Establishing a branch in Egypt might have some shortcomings. As the branch is an extension of the parent company and not an individual entity, the foreign company holds full liability for its branches’ operations, moreover, tax consequences must be considered. Youssry Saleh & Partners’ corporate lawyers offer its clients integrated support throughout the planning, incorporation and operation stages of the foreign business.
The following rules and limitations apply:
• Foreign companies of all legal forms and structures that undertakes a task of doing business in Egypt goes through a procedure of registration with the Commercial Registry and applies for an approval from GAFI.
• A branch has no limitations regarding the legal activities to be performed in Egypt
• The appointed manager may come from abroad with the full control being in the hands of the parent company
• No minimum capital requirements are mentioned in the Commercial Law regarding branches. The investment of the initial capital is made by a transfer of foreign currency by the means of a registered Egyptian bank
• No taxes on company profits apply
• As of Law 88 of 2003 any natural or juristic person has the right to preserve and handle the foreign currency that come as a result of doing business in Egypt. After paying all the applicable taxes, the branches may transfer abroad the profit in foreign currency. Some branches require to obtain a license to employ technology or other types of intangible assets. For this purpose license fees or royalties have to be paid to the mother company. In order to transfer abroad the said fees a tax certificate is acquired proving the application of 20% taxes (15% in case the technology is conveyed from the United States corporations) along with an approval from the Industrial Control Department. Moreover, an Egyptian auditor issues a certificate, confirming the obtainment of all the above mentioned documents and receipts. The foreign currency transfer takes place through a bank
• All the regular import and export regulations apply for branches. In reality, the importation of products happens through a local buyer or an agent that holds an importation license. Such a license is given under Egyptian law to business entities of Egyptian origin. The importation of raw materials requires no license.
• At least 10 per cent of the business profit is distributed among employees both local and foreign with the condition that the amount does not exceed the annual wages and salaries payable.