Thereare three laws governing the acquisition of land by foreign entities. Under Law143 stipulates, foreign entities are limited in freedom to the area available, andin this case as a foreigner, you are constrained by the number of “feddans” youare allowed access to. Unfortunately, land acquisition is available if and onlyif the foreigner owns at most 49% of the company.
This restriction willcontinue on after the land has been acquired, therefore, even after buying theland you cannot change the ownership structure where the foreigner owns morethan 49% of the company. In the circumstance where the company is liquidatedthe plot of land must go into the hands of the Egyptian partner. According toReuters, “The initial investment law stipulates investors get back halfof what they pay to acquire land for industrial projects if production beginswithin two years, and provides a 50 percent tax discount on investments made inunderdeveloped areas.” Althoughthis is good news for foreign investment, this only accounts for industrialprojects.
There are a couple options for youto discuss with your partner. The first is apparent, if you are willing tochange the ownership structure to 51-49 then the land you asked for will easilybe acquired. Although this is difficult to ask for it is an option that shouldbe brought up. The second option here is also quite simple and has many benefits.This option will help if as a LLC you are planning on exporting the items inthe storage space abroad.
In this case, you should think about opening up thestorage space in a free zone and enjoying the many benefits that come with thefree zone. A third option is to simply rent out the land for a long period oftime instead of buying it. This option will help the company go around thetedious laws and regulations against foreign ownership. The World Bank definesfree trade zones as “small, fenced-in, duty-free areas, offeringwarehousing, storage, and distribution facilities for trade, transshipment, andre-export operations.Companiesoperating in a free zone are considered a separate “country” from Egypt, asthey are exempt from Egyptian tax laws, labor laws, company laws andcustoms. In order to operate within afree zone a company must first register a head office in the area of its choiceoutside the free zone.
When it comes to a public free zone, only a 1%administration fee is paid on the value of goods imported or exported.(Business Law) You can also take upa private free zone, which will allow you to operate anywhere in Egypt,provided that you meet some prerequisites. The following criteria must be metin order for a company to be set up as a Private Free Zone” (1) the “projecthas already started business”, (2) the exported share of production amounts toat least 50%, and (3) certain building prerequisites are fulfilled. (BusinessLaw) Within the zone,investors enjoy duty-free facilities and other benefits, such as fiscal, legal,and administrative advantages, and sound infrastructure within a limitedarea.
