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  Investment Starting a Business in Egypt

Foreign Investment in Egypt is strongly supported and encouraged by the Government here, as they see it as an opportunity to contribute to the creation of new employment and to further the potential of all residents.
Recent initiatives that support investment include the newly-implemented reduction of customs tariffs, the recently approved reduction of taxation which is expected to be implemented shortly, and most importantly, the attempts to reduce and hopefully eliminate the current procedural bureaucracy, which has in the past discouraged local and international business.
For the first time in many years, there is growth within markets and new business opportunities emerging.
After developing the concept and idea for a business, one of the most important decisions to make is to choose the legal structure. This brief will outline the various legal structures available under Egyptian law and will provide an insight on the current investment regulations and adopted Treaties which your business can benefit from.
There are two general categories of companies that can be used under Egyptian Law, namely personal partnerships and standard companies.

The Personal Partnership
The personal partnership is simple to set-up and requires limited capital, but however, has various disadvantages and drawbacks to expatriate investors such as the requirement to have an Egyptian partner and the direct liability of the founding partners to all obligations of the partnership.
As an example, the founding partners of a partnership are directly liable for the taxes and debts of the partnership. Hence, we generally discourage the incorporation of such a genre of entities.

Standard companies – LLC & JSC
There are two kinds of companies which differ in light of the envisaged capital, size and activity of your business. The two forms are the Limited Liability Company ('LLC') and the joint Stock Company ('JSC').
The Legal structure of Limited Liability Companies ('LLC')
The main characteristics of an LCC are a minimum share capital of fifty thousand Egyptian pounds (50,000 LE). The issued share capital must be fully paid up at incorporation and placed in a blocked bank account until the company is recorded in the Commercial Registry. The number of founding partners must be between two and fifty who may be either individuals or legal entities. Unlike the personal partnerships outlined above, the limited liability company can be foreign-owned in its entirety, but at least one of its managers must be Egyptian. It can conduct all types of activities, but cannot issue debentures or offer shares to the public. Nor may the limited liability company operate in the fields of banking, insurance, deposit taking or the investment of funds on behalf of third parties. There is no requirement that employees participate in management.


The Joint Stock Company
The Joint Stock Company is very similar to the English 'PLC' and is designated for larger operations. It may issue debentures or offer shares to the public and must be registered with the Cairo and Alexandria Stock Exchanges. It remains optional for the shareholders to list the shares of the company on the said Stock Exchange. The Joint Stock is also appropriate when a larger number shareholders are envisaged and when it is intended to raise large amounts of capital through equity.
The minimum share capital for a joint stock company whose shares are not offered to the public is LE 250,000.00 and if the shares are offered to the public, the minimum capital is increased to LE 500,000.00. At least 25% of the capital must be paid at incorporation.
Cash capital must be placed in a blocked bank account until the company is recorded in the Commercial Registry. Egyptian participation is not necessarily required for Joint Stock companies as they can be wholly owned by foreigners. There must be a minimum of three founding shareholders (founding shareholders may be persons or legal entities).
The name of the company should indicate the activity or business. It must not include the name of any of the shareholders unless such a name is a registered trade name.
A joint stock company is managed by a board of directors with three or more members and must be an odd number.
Until the envisaged implementation of the tax reduction recently proposed by the new government, both companies (LCC and the JSC) are subject to a corporate tax imposed on its annual net profits, to a standard rate of 40% tax, and a supplementary State Resources Duty of 2% payable on all annual net taxable profits exceeding eighteen thousand Egyptian pounds (LE 18,000) per year.
Last but not least, it should be noted that both companies have limited liability and the joint stock can be established under the Investment Law.

The Investment Law
Companies can only elect for incorporation under the Investment Law, if their activity fall within the listed activities by the law covering diverse sectors. The investment incentives include tax exemptions and breaks for the periods ranging from 5 years to 20 years. Qualifying companies are permitted to import all materials required for operation, construction or expansion of a project without the need for a special import license or registration in the import register and may not export products without the special licenses or registration in the export register . Custom duties on the equipment and machinery imported for the project are at a flat rate of 5%. Furthermore, qualifying projects are exempted for 3 years from the stamp duties and notarization fees from their date of registration on the commercial register. Projects are also exempted from registration and notarization charges levied on contracts for purchase of land.

Beneficial Treaties to your Business
Along the lines of the WTO, the government has concluded various bilateral and multilateral treaties to facilitate and encourage trade between Egypt and the neighboring countries.

Euro-Mediterranean Association Agreement
The target is that trade barriers in the Euro-Mediterranean should end by 2010. However, Morocco , Jordan , Tunisia and Egypt signed in May this year an accord to initiate a free trade zone amongst themselves, which should come into effect by the end of the year. It is hoped that the other six Arab countries, Algeria , Libya , Mauritania , Syria , Lebanon and Palestine will join the free Trade Zone to. The ultimate goal is to establish a Euro-Mediterranean free zone of 27 countries by 2010. In the meantime, Tunisia , Morocco , Palestine , Israel and Jordan have already signed association agreements with the EU. Egypt finally signed the association agreement with the EU at the end of June. Some of the provisions will take immediate effect, whilst others will be granted a margin for implementation, to allow Egypt time to increase its competitiveness.

COMESA
The Common Market for Eastern and Southern Africa (COMESA) launched a free trade area last October, aimed at forming a customs union by 2004. Egypt joined in 1999 and other members include Angola , Burundi , the Comoros , and the Democratic Republic of Congo, Djibouti , Eritrea , Ethiopia , Kenya , Madagascar , Madagascar , Malawi , Mauritius , Mozambique , Namibia , Rwanda , the Seychelles , Sudan , Swaziland , Uganda , Zambia and Zimbabwe .

We wish you all the best in your new or expanding venture.

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