The Law on the Development of Medium, Small, and Micro Enterprises in Egypt

The Law on the Development of Medium, Small, and Micro Enterprises No. 152 of 2020 is the legislative framework issued by the Egyptian state to support this vital economic sector. The law aims to establish a comprehensive system to incentivize small enterprises and encourage entrepreneurship, thereby contributing to economic development and job creation. It is an extension of government efforts to integrate the informal economy into the formal system by offering a range of tax and non-tax incentives, as well as providing the necessary financing for the growth and development of these enterprises.

______________________________________________________________________________________________

Objectives of the Law

The law seeks to achieve several strategic goals that contribute to economic growth and improve the business environment for small and medium enterprises:

1. Encouraging Investment in Small and Medium Enterprises:

• Supporting entrepreneurs and startup owners by providing investment and financial incentives.
• Simplifying administrative procedures for establishing enterprises and reducing bureaucracy.
• Supporting priority production sectors to increase their contribution to GDP.

1. Creating a Supportive Environment for Enterprise Growth:

• Allocating land for projects at affordable prices or under long-term usufruct arrangements.
• Simplifying project registration and providing flexible mechanisms for obtaining licenses through a one-stop-shop system.
• Encouraging the use of modern technology in production and marketing processes to enhance competitiveness.

1. Gradually Integrating the Informal Economy:

• Providing financial and tax incentives to encourage unregistered enterprises to join the formal economy.
• Offering temporary tax exemptions for businesses that register for the first time.
• Launching awareness programs to educate business owners about the benefits of legal registration.

1. Creating Job Opportunities and Increasing Employment Rates:

• Encouraging small enterprises to hire new employees by reducing employment taxes.
• Providing training and qualification programs for young professionals to meet labor market needs.
• Supporting businesses that create sustainable job opportunities, especially in rural and underserved areas.

1. Enhancing the Competitiveness of Enterprises:

• Supporting innovation and development by offering research grants and funding for emerging technology projects.
• Assisting enterprises in registering trademarks and patents.
• Improving the quality of products and services offered by businesses through technical and managerial consultations.

1. Facilitating Access to Finance and Financial Support:

• Offering low-interest loans through the Medium, Small, and Micro Enterprise Development Agency.
• Providing credit guarantees to encourage banks to finance these enterprises.
• Establishing specialized investment funds to support emerging enterprises and enhance their competitiveness.

1. Reducing Tax Burdens and Stimulating Economic Growth:

• Implementing a simplified tax system based on revenue size rather than profits.
• Granting tax exemptions for newly established enterprises for a specified period.
• Reducing taxes on small and medium enterprises that commit to hiring a certain number of employees.

1. Promoting Exports and Expanding into Foreign Markets:

• Providing support for small and medium enterprises to export their products to international markets.
• Offering consultations on quality requirements and international standards.
• Facilitating the participation of small businesses in international exhibitions and trade missions.

1. Supporting Women and Youth in Entrepreneurship:

• Offering special incentives for women and youth who wish to start their own businesses.
• Easing access to financing and support for women entrepreneurs.
• Providing training and mentoring programs for young entrepreneurs.

______________________________________________________________________________________________

Definition of Enterprises According to the Law

The law classifies enterprises based on their annual turnover or capital investment:

• Micro Enterprises:
• Includes commercial, industrial, or service activities managed by an individual or a small group.
• Annual turnover does not exceed EGP 1 million.
• Often home-based or small-scale ventures with limited resources, such as grocery stores, handicraft workshops, and home-based food businesses.
• Small Enterprises:
• Annual turnover ranges from EGP 1 million to EGP 50 million.
• Has a simple organizational structure but has the potential for expansion and growth.
• Requires higher capital than micro-enterprises and may employ a limited number of staff.
• Examples include small restaurants, medium-sized industrial workshops, and consulting firms.
• Medium Enterprises:
• Annual turnover ranges from EGP 50 million to EGP 200 million.
• Has a more developed administrative and organizational structure than small enterprises.
• Plays a key role in supporting industrial and commercial supply chains.
• Examples include medium-sized factories, startup technology companies, and logistics service providers.

This classification helps determine the type of incentives and financing that enterprises can access and ensures tailored support policies based on their specific needs.

______________________________________________________________________________________________

Tax Incentives and New Facilities

The Egyptian government has recently announced several tax relief measures to support small and medium enterprises, including:

1. Reducing Taxes on Small Enterprises:

• Implementing lower tax rates based on annual turnover, reducing the tax burden on business owners.
• Exempting some micro-enterprises from taxes entirely for a specified period.

1. Extending Tax Exemptions:

• Extending tax exemption periods for new enterprises, especially those entering the market for the first time.
• Granting tax exemptions for enterprises transitioning from the informal to the formal economy.

1. Simplifying Tax Audit Procedures:

• No tax audit for enterprises until three years after registration.
• Implementing an electronic audit system to reduce human intervention and enhance transparency.

1. Reducing Registration Fees and Property Taxes:

• Lowering registration fees for small enterprises in the Tax Authority.
• Reducing property taxes on premises used for small and medium enterprises.

______________________________________________________________________________________________

Non-Tax Incentives

• Allocating land for enterprises at discounted prices or under long-term usufruct arrangements.
• Simplifying the issuance of licenses and permits for business operations through a one-stop-shop system.
• Providing training and consultancy programs for entrepreneurs and business owners.
• Assisting enterprises in registering trademarks and patents to protect intellectual property rights.

______________________________________________________________________________________________

Financing and Credit Facilities

• Offering low-interest loans through banks and Egypt’s banking system.
• Providing credit guarantees to facilitate access to financing from financial institutions.
• Establishing specialized investment funds to support and finance startups.
• Offering special financing programs for women and youth to encourage their participation in the labor market.

______________________________________________________________________________________________

Formalizing Informal Enterprises

• Providing significant incentives for registering informal enterprises, including fee exemptions for a limited period.
• Granting unregistered business owners access to tax incentives and financial support.
• Offering technical and advisory support to help informal enterprises transition to the formal sector.
• Simplifying legal and administrative procedures to incorporate these enterprises into the official economy without complexities.

______________________________________________________________________________________________

How to Benefit from the Law

Business owners can access the benefits of this law through the following steps:

1. Registering with the Medium, Small, and Micro Enterprise Development Agency:

• Registration can be done at agency branches across all governorates or online.
• Registered enterprises can access financial and credit facilities, as well as tax incentives.

1. Utilizing the Simplified Tax System:

• Business owners can apply for the simplified tax system based on revenue rather than profits.
• This system reduces tax burdens on startups.

1. Accessing Finance and Low-Interest Loans:

• Enterprises can obtain low-interest loans through the Development Agency.
• Credit guarantees are available through banks supporting small enterprises.

1. Participating in Training and Support Programs:

• The agency offers training courses in financial management, marketing, and strategic planning.
• Entrepreneurs can attend specialized workshops to enhance their skills.

1. Simplifying Licensing and Registration Procedures:

• Unregistered enterprises can formalize their status easily through the one-stop-shop system.
• The government offers temporary tax exemptions to encourage official registration.

______________________________________________________________________________________________

The Law’s Role in Supporting the Egyptian Economy

The law plays a crucial role in:

• Boosting economic growth by encouraging new enterprises and increasing local production.
• Creating job opportunities and reducing unemployment rates.
• Formalizing the informal economy to enhance transparency and government revenues.
• Attracting investment through financial and tax incentives.
• Increasing competitiveness of local industries and expanding export opportunities.

This law is a key step towards sustainable economic development, fostering innovation, and supporting entrepreneurs in building successful businesses in Egypt.