Doing Business
in Egypt
Foreword
This book is intended to provide useful information about doing business in Egypt. No responsibility for any errors or omissions nor loss occasioned to any person or organization acting or
refraining from acting as a result of any material in this publication can, however, be accepted by
the firm or RSM International. The information in this booklet should not be relied upon to replace
professional advice on specific matters.
About RSM International
RSM International is a worldwide network of independent accounting and consulting firms. RSM
International and its member firms are separate and independent legal entities. RSM International
does not itself provide accounting or consultancy services. All such services are provided by member firms practicing on their own account.
RSM international is represented by independent members in 107 countries and brings together
the talents of over 35,396 individuals in over 700 offices worldwide.
The network’s total fee income of US$4bn places it amongst the top 7 international accounting
organisations worldwide. Affiliate member firms are driven by a common vision of providing high
quality professional services, both in their domestic markets and in serving the international professional service needs of their client base.
RSM International is a member of the Forum of Firms. The objective of the Forum of Firms is to
promote consistent and high quality standards of financial and auditing practices worldwide.
About RSM Egypt - The Advisors
RSM Egypt - The Advisors Ltd is a professional firm specialising in financial and management consulting, accounting, tax, outsourcing services and other corporate advisory services. RSM Egypt
- The Advisors’ areas of expertise in financial consulting include financial feasibility studies, including market analysis, financial and capital restructuring, mergers and acquisitions, divestments,
business valuations, financial policies and procedures development. RSM Egypt - The Advisors’
areas of expertise in management consulting include strategic planning, corporate governance,
performance measurement, organisational structures, process improvement and management
information systems. RSM Egypt - The Advisors’ Financial Process Outsourcing department has
the required capabilities to be the back office of a wide variety of clients and industries through
providing a full range of customized, out-sourced finance and accounting, analytic, and consulting
& advisory services.
About RSM - Arab Chartered Accountants, Magdy Hashish & Co.
In Egypt, Arab Chartered Accountants (ACA) Magdy Hashish & Co. is the sister company of The
Advisors Ltd. ACA is a leading full service accounting, auditing and consulting firm. By pooling
resources, expertise and facilities and thus building an even stronger base of shared and complementary skills and experiences for the benefit of our clients.
Our firms now have a total of 250 employees located in 4 offices in Cairo, 1 in Alexandria and 1 in
Tanta. These dedicated professionals are serving a client base of over 400 companies (local and
multinational, listed and not listed) and offer quality that are tailored to the clients needs.
DOING BUSINESS IN EGYPT | 3
Our time and effort are
precious.
We Believe you should be
free to do what you do best,
“Your Core Business”
RSM International is the sixth largest network of independent accounting and consulting firms worldwide. RSM International is represented in over 80 countries and brings together the talents of 32,000 individuals. RSM member firms
are driven by a common vision of providing high quality professional services to ambitious and growing organisations.
| DOING BUSINESS IN EGYPT
Citadel, Cairo-Egypt
Contents
About Egypt
6
Setting up a Business
10
Taxation
22
Employment
28
Accounting
36
Intellectual Property Rights
38
Capital Market
42
Listing Rules in Egypt
46
Relevant Websites Further Readings
50
Contacts in Egypt
52
DOING BUSINESS IN EGYPT | 5
1. About
Egypt
| DOING BUSINESS IN EGYPT
Kebash Road, Luxor
1. About Egypt
1.1 Geography
Egypt is located at the north-eastern corner of the African continent. It borders the Mediterranean
Sea to the North; the Red Sea to the East; Palestine, Israel, and Jordan to the Northeast; Sudan
to the South; and Libya to the West. The country encompasses an area of approximately 1 million
square kilometres (equivalent to approximately 386,000 square miles). However, only 5.3% of this
total area is inhabited (approximately 53,000 square kilometres), which is mainly comprised of the
lush Nile Valley and Delta.
When looking at a map of Egypt, it is helpful to use the Nile as a reference point to divide the
country into four sections: the Western Desert (occupies 2/3rds of the total area), the Eastern
Desert, the Sinai Peninsula, and the Nile Valley and Delta. The Sinai Peninsula and the Eastern and
Western Deserts are comprised of sparsely populated arid deserts. While on the lush river valley
and delta of the Nile, all of the major cities of Egypt are located by the river, which provides the
major source of water for Egypt.
1.2 Climate
Egypt’s climate can be described as hot and dry during most of the year with a moderate winter.
During the winter months - December, January, and February - average daily temperatures stay
up around 20°C (68°F) on the Mediterranean coast and a pleasant 26°C (80°F) in Aswan (the
southernmost city). Maximum temperatures during winter and summer can get up to 31°C (88°F)
and 50°C (122°F) respectively. Winter nights only get down to 8°C (45°F), a very Egyptian version
of chilly. Alexandria (the northernmost city) receives the most rain, with 19cm (7.5in) each year,
while Aswan is almost bone-dry with just 2mm annually. Between March and April the khamsin
wind blows in from the Western Desert at up to 150kmph (93mph).
1.3 Demographics
According to the 2014 census figures, the population, including those living abroad, is estimated
to have reached 86.9 million at an annual growth rate of 1.84%. 50.7% of the population are male
and 49.3% are female. A majority of the population (62.8%) is between the ages 15-64, 32.5%
between the ages of 0-14, and the remaining 4.7% is over 65.
1.4 Religion
Around 90% of the population is Muslim. The remaining 10% of the population is Coptic Christian
and other religions.
1.5 Language
Arabic is the official language of Egypt. Classical Arabic is used by the media and in formal writing,
but the spoken Arabic is colloquial and varies from one region to the next. The colloquial Arabic
of Cairo is widely understood throughout the Arab world, because of the cultural influence of
Egyptian films, songs and TV programs. English or French are widely spoken by the educated class.
1.6 Egyptian Standard Time
Egypt is two hours ahead of GMT/UTC.
DOING BUSINESS IN EGYPT | 7
1.7 Business Hours
Bank hours are from 8:30 a.m. to 2 p.m. Sunday to Thursday. Many private banks in Cairo extend
their working hours till 5 p.m., largely for foreign exchange transactions. Some of them also open
on Friday and Saturday for the same purpose. During Ramadan, banks are open between 10 a.m. 1:30 p.m. Foreign exchange offices are generally open throughout the day.
Most government offices operate from about 8 a.m. to 2 p.m. Sunday to Thursday, but tourist offices are generally open for longer hours.
Shops generally have different hours at different times of the year. In summer, most shops are
open from 9 a.m. to 1 p.m. and from 5 p.m. to 10 p.m. or even later. Winter hours are from 10 a.m.
to 6 p.m. Hours during Ramadan are from 9:30 a.m. to 3:30 p.m. and 8 p.m. to 10 p.m. However,
hours can vary depending on the individual business and some shops maybe open for most of the
day. Restaurants usually open up shortly before noon and stay open late into the night. During
Ramadan, most restaurants are not open during the day and some may be closed for the entire
month of Ramadan.
1.8 Public Holidays
Egyptians celebrate 14 public holidays in the calendar year. Most of the holidays are Islamic or
Coptic religious celebrations and are celebrated by the entire population. Since the Islamic (Hegira) calendar is 11 days shorter than the Gregorian calendar, the Islamic holidays are observed 11
days earlier each year. The exact dates of the holidays are not known until shortly before they are
observed since they are dependent on the sighting of the moon.
1.9 25th January Revolution
The Arab world has been moving towards change in successive events since the beginning of 2011.
This change resulted in successful and semi successful revolutions. It started in Tunis, was followed by the events in Egypt, (which began on 25 January 2011), and came to an end on February
11, 2011 when President Mubarak stepped down. To avoid losing direction following the outbreak of
the 25th of January Revolution and in order to change the old regime and bring a new one to life,
together the youth alongside with the people who embraced them, and the army who protected
them, created a new mainstream for society. A mainstream conscious of the need to put an end
to the old economic system, which was based on organized corruption, protected monopoly, and
covered up for illicit gains. A new system is now required to encourage investment, prioritize productivity and promote private citizens’ profits while ensuring society’s earnings.
1.10 Legal Environment
Judicial System
Judicial system of Egypt is an important division of the Egyptian Government. Egypt was one of
the foremost countries, after France, to establish its own judicial system. The codifications for
the country were done in 1875. The judiciary of Egypt went through various transformations and
development over the years.
Under Article 165, the Judicial Authority of Egypt was declared independent. The judicial system
of the country is divided into several sections managed by responsible judges of respective courts.
These judicial courts of Egypt are supposed to enact according to the laws of the land.
The judicial courts are established in the country, so that law of the country can be correctly interpreted and implemented for equal justice to the people. These courts execute judicial functions
according to the set hierarchy. The judicial system of Egypt follows a system of dual judiciary. One
is known as ordinary judiciary and the other as administrative judiciary. There are courts in Egypt
that have limited judicial functions.
8 | DOING BUSINESS IN EGYPT
There are a number of courts in Egypt that carry out the judicial functions of the country. They
can be categorized as:
•Court of Appeal
•Court of Cassation
•Constitutional Court
•Courts of Limited Jurisdiction
•Family Court
•Court of First Instance
•Administrative Judiciary
•Public Prosecution
1.11 Economy
GDP
The Gross Domestic Product (GDP) in Egypt expanded 0.2 percent in the third quarter of 2011
over the same quarter, previous year. Historically, from 1992 until 2011, Egypt’s average quarterly
GDP Growth was 4.48 percent reaching an historical high of 7.30 percent in March of 2008 and a
record low of -4.20 percent in March of 2011. Egypt has one of the most developed and diversified
economies in the Middle East. Agriculture (cotton, corn, sugarcane, fruit and vegetables, fodder,
and rice), industry (textiles and clothing, chemicals, steel, consumer electronics and home appliances) and services (tourism) represent almost equal rates in national production. However,
despite high levels of economic growth over the past few years, living conditions for the average
Egyptian remain poor.
DOING BUSINESS IN EGYPT | 9
2. Setting up a business
entity in Egypt
10 | DOING BUSINESS IN EGYPT
Hanging Church, Cairo
2. Setting up a business entity in Egypt
2.1 Types of Business Entities
The Law of Commerce No. 17 of 1999 and the Companies Law No. 159 of 1981 determine the kinds
of business entities allowed in Egypt. The Law of Commerce deals mainly with the sole proprietor
and the simple partnerships, whereas the Companies Law regulates in detail joint stock companies, limited partnerships by shares, and limited liability companies. Each of these structures will
be discussed below in details.
2.1.1 Sole Proprietorship Formation
A sole proprietor (or sole trader) is a natural person, who engages in a commercial activity for
his or her own account. To be licensed as a sole proprietor, the person should apply to the competent Commercial Registration Office for registration in the Commercial Register. The important
requirements for this registration are:
a. The applicant should be of at least 21 years old
b. The applicant should be of Egyptian nationality unless he or she will carry out his or
her activity under the Investment Law (at present law no. 8 of 1997), or will engage in
exporting activity.
c. The applicant should use his or her own name as a trade name. This trade name should
appear on his or her place of business and its branches (if any), and in all his or her
business correspondence.
d. The applicant should provide the Commercial Registration Office with other relevant
important data such as the nature of his or her trade or business, the trade capital
(no minimum capital is required), the address of his or her main place of business and
branches (if any) and details of trademarks or copyrights (if any).
Financial Requirements
The Law of Commerce requires from the sole proprietor whose trade capital is 20, 000 EGP or
more to keep proper accounting books. The annual profit (taxable profit) of the sole proprietor,
together with any other taxable income he or she may have from other sources, shall be subject
to the income tax:
•The first 3, 000 EGP taxable at 0%
•More than 5, 000 EGP up to 30,000 EGP taxable at 10%
•More than 30, 000 EGP up to 45, 000 EGP taxable at 15%
•More than 45,000 EGP up to 250, 000 taxable at 20%
•More than 250, 000 EGP taxable at 25%
2.1.2 Simple Partnerships Formation
The partnership is a business entity formed between two or more partners who are usually natural
persons. There are two kinds of partnerships: the general partnership and the limited partnership.
In the general partnership all the partners are considered as traders, and are jointly and severally responsible to meet all the business liabilities or obligations without any limits. This means
that if the partnership funds cannot meet its liabilities, creditors can recover their debts from the
partners’ private properties. The general partnership should have a trade name derived from the
name(s) of one or more of its partners.
After concluding the partnership agreement the following is required to complete registration:
a. A copy of the partnership deed is published at the Court of First Instance where the
partnership head office is located.
b. The partnership deed is published in two daily newspapers of wide circulation.
c. The partnership deed is registered in the Commercial Register (please refer to commercial registration requirements under the sole proprietor).
DOING BUSINESS IN EGYPT | 11
d. After completing the above registration, the partnership can start its commercial activity.
In the limited partnership at least one of the partners is a general partner who is active and is considered a trader with full responsibility to meet the partnership’s liabilities or obligations without
any limits. Other partners, who are called limited partners, are inactive or sleeping partners, and
their responsibility for meeting business liabilities or obligations is limited by the amount of capital
they have invested in the partnership, and no more. The trade name of the limited partnership is
derived from the name(s) of one or more of its general partners.
Foreigners can participate in partnerships, but they do not have the right to manage the partnership nor to sign on its behalf, and their share in its capital cannot exceed 49%.
Financial Requirements
No minimum capital is required. Regarding taxation, the general and limited partnerships are subject to the same tax provisions. The profit of the partnership itself as a legal entity is not taxable,
but the share of each partner (general or limited) of this profit together with any other taxable
incomes he or she may have is subjected, separately from other partners, to the unified income
tax at the progressive rate scale applicable to sole proprietors, i.e. between 10% and 20% in addition to the state resources duty at 2%.
Again each partner of a partnership is required to enroll himself or herself in the state social insurance system as a self-employed person.
Registration of a partnership requires concluding an agreement (the deed) between the partners
determining the partnership capital and the share of each partner (general or limited), the business (activity) of the partnership, its duration, and the distribution of its profits or losses, etc.
2.1.3 Joint Stock Companies Formation
The Egyptian joint stock company is similar in its main features to the same kind of companies existing anywhere else in the world. It is a company whose capital is divided into shares, the liability
of each shareholder is limited to the value of his or her shares, and the shares may be traded on
a stock exchange after meeting the registration requirements for trading on a stock exchange.
The number of founders of a joint stock company should not be less than three founders, and
consequently the number of shareholders cannot go below three at any time.
The shares of a joint stock company, private or public, can be fully owned by foreigners, but they
have to pay the value of their shares in the company in foreign convertible currencies.
To form a joint stock company, the founders (or an attorney on behalf of them) should submit an
application to the Companies Department with the following required documents:
a. A list of the founders’ names and details.
b. For founders who are corporations, a resolution from each corporate body indicating
participation in the formation of the new company.
c. For founders who are foreign nationals, relevant data is required in authenticated or
legalized form such as nationality, address, work or activity, documents of incorporation, etc.
d. The memorandum of association and the draft of the articles of association of the
new company.
e. A certificate from the Egyptian bank receiving the share capital payments, which
shows that each founder and ordinary shareholder has paid at least 25% of his share
capital. This 25% can be paid in two instalments: 10% before applying to the Companies Department, and the remaining 15% within three months following the registration of the company in the Commercial Register.
12 | DOING BUSINESS IN EGYPT
The Companies Department will submit the application and attached documents to a Special Committee for Company Formation, which will review the application, and the documents. If the application and documents are complete and within the requirements of the Egyptian law and public
order, the Committee will issue a resolution approving the formation of the new company, and
accordingly the memorandum and articles of association of the new company are published in the
Companies Bulletin.
Subsequently, the founders will apply to the Commercial Registration Office to register the new
company in the Commercial Register, after which the company will be fully incorporated and can
start its activity. The incorporation of a joint stock company usually takes 4 to 5 weeks to complete.
Management of a joint stock company
A board of directors composed of an odd number, which is not less than three, manages a joint
stock company. The board members, including the chairman, can be all foreign nationals. The
directors represent the shareholders in managing the company, and therefore are considered as
agents of the shareholders and not as employees of the company.
The remuneration of the director, will be subject to Egyptian income tax.
A joint stock company is supervised by the Companies Department to ensure its compliance with
the Companies Law. However, companies dealing with securities (e.g. broker dealers, investment
companies or portfolio management companies, and venture capital companies) are supervised
by the Egyptian Financial Supervisory Authority.
Financial Requirements of a joint stock company
The minimum issued share-capital of a closed or private joint stock company (i.e. a company which
does not offer its shares for public subscription) is 250,000 EGP, and that of a company which
offers its shares (or part thereof) to public is 1,000,000 EGP. At least 50% of the issued share
capital must be subscribed by the founders. At least 25% of the share-capital is to be paid during
foundation and the rest over a maximum of five years.
In-kind shares and founders shares cannot be traded on the Stock Exchange before the lapse of
two financial years from the incorporation of the company. A foreign shareholder of a company
traded on the Egyptian stock exchange can sell his shares in the Egyptian Stock Exchange and
repatriate the proceeds of the sale abroad without any restrictions, and free of any taxes or duties.
The annual net profit of a joint stock company has to be appropriated in accordance with the provisions of the Companies Law and the related executive regulations as follows:
a. At least 5% of the net profit is set aside as legal reserve; adding to this reserve will
cease when its amount reaches 50% of the issued share-capital or as per the companies bylaws.
b. At least 5% of the paid-up capital is payable to shareholders as a first distribution. A
maximum of 10% of the remaining profit is distributed as remuneration to the board
of directors. The remaining profit may be distributed to the shareholders as a second
distribution, carried forward to next year, or set aside in a special reserve account.
c. The employees are entitled to receive, as part of profit sharing, 10% of the first and
second distributions to the shareholders mentioned above, but with a maximum of
100% of their annual salaries. Therefore, the actual dividends to the shareholders
would be the total of the first and second distributions excluding the employees’ profit
sharing. The dividends are payable to the shareholders free of any taxes or duties.
d. The dividends of the foreign shareholder can be repatriated abroad through one of
the accredited banks in Egypt without any restrictions, and free of any taxes or duties.
DOING BUSINESS IN EGYPT | 13
e. The net profit of the joint stock company, adjusted according to the provisions of
the tax Law, will be subject to the Egyptian corporate tax whose standard rate is approximately 25%. However, profits of the Suez Canal Authority, the Egyptian Petroleum
Authority and the Central Bank will be taxed at 40%. Oil and Gas exploration and production companies are taxed at 40.55%.
2.1.4 Limited Partnerships by Shares Formation
The limited partnership by shares, or the “societe en commandite par actions” as called in France,
is similar to the joint stock company with the exception that at least one of the founders has unlimited liability in meeting the company’s financial liabilities. This company form is prohibited from
conducting the business of insurance, banking, or savings or investing funds on other people’s
behalf (Article 3 & 5 of the Companies Law).
Management of a limited partnership by shares
The company is managed by the founder(s) with unlimited liability without any direct participation
by the other founders or ordinary shareholders with limited liability. The founder(s) with unlimited
liability who is managing the company is called the“manager”, but his or her legal status is similar
to the director of the joint stock company and the provisions applicable to these directors apply
as well to the managers of limited partnerships by shares. The name and scope of such partner
manager’s authority must be specified in the Memorandum of Association (Article 111 of the Companies Law).
The company must have a Supervisory Board made up of at least three persons, whose purpose
is to supervise the actions of the manager(s). As such, this Supervisory Board may not be chosen
from the partner manager(s). (Article 112 of the Companies Law). In this respect, the supervisory
board will have the right to ask the manager(s) to provide it with management reports, and it can
review the company’s accounting records, and count the cash, the inventories and other company
assets. The supervisory board will also give opinion regarding matters that the manager(s) may
seek the board’s opinion on.
The general meeting of shareholders cannot amend the company’s deed without the approval of
the manager(s), unless the deed stipulates differently.
In case of the manager’s death, the company will dissolve, unless the company deed stipulates
that it will continue.
Financial Requirements of a Limited Partnership by Share
The minimum share capital required of a limited partnership by shares is 250,000 EGP. The capital
is divided into two categories: (1) shares owned by founder partners, and (2) shares of equal value
belonging to shareholders. The founder partners have unlimited liability while the shareholders’
liability is limited to the value of their respective shares (Article 3 of the Companies Law).
2.1.5 Limited Liability Companies Formation
The Egyptian limited liability company is a closed company where the liability of each of its owners
is limited to the value of his or her shares (called quotas) in the company. The number of owners of
a limited liability company cannot be less than two persons and cannot exceed fifty. The shares or
quotas of the limited liability company cannot be traded in the stock exchange. The trade name of
the limited liability company is usually derived from its purpose, but may also include the name(s)
of one or more of its owners. Additionally, the words “Limited Liability Company” must be included
in the name (Article 61 of Ministerial Decision Implementing the Commercial Companies Law.)
The founding owners of the company must submit an application requesting permission to incorporate a limited liability company. The ministerial decision implementing the Commercial Companies Law outlines the mandatory provisions that must be included in the Memorandum of Association.
14 | DOING BUSINESS IN EGYPT
The company is incorporated once it is registered in the Commercial Register. The company must
also maintain a Register of owners in its head office, which must contain the names, nationalities,
domiciles and occupations of the owner; the number of shares owned by each; the sum paid by
each; and the assignment or transfer of shares and related relevant information (Article 275 of the
Executive Regulation of the Companies Law).
Limited liability companies cannot raise funds (as capital or as loan) through public offering. Also
such companies may conduct a variety of business activities, with the exception of insurance,
banking, savings, receiving deposits or investing funds on behalf of others. (Article 5 of the Companies Law.)
Management of a Limited Liability Company
The management of a limited liability company may be assigned to one or more managers. At least
one manager must be of Egyptian nationality (Article 281 of the ministerial decision implementing the Companies Law). The manager(s) must be named in the Memorandum of Association but
need not be a shareholder(s). The manager(s) may be appointed for a definite term (which must
be specified in the Memorandum of Association) or for an indefinite term. The manager(s) shall
have full authority to represent the company; unless the Memorandum of Association limits such
authority.
The manager of the limited liability company has the same legal status of the director of the joint
stock company. The remuneration of the manager, after certain deductions, is subject to payroll
tax.
If the number of owners of a limited liability company exceeds ten, the owners should form a supervisory board consisting of at least three of them. The supervisory board has the right to check
the accounting records of the company, ask the managers to provide reports upon request, count
the company’s cash and other assets, and review the company’s financial statements before being
submitted to the general meeting of the owners.
Apart from the above, the provisions related to joint stock companies apply to limited liability
companies.
Financial Requirements of a Limited Liability Company
The equity capital should be fully paid up on foundation. The nominal value of the share or quota
cannot be less than 100 EGP.
The quotas cannot be traded in the stock exchange. Any owner can sell his or her quotas to outsiders, provided, however, that he or she has offered them for sale to the other owners first and they
declined to buy them.
Foreigners can own 100% of the equity capital of a limited liability company, but they have to pay
the value of their shares in foreign convertible currencies.
If a foreign partner(s) in a limited liability company wishes to repatriate his or her capital out of
Egypt, he or she has to sell his or her quotas or liquidate the company (if he or she actually owns
all or most of it), deposit the proceeds of sale or liquidation in an account at one of the accredited
banks in Egypt, and the bank will affect the required repatriation of the funds, free of any taxes
or duties.
A limited liability company which has a share-capital equal to or exceeding the minimum sharecapital of a closed joint stock company (i.e. 250,000 EGP) has to allocate at least 10% of the profit
to be distributed among its owners to its employees as profit-sharing, but with a maximum of
100% of their annual salaries.
DOING BUSINESS IN EGYPT | 15
2.2 Other Forms of Business Structures Associated with Foreign
Operations
In addition to the above, there are other forms of business associated with foreign operations such
as foreign branches and representative offices.
2.2.1 Foreign Branches
Foreign companies are allowed to open branches in Egypt to carry out construction works, hotels
management, commercial, financial and industrial activities or generally to execute works of contractual nature. Following approval of the registration application, all foreign companies conducting activities in Egypt must register their office in the Commercial Register. Once registered at the
Commercial Register, the foreign branch must also be registered at the Centralized Register of
Foreign Companies kept at the Companies Department.
A manager should be appointed by the foreign company to manage its branch in Egypt, and to
legally represent it in all matters related to its activity and existence. The manager can be of a
foreign national.
The manager may delegate to others who are professionals or specialists to handle matters of
complicated or specialized nature such as taxes, and legal disputes.
The remuneration of the manager is subject to payroll tax. If the manager is an Egyptian national,
then he or she should enrol himself or herself in the state social insurance system as an employee.
Enrolling in the social insurance system applies also to foreigners whose countries have reciprocal
social insurance arrangement with Egypt.
The foreign branch should keep proper books of account as required by law, and should issue annual financial statements, which should be audited by a certified Egyptian auditor.
At least 10% of the net profit of the branch should be allocated to employees as profit sharing,
but the amount of profit sharing should not exceed 100% of the annual salaries of the employees.
The net profit of the foreign branch can easily be repatriated abroad if the branch has acquired
enough foreign currency to do so. This also applies to the capital of the foreign branch.
The net profit of the foreign branch will be subject to the Egyptian corporate tax at the rate of
25%.
Establishing a branch of a foreign company in Egypt requires registration in the Commercial Registration Office. To register a branch of a foreign company, this company should first be awarded a
contract to perform work in Egypt, such as a contract for construction works, hotel management,
oil exploration, and the like.
Afterwards, the foreign company, or its attorney, will apply to the competent commercial registration office for registration of a branch with the following documents:
a. A copy of the contract awarded to the foreign company to perform works in Egypt with
a recognized Arabic translation thereof.
b. A legalized copy of the memorandum and articles of association of the foreign company with a recognized Arabic translation thereof.
c. A legalized copy of the foreign company’s board of directors’ resolution to establish
a branch in Egypt with a statement that the company has no other branches in Egypt.
d. Appoint a manager for the branch.
16 | DOING BUSINESS IN EGYPT
e. A certificate from one of the accredited banks in Egypt stating that the foreign company has transferred to the bank an amount in a foreign convertible currency equal to
at least 5,000 EGP to be the branch’s capital, and that this amount is deposited in a
blocked account.
f. In case of construction work, a document indicating that the foreign company has been
registered in the Egyptian Federation for Construction and Building Contractors as a
correspondent.
g. A copy of the rental contract of the office of the branch in Egypt.
The registration fees of a foreign branch are about 500 EGP. This is exclusive of the professional
fees of an attorney. The establishment of a foreign branch usually takes about 2 to 3 months to
complete.
2.2.2 Representative Offices
Foreign companies can establish in Egypt representative, liaison, or scientific offices. The purpose
of such offices is limited to studying the Egyptian market and exploring the possibility for their
companies to manufacture or carry out business in Egypt, but without actually performing any
kind of commercial activity including commercial agency work, or any other activity which may
generate income for the office.
Representative, liaison, or scientific offices should be registered at the Companies Department
before they are allowed to work in Egypt.
However, foreign pharmaceutical companies may apply to the Ministry of Health to open scientific
offices in Egypt and if the Ministry of Health approves their request, they may register their scientific offices at the Imports and Exports Control Authority (under the Ministry of Foreign Trade),
instead of the Companies Department. This kind of registration allows scientific offices of pharmaceutical companies to make promotions in Egypt for their pharmaceutical products. Such scientific
offices may also receive on behalf of their companies the royalty on the foreign pharmaceutical
products, which are manufactured by Egyptian pharmaceutical companies by license from the
foreign companies. Scientific offices may also receive a promotion allowance from the Egyptian
pharmaceutical companies if they make the necessary promotions for the locally manufactured
products by themselves.
The manager of the representative, liaison, or scientific office can be a foreigner. But the manager
of a scientific office of a pharmaceutical company, which is registered at the Imports and Exports
Authority, must be an Egyptian who is a licensed member of one of the medical professions in
Egypt.
There is no minimum capital for a representative, liaison, or scientific office, but the funds required
to establish any such office and to run it should be transferred from abroad in foreign convertible
currency and deposited at one of the accredited banks in Egypt. However, scientific offices of pharmaceutical companies are allowed to use the royalties and promotion allowances accruing thereto
as indicated above in meeting their expenses or part thereof.
Since representative, liaison, and scientific offices cannot exercise any commercial activity that
could generate income, they are not subject to the corporate tax and their employees do not enjoy
any profit-sharing rights.
The registration fees of a foreign branch are about 500 EGP. This is exclusive of the professional
fees of an attorney. The establishment of a foreign branch usually takes about 2 to 3 months to
complete.
DOING BUSINESS IN EGYPT | 17
However, the royalty accruing to the scientific offices of pharmaceutical companies is subject to a
withholding tax at the rate of 20% or at a reduced rate if there is a tax treaty with the country of
the foreign company, but the taxpayer in this case would be the foreign pharmaceutical company
itself and not its scientific office. Promotion allowances received by the scientific offices are not
subject to the corporate tax, as long as the total annual current expenses of the office exceed what
it receives as promotion allowance.
On the other hand, the managers and employees of these offices are subject to payroll tax on the
salaries and other remunerations they receive.
To register a representative office, the concerned foreign company, or its attorney, should submit
an application to this effect to the Companies Department (or the Imports and Exports Control
Authority in the case of scientific offices of pharmaceutical companies) with the following documents:
a. A legalized copy of the memorandum and articles of association of the foreign company with a recognized translation thereof.
b. A legalized copy of the company’s board of directors resolution to establish a representative office in Egypt to study the Egyptian market and explore production possibilities without being engaged in any trading or profit-oriented activities.
c. Appoint a manager for the representative office.
d. A certificate from one of the accredited banks in Egypt stating that the foreign company has a convertible foreign currency balance (no minimum amount is required) and
that the currency has been transferred from abroad.
e. A certified cheque for 1,000 EGP as registration fees in the name of the Ministry of
Foreign Trade.
f. A copy of the rental contract of the representative office in Egypt.
g. Registration of a representative office usually takes about one month to complete.
2.2.3 Franchising
A franchise is an agreement by which the owner of an intellectual right, a potential property, or
a brand product who is called the “franchisor” gives another person called the “franchisee” the
exclusive right to use or exploit this intellectual right or property, or to produce or just sell the
brand product within a designated area for a remuneration which is commonly called a license fee
or a royalty.
The license fee or royalty can take the form of a fixed amount of money payable by the franchisee
to the franchisor for using the right during a specific period of time, or it can take the form of a
percentage of the turnover or sales realized by the franchisee during a specific period of time, or
it may combine between these two forms of remuneration.
A new law for Intellectual Property Rights No. 82 of 2002 was passed on June 2002; the new law
applied the rules of the Trade Related Aspects of Intellectual Property Rights Agreement (TRIPS
Agreement) and makes protection of intellectual profits under a franchise agreement more secure. Being a member of the World Intellectual Property Organization (WIPO), Egypt is a signatory
to a number of major international agreements such as Madrid international convention protecting trade and industrial marks.
According to the income tax law, royalties, license fees, or payments for know-how and the like
are subject to the royalty tax at the rate of 20% without any deductions for costs or expenses.
However, if the recipient of the royalty or the like is a resident of a country which has a tax treaty
with Egypt the tax rate is usually reduced.
18 | DOING BUSINESS IN EGYPT
2.2.4 Importers, Commercial Agents & Contractors
Importation for trading purposes and commercial agency activity are both restricted to Egyptians
or business firms wholly owned by Egyptians. Further details on the activities of importers, commercial agents, and contractors are given below.
Importation for Trading Purposes
Law no. 121 of 1982 on“Importers Register”requires that any natural or legal person wishing to
import goods for trading purposes should, first of all, be registered in the Importers Register.
To register a natural person in the “Importers Register” the following requirements should be met:
(Article 2)
a. He or she should be registered in the Commercial Register, and should have a tax card.
b. He or she should be of Egyptian nationality and if his or her Egyptian nationality was
acquired, then at least ten years should have elapsed since acquiring it.
c. He or she should have carried commercial activities for at least two consecutive years
(there are some exceptions to this rule).
d. He or she should have a clean criminal record.
e. He or she should not have been bankrupt, or if he or she was bankrupt, has now been
rehabilitated.
f. His or her business capital amount should not be less than 10,000 EGP, with some
exceptions.
g. If the person has been a civil servant performing works related to commercial activities, then at least two years should have elapsed since his or her leaving the civil
service.
h. He or she should not be a member of the parliament, the advisory council, a local
municipality, or fully engaged in political work, unless he has been undertaken such
activities before being a member of such councils.
To register a partnership or a company in the“Importers Register”the following requirements
should be met: (Article 2)
a. The partnership or company should be registered in the Commercial Register. For partnerships, the commercial registration should have taken place since at least one year,
and the capital of the partnership should not be less than 15,000 EGP, but if its capital
is 20,000 EGP or more, then it is exempted from the one- year condition.
b. Its head office must be in Egypt.
c. Its object should include importation for trading purposes.
d. All the partners and managers of partnerships and all the managers of companies
must be of Egyptian nationality, or at least ten years should have elapsed since acquiring it.
e. The general partners of partnerships, and the managers of companies must meet the
requirements (d), (e), (g), and (h) applicable to natural persons.
Limited liability companies are treated the same as partnerships for registration purposes.
Importation of materials for manufacturing purposes, and importation of capital assets such as
machines and transport means to be used in the activity of the business firm and not for trade,
can be carried out directly by the concerned business firm without the involvement of a registered
importer.
DOING BUSINESS IN EGYPT | 19
Commercial Agents
Law no. 120 of 1982 regulates commercial agencies. According to the law, foreign companies wishing to engage in any type of consulting or other services, or to tender on government agency
bids (except sales to the Ministry of Defence) may do so only through a registered local agent or
intermediary. A foreign company cannot establish in Egypt a scientific, technical, or consulting office or any similar kind of office unless it appoints an Egyptian commercial agent. Also, any foreign
company wishing to store its goods in Egypt for the purpose of selling or distributing them must
appoint an Egyptian commercial agent to carry out these activities.
To work as a commercial agent or intermediary, the person must be either an Egyptian national or
an Egyptian juristic entity whose name has been registered at the “Commercial Agents Record” or
“Intermediaries Register” at the Ministry of Foreign Trade.
Registration in the record requires also the submission of the commercial agency contract showing the nature of work of the commercial agent, and the responsibilities of the principal and the
agent, the percentage of the agency commission, the conditions for paying it to the agent and the
currency of payment.
Registration in the “Commercial Agents Record” must be renewed every five years. Furthermore,
the Commercial Agencies Law requires that each agency agreement contain a specific obligation
by the foreign principal to inform the appropriate Egyptian embassy or consulate (in the foreign
principal’s home country) of any amendments to the agreement.
Principals must report to the tax department details of payments of commissions made to commercial agents and intermediaries within one month of each payment. On the other hand, the
commercial agent must keep proper books of account and record therein all the commissions
received and the banks in which they are deposited.
Foreign Contractors
As already mentioned, if a foreign contracting/construction company is awarded a contract to
perform works in Egypt it must register a branch, and appoint a manager for this branch. If the
owner of the work requires that the works be executed by a joint venture or a consortium made of
two or more contractors, then the foreign contractors in the joint venture or the consortium would
still be required to register branches in Egypt.
Alternatively, a foreign contracting/construction company may choose to establish an Egyptian
company in Egypt usually in the form of a joint stock company, or limited liability company. In this
case the foreign company would not be required to obtain a local contract to be able to establish the company, but can establish the company then search for works in Egypt. Usually foreign
contracting/construction companies seek to establish the Egyptian company together with well
known Egyptian contracting/construction companies for better penetration into the Egyptian market, and to secure better cooperation and expertise in performing the local work.
Non-Governmental Organizations (NGOs)
In June 2002, the People’s Assembly ratified a new law regulating the work of non-governmental
organizations (NGOs). The law is largely identical to a 1999 law, which was annulled because the
Shura Council, Egypt’s upper parliamentary house, had not passed it. Under the new law, the government determines how NGOs are run and requires that NGOs obtain the government’s permission to receive funds from abroad. The law gives the Social Affairs Ministry the sole authority to
approve new NGOs or to withdraw approval of existing ones.
20 | DOING BUSINESS IN EGYPT
DOING BUSINESS IN EGYPT | 21
3. Taxation
in Egypt
| DOING BUSINESS IN EGYPT
Tutankhamun Mask, The Egyptian Museum - Cairo
3. Taxation in Egypt
3.1 General
Taxes in Egypt may be divided into two categories. The first one concerns direct taxation of individuals and legal entities on their income or profit. The second involves indirect taxation of goods,
services, and events. The Egyptian taxation framework is statutory based. Tax administrators are
given, under the relevant legislation, few discretionary powers. Courts are primarily responsible
for the interpretation of statutes. The nature of the Civil Law system operating in Egypt allows
precedent to have an influential but not necessarily a binding effect.
3.1.1 Taxable Parties
The Egyptian corporate tax regime applies to joint stock companies, limited liability companies,
partnerships limited by shares, foreign companies and branches of foreign companies whose head
office is situated abroad. This tax is also applicable to banks and public sector companies. It should
be noted that general partnerships and simple limited partnerships are not taxable entities under
Egyptian law. The partners in such partnerships are personally liable for the tax due on their respective shares in the partnership’s profit. Partners, therefore, are taxed in the same manner as
individuals.
3.1.2 Group of Companies
In general, Egyptian tax law treats every company in a group of companies as an independent unit.
No provision is made for affiliated companies to file a consolidated return or for the losses of one
company in a group of companies to be deducted from the profits of others in the same group.
Fixed assets may not be transferred tax free between affiliated companies.
3.1.3 Foreign Branches
• Branches of foreign entities operating in Egypt are subject to the same corporate income taxes and tax exemptions as their Egyptian counterparts.
• If a branch of a foreign company fails to keep proper books, the Egyptian tax authorities will seek to assess tax on a proportion of the foreign company’s worldwide profits.
• No withholding tax is imposed on a branch on its payments to its head office abroad or
on divi- dends paid by the locally incorporated subsidiary to its foreign parent company.
It is not usually possible to set up a branch under Investment Law No. 8/1997, except
in the free zones.
• Dividends and interest received from abroad, and the net of foreign taxes paid, are
subject to the tax on moveable funds at 32%. Citizens from countries having double
taxation treaties with Egypt are treated in accordance to these agreements.
3.2 Income Tax
Taxable Entities
Tax Rate (%)
Income (of net profit)
20
A temporary annual tax shall be imposed for three years as of the present taxation period, at the
rate of 5% on the amount that exceeds 1 million Egyptian pounds out of tax base of the income of
the natural persons or the profits of the juridical persons pursuant to the provisions of the income
tax law referred to; and it shall be assessed and collected pursuant to the provisions.
3.2.1 Relief for losses
A tax payer may offset losses against profits of a business and may carry losses forward for a
period up to five years. Losses may not be carried back. Losses incurred in long-term projects may
be carried back within the same project.
DOING BUSINESS IN EGYPT | 23
3.2.2 Tax filing and payment procedures
The taxpayers may request to extend the date of submitting their tax return if the request is submitted 15 or more days before the due date for the submission of the return and if, on the date of
submitting the request, the individual pays the estimated tax stated in the tax return. If the extension request is submitted in accordance with the above requirements, the date for submitting the
tax return is extended for a period of 60 days.
Employees are not required to submit annual returns for their employment income.
Companies must withhold monthly tax from the salaries of employees and remit such amounts to
the tax authorities. They must submit a quarterly declaration to the relevant tax office in January,
April, July and October of each year. Companies must submit an annual declaration to the relevant
tax office in January of each year. Free-zone projects must withhold the taxes due from their employees and remit such amounts to the tax authorities.
Taxpayers must file annual tax returns within four months after the end of the financial year or
within 30 days after the cessation of their activities.
3.2.3 Corporate Tax Exemptions and Deductions
• Almost all business expenses are deductible including depreciation, interest, royalties,
rent, profit sharing payments to employees, legal expenses, pension, and Egyptian
state social insurance contributions.
• Profits of companies located in the free zones.
• Tax exemptions on capital gains are applicable in some cases of asset replacement.
• All tax holidays granted under Investment Law No.8/1997 and its amendments: This
also applies to free zone areas.
• Joint stock companies employing more than 50 employees and maintaining proper
books of
accounts are granted a tax holiday for a five-year period. Also, hotels and tourist projects
are granted a tax holiday for a five-year period which can be extended to ten years if
the project is located in a remote area.
• Transfers to provisions or reserves to meet specific losses or financial commitments
that are certain to occur, even if the amount is not yet determined, may be deducted,
up to 5% of annual net profits.
•For jointstock companies listed in the stock market, a deductible allowance is made
that is equal to interest income, which can be earned on a bank deposit (currently 10.5
percent). In other words, taxes are only charged when the rate of return is above the
market rate of interest.
• Ninety percent of income generated by companies from their movable capitals which
have been subject to the new tax imposed by Law 187 of 1993. This 90 percent is not
applicable if the income is generated from the main activities of the company. It is also
not applicable for dividends received on shares in another Egyptian company. The 90%
deduction also applies to income from real estate owned by the company.
• In the year 2005, the rule was amended to Law 91 and then to Law 53 in 2014.
Those amendments are not applied to companies created under the Investment Law
No.8/1997.
• Donations to the government, local authorities, and public bodies are deductible without limit. Donations to legally registered charitable institutions and social welfare organizations and to educational institutions and hospitals under government supervision are deductible up to 7% of net profits per year.
• Bad debts written off are deductible. Provisions against specific doubtful accounts are
deduct- ible, as long as together with other provisions for specific losses-they do not
exceed 5% of net profits per year.
• Losses may be carried forward and applied against future profits for up to five years.
24 | DOING BUSINESS IN EGYPT
• Bonuses to employees, amounting to three months of salaries or wages are deductible.
• Egypt is known for its stable income tax rate (20% of net profit).
3.3 Personal Income Tax
3.3.1 Taxable Income
Taxable income for resident individuals is defined as income generated from Egyptian sources.
Income generated outside Egypt may also be taxable but the rules vary for each taxpayer. Tax
Law No. 187 of 1993 distinguishes among the following categories of income of individuals (as well
as partners in partnerships. In the year 2005, the rule was amended to Law 91 and then to Law
53 in 2014. Those amendments are not applied to companies created under the Investment Law
No.8/1997.):
• Salaries and wages.
• Commercial and industrial profits
• Income from immovable property
• Income from movable capital
• Noncommercial profits.
3.3.2 Taxation of Foreigners
Payments to nonresidents (foreigners) that have been working in Egypt for less than 183 days are
subject to a 10% income tax, if they exceed 183 days they are considered a resident and taxed
accordingly.
For foreigners who do not have a work permit, the tax burden is transferred from the employee
to the employer. This includes multinationals that have to pay a tax on employees hired abroad.
The manager of a foreign company’s representative office in Egypt is liable to taxation on the
portion of his salary that is related to his services rendered in Egypt only. Foreign experts who
are employed for more than six months during the tax year are eligible for deductions and reliefs.
However, those who already pay taxes to their home governments will not have to worry about
paying taxes twice due to “the non-double tax treaty” that Egypt has signed with many countries.
3.3.3 General Tax on Income
In addition to the specific taxes that are levied on specific types of income as mentioned above,
the Egyptian legislature has imposed a general tax on income, which is applicable to individuals.
This tax is an additional tax, and the tax base is regarded as the total net income that the individual receives during the year. Only income that is subject to a specific tax is included in the tax
base for the general tax on income.
3.4 Payroll Tax
3.4.1 Deductions
The following deductions may be claimed:
• An annual personal deduction of EGP 7,000 for each individual.
• Social insurance and other contributions that may be deducted in accordance with the
measures in the social insurance law and under alternative systems.
• Employees’ contributions to private insurance funds established according to the provisions of the Private Insurance Funds Law, as promulgated by Law No. 54 for 1975.
• Premiums paid for private and health insurance for the benefit of the individual or the
individual’s spouse or minor children, and insurance premiums paid with respect to
pensions.
The total deduction for the last two items mentioned above may not exceed 15% of the net income
or EGP 10,000, whichever is Less.
DOING BUSINESS IN EGYPT | 25
For purposes of computing taxable commercial and industrial income, all costs generally are deductible. In particular, the following specific deductions are allowed:
• Costs for rental of premises.
• Tax depreciation and accelerated depreciation for new machines.
• All taxes except taxes on business income.
• Social insurance contributions
• Contributions to pension and savings funds.
• The deductions described in the first paragraph of this section.
3.4.2 Rates
The following Progressive tax rates apply to employment income:
Taxable Income
Tax rate (%)
Exceeding (EGP)
Not Exceeding (EGP)
-
5,000
0
5,000
30,000
10
30,000
45,000
15
45,000
250,000
20
250,000
1,000,000
25
1,000,000
-
30
3.4.3 Social Insurance Contributions
Employers must pay social insurance contributions to the Ministry of Social Insurance and Social
Affairs with respect to their Egyptian employees. Egyptian employees are also liable for contributions. The social insurance laws do not generally apply to expatriate staff. Employees’ contributions are withheld by the employer from the employees’ salaries and wages each month and paid
to the ministry; together with the employer’s own contributions, within the first two weeks of the
following month.
3.4.4 Social Insurance Contribution Rates
For tradesmen and other workers employed by a contractor, contributions are paid on the basis of
arbitrarily calculated wages, which can often be higher than the wages actually paid
3.5 Withholding Tax
Any business operating in Egypt must withhold against any payments made to any contractor
or supplier of goods or services. There is no withholding tax on dividends. Taxes on income from
moveable capital and salaries are withheld at source. Amounts withheld are paid quarterly to the
Tax Department. The following basic percentages:
• Contracting and supplying: 0.5%
• Services: 2%
• Commissions: 5%
• Professional fees: 5%
Amounts paid to nonresidents in or out of Egypt by permanent establishment in Egypt are generally taxed at 20% withholding tax without any cost or expense deduction. The withholding percentage may- be lower under tax treaties with other countries.
3.6 Sales Tax
All non-exempt domestic and imported goods and services are subject to the sales tax according
to Law 11 of 1991. The tax is due upon the sale of goods or rendering of services. The following are
exempted from the sales tax:
26 | DOING BUSINESS IN EGYPT
• Personal belongings of embassy and consular staffs, except food, alcohol and tobacco.
•Local dairy products.
•Bread and pasta made from local flour.
•Meat and fish except caviar and smoked fish.
•Domestic fruits and vegetables.
•Paper, books and magazines.
•Natural gas, butane gas, and petrol.
•Food industry wastes used for fish feed.
•Goods and services exported outside the country, goods and services imported into or
exported outside Egypt from Free trade zones and goods in transit.
The sales tax is calculated either as a percentage (10%) of the value of the good or as a fixed rate
per kilo or ton. It varies according to the good, whether it is produced locally or imported; taxes
on imported goods are higher. The value of the locally produced good is determined by the market
value of the good whereas in the case of imported goods it is calculated as that applicable for
customs duty purposes plus the customs duty.
In 2001, law No.17 was enacted to implement the second and third phases of the sales tax. The new
phases require that all producers and importers be registered with the Sales Tax Authority, keep
regular accounting records, issue invoices for sold goods and rendered services and make monthly
declarations of the tax due. The declaration must be made within 60 days following the end of the
accounting month, whether or not any taxable sales or services occurred during that period. In
case of failing to present a timely declaration, the Sale Tax Authority will estimate by itself the tax
for the accounting period.
3.7 Stamp Tax
Stamp duty is charged at various rates and fixed charges. The rate on banking transactions is 0.1%
quarterly. The rate is 20% on commercial advertisements and from 0.08% to 10% on insurance
premiums. A rate of 0.1% is levied on the trading and sale of securities and payable by both the
buyer and the seller.
3.7.1 Repeal of stamp duty on securities now subject to capital gains tax
The article of the stamp Duty Tax Law no. 83 which states that “a stamp duty of 0.01% shall be
borne by the purchaser, and 0.01% shall be borne by the seller on all securities sale or purchase
transactions” has been repeated.
3.8 Treaties for the Prevention of Double Taxation
Egypt has concluded treaties for the prevention of double taxation with a number of countries,
including: Austria, Canada, Cyprus, Denmark, Finland, France, Germany, India, Iraq, Italy, Japan,
Libya, Norway, Oman, Pakistan, Romania, Singapore, Sudan, Sweden, Switzerland, Syria, Tunisia,
the United Kingdom, and the United States. Draft treaties, which have not yet been ratified, were
concluded with Indonesia, Korea, Malaysia and Morocco. It is notable that since Egypt does not
levy withholding tax on dividends, its tax treaties provide reduced withholding tax rates only for
interest and royalties. In the absence of a tax treaty, unilateral tax relief is available by way of
deduction rather than by a tax credit.
3.9 Free Zone
The rule to be applied for free zone trade is Law No.19/2007. There are 13 free zone areas in Egypt
that are spread out in different regions. The free zone law applies to all business sectors.
DOING BUSINESS IN EGYPT | 27
4. Employment
| DOING BUSINESS IN EGYPT
Ibn Tulun Mosque, Cairo
4. Employment
4.1 Egyptian labour
Around 96% of the Egyptian population live in the Nile Valley and Delta, with 16 million residing
in Cairo and 6 million in Alexandria. Approximately one-third of the workforce is employed in agriculture. An estimated 47% of Egypt’s economic and social establishments are in the Cairo and
Alexandria governorates, which host 25% of the labour force.
The number of non-Egyptian employees in any establishment must not exceed 10 percent of the
total work force for unskilled or semiskilled workers. For skilled workers the limit of Egyptian labour is 25 percent. Also total compensation of foreign employees must not exceed 35 percent of
the total payroll of the establishment.
The Egyptian labour market is regulated by the new unified Labour Law No. 12 for 2003. The new
Law comprises 257 articles that address all the legal aspects regulating the Egyptian labour market. The new law aims at increasing the private sector involvement and at the same time achieving
a balance between employees’ and employers’ rights. Amongst the most important issues that the
new law addresses is the right of an employer to fire an employee and the conditions pertaining
to this as well as granting employees the right to carry out a peaceful strike according to controls
and procedures prescribed in the new law.
4.2 Employment contracts
Employment contracts are required to be in writing, in triplicate and in Arabic language. The employer, employee and social insurance office each keep one copy of the employment contract,
which must include certain information as specified in the Labour Law.
4.2.1 A typical labour contract would include
•Name of the employer and the address of the work place.
•Name, qualifications, occupation and address of the employee and the documents required to prove his identity, and his social insurance number.
•Nature and kind of work subject to the contract.
•The wage agreed upon and method and time of payment.
If an employee is hired on probation, the employment contract should indicate the probationary
period, which cannot exceed three months.
An employment contract may be drawn up for a fixed-term or indefinite period of time. In case the
employee and the employer continue in implementing a fixed-term contract after its term, such
action shall be considered as renewal of the contract for an indefinite term.
It is necessary that both the employer and employee agree on essential matters in the law concerning wages, job description, and contract period.
It is also important to state the kind of work, which the employee is obliged to do, and the entity
to which he/she is accountable if work is not performed.
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4.2.2 Contract Period
The legislator regulates a maximum of five years for a fixed contract. If the employer and employee agree on a longer employment duration, then the latter has the right to terminate the
contract after the initial five years, without receiving compensation; however, the employer must
be notified within an agreed upon time period, which is a three-month prior notice.
The probation period shall be specified in the labour contract and no employee shall be appointed
under probation for a period exceeding three months, neither shall an employee be appointed
under probation more than once with the same employer.
4.2.3 Working Hours
Employees should not work more than eight hours a day or 48 hours over a six day working week.
Most private sector employees work 5 days a week, usually Sunday to Thursday. The number of
working hours may be increased to 9 hours a day in certain circumstances.
Employees are entitled to one whole working day off each week. Certain exceptions apply when
work is intended to prevent a serious accident or to cope with a heavy workload. In such situations,
the employee must be paid overtime.
4.2.4 Employers file
Article 77 of the Law No. 12/2003 states that the employer should establish a file for each of his/
her employees where he/she shall detail the employee’s name, occupation, level of skills, educational degree, his address, military status, social status, date of appointment, wage and changes
in wage, penalties imposed, leaves obtained, and finally the date of service termination and the
reasons for it.
Employee’s supervisor concerning performance, and any other document related to the employee’s service.
Moreover, the employee should keep the above-mentioned file for at least one year after the
termination of the labour relationship. Reasons behind this commitment is to prevent any dispute
that may take place on wages, leaves, firing or dismissal reasons and to facilitate the employer’s
administration regarding accomplishing the Labour Law requirements.
The previously referred to data in Article No. 77 represent the least amount of data that should
be provided in the employee’s file. There are no restrictions to adding any more data such as: the
employee’s age, sex (male, female), qualifications acquired and certificates of experience.
4.3 Records Stated in Labour Law
The Labour Law obliges the employer to present the following records to the Ministry of Manpower
and Migration:
4.3.1 Disabled Record
Regarding the employment of disabled individuals according to Law No. 39 of 1975, which entails
qualifications and employment of the disabled, this law obliges private sector employers, whose
number of workers equals to or exceeds fifty employees, to employ 5% of the total number of
workers from the disabled as recommended by the Manpower Offices.
The employer also has the right to appoint disabled individuals he chooses provided they are holding the registry certificate which proves their disability.
30 | DOING BUSINESS IN EGYPT
Any employer who hires a disabled worker should send a registered mail letter with receipt confirmation to the manpower office in charge during the first fifteen days of the employment of the
disabled worker/employee.
4.3.2 Foreigners’ Record
In an attempt to enforce control on employing foreigners, the ministry obliges organizations employing foreigners to make a record including the following:
•The foreigners name, surname, nationality and religion.
•Birth date.
•Job title and exact job description.
•Qualifications.
•Date and number of his employment permit.
•The wage (Article 13 of MD 136 of 2003).
4.3.3 Financial Penalties Record
An employer shall make entry of the financial penalties imposed on employees in a special register, detailing the reasons why such penalties were imposed, the name of the employee and his/her
salary. According to Article 2 of the Ministerial Decree 123 of 2003, all financial penalties imposed
on employees should be spent over the social, cultural, and sports activities for employees.
4.3.4 Termination of Employment: Duration of Probation
The probation labour contract should not exceed three months neither shall an employee be appointed under probation more than once for the same employer.
A probation contract is a conditional labour contract, in case the employee proves unsuitable for
the job during the allotted period; thus, allowing the employer to cancel the contract.
4.3.5 Dismissal & Termination
Article 69 of the Labour Law, lists the grounds under which an employee may be dismissed. An
employee may not be dismissed until the matter is brought before a committee with judicial powers at the Ministry of Manpower and Migration. The committee shall decide the request for dismissal brought to it within (15) days from the date of the first session and its decision shall be final.
However, the employer may thereafter dismiss an employee and the employee retains the right to
challenge the dismissal in court.
Egyptian Labour Courts retain discretion in reviewing an employment dismissal. Compensation
awards may be granted to employees for wrongful dismissal on the basis of a review of the facts
and circumstances of each case.
An employee is entitled to 60 days notice for dismissal if his period of service does not exceed
10 years and 90 days if that period exceeds 10 years. (Should the employer desire to dismiss the
employee without giving him the relative notice period, the employee shall receive two or three
month salary payment instead of such notice).
Article 122 Labour Law states that the compensation shall not be less than the wage of two
months’ salary for each year of employment for wrongful dismissal. Throughout the notification
period the labour contract shall remain ruling.
Grounds for legal termination without notice include the expiry of a fixed-term employment contract, retirement, resignation, death, or a court ruling.
DOING BUSINESS IN EGYPT | 31
4.4 Leaves
4.4.1 Annual Leaves
An employee is entitled to a minimum annual paid leave of 21 days every one full year of service
and proportionally if his period of service is less than one year. This annual leave is increased to
one month after the employee has worked for 10 consecutive years or is over 50 years old. In
addition, every employee is entitled to full pay for official holidays designated by the Ministry of
Manpower and Immigration, not to exceed 13 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 leaves.
4.4.2 Accidental Leave
Accidental leave is the leave taken by an employee, as a result of unexpected circumstances, in
which he has no choice except desisting from work, after that he should inform the employer with
the reasons of desisting.
Article No. 51 of the Labour Law states that desisting from work for accidental reason should not
exceed six days per year with a maximum of two days each time, and this leave will be deducted
from the annual leave of the employee.
4.4.3 Sick Leave
The Labour Law provides that an employee whose sickness is established and determined by the
concerned medical responsible is entitled to sick leave, and shall be compensated according to the
Social Insurance Law (up to six months of paid sick leave annually at between 75% and 100% of
the employee’s normal wage).
A worker shall be entitled to benefit from his accumulated annual leaves in addition to leaves of
sickness and he shall also have the right to request his leaves of sickness to be transferred to the
annual leave balance.
An employer shall not terminate the employee’s service due to sickness unless the employee has
utilized the above-mentioned period.
4.4.4 Official Leaves (Public Holidays)
Egyptians celebrate 14 public holidays in the calendar year. Most of the holidays are Islamic or
Coptic religious celebrations and are celebrated by the entire population. Since the Islamic (Hegira) calendar is 11 days shorter than the Gregorian calendar, the Islamic holidays are observed 11
days earlier each year. The exact dates of the holidays are not known until shortly before they are
observed since they are dependent on the sighting of the moon.
4.4.5 Performing Pilgrimage or Visiting Jerusalem
Regarding religious respects, Article No. 53 of the new Labour Law stated that an employee who
has spent five consecutive years in the service have 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 period of service.
4.4.6 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 childbirth, she has the right to two period of rest daily
(30 minute each) for breast-feeding her child, with the option to combine both periods in one.
32 | DOING BUSINESS IN EGYPT
4.5 Employees’ Benefits
4.5.1 The Social Security System and Public Health Insurance
Social security is a public program designed to protect individuals and their families from income
losses due to unemployment, old age, sickness, or death and to improve their welfare through
public services (e.g. Medical Care).
For Egyptian employees, who must constitute a significant part of a company’s workforce, there is
a social security system under which the employer pays contributions equivalent to approximately
one-fourth of the salary earned, up to a certain limit of salary.
Contributions in the private sector under social security regulations are levied only on Egyptian
nationals who are in full-time employment. Contributions are required at the following rates:
On a monthly basis, the deductable social insurance salary from the employer is 26%
from the basic salary and 24% from the variable salary. The deductable social insurance salary from the employee is 14% from the basic salary and 11% from the variable
salary.
For seasonal and temporary workers employed by construction contractors, a different system applies, Social Security contributions by the contractor amount to 18% of the percentage that labour
costs bear to total contract costs. This levy may significantly increase labour costs on projects.
Benefits provided under the social security scheme are pensions, disability payments, sickness
payments, maternity and death allowances, and unemployment insurance. These benefits are not
given to non-Egyptians.
All private sector companies in Egypt are required to provide free health care for their Egyptian
employees either through the Medical Insurance Plan of the Ministry of Social Insurance or privately. They are also required to contribute to the Pension Insurance Fund of the Ministry of Social
Affairs and Insurance.
4.5.2 Other Benefits
1. Annual Increment: Employees are entitled to a periodical annual increment of not be
less than (7%) of the basic salary on which the social insurance subscriptions are calculated. Thus until the National Council for Wages issues the decisions regulating the
payment of that increment.
2. Overtime Pay: The minimum overtime premiums are 35 percent of normal pay for
overtime worked during daylight, 70 percent for that worked at night, and 100 percent
on rest days and 200 percent on official holidays. Production incentive bonuses are
tax-free.
3. Minimum Wage: Not yet determined by the National Council for Wages.
4. Profit Sharing: Employees of a Joint Stock Company, Limited Liability Company, or
Foreign Branch are entitled to a share in the distributable profits. The share is fixed at
an amount not less than 10% of distributable profits and not more than the total annual
salaries of the employees. However, Limited Liability Companies with capital less than
250,000 EGP are not subject to this distribution of profit share.
5. Bonuses: There is no obligation to pay annual bonuses.
DOING BUSINESS IN EGYPT | 33
4.6 Special Requirements for Foreign Residents
4.6.1 Visas
Tourists and visitors are generally permitted to enter the country with a minimum of immigration
formalities. Except for nationals from certain countries who must obtain visa from the Egyptian
Consulate in the country where they live, most visitors require temporary visas to enter Egypt.
These are issued at ports.
1. Tourist Visas: Tourist visas are issued to foreign nationals visiting Egypt for recreational purposes or to foreign nationals whose stay in Egypt will not exceed three
months. It is possible to renew this visa for similar durations.
2. Temporary Visas: Temporary visas are issued to foreign nationals who are entering
Egypt for reasons other than recreational purposes and whose stay will exceed three
months but will not exceed one year.
4.6.2 Work Permits
All Egyptian workers, except part-time or temporary staff, must obtain work certificates.
Foreigners interested in employment in Egypt have to obtain work permits and follow the corresponding regulations issued by the Ministry of Manpower and Migration in this regard. After a
work permit is obtained, the foreign national’s visa (whether tourist or temporary) is converted
into a work visa, with the same duration as the work permit.
Work permits are easier to obtain for technical staff than for unskilled or semi-skilled workers.
Work permits are usually granted to foreigners for a period of one or less than one year. It may
also be issued for a period exceeding one year after settling the relative fee for the requested
period.
Documents Necessary for Obtaining Work And Residence Permits for Foreigners in Egypt:
•Filling the applications forms for work permits of foreigners willing to work in Egypt.
These application forms may be obtained from the work permit department at the
Manpower and Training Directorate.
•Passport for perusal. It is important to apply while residence is valid.
•Copies of passport size photographs of the foreigner.
•Copies of the company incorporation contract.
•Copies of the Tax ID Card.
•A copy of the commercial register.
•Copies of the certificates of academic degrees and experience of the foreigner.
•The license for exercising the profession in the cases where such license is required.
•A memorandum justifying the recruitment of the foreigner for that job, stating the
reasons for not recruiting an Egyptian as well as the tasks assigned to the foreigner
together with the name of the Egyptian assistant whose qualifications and experience
are consistent with the foreigner.
•Approval of the related Authority (e.g. Investment Authority, Egyptian General Petroleum Corporation, etc.).
•A delegation from the company to the person who is going to apply for the work permit
on behalf of the foreigner.
•A certificate from a public hospital or a recognized laboratory such as the vaccination
laboratory of the Ministry of Health, confirming that the foreigner is free of HIV.
•The approval of the concerned security authorities. This can be arranged through the
department of work permits at the Manpower and Training Directorate at Tahrir complex.
•Evidence of settlement of the work permits fees.
•Fees for issuing the permit are set as follows:
•Issuing the permit for the first time or on its renewal for both Aliens and nationals of
Arab countries is approximately 1,000 EGP.
•The fee should be due in full for the whole year or its fractions
34 | DOING BUSINESS IN EGYPT
4.7 Social Insurance Contributions:
Employers must pay social insurance contributions to the Ministry of Social Insurance and Social Affairs with respect to their Egyptian employees. Egyptian employees also are liable for contributions. Employees’ contributions are withheld by the employer from the employees’ salaries
and wages each month and paid to the ministry; together with the employer’s own contributions,
within the first two weeks of the following month.
Employer(%)
Employee(%)
On basic monthly salary up to 500 EGP / month
26
14
On variable pay (such as production incentive bonuses) up
to 500 EGP / month
24
11
DOING BUSINESS IN EGYPT | 35
5. Accounting
| DOING BUSINESS IN EGYPT
River Nile
5. Accounting
Egyptian Accounting Standards (EAS) have been prepared to comply with International Accounting Standards except for certain minor differences to adapt to Egyptian economic environment.
Therefore all companies listed on the Cairo Stock Exchange must follow EAS.
5.1 Summary of Egyptian Accounting Standards (EASs) vs IFRSs
5.1.1 Property, plant and equipment
Under IFRS, the use of historical cost or revalued amount is permitted. Frequent valuations of
entire classes of assets are required when the revaluation model is chosen. Under EAS, evaluation
is not permitted except in certain circumstances (e.g. a merger or a change in the legal structure).
5.1.2 Acquisitions from entities under common control
Under IFRS, there is no specific guidance for transfers of net assets or exchanges of equity interests between entities under common control. In practice, the approaches followed by companies
vary, and include both purchase accounting, using fair values, and approaches based on book
values. EAS is silent regarding the accounting treatment for acquisitions between entities under
common control.
5.1.3 Capital lease
Under IFRS, lease classification depends on whether substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred from the lessor to the lessee. Under
EAS, the leased asset is recognized in the lessor books and depreciated, and the lessee recognizes
lease payments in the income statement in the period in which it is paid.
5.1.4 Profit sharing to employees and board of directors
Under IFRS, profit sharing to employees and board of directors is recognized when incurred in the
income statement (using the accrual basis of accounting). Under EAS, profit sharing to employees
and board of directors is recognized as a dividend distribution through equity and as a liability
when approved by the relevant company’s shareholders meeting.
DOING BUSINESS IN EGYPT | 37
6. Intellectual
Property Rights
| DOING BUSINESS IN EGYPT
Cairo Tower, Cairo - Egypt
6. Intellectual Property Rights
6.1 Law 82 of 2002
The main source of IP laws is Law 82 for the Year 2002 (Law 82/2002). Law 82/2002 replaced a
collection of laws dating back to 1939 with a comprehensive intellectual property code as part of
an effort to bring Egypt into compliance with its obligations under different international agreements. The four “books” of the new code address patents, integrated circuit designs, undisclosed
information, trademarks, geographical indications, trade statements, industrial designs, copyright
and related rights, and plant variety protection.
Law 82/2002 generally attempts to mirror the provisions of the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPs).
An English translation of this law can be accessed at the World Intellectual Property Organization
(WIPO).
Website: http://www.wipo.int/clea/docs_new/pdf/en/eg/eg001en.pdf
6.2 Copyrights
Egypt protects the creative works of authors under copyright and protects performers, producers
of phonograms, and broadcasting organizations under related rights.
6.3 Patents
Once an application for the grant of a patent is filed, it is examined with respect to compliance
with the formalities and patentability provided under Law 82/2002. The Patent Office may require
amendments necessary to bring the application into conformity with the law.
A patent application must be filed before the invention has become known through disclosure or
use worldwide. Novelty is evaluated on the basis of the filing date in Egypt or the application’s priority document if applicable. The Patent Office currently receives many published patents worldwide and requires absolute novelty when examining the patent application.
Patent applications are examined for novelty, inventive step, and industrial applicability. Once the
application is accepted it is automatically published in the Official Gazette. Any interested party
may oppose the grant of a patent within 60 days as from the date of publication. The opposition
notice is submitted to the competent committee.
It takes an average of three years from the filing date for a patent to be granted or finally refused.
Annuities are to be paid every year as from the filing date of the application even before the patent is granted. However, according to the current patent law, there is a one-year grace period from
the due date with a late fine to settle payment of an annuity.
An applicant is entitled to appeal the requirements and conditions of the Patent Office by means
of submitting a petition to the competent committee within thirty days as from the receipt of the
notice, served to him by the Patent Office. Approved applications are published in the Official Gazette and are rendered open for public inspection.
The patent term is twenty years starting from the date of filing the application. Annuities should
be paid until the expiry of the patent protection period.
DOING BUSINESS IN EGYPT | 39
The rights to a patent may be assigned or transferred through succession. The assignment of patent applications and granted patents must be made in writing. An assignment shall have no effect
against third parties unless it has been published in the Official Gazette and duly entered in the
relevant records of the Patent Office.
Working of the patent is compulsory in Egypt. In the event that the owner of a patented invention
does not satisfy the working requirements within three years as from the date of the grant, or
within four years from the filing date, whichever of the two periods is longer, or if working ceases
for one year without an acceptable reason, then the patent will be subject to compulsory licensing
under the provisions of the law. If within two years as from the grant of the compulsory license,
the licensee does not exploit the patented invention, any interested party may apply to the Patent
Office demanding the cancellation of the subject patent for non-working.
The rights conferred by a patent lapse, with the end of the protection period as prescribed by the
laws, abandoning of patent rights, final court decision to this effect, non-payment of a due annuity
within one year after the respective due date or failing to respond to an official action.
Infringement of the rights of a patentee is punishable under the provisions of Law 82/2002.
Egypt signed the TRIPS Agreement in 1995, therefore pharmaceutical and food products could
be filed as “mailbox” applications during the transitional period ending on January 1, 2005. As of
January 1, 2005, the Egyptian Patent Office opened the “mailbox” and began examination of these
product applications.
6.4 Trademarks
Egypt is a party to the Madrid Agreement Concerning the International Registration of Marks (Act
of Stockholm of 1967) as of March 6, 1975. The international classification of goods and services
for the purpose of the registration of marks (Nice Classification) is followed in Egypt, and the
revision of class 42 with the creation of classes 43 to 45 has been adopted as of January 1, 2002.
Once a trademark application is filed, the trademark is examined as to its registrability. Applications filed in classes 02, 05, 08, 13, 14, 15, 23, 24, 25, 27, 28, 29, 30, 32, 33, 34, 35, 36, 37, 38, 39,
40, 41, 42, 43, 44 and 45 can claim all the goods the classes cover, whereas the remaining classes
must omit at least one good. Should the application lack any requirement as provided for in the
law and its regulations, the examiner will reject the application. The applicant may appeal such a
rejection within thirty days from the date of receiving the relevant official notification.
Trademark applications approved by the Registrar are published in the Official Gazette. There is a
two-month period from the date of publication during which any interested party may file an opposition notice. An opposition to the registration of a published trademark may be prosecuted by
either a trademark attorney or an applicant before the Registrar. The opposition case is referred
to the competent tribunal if not settled by the Registrar or if either party objects to the decision
issued by the Registrar. In the absence of opposition, a published trademark is registered and the
registration certificate is issued.
A trademark registration is valid for ten years from the date of filing the trademark application.
Thereafter, a trademark registration is renewable for periods of ten years upon application and
payment of the prescribed renewal fees. The Trademark Office serves a written notice to the registered owner of a trademark at the address noted in the register. The notice, which is served
during the month following the expiry of the validity term, indicates the date on which the renewal
fees should have been paid and calls for payment during the grace period. If the registrant fails to
apply for renewal during the six month grace period following the expiry of the stipulated protection period, the Trademark Office ex officio will cancel such registration, which will eventually be
removed from the register.
40 | DOING BUSINESS IN EGYPT
The assignment of a trademark should be recorded with the Trademark Office. Unless it is published in the Official Gazette and entered in the records of the Trademark Office, an assignment
shall not be effective vis-à-vis third parties. A trademark may be assigned with or without the
establishment associated with that mark. Changes in the name and/or address of a registrant
must be recorded.
Use of trademarks in Egypt is not compulsory for filing applications for registration or for maintaining trademark registrations in force. However, a trademark registration is vulnerable to cancellation for lack of use by a third party through a court proceeding. A cancellation action relies
on establishing sufficient grounds that the trademark in question has not been used seriously for
a period of five consecutive years. A trademark registration will be cancelled unless the owner
proves that non-use of the trademark was for reasonable cause of which the court approves. The
Trademark Office or any concerned party is entitled to demand cancellation of any trademark
registered in bad faith.
Any infringement or unauthorized use of a registered trademark is punishable under the provisions of the current Trademark Law.
DOING BUSINESS IN EGYPT | 41
7. Capital Market
| DOING BUSINESS IN EGYPT
The Pyramids & Sphinx, Giza
7. Capital Market
7.1 Capital Market Legislation
The Capital Markets Law No. 95/1992 regulates the operations of the capital market in Egypt.
Under the Capital Market Law, any company intending to issue securities must notify the Egyptian
Financial Supervisory Authority (EFSA), which then has 3 weeks in which to review the proposed
securities issuance.
For a public issuance of securities, a company must prepare a prospectus approved by the EFSA
and must provide the EFSA with periodic reports and information relating to such a public issuance.
A company offering part of its shares in a public offering, or trading a minimum of 30% of its
shares on the stock exchange, must inform all shareholders owning at least 1% of the company’s
capital of any other shareholder wishing to increase its shareholding above 10%. Any Board member or employee of the Company wishing to increase his/her shareholding above 5% must also
comply with the foregoing requirement.
The Capital Market Law also allows the issuing company to set a return on securities that exceeds
the limit established in other laws (i.e. 7% ceiling in the Civil Code).
The Capital Market Law provides that trading of securities may only be undertaken by companies
licensed by the EFSA. Board members of such companies must have a minimum of 5 years experience in the field of securities or must have 4 years experience and have participated in a training
course set up by the CMA.
7.2 Areas Covered
The Capital Market Law regulates both companies that offer their shares to the public and those
that deal in securities. In particular, it regulates the actions of companies engaging in the following
types of securities related activities:
•Promoting and underwriting investments in securities.
•Participation in the formation of companies that issue securities or in the increase of
their capital (Egyptian equivalent to the holding company).
•Venture capital.
•Securities clearing and settlement activities.
•The creation of securities portfolios and investment funds portfolio and investment
fund management.
•Securities brokerage activities.
•Other securities activities specified by a decree of the competent Minister following
approval of the EFSA.
7.3 Registration
Joint stock companies must register with the Stock Exchange in either Cairo or Alexandria. A joint
stock company’s securities can be listed in either the official or the unofficial register. The following securities may be listed in the official register:
•Public issuance of securities that represents no less than 30% of the joint stock company’s nominal shares and that is subscribed to by no fewer than 150 persons.
•Public issuance of securities by the government or a public sector company.
DOING BUSINESS IN EGYPT | 43
Securities that do not meet the criteria for listing in the official register (including foreign securities) could be listed in the unofficial register. Investors dealing in securities listed in the official
register are exempt both from stamp duties ordinarily due at the time the securities are issued
and from annual stamp duties and from capital gains tax on profits realized from trading of such
securities.
There is no mention of the Nile Stock Exchange”NIlex” for Small & Medium Enterprise
7.4 Issuance of Securities
The Capital of Joint stock companies and the shares of dormant partners in companies with a
limited number of shares shall be divided into nominal shares of equal value. However, the company may issue bearer shares within certain limits and according to specific terms and conditions.
(Article 1)
The company’s articles of association shall determine the value of the nominal shares, but the
nominal share cannot be valued less than LE5.00 and shall not exceed LE1,000.
A share should be indivisible. New shares may be issued, upon increasing the capital of the company with a different value from that of shares from previous issues.
For issuing shares against a real-share, or on the occasion of merger, the value of these shares
should conform to the value of the real share or the merged rights, as determined by the concerned evaluation committee. However, the party submitting the real share may pay the difference
in cash or decline the deal.
No stocks/securities of any company, including public business sector companies, and public sector companies shall be floated for public subscription, except by virtue of a subscription prospectus, approved by the EFSA to be published in two prominent daily newspapers, at least one shall
be in Arabic.
7.5 Obligations of Listed Companies
In order to secure the rights of investors and the users of financial statements, listed companies
must provide the following information about their financial and business results:
1. The balance sheet and other financial returns and statements of the company shall be
prepared according to the accounting criteria and auditing standards to be determined
or referred to in the executive regulations of the Capital Market Law.
2. All listed companies should submit to the EFSA a copy of their financial statements,
reports of the Board of Directors, and the auditors’ report, one month prior to the date
scheduled for convening the general assembly meeting.
3. All listed companies shall publish an adequate summary of the semi-annual reports
and annual financial statements, in two leading daily newspapers one of which to be
in Arabic.
7.6 Central Depository
A new Law on Central Registration and Depository, Law 93/2000, was adopted. This law provides
for the creation of a licensed Central Depository that is to issue deeds that will be able to be used
instead of material shares. For the first time, the law introduces a concept of beneficial ownership
of shares. Banks and other licensed securities companies are required to enter into agreements
with the Central Depository that include certain mandatory provisions. They are required to participate in a special fund that will guarantee settlement of securities transactions.
Its members own the Central Depository. Transactions are to be based on cash against delivery
with a settlement time to be specified by the EFSA.
44 | DOING BUSINESS IN EGYPT
7.7 Investment Funds
The Capital Markets Law stipulates that an investment fund must take the legal form of a joint
stock company. The EFSA has the authority to review and object to the members of an investment
fund company’s Board of Directors as well as the fund managers. A specialized investment management company must manage an investment fund.
The Capital Market Law provides that an investment fund must maintain a certain ratio between
its paid-in capital and its financial resources. Only banks that have been authorized by the Minister
of Foreign Trade may deal in the subscription of investment fund shares.
Banks and insurance companies may establish investment funds without having to create a separate joint stock company, if they have received authorization to do so from the CMA and, either
the Central Band of Egypt (CBE) in the case of banks or the General Organization for Insurance
Supervision (in the case of insurance companies).
7.6 Employee Shareholders’ Association (ESA)
The Capital Markets Law also introduced the concept of Employee Shareholders Associations,
whereby employees of a joint stock company may form an association that owns shares in the
joint stock company’s capital on behalf of the employees.
7.7 Brokers’ Obligations and Restrictions
The obligations of and restrictions on brokerage companies are set out by the Executive Regulations of the Capital Market Law, Decree 39/1998.
Brokerage companies are bound by fiduciary duties of honesty and integrity. Therefore, brokerage
companies are required to disclose any conflict of interest that may exist. Also included in their
fiduciary duty is the obligation not to disclose any information regarding their clients. Insider trading rules, Article 244 of Decree 39/1998, have been established which stipulate that brokerage
companies, their directors and employees are expressly prohibited from engaging in insider trading by using non-public information in accordance with, among other things, these rules:
•Brokerage companies may not execute transactions on behalf of their clients, without
sufficient evidence justifying their advice and the resulting transactions.
•Brokerage companies are prohibited from “churning” (i.e. entering into transactions
for clients participating in excessive trading, with the aim of increasing commissions,
expenses or other fees).
•Brokerage companies may only deal on behalf of their clients in transactions for which
they have been granted specific instructions. These instructions should be recorded by
the brokers.
•The client must be informed of the completion of a transaction within 24 hours.
•Transactions on behalf of the brokerage companies’ directors, employees or relatives
are permitted only with the explicit written consent of the Board of Directors of the
brokerage company.
DOING BUSINESS IN EGYPT | 45
8. Listing Rules in
Egypt
| DOING BUSINESS IN EGYPT
Nile River, Cairo
8. Listing Rules in Egypt
8.1 General Rules
The following general criteria must apply for shares to be listed on the Stock Exchange:
• Shares must be centrally registered and deposited.
• The company’s bylaws must not include any restrictions on the share trading; except as
may be the case related to some activities and/or geographical areas in Egypt.
• Registration should be made to all issued shares, and subsequent issuance of shares.
• The approval of the EFSA in relation to companies related to the financial activities
regulated by article 27 of the Capital Market Law.
• Having a website for the declaration of periodic financial information.
• Listing requests should be made either by the legal representative of the company, or
by one of the licensed listing agents.
• A contract should be signed between the company and the Stock Exchange.
8.2 Listing Rules for Egyptian Joint Stock Companies:
• A minimum placement of 10% of the company’s issued shares should be offered to the
public.
• Number of shareholders should not be less than 300 shareholders. The shares owned
by each of these shareholders should not exceed 1/1000 of the total issued shares, with
a nominal value not less than LE 5,000.
• Free float should not be less than 5% of the total listed shares, or with a book value of
LE 10 million, whichever is higher.
• Issued shares should not be less than 5 million shares,
• The company should provide financial statements for the last two financial years, audited by one of the listed auditors in the EFSA.
• The issued capital should be fully paid-up, not less than LE 50 million (or equivalent in
other currencies), and the shareholders book value should not be less than the paid-in
capital.
• A declaration from the main shareholders to keep a minimum of 65% of their shares
for a minimum of two years from the date of the listing and placement of the shares in
the stock exchange. This percentage should apply for any subsequent capital increase,
except for stock dividends.
• Providing detailed report including the company’s business model, past experience, and
corporate governance procedures.
• Net profit before tax (NPBT) margin should not be less than 5% of the paid-in capital
during the last year before the listing. NPBT should be generated from the company’s
main activities as stated in its bylaws.
The company’s however could list their shares if the first two conditions are not available, with a
given grace period of 6 months to comply with these conditions.
DOING BUSINESS IN EGYPT | 47
8.3 Listing Rules for Egyptian Companies Offering its shares in
Public Offering without issuing financial statements for two years:
Companies offering their shares in a private or public offerings, which do not have the financial
statements for two years, could list their companies in the stock exchange upon meeting the following conditions:
• The issued and paid-in capital should be less than LE 250 million.
• Shares owned by major shareholders should be less than 51% of the total company’s
outstanding shares.
• Free float should not be less than 15% of the total outstanding shares, and number of
shareholders should not be less than 1,000 shareholders.
• Issued shares to be listed should not be less than 20 million shares.
• Founders and major shareholders should keep all their shares in the company until
reaching the minimum profitability condition of the shares in an annual audited financial statement, and for a minimum of two financial years from the date of registering
the shares in the stock exchange.
• To provide a report from one of the authorized Independent Financial Advisors listed in
the EFSA detailing the growth opportunities, and projected profitability.
8.4 Listing Rules in the Nile Stock Exchange (NILEX)
The following represent the listing rules in the Nile Stock Exchange for Small and Medium Enterprises (SMEs):
• Offering a minimum of 20% of the company’s total outstanding shares for the public.
• Number of shareholders should not be less than 100, with a cap of 1/1000 of the total
outstanding shares, and a minimum of LE 1000 book value.
• Free float shares should not be less than 10% of the total outstanding shares.
• Issued shares to be listed should not be less than 100,000 shares.
• The company should provide the financial statements for at least one financial year prior to the listing request, which are audited from one of the listed auditors in the EFSA.
• The issued capital should be fully paid-up and not less than LE 1 million, and no more
than LE 50 million.
• The shareholders book value stated in the last audited financial statements should be
less than the paid-in capital.
• Founders, board members, and major shareholders should keep together a minimum of
51% of the company’s total outstanding shares for at least two years from the date of
the listing and offering, and a minimum of 25% for another 3 consecutive years.
• Signing a contract with one of the authorized Nominated Advisors.
• Companies providing non-banking financial services should obtain a prior approval
from the EFSA for listing their shares in the NILEX.
48 | DOING BUSINESS IN EGYPT
DOING BUSINESS IN EGYPT | 49
9. Relevant websites
and further readings
50 | DOING BUSINESS IN EGYPT
Smart Village, Cairo
9. Relevant websites and further readings
Labour Law:
http://www.egypt.gov.eg/english/laws/labour/default.aspx
General Sales Tax:
http://www.egypt.gov.eg/english/laws/labour/default.aspx
Banking and Credit Laws:
http://www.egypt.gov.eg/arabic/laws/download/banks.zip
Non Governmental Organizations Laws:
http://www.egypt.gov.eg/english/laws/personal/default.aspx
Insurance Laws:
http://www.egypt.gov.eg/arabic/laws/download/insurance.zip
Egyptian Financial Supervisory Authority
http://www.efsa.gov.eg/
Ministry of Invesment
http://www.investment.gov.eg/
DOING BUSINESS IN EGYPT | 51
10. Contacts in Egypt
| DOING BUSINESS IN EGYPT
Bibliotheca Alexandrina, Alexandria - Egypt
10. Contacts in Egypt
RSM Egypt - The Advisors Ltd.
40 Road 254, Shell Building, 5th floor
Degla, Maadi, 11431 Cairo, Egypt
Telephone: +2(02) 2521 15 10
Fax: +2(02) 2521 15 19
International desk for all services in Egypt:
heba.elsemary@rsmi.com.eg
www.rsmi.com.eg
RSM Egypt - Arab Chartered Accountants, Magdy Hashish & Co.
Downtown Office:
22 Kasr El Nil St.
Cairo 11111, Egypt
Telephone: +2(02) 393 0850 / +2(02) 392 1714
Fax: +2(02) 393 0522
Alexandria Office:
392-394 El Horreya Road, Al Ashraf Towers
Alexandria, Egypt
Telephone: + 2(03) 545 9922
Fax: + 2(03) 545 9921
Tanta Office:
6, Bahgat St. Hegazi Bldg.
Tanta, Egypt
www.magdyhashish.com
DOING BUSINESS IN EGYPT | 53
Notes
54 | DOING BUSINESS IN EGYPT
RSM International Executive Office
11 Old Jewry
London
EC2R 8DU
United Kingdom
T: +44 20 7601 1080
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The aim of this publication is to provide general information about doing business in Egypt and every effort
has been made to ensure the contents are accurate and current. However, tax rates, legislation and economic
conditions referred to in this publication are only accurate at time of writing. Information in this publication is
in no way intended to replace or supersede independent or other professional advice. Copies of this booklet or
additional information can be obtained from the RSM International Executive Office or The Advisors Ltd.
RSM is the brand used by a network of independent accounting and advisory firms each of which practices in
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is administered by RSM International Limited, a company registered in England and Wales (company number
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an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug.
© RSM International Association, 2014