Business Guide – Egypt

Which business structure can I use?
There are three main types of business structures which you can operate from in Egypt¹.

How many directors do I need to set up a company? Do I need a minimum number of resident directors?

• LLCs
  At least one director must be of Egyptian nationality. There are no nationality or residence restrictions on other directors.


• JSCs
  There must be an odd number of directors to manage JSCs, with three being the minimum.


• SMLCs
  Subject to the same provisions as LLCs².

Are there any restrictions on who I can appoint as a director? Can I appoint foreigners as directors of my board?

• LLCs
  At least one director must be of Egyptian nationality.


• JSCs
  Majority of the Board of Directors must be Egyptian nationals, and hold a term of 3 years, except for initial directors, who are appointed for a term of 5 years³.

What is the profit share attributed to a foreign shareholder like myself?
There are no restrictions on repatriation of profits as long as supporting documentation can be provided.

Can a company in Egypt be wholly-owned by foreigners? Do I need a minimum percentage of local shareholders?
An LLC is permitted to engage in all business activities and may be owned by foreigners. LLCs are not permitted to import goods or equipment for the purpose of trade, unless it is at least 51% owned by Egyptian shareholders.

A JSC may be 100% owned by foreign investors. However, the company does not have the right to import. Similar to LLCs, the company should be at least 51% owned by Egyptian shareholders in order to import. ⁴

²^, ³ AP Consulting, Middle Eastern Laws
⁴ https://santandertrade.com/en/portal/establish-overseas/egypt/foreign-investment

Are there business activities which foreign companies cannot do?
Banking is exclusively held by the State. A joint venture is required for certain sectors, namely hydrocarbons and real estate.

Typically, do I apply for licenses before or after setting up my company?
You may apply for licenses after the incorporation of your company.

What is the minimum share capital or investment capital I need to set up my business?

• LLCs
  There are no minimum capital requirements for establishment, except for certain activities. If the capital of the company reaches EGP 250,000 (S$20,600), 10% of the company’s annual net profits must be distributed to employees.


• JSCs
  The minimum capital of JSC is EGP 250,000 (S$20,600), where 10% of such capital (“Issued Capital”) is paid upon incorporation, with an additional 15% paid within 3 months from the date of registering the company in the commercial register (“Paid Up Capital). The remaining 75% may be paid within a maximum of five years from the date of establishment.

However, certain activities may require a higher minimum capital⁵.

Do I need approval to increase my share capital or investment capital?
The limit of a company's capital will be set by the General Authority for Investment & Free Zones (GAFI) at the same time as the application for incorporation. It is possible to increase your company's capital, depending on the needs. However, do take note to alert GAFI on any significant increases.

⁵ PwC, Doing business in Egypt: A tax and legal guide, 2019

What is the current corporate tax rate?
The current corporate tax rate is at 22.5%.

It is imposed on:

• Companies that are resident in Egypt on all profits realised from Egypt and abroad.
• Companies that are non-resident in Egypt with regard to profits realised through a permanent establishment in Egypt

Are there any special grants for foreign companies or for specific industries which the local government encourages?
Incentives will be provided for businesses that meet specific criteria, including reduced energy prices, and related payment facilities, subsidies on technical training and utilities allocation expenses.

To be eligible, your project should have started and satisfy at least of one of these conditions below:

1. Intensive labour requirement:
   • The number of Egyptian employees must not be less than 250 as stated in the social insurance form.
   • The cost of creating a new job opportunity in the project must not exceed EGP 250,000 or approximately S$20,600.
   • The direct cost of the salaries must be more than 35% of the total cost of operating the project.


2. Reinforcement of local components used in product production:
   • The percentage of local components used in its ‘products' or in the tools and equipment necessary for production should not be less than 50%.


3. Improves transport and logistics' capacities, this includes:
   • Cooling transport for goods, refrigerators and the stations for preserving agricultural crops, industrial products and food products and its cooling, freezing, packing and wrapping.
   • Stations of operating and trading containers.
   • Silos of reserving and storing the yields.
   • Loading and unloading services related to the above activities.


4. Projects that develop internal trade, which include:
   • Trading centres, wholesale trade, retail trade and supply chain activities, provided that these activities are practiced in the new urban communities, remote areas, Upper Egypt and the border areas.


5. Investment in electricity production, transport, and distribution (this includes new and renewable energy).


6. Agricultural projects (reclamation and cultivation):
   • The area of the reclaimed/cultivated land should not be less than 1000 Acres.
   • New irrigation methods should be used.


7. Road, maritime, and railway transport


8. Investment in specific remote areas that have been targeted for development by the government, which are:
   • Upper Egypt
   • Sinai
   • Matrouh
   • Nubia areas

When do I pay corporate tax? Is this paid annually or monthly?
Companies are required to submit a tax return within four months of the end of their financial year. They are required to assess the amount due in the form of a self-assessment.

What are the withholding tax rates on interest, dividends and royalties⁶?

• Dividends
  Dividends distributed by resident companies to resident or non-resident individuals or companies are subject to a 10% withholding tax (WHT). The WHT rate is reduced to 5% for qualifying dividends, such as dividends earned from participations representing more than 25% of the shares or voting rights of the subsidiary company, subject to a two-year minimum holding period.


• Interest
  20%. Interest payments on loans of a duration more than three years in Egypt are exempt from WHT.


• Royalties
  20%.

Do I need to pay tax when I send dividends back to Singapore?
Yes, dividends distributed by resident companies to resident or non-resident individuals or companies are subject to a 10% withholding tax.

Are there any tax treaties between Egypt and Singapore?
Yes, Singapore and Egypt signed a Double Tax Avoidance Agreement in May 1996. The agreement came into effect in January 2005.

Any value-added tax (VAT) or goods & services tax in Egypt? If so, what is the current rate?
Yes, at 14%. This rate applies for all goods and services, except for machinery and equipment used for production purposes, which are subject to a 5% VAT.

⁶ Deloitte, International Tax: Egypt Highlights 2019

What basic employment benefits must I give to my employees?

• Working Hours
  As per the Labour Law, employees should not work more than eight hours a day or 48 hours over a six day working week. It is common practice that private sector employees work five days a week – usually from Sunday to Thursday. The number of working hours may be increased to nine hours a day, inclusive of a one-hour break.


• Annual Leave
  An employee is entitled to a minimum annual paid leave of 21 days for every full year of service and a proportional amount if the period of service is less than one year (eligible to be used after 6 months of employment). This annual leave is increased to 30 days after the employee has worked for 10 consecutive years or is over 50 years old.


• Public leave
  In addition, every employee is entitled to full pay for official holidays designated by the Ministry of Manpower and Immigration, not to exceed 14 days a year. If employees are required to work during official holidays, the employees are entitled to overtime (paid at twice their normal rate). The weekly days off and the official holidays shall not be counted as part of the annual leave.


• Accidental Leave
  Accidental leave is the leave taken by an employee, as a result of unexpected circumstances, in which he has no choice except to be absent from work. He should inform the employer with the reasons of absence. The Labour Law states that absence from work for accidental reasons should not exceed six days per year with a maximum of two days each time, and this leave will be counted from the annual leave of the employee.


• Sick Leave
  The Labour law provides that an an employee whose sickness has been established by a responsible medical professional is entitled to a sick leave of maximum 180 days per year (6 months per year), in which the employee is entitled to receive 75% of his/her monthly social insurance salary during the first three months of the sick leave and 85% for the following three months of the employee social insurance monthly salary. The employer is not entitled to terminate the employee's service due to sickness, unless the employee is absent due to sickness for more than 180 days in a year. After the employee utilizes all his entitled sick leave, a governmental medical committee should evaluate the employee's ability to work. The committee takes the final decision related to the employee's ability to work or not.


• Performing Pilgrimage or Visiting Jerusalem
  Regarding religious respects, the Labour Law stated that an employee who has spent five consecutive years in the service has the right to full paid leave for a period not exceeding one month for performing pilgrimage or to visit Jerusalem and such a leave shall be enjoyed only once during the entire period of service.


• Maternity and Child Care Leave
  A female having spent 10 months in the service of an employer shall be entitled to a maternity leave of 90 days with full wage payment including the period preceding giving birth. The female employee is not entitled to this maternity leave for more than twice during her working period. During the 24 months following the date of child birth, she has the right to be excused from work for one hour daily for feeding her child.

Do I need to pay taxes or social security contributions for employees?

Employers must deduct tax from the employee's salary and transfer it to the Egyptian tax authority on the employee's behalf.

If I send a Singaporean employee to work in Egypt for less than a year, does my employee need a work pass?

Your Singaporean employee would need to obtain a work permit from the Egyptian Ministry of Manpower and Immigration before being able to stay and work in Egypt. There is a difference between the procedures that apply to a board member or a manager in a company versus an employee.