Everything you need to know about legally starting an ecommerce business in Egypt

eCommerce has been booming in Egypt, and the government authorities have begun to release new laws and regulations to help business owners run their businesses officially and abide by the law which protects them and their customers 

In this article, we'll talk you through the registration steps you need to follow when starting your business and everything you need to know regarding the registration duration, fees, laws and regulations, responsible entities, etc. 

The Registration Steps: 

According to an article created by Egypt's Competitiveness Project to standardize the registration process. Here are the steps: 

ECP Version of Procedures for Starting a Capital Company in Egypt

Given the assumption of starting a limited liability company, the entrepreneur would register the company at the General Authority for Investment and Free Zones (GAFI) under law 159 (in the year 1981).

Procedure 1: Trade Name Clearance Certificate (done by the client) 

The Commercial Registry issues the certificate with the new CRA system by Sakhr; the certificate will be issued. The current CRA system only checks the availability of the name, but it does not reserve it. The new system will enable us to implement the Trade Name law correctly. The law says that the name should be unique, as the CRA will be checking against all registered companies. They do not do that now, and they do not reserve a name. The new system will secure the name for 30 days – time enough to register the company.

Procedure 2: Obtain a certificate from an authorized bank (done by the client) 

The Bank of Alexandria branch at the General Authority for Free Zones and Investment (GAFI) issues and delivers the certificate in 1–2 days. The bank certificate costs between EGP 200 to EGP 500, depending on the bank.

Procedure 3: Submit documents to the Companies Establishment Department, under GAFI (done by the client)

Department of Companies is the old name. It is now the Companies Establishment Department under General Authority for Investment and Free Zones (GAFI)

The founder deposits the company documents at the reception desk, where they are reviewed immediately by a lawyer. The documents to be reviewed are:

1. Trade Name Clearance Certificate
2. Original Bank Certificate
3. Power of Attorney from all the founders
4. Founders IDs
5. Certified copy of auditor's listing on Registry of Accountant and Auditors Association
6. Application to GAFI

Notes:  Security Clearance for foreigners is now part of the WB assumption (100% local owners); WB report indicates "preliminary consent of General Authority of Manufacturing" this became the Industrial Development Authority (IDA) via Presidential Decree in 2005. This consent is only required for manufacturers.   

The GAFI lawyer reviews the documents and issues an Articles of Association (This is the official contract of the company.)

A GAFI employee calculates the fees associated with the company's establishment.

Fees for company establishment:

• Notary public fee: 0.25% of capital ( minimum of EGP 10 and a maximum of EGP 1,000).
• Establishment fees: 0.1% of capital (minimum of EGP 100 and maximum of EGP 1,000 according to Article 17 (d) of the Companies Law).
• Commercial Syndicate fee: EGP 125 (for capital less than or equal to EGP 500,000) or EGP 250 ( for capital more than EGP 500,000).
• Publication fee: EGP 150 (for a limited liability company in Arabic) or EGP 300 (for a limited Liability company in Arabic and English).
• Chamber of Commerce fees: 0.2% of capital (minimum of EGP 24 and maximum of EGP 2,000) and EGP 29 for issuing an operating certificate.
• Commercial registration: EGP 51.
• Issuance of operation certificate: EGP 29.

You pay the amount on the receipt to the bank cashier. GAFI stamps the Articles of Association.

Procedure 4: Notarize company’s contract (done by the client)

Public Notary reviews the documents again, particularly the Power of Attorney, then notarizes the Articles of Association.

Procedure 5: Obtain Chamber of Commerce Certificate (done by GAFI)

A GAFI employee will obtain the Chamber of Commerce Certificate (because the company is under Law 159) on behalf of the client and provide it to the client. The fee is collected in step 2.

Procedure 6: Issuance the notification of incorporation (done by GAFI)

When the articles of association are submitted, the competent authority must ratify them and issue a decree approving the company's establishment. This decree is issued within 24 hours.

Procedure 7: Commercial Registry Certification (done by client)

At the Commercial Registry office, the lawyer (on behalf of the applicant) submits an application to the Commercial Registry along with the Chamber of Commerce certificate, the notification from GAFI, and the original Article of Association. The Commercial Registry provides the original Commercial Registry certificate.

After the lapse of 15 days, the company assumes legal responsibility and judicial personality. Within the 15 days, if the competent authority has no objection, afterward, the Department of Companies is responsible for publishing the notice of incorporation in the Investment Gazette at the company's expense. (Note: This is true for companies under law 159. Under Law 8, the company acquires legal personality on the same day of registration.)

Procedure 8: Register for taxes (done by the client)

Upon incorporation, the company can complete tax registration and obtain the tax card at the one-stop shop's tax counter. Upon receiving the card, the company may choose to register for sales tax, provided that they have started production. Companies are obliged to register for sales tax only once they reach at least EGP 54,000 in sales for industrial activities and EGP 150,000 in sales for commercial activities.

The required documents include:

• The articles of association (this should not be required since the vital document is now the commercial registry certificate)
• The powers of attorney
• The bank signature authentication will be issued to the appropriate person by the manager having the power to sign on behalf of the company.
• The tax card
• An original extract from the company's commercial register (certificate)
• The original copy of the company's lease agreement for its premises.
• The Tax Authority requires a list of branches of the company and their activities/purpose.

A new reform took place recently that will further reduce the time for this procedure due to the automation of the tax office at the OSS and the tax authority.

Procedure 9: Register employees with the National Authority of Social Insurance (done by the client)

Social insurance compensates for disability, retirement (pension), unemployment, and work-related injuries. By law, employers are required to subscribe to the social insurance system.

Otherwise, they may be subject to sanctions. The employer must submit a fully completed, authority-issued application (Nos. 1 and 2) and the following documents to the competent authority's office:

• Employer's lease agreement for company premises
• Employer's tax card
• Employee's identification card and birth certificate (copy)
• Employee and employer's graduation certificate
• A Commercial Registry certificate

The National Authority of Social Insurance issues a unique social insurance ID number.

Note: NASI requires a copy of the Commercial Registry Certificate; this is not listed in the DB. The customer service rep says the process takes one day to 1 week. And she says the applications are No. 1 and No. 7, not No. 2.

Procedure 10: Open a Bank Account (done by the client)

Once your company is officially registered, you will need to open up a bank account in the company's official name.

The Electronic Contract and signature: 

According to an article written by Youssry Saleh Legal Firm, The Egyptian legislation had regulated the electronic contracts and the electronic signature in 2004 under the Electronic Signature Law No. 15 of the year 2004 and Executive Regulation No. 109 of the year 2005.

The law mentioned above indicated the establishment of the Information Technology Industry Development Agency "ITIDA" to have the competence with all the matters related to the electronic contractual relations in Egypt, including:

• Issuing and renewing licenses required for operating e-signature services and other activities of e-transactions and IT industry fields under the laws and regulations regulating thereof.
• Setting out the e-signature standards/ criteria to control e-signature technical specifications.
• Receipt of complaints related to e-signature, e-transactions, and IT activities; take necessary actions.

This law provided for applying the same rules of the material documents and signatures on the electronic forms of such documents and signatures; since it stipulated, in Article 14, that "Within the scope of civil, commercial and administrative transactions, e-signatures shall have the same determinant effect that signatures have under the provisions of the Evidence Law in the civil and commercial articles …".

The same was stipulated in Article 15 regarding the electronic writing, and electronically written messages shall have the same determinative effect as writing, official, and unofficial messages, taking into consideration that the Law and its Executive Regulation determined the requirements which will be fulfilled in the e-signatures, e-writing, and electronically written messages to have the determinative effect for evidence as follows:

According to Article 18, the e-signatures, e-writing, and electronically written messages shall comply with the following:

• The e-signature is for the signer solely
• The signer has sole control over the electronic medium
• Possible discovery of any modification or replacement of the data of electronically written message or e-signature.

In addition to that, the following technical controls shall be fulfilled, as per Article 8 of the Executive Regulation:

• Determining the time and date of creating the electronic writing or the official or non-official electronic documents shall be technically available. Such availability shall take place through an independent electronic save system, which is not subject to control by the creator of that writing or these documents or by the party concerned with them.
• Determining the source of creating the electronic writing or the official or non-official electronic documents and the degree of their creator's control on that source and the media used in making them shall be technically available.
• In case of creating and issuing the electronic writing or official or non-official electronic documents without human intervention, partially or wholly, their conclusiveness shall be established once it is possible to ascertain the time and date of their creation and if such writing or documents have not been tampered with.

However, despite the Electronic Signature Law and its Executive Regulation, there is a legislative deficiency regarding the practical aspects of electronic transactions. Its conclusion, the liability of each party, burden of proof and methods of evidence, data protection, and some other specifications that need to be legally regulated. 

The Data Protection law: 

The Egyptian Data Protection and Privacy Law (Law # 151/2020) entered into force on 14th October 2020. Before its enactment, Egypt lacked a single comprehensive regulatory framework governing data privacy and protection-related issues before its implementation. 

Matters of data protection were present in other legal frameworks such as the Cybercrimes Law, the Consumer Protection Law, and the Egyptian Penal and Civil Code. The Government of Egypt (GoE) is currently drafting the law's executive regulations, expected in 2H2021.

The law identified two types of data:

PERSONAL DATA

• Related to an identified natural person
• Includes: name, voice, ID number, picture
• Determines psychological, physical, economic, or cultural identity

SENSITIVE DATA

• Religious, political, financial, or health data
• Children's data 
• Obtained through the consent of the data subject. The executive regulations will define the means of obtaining consent.

Linux Egypt shared a detailed document on this law.

Since the executive regulations of the law haven't been released yet, there are things you can do to keep your company abiding by the law itself; these steps are recommended by the law and tech consultants RegHub: 

1. Audit the technologies you use and all the information you are collecting and processing 
2. Identify why you are collecting this information and whether or not the information you are collecting adheres to the data protection law. 
3. Ensure that any third-party company you deal with also follows the Data Protection Law, as you are liable if they aren't. 

Once you perform these steps, you'll need to do the following: 

1. Change all the technologies which aren't adhering to the law.
2. Release a privacy policy and a user policy, where you explain everything in detail on why you collect data, how you process it, and the safety measures your company is taking to ensure the privacy of your users' data. 

This process needs to be done regularly to ensure that you always adhere to the Data Protection Law. 

Registration incentives and Taxes 

Reported by Egypt's Daily News: "Mohamed Maait, Minister of Finance, urged owners of small and micro enterprises working in e-commerce to quickly register their businesses at the Micro, Small, and Medium Enterprises Development Agency (MSMEDA), and then join the e-commerce unit at the Tax Authority to benefit from the new tax incentives stipulated in the Micro, Small, and Medium Enterprise Development Law'. 

Maait added: "You are an expert yourself, and a tax officer will not have to visit you. You will not need an accountant. Determine the annual sales or business volume yourself, and we trust your calculations. If your sales do not exceed EGP 250,000, the tax will be EGP 1,000 annually. If they do not exceed EGP 500,000, the tax will be EGP 2,500. If they do not exceed EGP 1m, the tax will be EGP 5,000 annually, and so on."

Another report by Egypt's Daily News: "Reda Abdel Qader, Chairperson of the Egyptian Tax Authority (ETA), has called on those who engage in e-commerce activity and online content creators to register with the ETA quickly.

He added that all companies that engage in commercial or non-commercial (free professions) activities are subject to income tax according to Law 91 of 2005.

Separating eCommerce companies into three types: 

1. Companies use e-commerce as one of the various means of sale or distribution. 
2. Companies depend mainly on electronic means in selling and distributing their products and services.
3. Companies use digital platforms to promote products of other companies to customers.

The ETA authority also demanded individuals and companies that use social media networks for e-commerce to register for income tax and VAT – if their revenues reached EGP 500,000 per year – under the law.

Explaining that the documents required for the tax registration are:

• National ID.
• Lease or ownership contract.
• A utility receipt (electricity – water – gas – telephone, etc.)
• The company's contract in the case of legal persons. 

He stressed that the department's e-commerce unit is making intensive efforts to follow up and communicate with everyone who practices e-commerce activities to inform them about the required procedures and answer their inquiries and questions.

Abdel Qader said that the ETA allocated hotline 16395 to receive inquiries related to taxation of e-commerce and online content creation activities."

 With eCommerce on the rise in Egypt, the government is trying its best to produce new laws and regulations to make starting or registering your eCommerce business in Egypt more accessible and transparent.