Setting up your Business in Egypt
Issues to consider
Egypt has traditionally been an attractive market for investors thanks to its unique mix of demographics and commercial links to the broader world, strategic location and a demonstrated ability to innovate and compete in global markets. Egypt’s population of over
85 million makes it the largest Arab country, and its location at the gateway of trade and commerce for Southern Europe as well as Africa and the Middle East, position it as a prime location for the transit of goods as well as a key destination for companies seeking to do business in the region.
What type of Business Structure should we use?
There are advantages and disadvantages to all of them, and there is no one correct answer, depending on your specific business circumstances and needs. A brief overview of the main structures is detailed below:
Establishment (a branch of your overseas business)
 Not a separate legal entity, but an extension of the overseas parent company
 Branch is a permanent establishment (PE) in Egypt according to the tax law then profits from this PE are liable to Egyptian Corporation tax
 The general companies administration keeps a special register for recording the foreign companies branch working in Egypt detailing the name, the head office and the purposes of the principal foreign firm and the branch address in Egypt the activity exerted by such a branch, date and number of its recording in the commercial register and all other information related thereto.
 The contracts or disposals concluded by the local manager of the branch of the foreign company, or who is in his position are obligations of the company, as long as such contracts or actions are in the scope of the normal actions for management of the affairs of the branch.
Limited Company:
 The limited liability company is one in which each partner is responsible within limit of his contribution.
 Gives a perception of a local business, with longevity.
 Corporation tax to be paid on company profits
 The number of partners shall not exceed fifty, The company may adopt a particular name which may be derived from its purpose; and its address may include the name of one or more of its partners.

Setting up your Business in Egypt
Issues to consider
 The Company shall have one or more auditors of accounts fulfilling the stipulations contained in the law of exercise of the accountancy and auditing profession, to be appointed by the General Assembly.
Limited Partnership:
 In a simple limited partnership, there are two types of partners. General partners are liable for partnership debts to the extent of their entire personal wealth, and limited partners are liable to the extent of their investment in the partnership.
 Corporation tax to be paid on company profits
How much Corporation Tax will the business pay?
Egyptian tax law differentiate between business profit generated by individuals and those generated by a corporation
Current Corporation Tax rate in Egypt:
 The tax base is rounded to nearest lower ten pounds and it shall be subject to tax at the rate of 25% of the net annual profits.With exception to the rate mentioned in the preceding paragraph, the profits of Suez Canal Authority, the Egyptian General
Petroleum Corporation and the Central Bank are subject to tax at the rate of 40%, and the profits of oil and gas exploration and production companies are subject to tax at the rate of 40.55%.
Current individuals Tax rate in Egypt:
Bracket
First Bracket
Second Bracket
Third Bracket
Fourth Bracket
Earnings Egyptian Pounds
Up to 5,000
5,000
– 30,000
30,000 – 45,000
45,000 – 250,000
Rate %
0
10%
15%
20%
Fifth Bracket 250,000 upwards 25%
On computing the tax, the total annual net income shall be rounded to the nearest lower ten pounds.
(NB: rates are updated for the tax years from 2013 till another future notice)

Setting up your Business in Egypt
Issues to consider
What if we make cross-border transactions between group companies?
Egypt follows internationally recognised Transfer Pricing (TP) rules where cross-border trading and financial transactions between affiliated entities have to be conducted on an arm’s length basis. The price and terms should be the same as if the transactions had been between completely independent parties.
Typical transactions between affiliated entities that are covered by TP regulations are:
Any transaction in which related parties have set conditions for their commercial or financial transactions other than those operative among non-related persons, either to reduce the tax base or to shift the tax burden from a taxable person to an exempt or non-taxable one.
A business will need to prepare a Transfer Pricing Report proving the arm’s length basis of transactions. The report will include a functional and risk analysis, analysis of the adopted pricing model an d benchmarking of the arm’s length basis. The Commissioner may conclude agreements with such related persons to follow one or more ways in determining the
Transfer price in their transactions .
In determining which approach to use, the comparative price method must be used first and if data is unavailable to support this determination, either of the total cost added to markup method or the resale price method may be used.
In the case of an inability to apply any of the methods mentioned in the preceding paragraph the market price may be determined by any other method described by the Organization of
Economic Cooperation and Development .
What Employment Taxes and Social Security will need to be paid?
If an individual is resident in Egypt or who is paid his salary check from Egypt then they are subject to Egypt tax laws. a natural person is an Egyptian resident, in any of the following cases:
1- If having permanent residency in Egypt
2- If residing in Egypt for more than 183 continuous or intermittent days within twelve months
3- An Egyptian working abroad, and receiving income from an Egyptian treasury
We would advise any new entrant to Egypt or person who spends time working in Egypt to take professional advice to determine whether they are Egypt tax resident.

Setting up your Business in Egypt
Issues to consider
Current Personal Income Tax rates in Egypt are:
Current individuals Tax rate in Egypt:
Bracket
First Bracket
Second Bracket
Third Bracket
Fourth Bracket
Earnings Egyptian Pounds Rate %
Up to 5,000
5,000 – 30,000
30,000 – 45,000
45,000 – 250,000
0%
10%
15%
20%
Fifth Bracket 250,000 upwards 25%
On calculating the tax, the total annual net income shall be rounded to the nearest lower ten pounds.
Individuals are entitled to personal annual exemption of 7,000 pounds .
(NB: rates are updated for the tax years from 2013 till another future notice)
Employers and employees also have to pay Egypt social security, which is called [National social Insurance]:
Current Social Security rates are:
Rate (%)
Employer
Employee
Band of income
Basic insured Salary
Variable insured Salary
Basic insured Salary
26%
24%
14%
Variable insured Salary 11%
What is General sales tax ( GST) - known in most countries as VAT- and should the business be registered?
GST is a “goods and some services tax” on supplies made, the standard rate of which is
10%. Some ítems may be subject to rates of up to 25%. If a business makes taxable supplies in excess of EGP 54k for manufacturer and EGP150k for trader in any 12 months then it must be registered for GST.
 General Sales Tax (G.S.T) shall be levied on locally manufactured goods or imported goods except goods exempted by a special provision.
 The Tax shall also be levied on certain services.
 Goods and services exported shall be subject to a zero rate.

Setting up your Business in Egypt
Issues to consider
Tax previously paid or charged on inputs and tax on returned goods shall be deducted from the tax levied on the output with the exception of certain services and goods for which no deduction is allowed.
When calculating the tax due, a registrant may deduct from the tax amount due on his / her sales of goods and services the tax previously paid on machines, equipment, parts, and accessories thereof used in manufacturing a taxable commodity or performing a taxable service except for motor vehicles for the transport of persons and motor cars, unless such vehicles and cars are used for carrying out the licensed activity of the of the business.
Can we provide Share option plans to our staff?
Many companies see Share Option plans as being an important way of attracting, motivating and retaining key staff.
The benefit value is taxable. Taxable benefit is determined by the difference between the stock market value on the date of receiving the grant, and the value required to be paid by the employee.
In case of restrictions in the grant limiting the employee’s ability to sell or otherwise dispose of the shares, the benefit shall not be included in the income of the employee until those restrictions have expired or are otherwise removed.
How else can we compensate our employees?
Egypt has a very comprehensive range of compensation and benefit options available for companies to offer their employees.
Pensions, private medical insurance, life and disability cover are now commonplace benefits provided by many Egypt businesses to their workforce.
Flexible benefit packages are also gaining in popularity, giving employees options on how they wish to “spend” their benefits allowance; which can range from “purchasing” additional holiday entitlement to obtaining full family medical cover.
To discuss your requirements please contact the International Office on +44 (0) 1245
449266 or email us directly.

Setting up your Business in Egypt
Issues to consider
Kreston International
Kreston International Limited is a global network of independent accounting firms. Offering reliable and convenient access to efficient and seamless advisory and assurance services through member firms located around the globe, Kreston:
 Is ranked the 13th largest accounting network in the world
 Covers 105 countries
 Has 700 offices
 Has a resource of 21,000 professional and support staff.
Our members are accustomed to working together to deliver cohesive international solutions to ensure clients receive the highest quality of expertise available in their respective countries. Beyond assurance, quality and experience, clients will enjoy the unique synergy that stems from the trusted relationships that Kreston members have created globally and which support the consistent delivery of exceptional international service.
This information is provided for guidance only and is not a substitute for professional advice.
Neither Kreston International Limited nor its member firms accept any liability for any loss arising as a result of actions taken or not taken based on the information contained in this document.
The information in this document was prepared as at 30 November 2013.