Business Law: the Acquisition of Land by Foreign Entities in Egypt

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There are three laws governing the acquisition of land by foreign entities. Under Law 143 stipulates, foreign entities are limited in freedom to the area available, and in this case as a foreigner, you are constrained by the number of “feddans” you are allowed access to. Unfortunately, land acquisition is available if and only if the foreigner owns at most 49% of the company. This restriction will continue on after the land has been acquired, therefore, even after buying the land you cannot change the ownership structure where the foreigner owns more than 49% of the company. In the circumstance where the company is liquidated the plot of land must go into the hands of the Egyptian partner. According to Reuters, “The initial investment law stipulates investors get back half of what they pay to acquire land for industrial projects if production begins within two years, and provides a 50 percent tax discount on investments made in underdeveloped areas.” Although this is good news for foreign investment, this only accounts for industrial projects.

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There are a couple options for you to discuss with your partner. The first is apparent, if you are willing to change the ownership structure to 51-49 then the land you asked for will easily be acquired. Although this is difficult to ask for it is an option that should be brought up. The second option here is also quite simple and has many benefits. This option will help if as a LLC you are planning on exporting the items in the storage space abroad. In this case, you should think about opening up the storage space in a free zone and enjoying the many benefits that come with the free zone. A third option is to simply rent out the land for a long period of time instead of buying it. This option will help the company go around the tedious laws and regulations against foreign ownership. The World Bank defines free trade zones as ‘small, fenced-in, duty-free areas, offering warehousing, storage, and distribution facilities for trade, transshipment, and re-export operations.

Companies operating in a free zone are considered a separate “country” from Egypt, as they are exempt from Egyptian tax laws, labor laws, company laws and customs. In order to operate within a free zone a company must first register a head office in the area of its choice outside the free zone. When it comes to a public free zone, only a 1% administration fee is paid on the value of goods imported or exported. (Business Law)

You can also take up a private free zone, which will allow you to operate anywhere in Egypt, provided that you meet some prerequisites. The following criteria must be met in order for a company to be set up as a Private Free Zone” (1) the “project has already started business”, (2) the exported share of production amounts to at least 50%, and (3) certain building prerequisites are fulfilled. (Business Law) Within the zone, investors enjoy duty-free facilities and other benefits, such as fiscal, legal, and administrative advantages, and sound infrastructure within a limited area.

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