Egypt is one of the most prominent countries on the African continent. It is famous for its immense wealth and resources, as the country’s history comes from Pharaohs and wealthy merchants. The nation connects Africa with middle eastern countries. Hence, it has access to a thriving market and a huge chunk of talent.
You can set up a subsidiary in Egypt to expand your business and provide services to the African subcontinent and middle eastern countries. The strategic location of Egypt makes it one of the best countries for business expansion.
The country is ranked 114 in terms of Ease of Doing Business as per World Bank’s Report 2020. The Government of Egypt is trying to open up the economy for foreign investments to boost growth, increase employment opportunities, and use underutilized resources. The GDP of Egypt is $435.62 billion and shows a growing trend. Also, the GDP per capita is $4,162.09.
Egypt is a growing economy, and people look for newer products and services that can improve their quality of life and standard of living. Your subsidiary can provide the service citizens are looking for via its business operations. Also, the country offers a highly educated workforce and low labor costs.
You can join the growing economy by setting up a subsidiary in Egypt. However, before you expand your business in Africa, you must familiarize yourself with the country’s local laws. Read on to learn everything about starting a subsidiary business in Egypt.
What are the Types of Subsidiaries in Egypt?
There are different types of companies that you can establish in Egypt. You should know about these types before selecting a particular business form.
Some of the most popular types of subsidiaries in Egypt are
Limited Liability Company (LLC)
- Egypt allows the incorporation of a subsidiary as an LLC. Here, the shareholders’ liability is limited to the value of the capital they bring into the business.
- An LLC must be duly registered with the Commercial Registry before it begins its activities in Egypt.
- To establish a subsidiary in Egypt, you must preclude industries like insurance, investment management, and banking.
- An LLC can carry out different kinds of commercial activities along with adhering to the laws decided by the Federal Government.
- An LLC in Egypt can be a wholly or partially owned subsidiary. There are no limitations on the percentage of ownership that the owner can have.
- However, the LLC must have more than one foreign owner per Egyptian Company Law.
- You need at least two partners to set up an LLC in Egypt.
- You need to have a minimum of LE 1,000.
- A joint-stock company is one of Egypt’s most popularly incorporated subsidiaries. Depending on its scale and financial requirements, the company may be closed or listed.
- In a joint-stock company, the shareholders’ liability is limited to the value of the capital they bring in during the company’s registration.
- Registering a JSC with the Commercial Registry is mandatory before the company commences any activity in Egypt.
- A JSC can carry out any legal, commercial activity within Egypt’s territories. However, import activities and other allied industries come under the purview of the Government. You might have to seek the permission of the Government to set up a JSC in these industries.
- You need at least three partners to start a joint-stock company in Egypt. Also, the partners must elect three members of the company’s Board of Directors.
- If the company is not public, you need to bring in a minimum share capital of LE to start a JSC.
- You need to pay 10% of the minimum share capital during the incorporation, while you can pay the remaining amount in parts across the next five years.
- If the JSC is public, the company must offer shares worth LE 20,000,000 for the subscription.
- In a partnership company in Egypt, the company’s share capital must be equally divided among all the shareholders.
- Here, the company’s partners have unlimited liability; hence, they are responsible for meeting all its financial obligations.
- The company must have at least two people who come together to incorporate the business.
- A partnership company needs to register with the Ministry of Finance of Egypt.
Limited partnership company
- Specific rules and regulations govern a limited partnership company in Egypt.
- The deed of incorporation of a limited partnership company will state the partners who will be responsible for paying off the company’s debts and those who will not.
- You can easily convert a limited partnership to a joint stock company in Egypt.
You must weigh all your options and decide the kind of subsidiary you want for your subsidiary business. You must also consider the scale and budget of your predicted operations before setting up a subsidiary in Egypt.
How to Set Up Subsidiaries in Egypt?
Setting up a subsidiary in Egypt is quite straightforward. Before starting your business operations, follow a few simple steps below. Let’s look at some of these steps.
Step 1: Registration
- The company must register with the Commercial Registry to begin the incorporation process.
- Post that, you must register the organization at the General Authority for Investment and Free Zones or the GAFI.
Step 2: Trade name clearance
- The Commercial Registry will issue a certificate via a CRA system.
- The CRA is an automated tool that checks if the proposed business name is already taken up by any other company operating in Egypt. Hence, it would help if you proposed a unique name for your business, so it does not get flagged by the CRA.
- CRA system will reserve your company’s name for the next 30 days. You must register your company within this time frame.
Step 3: Authorization certificate from bank
- You need to contact a local bank to collect your authorization certificate. Several banks are in the General Authority for Free Zones and Investment (GAFI) area. You can pick one of these for ease of operation.
- Depending on the bank, you will have to pay around EGP 200 to EGP 500 for the certificate.
Step 4: Submit the documents
- Visit the Companies Establishment Department under the General Authority for Investment and Free Zones to submit all your documents.
- You must submit the Trade Name Clearance Certificate, GAFI application, and other documents.
- You need to pay the following charges post the submission of the documents:
- Notary public fee: 0.25% of the capital value up to EGP 1,000
- Establishment fee: 0.1% of the capital up to a maximum of EGP 1,000
- Commercial Syndicate fee: EGP 125 for companies with capital up to EGP500,000, EGP 250 for companies with a greater capital value
- Publication fee: EGP 150 to EGP 300
- Chamber of Commerce fees: 0.2% of the capital to a maximum of EGP 2,000.
- Issuance of operations certificate: EGP 29
- Commercial registration: EGP 51
- Once you pay all these charges, the GAFI will give you a duly stamped copy of the Articles of Association.
Step 5: Notarising the company contract
- Once you have the Articles of Association, reach out to a Public Notary.
- They will review all the essential documents, like the Power of Attorney, and notarise the AoA.
Step 6: Get the Chamber of Commerce certificate
- GAFI collects the Chamber of Commerce certificate and gives it to the company’s owner or representative.
- You need to visit the GAFI office to collect the certificate.
Step 7: Notification of incorporation
- Once you submit the notarised Articles of Association, they will be duly ratified.
- In the next 24 hours, the company’s establishment is approved, and the company representative is notified.
Once these formalities are done, you can collect your Commercial Registry Certificate from the authorities and start with the business operations. However, you must register with the tax and social security bodies before onboarding employees and proceeding with regular business activities.
Benefits of Setting Up an Egypt Subsidiary
Setting up a subsidiary business in Egypt has several benefits. Some benefits include the following:
- Egypt has a young and thriving population. The average age of people in Egypt is 24.6 years as of 2020. Hence, the country gives you access to young and talented individuals who can become a part of your organization.
- All subsidiary businesses in Egypt are treated at par with the other local companies operating in the country.
- The country connects Africa with the Middle East. Hence, its strategic location makes it ideal for business expansion if you want to serve additional countries.
- Egyptian LLCs can work according to the country’s laws and reap the benefits of the parent company.
- Different subsidiaries have either no or minimal share capital requirements to function in Egypt.
Documents to Prepare When Opening a Subsidiary in Egypt
You need to have the original set of documents along with their copies to incorporate a subsidiary business in Egypt. Some of these documents include the following:
- The Articles of Association of the company
- Duly notarized Power of Attorney of the company with the signatures of all the founders or partners of the company
- Copies of Government IDs and passports of the founders
- Official bank certificate from the Accountants and Auditors Register or an acceptance letter from the GAFI if you furnish the parent company’s financial statements before or during the process.
- Non-Confusion of company name certificate issued by the Commercial Register
- A Bar Association Card of the lawyer who notarises the Articles of Association of the company
- Details of the legal consultant of the company
- A security check report for all the foreign founders, partners, and managers
- A bank certificate showcasing the payment of 10% capital in case of joint stock companies
Once you submit these documents, they are processed, and you will be issued a Certificate of Incorporation.
What Business Forms can Egypt Subsidiaries Take?
There are different business forms that an Egyptian subsidiary can take. You can set up both wholly and partially owned subsidiaries in Egypt. In the case of a wholly owned foreign subsidiary, you need to have more than one foreign founder.
Limited liability companies are among Egypt’s most popular business forms as they are quite flexible, and incorporating them is hassle-free. However, you can consider other options, too, based on your budget and other requirements.
Egypt Subsidiary Laws
When you set up a subsidiary in Egypt, you should adhere to all the subsidiary laws specified by the Egyptian government. These laws keep any fraudulent activities in check and safeguard Egyptian employees. Some rules help you maintain workplace hygiene so that the employees feel safe and comfortable working for your company.
You must collect the Incorporation Certificate and then register with the country’s tax authorities. Also, collect all the other important certificates once the incorporation process ends. Subsidiaries operating in Egypt come under the purview of the Egyptian Government. Hence the laws of the parent company’s country are not applicable.
You must also set up a bank account to make all business and payroll-related transactions. Also, you must pay all your employees in the local Egyptian currency as per the laws. You must also stick to the minimum capital and founder/manager requirements for the subsidiaries discussed above.
Post Incorporation Compliance
Regarding foreign subsidiary compliance in Egypt, complete all the post-incorporation compliance requirements. Some of these requirements are:
- Open a local bank account for processing business payments.
- Collect the Commercial Registry Certificate from the Commercial Registry
- Register for taxes and collect the tax card from the tax counter
- Register for sales tax if you have already begun producing goods in Egypt. However, you must have a revenue of at least EGP 54,000 to register for sales tax.
- Visit the office of the National Authority of Social Insurance and register all your employees with them. The National Authority of Social Insurance will provide you with a unique social insurance ID for the company and the employees.
Taxes on Subsidiaries in Egypt
All companies in Egypt need to pay taxes on the revenue they generate from all kinds of business activities in the country. The corporate income tax, or the CIT, is 22.5%. The tax is calculated on the net taxable profits of the company.
However, companies in the oil exploration industry must pay corporate taxes at a rate of 40.55%. Apart from this, the Egyptian Petroleum Authority, the Suez Canal Authority, and the Central Bank of Egypt pay a corporate tax of 40% on their income.
Tax Incentives for Firms Setting Up a Subsidiary in Egypt
Egypt does not offer any tax incentives for subsidiaries in Egypt. However, if the company is a part of the free zone, there are no taxes levied on the income that the company earns. Some industries receive a few tax rebates, but the Government has not named these industries explicitly.
Also, if a resident company pays foreign taxes, these expenses can be deducted while paying taxes in Egypt.
Other Important Considerations
Establishing a subsidiary company in Egypt takes time. Set aside a few weeks from your schedule to concentrate on the company’s growth. You also need to travel to and from Egypt for all legal work. If your parent firm keeps you busy, you can outsource the task to another corporate leader or form a partnership with them.
The next step is for businesses to finalize the budget they need to establish subsidiaries in Egypt. Companies must pay different fees while forming subsidiaries.
How can Multiplier’s Employer of Record Help You Hire and Expand in Egypt?
Whether domestic or international, planning a business requires time and money. However, it could be challenging to follow local business practices and labor rules when moving to a foreign country.
Why not use a third-party service provider like Multiplier to overcome this obstacle to your company’s growth?
You don’t need to worry because Multiplier handles all the formalities associated with entering a new market. We support your hiring of local and foreign professionals while guaranteeing that all Egyptian labor laws and customs are carefully adhered to. You do not need to worry about setting up a subsidiary in Egypt and benefit from our employment infrastructure. You can test new markets for your business and set up teams in different countries. Our clients can also take advantage of our payroll and employee management services.