On July 13, 2020, Egypt has issued a new law focusing on the development of small, medium and micro enterprises (SMMEs) (the “SMMEs Law”).
The SMMEs Law regulates and incentivizes SMMEs through a variety of tax and non-tax incentives. The SMMEs Law also attempts to bring in the informal sector of the economy under its auspices by offering a range of benefits which include facilitating the licensing process and tax breaks.
The New Law defines SMMEs eligible to the incentives as follows:
The Medium Enterprise: any enterprise with annual revenues between EGP 50 million and EGP 200 million, any newly established industrial enterprise with a paid or invested capital that ranges from EGP 5 million to EGP 15 million or any newly established non-industrial enterprises with a paid or invested capital that ranges from EGP 3 million to EGP 5 million.
The Small Enterprise: any enterprise with annual revenues between EGP 1 million and EGP 50 million, any newly established industrial enterprise with a paid or invested capital that ranges from EGP 50,000 to EGP 5 million or any newly established non-industrial enterprises with a paid or invested capital that ranges from EGP 50,000 to EGP 3 million.
The Micro Enterprise: any enterprise with annual revenues less than EGP 1 million, or any newly established enterprise with a paid capital or invested capital of less than EGP 50,000.
The SMMEs Law facilitates the allocation and financing of lands to SMMEs as it provides creditors with a new mechanism for enforcing their rights over the allocated land; including, temporary allocation of the land in the name of the creditor, facilitating transfer of allocation rights and simple and expedited enforcement procedures. Further incentives are also provided for certain sectors; including, technology, entrepreneurship, manufacturing, and agriculture.
The SMMEs Law extends some of the incentives to incubators and accelerators of SMMEs. Incubators and accelerators of SMMEs are companies, entities, associations or any other legal entities that support SMMEs by providing either financial, marketing or management services. Some incentives can also be provided to investment companies which provide equity financing to SMMEs.
The SMMEs Law also provides for tax and non-tax incentives for SMMEs; including, exemption on governmental fees such as incorporation fees as well as reduced tax rates.
A further temporary licensing regime was introduced with the aim of incorporating the informal economy into the formal economy. This is combined with establishing specific units within governmental authorities to deal exclusively with SMMEs in order to facilitate and expedite all their procedures.
