Egypt has introduced a pivotal piece of legislation, Law No. 152 of 2020, aimed at developing the Micro, Small, and Medium Enterprises (MSMEs) sector. The law provides a comprehensive package of incentives and facilities designed to integrate informal businesses into the formal economy, stimulate entrepreneurship, and create job opportunities across the nation.
The initiative is spearheaded by the Micro, Small and Medium Enterprises Development Agency (MSMEDA), which is tasked with implementing the law’s provisions and providing a one-stop-shop for entrepreneurs seeking to formalize their operations.
A Pathway to Formalization Through Temporary Licensing
A cornerstone of the new law is the introduction of a temporary license, allowing unregistered projects to operate formally for up to five years. This measure enables businesses to continue their activities without interruption while they complete the necessary procedures to obtain a final license, providing much-needed stability.
To acquire this temporary license, entrepreneurs can apply through MSMEDA’s one-stop-shop units in their respective governorates. The process involves submitting basic personal and project information, along with proof of identity and premises documentation, for a nominal fee ranging from EGP 500 to EGP 10,000, depending on the project’s classification.
Significant Financial and Tax Incentives
The law offers a substantial set of financial reliefs to ease the burden on new and formalizing businesses. Key incentives include exemptions from stamp duty and notarization fees for company incorporation contracts and the registration of land required for projects.
Furthermore, capital gains from the disposal of assets or production equipment are tax-exempt, provided the proceeds are reinvested in new assets or equipment within one year of the sale. To provide immediate relief, the law also suspends all tax claims and seizures against projects that have obtained a temporary license until their outstanding tax obligations are settled under the new framework.
Crucially, businesses previously operating in the informal sector will not be held liable for back taxes for the years preceding their application for formalization. They will instead be integrated into a simplified, flat-rate tax system determined by their business volume.
Streamlined Operations and Government Support
To reduce administrative complexities, the law exempts MSMEs from the obligation to maintain the detailed books, records, and documents typically required by the Income Tax Law.
Beyond regulatory relief, the government is committed to providing practical support. Registered MSMEs will gain access to specialized technical and administrative training programs, facilitated financing through MSMEDA and its partner institutions, and marketing assistance, including participation in exhibitions organized by the state.
Prioritizing SMEs in Government Contracts and Land Allocation
The law mandates significant inclusion of MSMEs in public procurement. A minimum of 20% of government contracts will be allocated to medium-sized enterprises, with a similar 20% quota reserved for small and micro-enterprises.
Additionally, to facilitate physical expansion, 30% of vacant land in industrial zones, tourist areas, and new urban communities will be specifically allocated for the establishment of these projects, providing a critical resource for growth.
About Egypt’s Law No. 152 of 2020
Law No. 152 of 2020 is a comprehensive legislative framework designed by the Egyptian government to foster the growth and development of Micro, Small, and Medium Enterprises. Implemented by the Micro, Small and Medium Enterprises Development Agency (MSMEDA), the law aims to integrate the informal economy by offering a clear path to formalization through temporary licenses, significant tax exemptions, simplified administrative procedures, and dedicated support programs in financing, training, and marketing.
Source: Parlmany
