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Political and Economic Overview Business Forms & Structures
Growth Prospects Legal Review
Investment Issues Taxation
Sector Analyses

Intellectual Property



Political & Economic Overview

Egypt is strategically located at the center of the Middle East-North Africa (MENA) region and has traditionally played a leading role in regional politics, commerce and arts. Egypt is also the largest country in the Arab world.  Its population has trebled since 1950 to 75 million people today. Conservative estimates predict a population of 100 million by 2035.


The country has had limited success in moving away from almost total state control of the economy to the governments promise of more market-centered policies. In 1991, Hosni Mubarak's regime inaugurated an emergency reform program to stop a worsening balance of payments, declining growth and rapid inflation. Progress in deregulation and divestment has created moderately open industrial and financial sectors and by late 2003, the IMF praised Egypt for achieving equilibrium in its balance of payments.



Growth Prospects


The Egyptian economy did not achieve its targeted growth rate of 6% in 2003 and still suffers from a major liquidity crisis. Inflation is rising, 


74.7 million (2003)


92% Sunni Moslem, 8% Coptic Christian




Arabic (English and French widely spoken)

Work Week:


Saturday - Thursday

9:00-15:00; 18:00-21:00

Monetary Unit:

Egyptian Pounds

Exchange Rate:

7 Egyptian pounds: $

as is unemployment.  Most economists point out that Egypt's success at balancing the books obscures the reality that foreign loans are registered as revenue and not debt. Egypt received considerable loans from the World Bank in the course of 2003 and the surplus in the balance of payments could spell a mounting debt.  The accelerating pace of privatization, however, and the increasing interest in the Cairo stock market and natural gas production may yet provide a boost to the economy. Egypt now ranks among the top ten countries in terms of natural gas operations and some $2 billion are invested annually. 60 trillion cubic feet of proven gas reserves have yet to be tapped.



Although Egypts privatization efforts are proceeding slower than expected, the Egyptian government is promising to privatize telecoms by 2005.


Government Reform Program

Egypt is working closely with the World Bank and International Monetary Fund (IMF). As a part of its stabilization program, supported by an IMF Standby Agreement, the government freed interest and exchange rates, committed to reducing the budget deficit and disciplined monetary growth. A World Bank structural adjustment loan is intended to help Egypt develop a framework for public sector reform (that provides 25% of all employment), privatization and liberalization of trade, the banking system and investment policies.


The core changes require reductions in the maximum tariff rate and elimination of tariff exemptions, consistent application of quality control standards, unification of the laws governing investment and commercial activity and a labor law that allows employers to dismiss workers for economic reasons.


Stability and Demographics

Egypt is the largest of the Arab countries. Its population stands at 74.7 million (July 2003 est.) a six-fold increase in 100 years and is expected to approach the 100 million mark by 2035. 



Sector Analyses



The most important products of Egyptian industry include cotton yarn, jute yarn and fabrics, wool yarn, refined sugar, sulfuric acid nitrogenous fertilizers, paper, cement, motor-vehicle tires and television receivers. Other industrial activities include the manufacture of iron and steel, car assembly, oil refining  and natural gas production. Smaller-scale industrial enterprises of significance to the economy include asphalt, tanning, brewing, and the manufacture of pottery, perfumes, handicrafts, cottonseed oil, flour and other processed foodstuffs. Most industrial activity is centered around Cairo and Alexandria.



In 2003,  Agriculture still accounts for 20% of GDP and over 30% of total employment. Cultivation is concentrated in the Nile and Delta regions but less than 3% of total land area is cultivated. The government has pushed hard for economic reform in this sector and as a result, efficiency has improved and growth has been achieved both in terms of increases in cultivated areas and in production levels. The yields of Egyptian farmlands are now among the highest in the world. Egypt is the world's most important producer of long-staple cotton. Other leading crops include rice, tomatoes and wheat. Also produced are sugarcane, watermelons, millet, barley, onions, vegetables, citrus fruits, mangoes, dates, figs and grapes. According to official figures, the value of agricultural production increased by 74% over the five year period 1988-1994, from US$ 7 billion in 1988 to US$ 12.2 billion in 1994 and value added in agriculture reached US$ 9.6 billion in 1994.



The Egyptian tourist industry - accounting for 11% of GDP in 2003 - was hit hard by 9/11 after suffering years of intermittent terrorist attacks. Despite this, Egypt managed to record its highest number of visitors ever in 2003 and it ranks as a vital sector in terms of employment and foreign currency. Government efforts to crack down on terrorism have enabled this sector to survive.

Tourism officially became the country's second largest foreign currency earner in 1996 and in 2003 drew in revenues of $4 billion. The increase was due in large part to development along the Red Sea coast. Spin-off sectors such as construction are important channels of foreign investment.



Egypt produces approximately 800,000 to 900,000 barrels of oil a day (approximately forty-five million tons per year). Natural gas accounts for approximately 28 percent of total energy consumption in the country. In the next three years, production of natural gas and its derivatives is expected to increase by 5.2 percent annually. During 1997, Egypt hopes to have sufficient LNG production for export.

Egypt's electrical capacity has grown substantially over the last decade, reaching 11,910 MW. Hydroelectric power represents about 8.3 percent of the total annual energy production in the country.



Egypt offers an import market exceeding US$ 10 billion annually. The United States is the largest foreign supplier, capturing approximately 30 percent annually of Egypt's imports, hovering around US$ 3 billion for several years. The principal imports of Egypt are agricultural products, foodstuffs, transportation equipment, chemicals, mining and quarrying machinery and metal products. The country has become more and more dependent on imports and food grants, especially for wheat, flour and meat, because of rapid population growth. The major exports of Egypt are crude petroleum, raw cotton, cotton yarn, fabrics and rice. The chief customers for these and other exports are Italy, the US, Germany, France, the former USSR, Japan and Great Britain.


Finance & Banking

Totally dominated by the public sector, the Egyptian banking system consists of some 2,300 banking units under the control of the Central Bank. It has experienced enormous growth since Law 37 was passed in 1992, freeing up the foreign exchange market, offering high yields on government treasury bills, and deregulating the financial sector. The banking industry was given a further boost in 1996 when foreign banks were granted more freedom of movement and the opportunity to enter joint ventures.


Stock Exchange

Egypt's privaization program was largely carried out through the Cairo and Alexandria stock exchange, CASE. The heavyweights of CASE include MobiNil, Commercial International Bank, Orascom Telecom, and Orascom Construction, the joint-venture Banque du Caire Barclays International and ABN AMRO Delta Egypt.



Business Forms & Structures


Build Operate Transfer

Foreign and local investors are intensifying their involvement in both build-operate-transfer (BOT) and build-own-operate-transfer (BOOT) schemes in Egypt. Projects which have already been initiated include the construction on a BOOT basis of a thermal power station with two 325-megawatt generators, to be located at Sidi Krier on the Mediterranean coast, at an expected cost of about US$ 450 million (Siemens KWU has already won the contract to supply the generators), and a water-driven pumped storage plant at Ataqa near Suez, which will also have two 325-MW generators and is expected to cost some US$ 600 million. The pumped storage system would pump sea water into a basin in the mountains when the grid has plenty of slack and let the water down again to generate extra power during peak periods. Plans are also being drawn for a wind farm at Zaafarana on the Gulf of Suez, which will include a 300-MW turbine and cost about US$ 350 million.

An additional project involves the construction of a private airport at Mersa Alam on the Red Sea Coast, 300 kilometers south of Hurgada and 800 kilometers south of Cairo, also to be built on a BOOT basis. Plans for a second international airport project, to be located on the Mediterranean coast near El Alamein, have been announced, and an offer for tenders has been issued.

Other projects expected to go ahead on a BOT or BOOT basis include the construction of roads, hotels, restaurants, rest-stops and service stations along roadways, as well as the setting up of agricultural production and marketing schemes along urban and rural arteries.

The four toll roads to be constructed are between Alexandria-El-Fayyoum, El-Fayyoum-Aswan, Dairout-Farafra and El-Kharga-El-Dweinat highways, and have a total length of 1,850 kilometers (1,150 miles). International consultants have already been invited to bid for contracts and to advise the government on how to build the roads on a BOT basis. International tenders have also been invited for a suspension bridge over the Suez Canal. The bridge will span the 404 meter navigation channel and will be about seventy meters in height, to allow ships to pass underneath. The scheme is part of a strategy to develop Sinai as a major industrial and residential area in order to ease pressures on the Nile Valley.

In the medium-term, the General Authority for Investment (GAFI) foresees BOT and BOOT being applied to other transport projects, such as the construction of new railroads and metropolitan lines to serve the huge new industrial and residential cities which have been built in desert areas.

The Ministry of Transport and Communications is considering private sector involvement in the development of new telecommunications infrastructure. At present, the government is planning to add one million lines to the network each year, at a total annual cost of about US$ 1 billion.



The franchising market in Egypt has tremendous growth potential, mainly in the fast food sub-sector. This market has experienced remarkable expansion since it began in 1970, and market sources expect continued growth at an annual rate of 10 to 20 percent.

Brand conscious Egyptians, numberinby some estimates near percent of the population or two million consumers, are drawn to the increasingly popular and convenient service. Fare prices are high because of franchiser quality assurance standards and imported ingredients.

Of the nine fast food franchises today in Egypt with sixty-seven total outlets, five are US-based with a total of thirty-two sites, two are local with a total of ten facilities, one is UK-based and another is from Pakistan with a combined twenty-five outlets.

Garment franchising is another new and growing industry in Egypt. Using Egyptian workers and materials, garment franchises have met with great success in Egypt's increasingly freer market economy. Currently, approximately fifteen garment franchises exist in the Egyptian market.



Legal Review



A basic understanding of Egyptian law requires some knowledge of the origin and basis of Egyptian jurisprudence. Egyptian legislation can be traced to three major sources: Napoleonic Code, Roman law and Islamic law (Shar'ia).


Egypt is a constitutional democracy based on the principle of separation of powers between the legislative, the executive and the judicial branches. The 1971 Constitution of Egypt, as amended by the referendum of May 22, 1980, is premised upon respect for individual freedoms and for the rule of law. The Constitution is the supreme law of the land and provides for an independent judicial branch. Judges are subject to no other authority but that of the law; they serve until the age of sixty-four, until which time their jobs are secured.


Egyptian legislation is instituted according to the following hierarchy: the Constitution, Parliament legislation, Presidential decree, Prime Minister's decree, ministerial decision and acts of governors and heads of governmental bodies and public corporations.


Laws, Presidential decrees and Decrees of the Prime Minister are published in Egypt's Official Gazette, usually within two weeks of their issuance, and, unless they provide otherwise, they become effective one month from the date of publication. Ministerial decisions as well as other decisions and acts approved for publication are published in the Egyptian Proceedings, a supplement of the Official Gazette.


Until the first half of the 19th century, Egypt, under the leadership of Khedive Ismail and his successors, underwent a rapid process of westernization, which included, inter alia, the adoption of modern codes of law modeled after the French Napoleonic Code. Since that time, Egypt has adopted a more Roman (Civil Law) system, in which matters involving personal status such as marriage, inheritance and divorce were made subject to Islamic substantive law. Currently, the procedural and substantive laws of Egypt are applied throughout the Republic, except in cases of personal status which are decided in accordance with Islamic substantive law in cases involving Muslims whether Egyptians or aliens, Church substantive law in cases involving non-Muslim Egyptians or according to the substantive law of the nation of the litigant parties in cases involving non-Muslim foreigners.


The Egyptian judicial system consists of two separate court structures; the ordinary courts of law and the administrative courts.


The Common Court System

The Common Court System is composed of four tiers, including Summary Courts, Courts of the First Degree, Courts of Appeal and the Supreme Court (Cour de Cassation).


Summary Courts

The Summary Courts have jurisdiction to decide cases involving misdemeanors and minor offenses; civil and commercial cases the value of which do not exceed E 5,000 as well as minor personal status issues and labor disputes arising between employers and employees.


Court of First Degree

The Courts of the First Degree have jurisdiction to decide all cases involving matters the value of which exceeds E 5,000 and all major personal status matters, subject to a right of appeal to the Court of Appeal. They also have jurisdiction to hear appeals against decisions of the Summary Courts in civil and commercial cases and misdemeanor criminal offenses.


Courts of Appeal

Courts of Appeal are located in the major cities of Egypt. They have jurisdiction to hear appeals from civil, commercial and personal status cases decided in the first instance by the Courts of First Degree. Furthermore, they have jurisdiction to decide cases involving major crimes the penalty for which is death or imprisonment with hard labor of between three and twenty-five years.


Supreme Court

The Supreme Court (Cour de Cassation) only hears appeals on final judgments of the Courts of Appeal and is only available if a breach of law is claimed as the basis for the appeal.


The Administrative Court System

The judiciary in Egypt, similar to those of France and Italy, does not have jurisdiction to interfere with, repeal or nullify an administrative decree. Nonetheless, a court may award compensatory damages caused to a party by such administrative decree.


The only possible recourse regarding administrative decrees is to bring suit before the Council of State. The Council of State is composed of university trained judges. It alone is vested with the power to declare invalid and to revoke illegal, arbitrary, or abusive administrative decrees issued by government officials and ministries.

The Superior Constitutional Court was established in 1969 and is given exclusive jurisdiction to decide questions regarding the constitutionality of laws, rules and regulations.


Environmental Law  

Environmental issues in Egypt are governed by Law No. 4 of 1994. This law provides for the creation of an agency for the protection and promotion of the environment, the Environment Affairs Agency (EEAA). The EEAA is destined to formulate the general policy and to prepare the necessary plans for the protection and promotion of the environment. It should also follow up the implementation of such plans.


The law provides for a mandatory environmental review, to be undertaken by the competent administrative authority according to EEAA's instructions, as part of the approval process for all proposed projects.


The law forbids the handling of hazardous substances and wastes or the construction of any establishment for treating such substances without a license from the competent administrative authority. It is also forbidden to import hazardous waste or to allow its entrance into or passage through Egyptian territories. It is mandatory for all those who produce or handle dangerous materials to take precautions to ensure that no environmental damage shall occur.


All establishments (industrial and others) are required to ensure that while practicing their activities no leaked or emitted air pollutants (caused by the burning of fuel, etc.) shall exceed the maximum permissible levels. It is also prohibited to incinerate, to dispose of or to treat garbage and solid wastes as well as to spray pesticides or any other chemical compound unless it is done according to the conditions and safety measures specified in the Executive Regulations of the law.


Ships of any nationality, offshore platforms and any other companies or agencies authorized to explore or exploit natural marine resources are forbidden to discharge into the territorial sea of Egypt any polluting substances resulting in harm to the water environment.


The law further provides for a system of incentives to be offered to those who implement environmental protection activities or projects and sets penalties for those who are in violation of its provisions.

The Egyptian government has developed a five-year environmental action plan (1997/98-2001/02) for attacking the country's solid waste, air and water pollution problems.


The plan's priorities include: preparing feasibility studies for planned development projects, urging companies to work toward ISO 14000 environmental standards certification and urging the use of scientific management techniques and waste recycling to preserve natural resources.


Egypt is a signatory to various conventions concerning environment protection, among which are: the Environmental Modification Convention; the African Convention on the Conservation of Nature and Natural Resources; the Vienna Convention for the Protection of the Ozone Layer; the Convention for the Prevention of Pollution from Ships; the Barcelona Convention for the Protection of the Mediterranean Sea against Pollution; the Brussels Convention on Civil Liability for Oil Pollution Damage and the Moscow Treaty Banning Nuclear Weapon Tests in the Atmosphere.



Intellectual Property


The legal regime regarding patents and trademarks is similar to that of England, and registered owners of intellectual property are provided with adequate protection. Egypt is a signatory to the Paris Convention of the Protection of Intellectual Property and the Madrid Agreement regarding international registration of trademarks. Furthermore, Egypt is a member of the World Intellectual Property Organization.



The law on Patents and Industrial Designs, Law No. 132, of 1949, as amended, grants inventors fifteen years of patent protection from the date of application. In some cases, it may be extended for an additional five year term. The patent holder has exclusive rights to the invention and may license, assign, pledge or in any other way act with regard to the patent. At the end of the patent protection period, the invention enters the public domain.

A new patent law has been drafted recently. The new law, if approved, would extend patent protection period to twenty years and widen the definition of an "invention" as protected by the law. Unlike the current patent law, the draft law provides for a substantive examination of the patent application before granting the patent. The draft law also provides that not only the patentee but also any other party who introduced adjustments, improvements or additions to a patent invention shall have the right to apply and obtain an independent patent.

Egypt has adopted the Paris Convention, and, accordingly, a patent application filed in a member country entitles the applicants to apply for a patent in Egypt within one year.



The Trademarks Law, No. 47 of 1939, as amended, grants a ten year protection period to trademark holders from the date of application. The trademark is renewable for similar periods without restriction; an application must be filed for each renewal period.



The Copyright Law, No. 354 of 1954, provides copyright protection for, inter alia, written works, paintings, sculpture and architecture, theater and musical pieces, photographs and cinematographic films, television and radio works for publication, maps, and speeches. A 1992 amendment to the Copyright Law stiffened the penalties available under the Copyright Law and also provides for protection of video tapes.

A 1994 amendment to the Copyright Law treats computer software as a literary work and guarantees it a fifty year term of protection. Protection under the Copyright Law terminates fifty years following the demise of the author. Should the copyrighted material be owned by a legal entity rather than a natural person, then the fifty year protection period begins on the date the material was first published. The author may assign the rights granted to him by the law to other persons, subject to certain limitations set by the law.


Industrial Designs and Models

Some industrial designs and models (such as design features of products and designs new in many items) can be registered with the Office for Registration of Industrial Designs. Registration provides protection for a period of six years and is renewable for two additional five year terms.


Unified Intellectual Property Act Draft

A committee was formed at the Ministry of Commerce and Supply to draft a unified act to govern all elements of intellectual property. The new act is to include the existing laws concerning copyrights, models, industrial designs, patents of invention and trademarks. In addition, the act will extend protection period for industrial designs and models to a renewable periods of ten years. It will also provide for substantive examination of the model, design or patent to ensure that it is novel and innovative. The proposed act sets severe penalties for intellectual rights infringement.





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.

Over the last several years, Egypt has made many changes in its tax system. Some of these changes are merely cosmetic while others are rather substantial. Given this trend, it is advisable to seek up-to-date advice on recent and future changes to the tax law before pursuing commercial plans in Egypt.


Taxation of Companies

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.

As of January 1, 1994, companies are subject to corporate profit tax at a standard rate of 40 percent. Special rates, however, apply to companies engaging in the following activities: (1) Petroleum companies - 40.55 percent; (2) Companies with export activities - 32 percent; and (3) Industrial (manufacturing) companies - 32 percent.


Corporate income tax is based upon taxable profits computed according to generally accepted accounting principles and certain modifications as provided by statute, the most important of which involve depreciation, inventory valuation and inter-company transactions. Capital gains arising from the sale of fixed assets are treated as ordinary profits. Dividends received by resident companies from foreign sources are subject to tax on income from moveable capital at a rate of 32 percent, but foreign taxes paid on such dividends are deductible. Interest derived from securities listed on the Egyptian Stock Exchange is exempt from income tax.


Virtually all legitimate business expenses are deductible including depreciation, other taxes and duties, interest and royalties, bad and doubtful debts, rent, director's remuneration, profit sharing payments to employees, legal expenses, pension and Egyptian state social insurance contributions. Losses may be carried forward and applied against future profits for up to five years.


All operations owned by the same company must be aggregated for reporting purposes. If operations are carried out by separate companies which are owned or controlled by one parent company, however, consolidation is not permitted.


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.

Taxation of Individuals


Income Tax

Law No. 187 of 1993, also known as the Unified Tax Law, abolished the general income tax previously levied on individuals pursuant to Tax Law No. 157 of 1981. Under the new Unified Tax Law, individuals, including partners in partnerships, are subject to tax at various rates on income from five sources:

Income from Movable Capital: This tax is levied at a rate of 32 percent of gross income usually collected through withholding. This category refers to interest (other than interest on deposits), foreign-source dividends (less foreign taxes paid), executive director's fees and attendance fees.

Income from Immovable Capital: This tax is levied at rates ranging from 20 percent to 48 percent. This category applies to net income derived from land and buildings.

Commercial and Industrial Profits: This tax is charged on a sliding scale at rates ranging from 20 percent to 48 percent. This category applies to net commercial and industrial profits of enterprises which are not subject to corporate tax.

Professional Fees: This tax includes rates that range from 20 pto 48 percent. This category covers the net incomof professionals such as engineers, accountants and lawyers.

Salaries: This is a tax imposed on salaries paid in Egypt or abroad for services performed in Egypt. Taxable salary includes the value of all benefits, apart from housing allowances given to foreign experts. The salary tax is levied at 20 percent on the first E50,000 of net taxable salary, after deductions and allowances, and 32 percent on the excess.


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.

The general tax on income is progressive and reaches 65 percent for income in excess of E200,000 per annum. It should be noted that foreign employees in Egypt are subject to this tax unless there is a particular statutory or regulatory provision exempting them from the tax.


Real Property Tax

Real Estate taxes are levied on the assessed annual rental value of improved and agricultural property at rates ranging between 10 percent to 40 percent.


Stamp Duty

Most classes of documents, contracts, checks, receipts, bills, letters of guaranty, various banking transactions, transfer of unlisted securities, leases and many other instruments require payment of stamp duties. For example, between E150-E300 of stamp duty is charged upon the formation of companies, E50 is charged for the registration of companies in the Commercial Registrar and E0.01 is levied on bank checks.


Withholding Taxes

There are no withholding taxes as such in Egypt, apart from scheduled income taxes which are withheld at source in many cases. Dividends distributed by an Egyptian company are not subject to withholding tax. The main instances where taxes are withheld are summarized below.

Tax on income derived from moveable capital is withheld in many cases, including payments to a foreign company that has no branch in Egypt and payments to non-resident individuals. Royalties and technical assistance fees paid to a foreign company with no branch in Egypt are normally subject to the 40 percent corporate income tax rate. The tax is imposed on the net amount after an arbitrary deduction for expenses. Amounts are also withheld on account of taxes due at 10 to 15 percent on the amount payable for professional services, at 3 percent on commercial services and at 10 percent on commissions paid to commercial agents. Lastly, employers must withhold the scheduled tax on salaries and wages from their employee's pay.


Inheritance and Gift Taxes

Succession tax is imposed on gifts and inheritances at rates between 3 to 15 percent. No tax is charged on an inheritance of less than E 10,000. Resident foreigners are subject to inheritance and gift taxes on real estate and moveable assets. Non-residents are subject to these taxes only on real estate assets located within Egypt.


Development Duty

A 2 percent development duty is levied on the annual taxable income of individuals and companies that exceeds E 18,000.


Social Insurance Contributions

Employers and employees must pay social insurance contributions to the Ministry of Social Insurance and Social Affairs. The social insurance laws do not apply to expatriates. The rate paid is based on the employee's monthly salary and is contributed to at a rate of 26 percent by the employer and 14 percent by the employee.


Sales Tax

Law No. 11 of 1991 provides for a general tax on sales. The tax applies to most goods and certain types of services (mainly tourism, telecommunications and entertainment services). Goods imported from abroad for commercial purposes are also subject to the tax. The tax rate for goods ranges from 10 percent (the general rate) up to 50 percent for certain specified goods. The tax rate for services ranges from 5 to 10 percent. The tax is added to the price of the goods or services in question and is payable by the consumer at the point of sale and remitted by the billing entity to the tax authorities.


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. A taxpayer who derives foreign-source income which is subject to foreign as well as to Egyptian taxes will be allowed to deduct the amount of foreign tax paid in order to compute the taxpayer's taxable income for Egyptian tax purposes.



Investment Issues


Investment Law

On May 11, 1997, Egypt's new Investment Incentives and Guarantees Law (Law No. 8 of 1997), which repeals and replaces Investment Law No. 230 of 1989, was legislated. The new law aims to boost production and foreign and domestic investment and offers potentially good incentives for investors, including: The prohibition of nationalization, confiscation, and freezing of assets; The right to own buildings and land for project purposes regardless of investors' nationality and place of residence; The right to maintain foreign currency bank accounts; The exemption of manufacturing projects from price controls or profit limitations; The right to repatriate capital and profits; The right of 100 percent foreign ownership of ventures.


In addition, the new law provides extended tax holidays for projects in target areas. It allows companies, once established, to gain their tax incentives automatically without receiving the prior approval of any administrative authority. It also provides incentives for exporters. Whereas the previous law extended tax incentives for any capital increase or any project expansions, however, the new law provides no such tax concessions.


The law specifies a list of priority sectors that automatically benefit from its guarantees and incentives. These sectors include land reclamation, manufacturing and mining, transport, software and computer systems development and production, medical services, certain financial services, oil field services, agriculture and tourism. For these and for most other projects, investments are automatically approved.


The new law expressly preserves the benefits and incentives, as well as investment guarantees granted under law No. 230 for companies established under that law or existing prior to the promulgation of the new law under Law No. 230, all foreign investment projects are exempted from taxes and duties applied in Egypt for a period of five years which may be extended by another five years, regardless of the location of the project.


The new law has also abolished the highly bureaucratic General Authority for Investment (GAFI). The entity that will replace GAFI and its functions are to be determined by a presidential decree. Pending issuance of the decree, GAFI will remain the authorized administrative agency.


Tax Incentives

Law No. 8 of 1997 grants the projects working under its rubric a tax holiday that includes provisions of interest to investors.


Profits on projects and shareholder shares are exempted from the tax on industrial and commercial profits and from the corporate tax for a period of five years starting from the first fiscal year following the beginning of production or activity. The exemption may be extended to ten years for projects established in new industrial zones, new urban communities, remote arand those projects financed by the Social Fund for Developmen.


Profits on projects operating outside the Old Valley and profits of shareholder shares shall be exempted from tax on industrial and commercial profits and from the corporate tax for a period of twenty years starting from the first fiscal year following the beginning of production or activity.


An amount equivalent to a percentage of the capital paid in, to be determined by the Egyptian Central Bank for Lending, and discount rates, for the year of fiscal treatment, shall be exempted from the corporate tax, provided that the company is a JSC and its stocks are registered at one of the stock exchanges.


Yields of bonds, finance share warrants and incomes of the other similar securities portfolios as issued by the JSCs shall be exempted from the tax on revenues of movable capitals, providing they are placed for public subscription and registered at one of the stock exchanges.


A customs tax at a unified rate of 5 percent of the value is levied on the value of all imports (machines, equipment and instruments) imported by such projects.


The profits resulting from the merger, division or the change of the legal entity of a project are exempted from the taxes and duties payable on the merger, division or change of legal entity. Such projects shall enjoy the exemptions prescribed before the merger, division or change of legal entity, until the relevant exemption periods expires. The merger, division or change of the project's legal entity shall not result in any new fiscal exemptions.


The result of assessing the in-kind portions forming the foundation of JSCs, Partnership Limited by Shares and LLCs shall b exempted from the tax on revenues of commercial and industrial activities or the tax on corporate companies' profits according to each case.


Free Trade Zones

Projects set up in one of the active free zones enjoy certain benefits that may be of interest to foreign investors. Such projects are not subject to exchange-control regulations nor are they subject to any customs duties on imported goods or equipment. In addition, they are exempt from taxes for an unlimited period. These projects, however, are subject to annual duty of 1 percent of the value of products entering or leaving the free zone or on the annual value added to the project, as the case may be. Licenses to operate in free zones may be granted for the following activities: storage of goods

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