Mixed legal system based on Napoleonic civil and penal law, Islamic religious law, and vestiges of colonial-era laws; judicial review of the constitutionality of laws by the Supreme Constitutional Court.


Country overviewEgypt flag

Population

97m

President

President Abdel Fattah el-Sisi (since 2014)

Capital city

Cairo

Other major cities

Alexandria

Major industries

Textiles, food processing, tourism, chemicals, pharmaceuticals, hydrocarbons, construction, cement, metals, light manufactures

Currency

Egyptian pound

Languages

Arabic (official), English and French widely understood by educated classes

Major religions

Muslim (predominantly Sunni) 90%, Christian (majority Coptic Orthodox, other Christians include Armenian Apostolic, Catholic, Maronite, Orthodox, and Anglican) 10%


Legal information

Capital markets
Exchange

Egyptian Exchange (the EGX)

Nile Stock Exchange (the NILEX)

EGX is the main stock exchange market in Egypt. NILEX is an established exchange, targeting small and medium enterprises. NILEX offers an appropriate, secure, yet flexible regulatory framework for both companies and investors, together with a streamlined admission process.

Listing rules

Decree no. 11 dated 22 January 2014 issued by the board of Egyptian Financial Supervisory Authority (the EFSA) regulating the listing rules at EGX and NILEX (Arabic version)

Takeover / merger regulations

Capital Market Law no. 95 for the year 1992

Egyptian Companies Law no. 159 for the year 1981

Egypt is also a Member State of COMESA and therefore subject to the COMESA Competition Regulations. Please see the COMESA summary in the AG section of the app to be found under the AG in Africa page.

Current No. of listed companies

EGX: 192

NILEX: 15

Public offers / disclosure regulations

Capital Market law no. 95 for the year 1992

EFSA’s board decree no. 11 dated 22 January 2014 regulating the listing rules at EGX and NILEX

Regulatory body or bodies
  • Egyptian President
  • Egyptian Parliament
  • Cabinet of Ministers
  • Minister of Investment
  • EFSA
Principal legislation

Capital Market Law no. 95 for the year 1992

Competition regulation
Legislation

Law no. 3 for the year 2005 as amended and its executive regulation on the Protection of Competition and the Prohibition of Monopolistic Practices (the Competition Protection Law)

The Egyptian Competition Authority (ECA) is the regulatory authority responsible for monitoring the market and enforcing the provisions of the Competition Protection Law.

The object of the Competition Protection Law is to ensure that economic activities are undertaken in a manner that does not prevent, restrict or harm the freedom of competition in accordance with the provisions of the Competition Protection Law.

Please see the COMESA summary in the AG section of the app to be found under the AG in Africa page.

Impact of regulatory regime on business

According to Article 44 of the Egyptian Executive Regulation on Competition Protection Law, persons whose annual turnover of the last balance sheet exceeds EGP 100,000,000 (one hundred million Egyptian pounds) shall notify the Egyptian Competition Authority upon their acquisition of assets, proprietary or usufructuary rights, shares, establishment of unions, mergers, amalgamations, appropriations, or joint management of two or more persons. There are no filing fees.

Scope

Any agreements or contracts that would have monopolistic effect or aim to hinder the competition in the market such as mergers and acquisitions, distribution agreements, agreements between competing companies / persons etc.

Corruption / transparency
Corruption Perception Index score for 2017

32/100

Corruption Perception rank worldwide for 2017

117

Signatories to United Nations Convention Against Corruption (UNAC)?

Yes

UNAC ratified?

Yes

Signatories to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions?

No

Signatories to the African Union Convention on Preventing and Combating Corruption?

Yes – signed and ratified 2017 

Disputes
Enforcement of arbitral awards

With respect to the enforcement of arbitral awards, the applicable legal framework differs based on whether the arbitral award is a domestic, foreign or ICSID one as follows:

Enforcement of domestic arbitral award

The enforcement of domestic arbitral awards are governed by the Arbitration Law. The enforcement of the award may not be ordered by the Egyptian court except after verifying that the following conditions are satisfied:

  • the award does not contradict with a judgment previously issued by the Egyptian courts on the subject matter of the dispute;
  • the award is not in conflict with Egyptian public policy; and
  • the award was properly notified to the party against whom it was rendered.

An order accepting or rejecting the enforcement may be subject to a petition. The process of enforcing the domestic award ordinarily takes from one to three months. The petition against the order ordinarily takes from three to four months to be decided upon.

Enforcement of foreign arbitral award

The enforcement of foreign arbitral awards is governed by the New York Convention on the Enforcement of Foreign Arbitral Awards (the NYC) which prevails over any contradictory domestic rules according to Article 301 of the ECCPL. The NYC was signed by Egypt on 2 February 1959 and entered into force on 8 June 1959. Accordingly, the enforcement of the foreign arbitral awards in Egypt should be effected according to the substantive conditions laid down in the NYC and the procedures set forth in the Egyptian law. Under Egyptian law, two sets of procedures govern the enforcement of foreign arbitral awards under the Arbitration Law (Articles from 55 to 58) and the ECCPL (Articles from 296 to 301).

The majority of the Egyptian jurisprudence and the overwhelming majority of Cairo Court of Appeal judgments and some Court of Cassation judgments upheld the approach that foreign arbitral awards must be enforced according to the Arbitration Law procedures (which are the same for domestic arbitral awards) irrespective of whether the parties agreed to subject the arbitration to the Arbitration Law because these procedures are less onerous than those under the ECCPL.

Other minor jurisprudence and court judgments are of the opinion that:

  • the Arbitration Law should be applicable only for foreign awards issued in arbitration which the parties agreed to be subject to the Arbitration Law and in the absence of such agreement, the ECCPL shall apply; or
  • the foreign arbitral award must be enforced in accordance with the ECCPL irrespective of whether or not the parties agreed to subject the arbitration to the Arbitration Law.
Enforcement of ICSID arbitral award

The conditions of enforcement of forieign arbitral awards are:

  • the inexistence of a prior Egyptian award on the same issue;
  • the absence of any contravention to Egyption public policy considerations; and
  • the valid notification of the arbitral award.

Under Article 54(2) of the ICSID Convention, recognition and enforcement of the award may be obtained from the competent court or other authority designated by a Contracting State on presentation of a copy of the award certified by the Secretary General of the ICSID. The Ministry of Justice has been designated by Egypt as the competent authority for the recognition and enforcement in Egypt of arbitral awards rendered pursuant to the ICSID Convention.

Execution of the award is, in accordance with Article 54(3) of the ICSID Convention, governed by the law on the execution of judgments in force in the country where execution is sought, which in Egypt is the ECCPL. ICSID awards should be enforced in Egypt without prejudice to the Egyptian law provisions regarding the immunity of Egypt or any foreign state from execution (Article 55 of the ICSID Convention). Article 87 of the Egyptian Civil Code provides that public assets of the Egyptian state are immune from enforcement and attachment procedures. In practice, we are not aware of any ICSID awards that have been enforced in Egypt.

Structure of the court system

The judicial system in Egypt is divided into two main branches: the ordinary judicial system and the administrative judicial system. The ordinary judicial system regulates all private law persons’ disputes (including disputes to which the State is a party acting as a private law person) as well as criminal cases. The ordinary judicial system’s courts are divided as follows:

  • Partial Courts;
  • Preliminary Courts;
  • Appellate Courts; and
  • Court of Cassation (the highest appeals body for civil and criminal cases).

The courts of the ordinary judicial system have sub-divisions including commercial, criminal, labour and personal matters divisions.

The administrative judicial system regulates public law persons’ disputes to which the state or any public authority, acting in its capacity as a public law person, is a party. The administrative judicial system’s courts are divided as follows:

  • Administrative Courts;
  • Administrative Adjudication Courts; and
  • The Supreme Administrative Court (the highest court of the State Council).

In addition to the two-tier judicial system, there are also courts with specialised jurisdiction such as the Economic Courts and Military Courts. The Economic Courts were established by the law no. 120 for the year 2008 with the main aim of expediting the settlement process of the investment-related disputes. These Economic Courts have the exclusive jurisdiction to settle the civil, commercial and criminal private persons’ disputes arising out of the application of certain laws (related mainly to the investment sectors) including, inter alia, Investment Law, Capital Market Law, Banking Law, Companies Law, Intellectual Property Law, Competition Law, and the commercial agency and transfer of technology provisions under the Commercial Law.

On the top of the judicial system hierarchy in Egypt, there is the Supreme Constitutional Court which was established in 1979 in accordance with the law no. 48 for the year 1979. The Supreme Constitutional Court has the jurisdiction to determine the constitutionality of the laws passed by Parliament and the regulations issued by the government, to settle jurisdictional disputes between the courts and to interpret the laws.

Arbitration

The Egyptian Arbitration Law no. 27 for the year 1994 (the Arbitration Law) was enacted based on the UNCITRAL Model Law on International Commercial Arbitration (1985). The Arbitration Law applies to arbitrations conducted in Egypt or when the parties to an international commercial arbitration conducted abroad agree to subject the arbitration to the Arbitration Law. An arbitration is considered international if the subject matter relates to international trade and, inter alia, if the parties to the arbitration agree to resort to a permanent arbitral organisation or centre having its headquarters in Egypt or abroad. The Arbitration Law is applicable without prejudice to international conventions to which Egypt is a party.

Cairo Regional Centre for International Commercial Arbitration (the CRCICA) is the principal arbitration centre in Egypt and the MENA that was established in 1970 under the auspices of the Asian African Legal Consultative Organization. Since its establishment, CRCICA has adopted, with minor modifications, the arbitration rules of the United Nations Commission on International Trade Law. CRCICA has amended its arbitration rules in 1998, 2000, 2002, 2007 and most recently 2011. The 2011 rules are based on the UNCITRAL Arbitration Rules as revised in 2010, with minor modifications, and apply to arbitral proceedings commenced after 1 March 2011.

Egypt has been a contracting party to the International Centre for Settlement of Investment Disputes Convention (the ICSID Convention) since 1972.

Enforcement of foreign judgments

Foreign judgments can be enforced in Egypt. According to the Egyptian Civil and Commercial Procedures Law no. 83 for the year 1969 (the ECCPL), Egyptian jurisprudence and court judgments, the enforcement of foreign court judgments is subject to the principle of reciprocity.

Egyptian law recognizes two kinds of reciprocity: legislative and diplomatic. With respect to diplomatic reciprocity, Article 301 of the ECCPL permits the recognition and enforcement of foreign judgments in accordance with bilateral or multilateral treaties to which Egypt and the foreign country (where the foreign judgment was issued) are parties. This treaty would supersede the rules and procedures of the ECCPL and would be applicable even if it is contradictory with said rules and procedures.

With respect to legislative reciprocity, Article 296 of the ECCPL provides that, subject to the principle of reciprocity, Egyptian courts may order the enforcement of the foreign judgments in Egypt with the same conditions and requirements for the enforcement of Egyptian judgments in the foreign country where the foreign judgment is issued as stated in the latter’s law.

In addition to the above requirement of reciprocity, the Egyptian courts order the enforcement of the foreign judgments only if the following minimum conditions and requirements are satisfied:

  1. The Egyptian courts do not have exclusive jurisdiction over the dispute subject matter of the foreign judgment.
  2. The foreign court which rendered the judgment enjoys jurisdiction pursuant to the rules of international jurisdiction embodied in the foreign law.
  3. The merits of the foreign judgment must be a private law issue and not a criminal or administrative issue.
  4. The foreign judgment is final and binding (i.e. Res Judicata) subject to no appeal pursuant to the law of the foreign country where the foreign judgment was issued.
  5. The parties to the foreign judgment were duly notified of the proceedings and validly represented before the foreign court that rendered the foreign judgment.
  6. The foreign judgment is not in conflict with a prior judgment rendered by Egyptian courts on the same subject matter between the same parties and for the same cause.
  7. The foreign judgment does not contradict with Egyptian public policy.

Further, a request for enforcement would be submitted to the competent First Instance Court in which jurisdiction the execution is sought. The court’s decision may be appealed before the Court of Appeal. In practice, the foreign judgment would not be enforced until after the decision of the First Instance Court ordering enforcement becomes final. The process of enforcing the foreign judgment would ordinarily take from nine to twelve months until the enforcement order (exequatur) becomes final.

Effectiveness of the court system

The adjudication under the Egyptian legal and judicial system is conducted with the aim to guarantee the fairness of the judicial system and protect the interests of the parties. However its effectiveness is impacted by the system being overloaded, bureaucratic and quite slow. There is a delay in settling the disputes before the Egyptian courts because rendering a final judgment requires quite a long time, and enforcing such final judgment could also take a while. In addition, there may be a degree of corruption among the court’s bailiffs and clerks. Such limited corruption results in the delay of trials and judicial process, but it does not materially affect the disputed rights, except in limited cases.

Judiciary

Pursuant to the Judicial Authority Law no. 46 for the year 1972, some requirements must be satisfied in order for anyone to be appointed as an Egyptian judge including, inter alia, the following:

  • having an Egyptian nationality and full legal capacity;
  • having minimum age of 30 years old to be appointed in the first instance to appellate courts and 41 years to be appointed in the Court of Cassation; and
  • having a bachelor’s law degree from any Egyptian faculty of law or an equivalent foreign law degree subject to passing the equivalency test.

All judges and justices are selected by the Supreme Judiciary Council and appointed by the president. Judges are appointed for life. 

Perception of the local courts

The Egyptian public generally perceives the local courts and litigation system to be quite slow to settle the disputes, as the courts are overloaded with a large number of cases and the procedural framework is not effective. However, the local courts are perceived to be fair and neutral and the Egyptian judges are generally perceived to be impartial.

Foreign investments
Foreign investment incentives

A new law, Investment Law No. 72 of 2017 came into effect on 1 June 2017 (the Investment Law), repealing the previous law governing business in Egypt and investment incentives and guarantees (the Investment Guarantees and Incentives Law no. 8 of 1997). The new law aims to encourage foreign investment in Egypt; offering incentives, less bureaucracy, and a simplified process.

The Investment Law sets out the principles of, inter alia: equality of investment opportunity, fair competition, consumer protection, transparency, and government support for emerging markets and new companies.

The investment guarantees included in the Investment Law are, inter alia: national and foreign investors should be treated in the same way by the government, foreign investors may be preferred in circumstances of 'mutual agreement', foreign investors shall be given assistance with Visas and residence during investment projects, investment projects should not be nationalised, and profits from investments in Egypt are permitted to be transferred abroad.

In order to further incentivise foreign investment in Egypt, there are no fees for registering companies and land in connection with qualifying projects, and reduced customs duties are imposed. With certain types of investment project, such as those in the renewable energy sector, those which employ a significant number of local workers, tourism projects, and those in the pharmaceutical industry, certain deductions (of up to 50%) of investment costs can apply. The Council of Ministers has the discretion to grant further incentives, including special customs rates and the government covering certain investment costs such as delivery of goods into Egypt and training local workers.

Certain investment projects commenced after the promulgation of Law 72 of 2017 are also eligible to enjoy a 50% discount on their taxable profits for sector A projects, and 30% for Sector B projects, for a period of up to seven years. Sector A projects and Sector B projects consist of specific fields of activity in the industry, manufacturing, agriculture, trade, education, health, transport, tourism, housing, construction, sports, electricity, energy, natural resources, water, communications, and technology sectors, as specified in the Investment Law and the distribution of investment activities as set forth in the Executive Regulations of the Law. Sector A projects are those projects located in certain areas of Egypt in urgent need for development, as determined by the Investment Map, based on data from the Central Agency for Public Mobilization and Statistics. Sector B projects are those projects located in other parts of Egypt. Application is made at the General Authority for Investment (GAFI) at the time of incorporation of the company which will undertake the project, which must be a new company with new assets which were not used by an existing or previous company. Once GAFI approval is obtained, the tax discounts shall be reflected on the company’s tax card.

Foreign investment rules
Listed companies

There are no restrictions on the foreign investors / companies to hold shares of a listed company. Listed companies could be fully owned by foreign investors / companies.

According to EFSA’s board Decree no. 11 dated 22 January 2014 regulating the listing rules at EGX, listing a company at EGX requires the fulfillment of certain conditions including, inter alia:

  • the listed company must be a joint stock company
  • the issued capital of the company must not be less than 5 million shares with at least 50 million Egyptian Pounds of fully paid-up capital
  • there must be at least 300 shareholders in the company
  • the company's by-laws must not include any restrictions on the trading of the shares to be listed
  • listing should be made for all the company's issued shares and subsequent share issues must be listed within 3 months of the date of the shares' registry
  • the issuer must sign an agreement with EGX agreeing to comply with the EGX listing rules and obligations
Regulation
Industry-specific legislation

Tobacco: Law no.52 for the year 1981 (as amended) and its executive regulation aim to deal with the reduction of the adverse effects of smoking

Pharmaceuticals: Health Minister Decree no. 76 for the year 2000 regulating the registration and advertising of medicines, pharmaceutical products and food supplements

Food: Law no.10 for the year 1966 regarding food control and regulating food trade

General legislation
  • Law no. 66 for the year 1956 and its executive regulation regulating advertising in Egypt
  • Consumer Protection Law no. 67 for the year 2006
  • Law no. 430 for the year 1955 as amended regulating censorship on cinema tapes, songs, plays, monologues, CDs and voice recording tapes
Taxation
Personal income tax

An annual tax is imposed on the total net income of individual residents in Egypt for income earned both inside and outside Egypt and on income non-resident individuals have earnt inside Egypt, and is generally withheld at source. 

The rates of the personal tax are distributed as follows:

  • EGP 7,200 and less are exempted from tax
  • 10% on more than EGP 7,200 to EGP 30,000
  • 15% on more than EGP 30,000 to EGP 45,000
  • 20% on more than EGP 45,000 to EGP 250,000
  • 22.5% on more than EGP 250,000

Resident and non-resident employees are entitled to an annual exemption of EGP 7,000.

Real estate tax

Real estate in Egypt with annual rental value exceeding EGP 1,200 (commercial property) or 24,000 EGP (residential property) is subject to real estate tax at a rate of 10% of the property's annual rental value (taking account of allowable deductible expenses, for example for maintenance). Tax is assessed in January and will be collected in equal instalments in each June and December.

A tax of 2.5% is imposed without any further reduction on the gross revenues from the disposal of constructed real estate or lands within the cities’ boundaries, whether the disposal commenced on the land parcel as it exists or after constructing buildings thereon, whether the disposal is inclusive of the entire real estate or part of it, or a residential unit thereof, or a unit for any other purpose, and whether the buildings were constructed on land owned by the taxpayer or by third parties. (Article 42 of the Income Tax Law).

Capital gains tax

Capital gains resulting from the sale of shares, whether they are resident or nonresident, are subject to tax. The tax rate on capital gains generated from the sale of listed shares at the Egyptian Stock Exchange shall be 10% without deducting any costs. However, the application of this capital gain tax has been suspended in Egypt until May 2020. The tax rate on capital gains generated from the sale of unlisted shares shall be subject to the regular progressive income tax rates.

Stamp duty

Stamp duty is governed by the law No. 111 for the year 1980 and its amendments (the Stamp Duty Law).

Stamp duty applies on the registration of land, real estate transfers, transfers of deeds, payments to governmental bodies, and banking transactions.

The stamp duty is either a nominal tax or proportional tax. The former is mainly imposed on legal documents at a rate of EGP 0.9 per docoument, the latter is imposed on transactions at a rate proportionate to the value of the transaction.

The Stamp Duty Law provides for many further types of documents that are subject to the stamp duty which are, inter alia, the following:

  • Commercial advertisements: 20% of the advertisement fees;
  • Insurance premiums: 1.08% to 10.08%; and
  • Credit facilities: 0.4% per quarter.

Kindly note that all the agreements necessary for the establishment of the project whatever its legal position, including the agreements related to the project until the completion of the its implementation, shall be exempted from stamp duty. Such agreements are such as the loans and mortgage agreements. (Article 59 of the executive regulation of the Investment Law).

Dividends

The articles of incorporation of a company may provide that its general assembly is entitled to distribute all or part of the dividends which are realized through the periodical financial statements. (Article 40 of the Egyptian companies law No. 159 for the year 1981 (the Companies Law).

The employees of the company must have a share in the distributed dividends with at least 10% of said dividends and shall not exceed the aggregate annual salaries of the employees. (Article 41 of the Companies Law).

Employees share in dividends distributed as per law is exempt from tax.

The dividends may not be distributed if it would lead to hindering the company from fulfilling its financial obligations.

A tax on dividend income was introduced in 2014. Dividend income is subject to 10% withholding tax when distributed by Egyptian companies to either resident or non-resident individuals or companies. In certain circumstances, this rate is reduced to 5%, where the owenership in the distrributing entity exceeds 25% of the capital, provided that the shares have been held for two years.

Corporation tax

With the exception of companies incorporated in an Egyptian free zone and the Agency of National Service Projects of the Ministry of Defence, all companies resident in Egypt are subject to the Egyptian corporate profits tax.

The corporate tax rate is 22.5%. The Central Bank, the Suez Canal Authority and the Egyptian Petroleum Authority are taxed at a rate of 40%. Companies in the oil and gas sector are also taxed at a rate of 40.55%.

For corporate tax to apply, the company must be resident in Egypt; a company is deemed resident if it is established in accordance with Egyptian law, has its main or actual headquarters is in Egypt, or 50% or more of its capital is owned by the Egyptian state or an Egyptian public judicial person. All resident companies are taxed based on their worldwide profits, however, non-resident companies are only taxed on income generated from activities carried out within the Egyptian territory.

(Articles (2) and (3) of the Egyptian income tax law no. 91 for the year 2005 (the Income Tax Law))

Egypt has concluded several treaties preventing the double taxation with a number of countries.

The major deductions allowed from taxable income are:

  1. Interest on business loans, regardless of their value, after deducting the non-taxable or legally exempt credit interest;
  2. Depreciation of the company’s assets, as stipulated below;
  3. Fees and taxes paid by the company, except for corporate tax;
  4. Social insurance contributions paid by employers in favor of their employees;
  5. Amounts deducted annually by the company from their finances or profits for the account of special savings, pension funds or others, established in accordance with the Private Insurance Funds Law No. 54 of 1975, or the Alternative Private Social Insurance Systems Law No. 64 of 1980, or according to the company’ scheme that has its own special regulations or terms, provided that the amount deducted does not exceed (20%) of the total salaries of the employees;
  6. Donations paid to government, local associations and other public legal entities, whatever their value;
  7. Donations and aid paid to Egyptian organizations and associations registered in accordance with the provisions of their respective regulatory laws, as well as to educational institutions and hospitals subject to governmental supervision, and Egyptian scientific research institutions, provided that the donations do not exceed 10% of the taxpayer’s annual net profit.; and
  8. Financial penalties and indemnities borne by the taxpayer resulting from his/her contractual liabilities.

Depreciation of a company's assets are to be calculated as follows:

  • (5%) of the cost of procuring, constructing, developing, renovating or reconstructing any building, establishment, ships and aircrafts, for each tax period.
  • (10%) of the cost of procuring, developing, improving or renewing any of intangible assets purchased, including goodwill, for each tax period.
  • The following two categories of assets are to be depreciated according to the Depreciable Base System at the rates corresponding to each:
    • (a) for computers, information systems, software and data storage equipment, 50% of the depreciable base for each tax year;
    • (b) for all other assets, 25% of the depreciable base for each tax year.
  • No depreciation shall be calculated for land, works of art, monuments, jewelry and other assets which by nature are not depreciable.

(Article 25 of the Income Tax Law)

In applying the provisions of Article 25, the depreciable base means the ledger value of the assets as included in the opening balance sheet for the tax period. This base shall increase in so much as the cost of the assets used and the cost of development, improvement, renewal or reconstruction during the tax period.

The base shall decrease in so much as the annual depreciation amount, the value of the proceeds of selling the assets and the value of compensation received as a result of their loss or depreciation during the tax period. If the depreciation base is negative, the sale value of the asset or the damages shall be added to the taxpayer's commercial and industrial profits. However, if the depreciation base does not exceed 10,000 EGP, the entire depreciation base shall be treated as a due deductible cost.

Profits from commercial and industrial activity shall be determined based on the revenue resulting from all commercial and industrial operations. This includes profits from the sale of a company’s assets as stipulated in items (1), (2) and (4) of article (25) of the Egyptian Income Tax, profits realized from compensation received by a taxpayer because of depreciation or acquisition of any of such assets, as well as the liquidation proceeds realized during the tax period after allowing all deductible costs.

Net profit is determined based on the income statement developed according to the Egyptian Accounting Standards. Tax base is determined by applying the provisions of this law to the net profit.

(Article 17 of the Income Tax Law)

Egyptian Tax Authority

Value added tax

Egypt introduced a new VAT in 2016. The standard VAT rate is 14% and is applicable to all goods and services. A 5% rate is applicable to machinery and equipment used in manufacturing. The VAT Law also imposed a Schedule Tax on a certain number of goods and services at different rates depending on the nature of the good or service.

A reverse charge VAT mechanism applies, meaning the provision of goods and services to residents by non-residents is also subject to VAT.

Businesses must apply to the Egyptian Tax Authority for VAT registration.

Transfer pricing

The Egyptian Tax Authority is entitled to verify that related parties transactions are performed in accordance with a neutral price.

There are three methods to determine the transfer price:

  • comparable uncontrolled price method
  • total cost plus profit margin method
  • resale price method

Priority is given to the comparable uncontrolled price method. If the information needed to apply this is not available, any of the other methods can be used. If no method is available, another method specified by the OECD transfer pricing guidelines will be accepted by the Egyptian Tax Authority.

The Egyptian Tax Authority has the discretion to require companies to provide relevant transfer pricing information and documentation for their review.

There are no specific penalties for transfer pricing; any penalties will apply to income tax.

(Articles (30) of the Income Tax Law and articles (38) to (40) of its executive regulations)

Thin cap regulations

Any debt interest paid by a residing company in Egypt on loans and advances that have been obtained exceeding four times the average of equity rights (based on the financial statements prepared according to the Egyptian accounting standards) shall not be deducted from the company’s net taxable income.

This provision does not apply to banks and insurance companies as well as those companies engaged in financing activity determined according to ministerial decrees which are: the securitisation companies and the financial leasing companies.

(Article (52) of the Income Tax Law)

(Ministry of Finance Decree no. 126 for the year 2006)

Payroll tax and social security

The employers and those required to pay taxable revenues, including companies and projects established under the free zones regime, shall withhold the amounts of due tax from the employees’ salaries according to the aforementioned income tax rates. They shall remit to the competent tax office within the first 15 days of each month payments withheld in the previous month.

(Article 14 of the Income Tax Law)

The employer and the employee contribute in the subscriptions paid to the National Organization for Social Insurance (the NOSI) (Articles 125 – 133 of the law No. 79 for the year 1975). The employer is committed to submit said subscriptions to the NOSI.

Exchange control

Egypt adopts a floating currency policy based on the supply and demand without interference from the Central Bank of Egypt (the CBE).  However, CBE interferes to control the exchange rates in licensed banks using financial tools. Exchange rates are not controlled in licensed exchange companies. Restrictions have been relaxed since the EGP's flotation in November 2016.

Export processing zone
Free zones investment system

The types of activities a company is allowed to perform within a free zone area are specified in Article 1 of the Investment Law. To facilitate import / export procedures, Free Zones are usually located adjacent to sea ports and airports. There are two different kinds of Free Zones: (i) Public Free Zones; and (ii) Private Free Zones. General provisions governing Public Free Zones are issued and determined by virtue of a Prime Minister decree based on a suggestion from the General Authority for Investment and Free Zones (the GAFI). A Public Free Zone can be established in maritime, aerial or terrestrial ports. All Public Free Zones enjoy a separate and distinct legal personality from GAFI.

Please find below a list of all Public Free Zones currently operational in Egypt:

  • Alexandria Public Free Zone;
  • Nasr City Public Free Zone;
  • Port Said Public Free Zone;
  • Suez Public Free Zone;
  • Ismailia Public Free Zone;
  • Damietta Public Free Zone;
  • Shebin El Kom Public Free Zone;
  • Keft Public Free Zone; and
  • Media Production City Free Zone .

Private Free Zones are established by virtue of a decree issued by GAFI and are each limited to a single project. Accordingly, Private Free Zones are established for non-continuous purposes to benefit from a specific project. Unlike Public Free Zones, Private Free Zones do not enjoy a separate legal personality and are affiliated to GAFI. The same privileges and incentives granted to Public Free Zones apply to Private Free Zones. (Articles (33) to (47) of the Investment Law and articles (74) to (120) of its executive regulations)

Free zone companies enjoy the following privileges in respect of taxation:

  1. Exemption from stamp duties and authentication fees in relation to the incorporation deeds of said companies and the loan and mortgage agreements connected thereto for a period of 5 years commencing from the registration of the company in the commercial register.
  2. Exports and imports activities conducted by free zone companies, including equipment, instruments and means of transportation that are necessary for the exercise of the licensed activity, are neither subject to Egyptian laws regulating exportation and importation nor tariffs, VAT and other fees applicable by the relevant Egyptian laws.
  3. Goods imported from the free zone into the local market are subject to the general rules and regulations governing import and export activities. Accordingly, standard customs duties and taxes shall apply to goods exported from free zones into the local market.
  4. Free zone companies and dividends thereof are not subject to Egyptian taxes.

Companies established within an Egyptian free zone are not subject to Egyptian taxes. However, manufacturing or assembly projects of free zones companies pay an annual charge of 1% of the total value of their products upon export of such products abroad.. Storage facilities are to pay 2% of the value of goods entering the free zones while service projects pay 1% of total annual revenue in the case of public free zones and 2% in the case of private free zones. Goods in transit to specific destinations are exempt from any charges.

In addition, all free zone projects must pay an annual service fee to the Free Zone Authority in an amount equal to .001% of their capital, with a cap of EGP 100,000.

(Article (41) of the Investment Law)

Royalties

Royalties which are paid to non-residents by resident corporate entities and non-resident entities which have a permanent establishment in Egypt are subject to 20% withholding tax without deduction of any expenses. Such rate is usually decreased by double-taxation treaties where applicable.

(Article (56) of the Income Tax Law)

Interest

Interest which is paid to non-residents (on loans of a duration of 3 years or more) by resident corporate entities and non-resident entities which have permanent establishment in Egypt is subject to 20% withholding tax without deduction of any expenses.

(Article (56) of the Income Tax Law)

Technical service fees

20% withholding tax is applicable, although in practice the Egyptian Tax Authority often re-qualifies Technical Service Fees, in some instances applying the treatment applied to Royalties.

Losses

Losses cannot be carried backward, with the exception of certain construction companies on long-term projects. Losses can only be carried forward for the maximum of five years. If losses are incurred on the trading of shares they may be carried forward for a maximum of three years. (Article 29 of the Egyptian Income Tax Law).