Egypt's General Authority for Investment and Free Zones (GAFI) issued Decision No. 742 of 2018 . The decision concerns foreign representative offices operating in Egypt, effectively implementing new controls for their operation.
In Egypt, representative office are permitted to operate solely for the purposes of conducting market studies and research, and are prohibited from taking part in any trading activities. Under this decision, offices which are compliant with this definition will be required to register as a branch or subsidiary within three years from the date of their establishment. This deadline may also be extended for an additional year in exceptional circumstances, subject to GAFI's assessment .
GAFI will however, strike off any foreign representative office which takes part in any activities outside of the limited scope of market studies and research, after notifying them of their violation. Thereafter, the company will have 6 months to restructure their entity as a branch or subsidiary which is permitted to take part in trading activities.
As per these new requirements, representative offices will not be able to surpass the limits of their activities, since they are now obligated to submit information at the start of the year stating their proposed areas of research, and then again at the end of the year clarifying the results of their findings. Additionally, companies will also be required to submit information regarding their employees, and in particular, their qualifications and capability to participate in the research and marketing activities they were initially hired for. Companies who fail to present the above information will be closed down by GAFI.
In our opinion, this decision is another step towards creating a system of justice and corporate accountability which will continue to positively affect the Egyptian business market, and will limit the cases of tax evasion, which will in turn strengthen the country's economy.
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