | Yes | Yes | Yes |
Minimum paid up share capital/ security deposit? | US$1 | US$1 | Varies | US$15,000 | US$350 | US$350 |
Can bid for Government contracts? | Yes | Yes | Yes | Yes | Yes | No |
Corporate bank account location? | HSBC Egypt | SCB Egypt | NBE Egypt | Banque MISR Egypt | CIB Egypt | Alex Bank Egypt |
Can secure trade finance? | Yes | Yes | Yes | Yes | Yes | No |
VAT payable on sales to local customers? | 14% | 14% | 0% | 14% | 14% | No Local Sales |
Average total business set up engagement costs? | US$23,150 | 34,350 | US$22,750 | US$20,750 | US$21,900 | US$21,900 |
Average total engagement period? | 3 months | 1 month | 4 months | 4 months | 4 months | 3 months |
Accounting and tax considerations | LLC | Nominee Fast Solution | Free Zone | JSC | Branch | Representative Office |
---|---|---|---|---|---|---|
Statutory corporate tax payable? | 22.5% | 22.5% | 0% | 22.5% | NA | 22.5% |
Legally tax exempt if properly structured? | No | No | No | No | No | No |
Group HQ tax incentives? | Yes | Yes | Yes | Yes | No | No |
Must file an annual tax return? | Yes | Yes | Yes | Yes | Yes | No |
Must file annual audited financial statements? | Yes | Yes | Yes | Yes | Yes | No |
Must appoint an auditor? | Yes | Yes | Yes | Yes | Yes | No |
Access to double taxation treaties? | Yes | Yes | Yes | Yes | Yes | No |
Withholding tax on payments to foreign shareholders? | 10% | 10% | 10% | 10% | 10% | 10% |
Company Registration | LLC | Nominee Fast Solution | Free Zone | JSC | Branch | Representative Office |
Resident director/partner/manager/ legal representative required? | No | No | No | Yes | Yes | Yes |
Minimum number of shareholders/partners? | 1 | 1 | 1 | 3 | Parent Company | Parent Company |
Maximum shareholding for foreigners? | 100% | 100% | 100% | 100% | 100% | 100% |
Minimum statutory paid up share capital/security deposit? | US$1 | US$1 | Varies | US$15,000 | US$350 | US$350 |
Security deposit to be kept with Government? | No | No | No | Yes | No | Yes |
Shelf companies available? | Yes | Yes | Yes | Yes | No | No |
Time to incorporate a new entity? | 2 months | 1 month | 3 months | 3 months | 3 months | NA |
Can easily convert to a PLC? | Yes | Yes | Yes | Yes | No | No |
Public register of shareholders and directors? | Yes | Yes | Yes | Yes | Yes | Yes |
Can have preference shareholders? | Yes | Yes | Yes | Yes | No | No |
Good entity for trademark registration? | Yes | Yes | Yes | Yes | Yes | No |
Can secure an import and export license? | Yes | Yes | Yes | Yes | Yes | No |
Sponsorship by a local citizen required? | No |
Our Client needs to travel to Egypt for business set up? | No |
Temporary physical office solutions available? | Yes |
You need a local resident as bank signatory? | No |
Can be wholly foreign owned? | Yes |
The entity will likely be regulated by? | GAFI |
Minimum number of directors/managers? | 1 |
Monthly VAT reporting to the Government? | Yes |
Must sign an office lease agreement during incorporation? | No |
Shareholders & directors documents to be attested/translated? | Yes |
Each foreign director needs a personal income tax number? | No |
Foreign director needs a residence visa? | No |
Maximum number of staff allowed? | Unlimited |
Expatriate to local staff ratio? | Foreign labour may not exceed 10% of total workforce |
Can secure residence visa for business owner? | Yes |
Other useful information | |
What will be included in my customer sales invoice? | Click link |
This country has signed free trade agreements? | Yes |
This country is a member of WIPO/TRIPS? | Yes |
This country is a member of the ICSID? | Yes |
Average custom duties suffered? | 5% to 40% on CIF (Cost, insurance and freight) |
Government foreign investment approval required? | Yes |
Average monthly office rental? (US$ per sq m) | US$35 |
Minimum statutory monthly salary? | US$174 |
Average monthly US$ salary for local skilled employees? | US$941 |
US$ deposit interest rate? (1 year average) | 1.10% |
Overseas remittance currency controls? | Yes |
Banking considerations | |
Multi-currency bank accounts available? | Yes |
Corporate visa debit cards available? | Yes |
Quality of e-banking platform? | Good |
Crowd funding available in this country? | Yes |
Advantages and disadvantages of doing business in Egypt
- The government is undergoing a large privatisation programme to encourage foreign investment across multiple sectors including i) financial services and ii) telecommunications and iii) construction and iv) green energy and v) petrochemicals and vi) mining and vii) logistics and viii) tourism and ix) pharmaceuticals. Clients’ deciding to invest in Egypt are likely to benefit from significant clustering effects brought by industrial, logistics and manufacturing hubs across the country. Egypt has consolidated its position as the second highest FDI destination in Africa and the third largest in the Middle East; and
- Egypt has established several free trade zones (FTZs). Goods exported or imported into the FTZs are not subject to routine import or export customs procedures, duties or other taxes and fees. Likewise, all instruments, machinery, equipment and transportation necessary for authorised operations within the FTZs are exempt from customs and duties. There are two types of FTZs: public and private. Public FTZs allow for multiple projects in one location, whereas private FTZs are confined to one specific project or company and must meet certain conditions, for example, concerning minimum capital (US$10 million) and exports (which must amount to no less than 80% of the production value). Enterprises in these zones benefit from complete exemption from import tariffs, income taxes and value-added tax; and
- Other Egyptian tax incentives include:
- After free zone company registration, goods exported from or imported to a free zone are exempted from custom taxes and VAT; and
- Machinery and equipment are VAT exempt, whether imported or purchased from the local market for industrial purposes; and
- Supplementary incentives for investment projects may be provided via Government decrees. These may include i) exemptions from land usage fees for a decade and i) a maximum 50% exemption from project contributions to infrastructure costs and i) a cost-sharing arrangement whereby the Egyptian treasury covers 50% of utility expenses for up to 10 years; and
- Industrial investment projects that are at least 50% funded from foreign sources and that commence operations between 2023 and 2029 are granted a cash tax investment incentive of 35% to 55% of the income taxes due; and
- Egypt has a network of Double Tax Treaties with over 60 countries, minimizing local withholding tax on overseas payments;
- Doing business in Egypt is difficult for our Clients’ because:
- Subsidiary company registration in Egypt is a long process. Unfortunately, all shareholder and director information must be officially translated into Arabic, notarized and attested by the Egyptian embassy in their country of origin. Furthermore, it is necessary for the Egyptian government to conduct a security check on each individual director and shareholder. This process can take up to 3.5 months!
- In Egypt, labour productivity is still significantly below the OECD average. Low investment in innovation and R&D also contributes to low productivity; and
- Imported products must be marked and labelled in Arabic. The language requirement is mandatory for all information, including brand and product type, country of origin, date of production, expiry date and handling instructions. For imported tools, machines and equipment, a user manual in Arabic must be attached; and
- The World Bank poorly ranks Egypt for the ease of paying taxes. On average annually i) paying taxes in Egypt takes 370 hours and ii) 27 payments are required. Consequently, meeting statutory obligations in Egypt is stressful and time-consuming; and
- Arabic is the primary language of Egypt. All communication with the Government must be in the local language; and
- Egypt is a civil law country, with a legal system based on the Islamic Shari’a and Napoleonic Codes. It is an ineffective legal system that fails to provide foreign investors with certainty when doing business, resulting in high legal costs, regular contract disputes and daily corruption. The judiciary has a high case load and backlog, and judiciary efficiency is low. Egypt ranks 130th out of 139 worldwide for effective enforcement of civil justice, and likewise (130/139) for regulatory enforcement. Enforcing Egyptian contracts take an average of 1,000 days, almost four times the average in the European Union; and
- After Egyptian company registration, our Clients’ can only appoint expat employees up to a maximum of 10% of the total work force. However, this rate could increase to 20% if our Client cannot find national workers who have the adequate qualifications for project; and
- Egypt’s regulatory landscape is complex. The industrial sector is governed by seven different laws, 15 legislative amendments, as well as presidential decrees. Three ministries are directly involved in granting industrial licences (Environment, Interior and Health). For heavy industry (such as steel and cement), their establishment or expansion requires a decision by the Prime Minister after determining the needs of the sector. Next, our Clients’ must bid for licences that are made available by the Industrial Development Authority, with uncertainty surrounding the final cost, the timing of new licences, the total market available, and approval times. Long delays and the multiple agencies involved provide opportunities for corruption; and
- Egypt is not well integrated into global value chains. External competition is hampered by trade barriers. Tariff and regulatory barriers to imports are high. Egypt’s average trade weighted tariff is 10.5%, the highest amongst regional peers; and
- Egyptian regulations restrict individuals and entities from directly exchanging foreign currencies or clearing between customer accounts of other currencies. Any such activity typically requires prior authorisation from the CBE to ensure compliance with the financial regulations; and
- Multi-national companies are slow to invest in Egypt because of significant macro-economic risks including:
- Egypt remains in the grips of an inflationary spiral (33% in 2024), high public debt and a depreciating currency. In fact, one-in-four (25%) business executives expect increased inflation and economic uncertainty to hinder their manufacturing capabilities, leading to higher input costs; and
- Egyptian businesses still face difficulties in accessing finance, as local banks overwhelmingly prefer to lend to the government. Local banks charge high interest rates of 17-20% on local currency lending. Because of the significant Egyptian pound devaluation over the past 5 years, our Clients’ avoid borrowing in foreign currency. This constraint leads to lack of investment in new high technology sectors that need high liquidity, cheap funding and longer loan maturity periods; and
- From top to bottom, corruption pervades the economy, judiciary and public sector. As such, Egypt poorly ranks 108 of 180 in Transparency International’s 2023 Corruption Index. It is common to have a dual system of payment for services with one formal payment and a secondary, unofficial payment required for services to be rendered. Our Clients’ will encounter corruption in the public sector in the form of requests for bribes i) to secure government approvals or licenses and ii) tampering with official documents and iii) customs (import license and import duties) and iv) public utilities (water and electrical connection) and v) construction permits; and
- Egyptian state owned enterprises (SOE) have a pervasive impact on the local economy, with combined assets of around 50% of GDP. SOE’s operate across a large number of sectors and prevent our Clients’ from competing on a level playing field. Wide-reaching state involvement in the economy is crowding out the private sector. Including military-owned establishments, there are more than 700 SOEs in Egypt enjoying anti-competitive benefits including i) better access to land and resources and i) exemptions from VAT and iii) lower corporation tax liabilities and iv) exemptions from paying fees, services charges or fines; and
- Egyptian political stability is vulnerable to rising social discontent because of i) high youth unemployment and ii) low purchasing power because of high inflation (33% in 2024) and iii) lack of foreign currencies and iv) currency depreciation and v) substantial influx of refugees from Palestinian and vi) security risks re conflict in Libya and Sudan and vii) poverty affecting one-third of the population.
Useful links for Egypt
Government and public authority websites:
- Ministry of Investment
- Ministry of Finance
- Ministry of Trade And Industry
- Central Bank of Egypt
- Egypt Stock Exchange
- Egyptian international trade point
- Egyptian Tourism Authority
External articles:
External videos:
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