Indirect business activity in Egyptian Market-Youssry Saleh Law Firm

Indirect business activity in Egyptian Market

admin   24 Jun 2016   988 Views

This section discusses the case of foreign entities marketing their products to Egypt directly without the requirement of business entity incorporation in Egypt but with the help of certain form of representation.

Commercial Agent

There is a possibility of an individual acting as an agent selling the products or goods on behalf of a foreign contractor.  Such an individual must be registered under the agency agreement that involves payment of commission. Under this circumstances the foreign supplier is not obliged to pay taxes for the sales realized by the agent, while the taxes apply on the commission received by the agent.  Any activities required to perform after the sale of the products, e.g. maintenance, are taxable on the net profit gained by the agent.

Any bidding process that takes place in Egypt under the governmental supervision requires the participation of a commercial agent for the supplier from abroad to partake.

The nationality of the commercial agent shall be strictly Egyptian.

A decree number 362 for the year 2005 from the Minister of Trade has been published and states that all foreign suppliers who have arguments with the local commercial agents should settle those amicably. Moreover, the registration of a new agent is not possible unless the dues of the terminated agent are cleared up.

Distributors

Distributors are business entities that act as a customer for the foreign goods and buy them only to resell them for a profit gain. No registration for distributors is required.

The foreign producers have the option of appointing a distributor in Egypt to purchase the products from them and resell further.

The employment of both the agent and the distributor is also possible for the purpose of allocating the responsibilities of marketing, importation and distribution. The distributor is not obliged to hold an Egyptian nationality.

The foreign business entity has the right to form a joint venture with the distributor or form a subsidiary and purchase its own products from the commercial agent in order to resell those inside Egypt. The taxation policies apply on the net profit realized by the distributor.

Technology Transfer and Licensing Agreement        

Last but not the least the foreign company is able to perform a technology transfer and licensing agreement with a local business with no involvement of an agent as the marketing of the produced goods shall take place through the Egyptian enterprise.

Under the Egyptian law the fees paid to the foreign business are taxable at a rate of 20 per cent with the reduction to 15 per cent under certain conditions.