Small and medium enterprises are the core of economies around the world, contributing to the gross domestic product, providing job opportunities and enhancing economic growth. In Egypt, small and medium enterprises contribute about 80% of the Egyptian gross domestic product and cover 90% of capital formation in Egypt. Small industrial projects also represent 13% of the value of industrial production, and the contribution of small and medium enterprises to total Egyptian exports is estimated at about 4%, according to statistics from the Central Agency for Public Mobilization and Statistics. The number of medium, small and micro enterprises in Egypt is estimated at more than 3 million establishments employing about 10 million workers.
Egypt issued Law No. 152 of 2020 regarding the development of medium, small and micro enterprises. This law aims to enhance the role of the Project Development Agency established by Prime Ministerial Decree No. 947 of 2017, which can finance and support these projects. It also aims to support and empower this sector. This law also covers the classification and financing of projects and issues related to related facilities.
The following highlights the most important aspects of the law:
First: Classification of projects: The law classified projects into:
• Micro-projects: Any project with an annual business volume of less than one million pounds; or any newly established project with a paid-up capital, or invested capital, as the case may be, of less than 50 thousand pounds.
• Small projects: Any project with an annual business volume of one million pounds and less than 50 million pounds, or any newly established industrial project with a paid-up capital, or invested capital, as the case may be, between 50 thousand pounds and 5 million pounds; or any newly established non-industrial project with a paid-up capital, or invested capital, as the case may be, between 50 thousand pounds and 3 million pounds.
• Medium-sized projects: Any project with an annual business volume of 50 million pounds and not exceeding 200 million pounds, or any newly established industrial project with a paid-up capital, or invested capital, as the case may be, of between 5 million pounds and 15 million pounds; Or any newly established non-industrial project with a paid-up capital, or invested capital, as the case may be, between 3 million and 5 million pounds.
The law also defined entrepreneurship projects as projects that have not been in operation for seven years or started production, as the case may be, and that include a degree of novelty or innovation.
Second: Non-tax incentives
Law No. 152 of 2020 grants non-tax incentives to medium, small and micro enterprises. These incentives include:
– Exemption from stamp duty, documentation and registration fees for contracts of incorporation of companies and establishments, credit facilities and mortgage contracts related to their business for a period of five years from the date of their registration in the commercial register.
– Allocating land for free or at a reduced price to industrial projects in the event that production begins within two years from the date of delivery of the land.
– Extending the due dates for paying the benefits allocated to the allocated lands, including full or partial exemption from delay costs.
– The state bears part of the cost of technical training for workers.
– Full or partial refund of the participation fee in exhibitions.
– Exempting entrepreneurship projects from the fees for registering patents, utility models and design plans stipulated in the Intellectual Property Protection Law, and the state provides assistance in registering patents according to the standards issued by the Board of Directors of the Project Development Agency.
Third: Tax incentives
The law grants a set of tax incentives to projects except for entrepreneurship projects, including
– Exemption from stamp duty, documentation and registration fees for incorporation contracts, credit facilities, mortgage and land registration: Small, medium and micro enterprises can benefit from a five-year exemption from these taxes and fees, provided that the period starts from the date of registration in the commercial register.
– Collection of a 2% customs tax on imported machinery and equipment: This exemption is applied to machinery and equipment, with the exception of passenger cars.
– Capital gains exemption: SMEs and micro enterprises can obtain an exemption from capital gains tax on the disposal of assets, machinery or production equipment, if the proceeds of the sale are used to purchase new assets, machinery or production equipment within one year of the date of disposal.
– Exemption from dividend distribution taxes for single-person companies: Single-person companies can benefit from this exemption, provided that the founder is a natural person and not a corporate entity.
In addition, further support can be provided to SMEs through land allocation, tax exemptions and marketing assistance.
Fourth: The Micro, Small and Medium Enterprise Development Agency
It is a special fund with a legal personality and is affiliated with the Prime Minister. In order to achieve its objectives, it provides soft financing in accordance with the controls determined by its Board of Directors to
1- Small, micro and medium enterprises
2- Companies financing troubled projects
3- Companies, associations and financial institutions operating in fields related to its field of work
4- Greenhouse guarantee companies
5- Business incubators and accelerators
The agency provides a wide range of services related to project development, such as preparing feasibility studies, identifying risks, identifying exhibitions, providing the necessary training and assisting in developing marketing and production techniques.