Foreign companies are permitted to establish representative or liaison offices, scientific or technical offices and other offices for the purpose of carrying out market surveys or studying the feasibility of production without entering into any commercial operations or commercial agency activities. Representative offices can be created much more easily than actual subsidiaries or branches. Despite this, some regulations apply to representative offices as well and they have to be observed in order to comply with the laws of the respective country.
A foreign company may register the establishment of a representative office either under the Companies Law or the Commercial Agencies Law which shall in both cases require submitting an application to the Companies Department of the General Authority for Investment and Free Zones.
Such application must specify the name, nationality, company objectives, capital and head office abroad, the nature of the office to be established in Egypt, its activities, capital and address in Egypt, together with certain information relating to the manager.
The representative office shall be managed by a manager(s) who does not need to be an Egyptian national(s). The representative office is controlled by the parent company. Its activities can come to scrutiny under the GAFI in order to ensure that laws and regulations are observed carefully.
c- Compliance with Egyptian Law
The representative offices of foreign companies must comply with Egyptian laws, including those governing companies, taxation, labor, social insurance and foreign exchange control, whilst particularly taking the following into account: It should be noted that representative offices may not engage in taxable commercial activities, such as invoicing the services rendered or trading in the company's products.
d- Filing & Accounting
A representative office must submit annual filings with the Companies Department setting out the following information in respect of its employees including: names, positions, nationalities, salary and total payroll earned by its Egyptian employees. Certain additional details regarding the representative office's activities during the year may also be requested.
As representative offices don't participate in any commercial activities they aren't profitable and therefore cannot be taxed. Employees of representative offices are, however, subject to income taxes as they do receive wages.
f- Required Documentation for establishment purposes
1) A request for registration addressing Head of the Investment Service as per the official form prepared for such purpose.
2) A receipt from the Security Department, acknowledging receipt of the security verification forms of the foreign company and the office manager.
3) A photocopy of the foreign company's articles of incorporation and statute along with a certified Arabic translation of a summary of both. It should be noted that the articles of incorporation must be authenticated by the Egyptian embassy or consulate abroad and by the Authentication Office at the Egyptian Ministry of Foreign Affairs.
4) A copy of the decision issued by the BOD of the foreign company showing its approval on the opening of an office in Egypt and the appointment of an Office Manager thereto. The decision must be authenticated by the Egyptian embassy or consulate abroad or by the Authentication Office at the Egyptian Ministry of Foreign Affairs upon review of the original copy of the decision and its certified Arabic translation.
5) Data concerning the Manager of the Representation Office:
- If the manager is a foreigner, a certificate should be submitted stating respective full name – first, father, middle and surname – in Arabic and Latin letters as well as nationality and a copy of the passport should be attached thereto.
- If the manager is an Egyptian, a certificate should be submitted stating respective full name-first, father and surname – nationality, place of residence, ID number and date of issuance and a copy of the ID card should be attached thereto.
6) A copy of the power of attorney authenticated by the Egyptian embassy or consulate abroad or by the Authentication Office at the Egyptian Ministry of Foreign Affairs (upon review of the original copy).
7) A copy of the leasing contract of the representative office provided that the contract is registered by date at the Notary Public and Registration Office.
8) A copy of the receipt proving payment of the L.E1000 (one thousand Egyptian pounds) office registration fees. In the event the office does not receive approval to operate, this fee will be refunded.
9) A bank certificate addressed to the GAFI Investment Service Division proving that the representative office has a transferred from abroad balance in foreign currency of what is equivalent to L.E5000 (five thousand Egyptian pounds) at the least.
It is worth to mention that on 13 November 2018, Egypt's General Authority for Investment and Free Zones (GAFI) issued Decision No. 742 of 2018, which establishes controls for representative offices in Egypt, as follows:
- At the start of each year,
representative offices must submit a statement including:
- For employees, their names, functions, nationalities, compensation, and the percentage of salaries paid to Egyptians.
- Work that will be initiated during the year.
- Changes to the activities of the representative office.
- Decisions by the head office about expected future operations in Egypt.
- Timetable for completing remaining studies, and for providing a statement of the conclusions and proposed actions following those studies.
- Foreign companies that establish a representative office should establish a company or branch in Egypt within three years of registering the representative office.
- The registration period for representative offices is a maximum of one year. However, the registration will be renewed annually, provided the representative offices comply satisfactorily with the annual statement submission.
- Representative offices must restrict their activities to conducting market studies and research. Foreign companies that violate this restriction should establish a subsidiary or branch within six months from being notified of the violation. If this is not done, GAFI may cancel the registration of the representative office.
Sadaany & Khalifa Law Firm
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