WHY INVEST IN EGYPT?Top of page

Tourists are attracted to Egypt for it’s history that dates back to around 3200BC, for the warm waters of the Mediterranean Sea, for the diving possibilities on the Red Sea and for the luxury hotels and resorts that make Egypt something special for the international tourist. An increasing number of visitors are buying into new build luxury apartment complexes in the major holiday hotspots and are being rewarded with low off plan prices, guaranteed rental yields, a holiday home in the sun and an investment that even begins increasing in value over the build period. These property investors are taking a very small risk in real terms since the government of Egypt has committed itself to transforming the country’s economy through the promotion of inward foreign direct investment over the long term. To that end the government began the introduction of new reforms to customs, income and corporate taxation in 2004; they are privatizing certain sector industries, working on currency liquidity and are trying to develop an export market for their natural gas deposits. Experts agree that all these efforts should improve the economy of the country, create more opportunity for employment and domestic wealth growth and increase the attraction of the country from an overseas investor’s point of view.

In the resort areas of the Red Sea coasts, property investors are tapping into the increasing demand for short term rental accommodation, this market was non existent two years ago as in the past it was only possible to rent property on a long term basis. Developers and forward thinking real estate agents are offering property management services making it possible for owners to rent their properties. Overall the future prospects for the property market in Egypt are positive. Egypt is a politically stable country and one currently enjoying the best relationships with many of the world’s most influential economies and hosted the “Economic Forum 2006 which was attended by all the influential countries worldwide, including the UK and USA.

The economic climate in Egypt is open for investment, the marketing campaign at the forum 2006 was “Egypt open for business” And with investors being actively encouraged by taxation breaks and low labour costs Egypt is set to succeed. Press articles on Investing in Egypt 2007 With over one million UK holidaymakers visiting in 2006 and property price rises already outstripping most emerging markets, experts are predicting that Egypt could offer one of the greatest overseas property investment returns currently available worldwide. According to Egypt's Tourism Authority, over one million UK holidaymakers visited Egypt in 2006, representing a 25% increase on the previous year. Property price rises are already outstripping most emerging markets and experts are predicting that Egypt could offer one of the greatest overseas property investment returns worldwide currently available. Average property prices in Egypt are expected to rise by 20% in 2007. Since Egypt’s Economic Reform Program in the early 1990s, which focused on stabilizing the economy, improving public finance and exchange rate policies, the economy grew by 6% in 2006 and the anticipated growth this year is 7%. Property purchase is relatively simple in Egypt requires no purchases taxes, stamp duty, income tax nor capital gains tax and there is no restrictions on freehold ownership of property for foreigners in most of Egypt. A rapidly expanding tourist market, the country, which is on course to welcome 16 million visitors from around the world by 2014, has benefited from one of the fastest growing property prices in the world, with the average property price rising by 50% in the last two years. It also offers one of the highest returns on investment worldwide, with rental yields in key tourist resorts reaching 11% compared to 4-6% in the UK.

Article Source: http://EzineArticles.com/?expert=Greg_Walters

Despite the recent boom, current prices still reflect Egypt’s status as a new player in There are so many positive aspects of the property market in Egypt that make the entire sector an exciting place to be right now that anyone serious about venturing into an emerging overseas real estate market should be focused on Egypt for at least the medium term. First things first let’s remove the confusion – Egypt is not a country plagued by terrorism, drought or famine – it’s a stunningly beautiful, ancient and interesting country with a coastline that is brushed and caressed by both the Mediterranean and Red seas. It is also one of the most exciting and exotic countries in closest proximity to Europe giving investors a massive potential tourist audience to target; it is also a country that can genuinely boast year round sunshine on its Red Sea Riviera which means it offers investors year round potential for profit. If these are not reasons enough alone for a property investor to get curious about Egypt, how about the fact that Dubai based mega property developers Emaar have just committed millions of dollars to the Egyptian residential real estate market place in Cairo? Or what about the fact that the Egyptian government have slashed property related taxation costs to make the whole process of owning real estate in Egypt that much more affordable for more people?

You can add to this the fact that inward foreign direct investment into Egypt is at an all time high, the country is receiving higher annual visitor intake than ever before and the country is enjoying its best relationships with Western governments in documented history if you like. Furthermore the amount of investment and economic confidence in Egypt is opening up a wealthy and growing middle class sector who are keen to afford property for sale and rent in Cairo and Alexandria in particular, and this gives an investor a local resale market to target in the medium term which further boosts the long term potential of an investment made into the real estate sector which is currently dominated by the tourism market. It’s a fact that the highest rental incomes achievable for a real estate investor in Egypt right now are from tourist friendly properties along the Red Sea and Mediterranean coastlines – properties that are well located and facilitated are most in demand from the tourism market looking for short term lets. But there’s also a growing retirement market in Egypt that’s attracting great attention and giving real estate investors another potential revenue stream to explore. Egypt really is the place to be for real estate investors looking for immediate income and medium to long term capital growth and resale potential - and because the property buying process for foreigners in Egypt has become more affordable and more transparent in very recent years, the numbers of investors examining the market and exploring its possibilities is set to rise and rise.

Article Source: http://EzineArticles.com/?expert=Rhiannon_Williamson

News article:
Positive Economic Outlook Good for Egypt’s Property Sector Our analysis of the recent comprehensive economic review of Egypt collated and produced by Moody’s Investors Service together with the latest economic findings of the Institute of International Finance relating to Egypt’s performance reveal an overall positive economic outlook emerging which is good for Egypt’s property sector.

News article:
Buying a Property in Egypt For investors, second home hunters and even those looking to develop or renovate real estate, buying a property in Egypt just became a million times easier with the announcement that one of the leading financial institutions in the GCC has partnered with Egypt’s first mortgage company to develop, promote, market and sell a sophisticated range of property finance schemes for all those buying, investing or developing property in Egypt.

Egypt in many people's eyes is a nation still emerging from previous governments' poor efforts to promote the country and as a result few people are aware of the enormous property investment potential that there is in this stunningly beautiful, ancient and historic country. But rest assured, this situation will not last for long and those who want to get in ahead of the crowd will be buying property in 2007 and watching everyone else play catch up in 2008.

Currently the Egyptian government is working through a process of aggressive reforms to strengthen and stabilize the economy, prove political stability and promote relations around the globe with nations such as the USA and UK. It is also a country actively courting foreign direct investment and which has received massive financial commitment from the Middle East. Much of this commitment has come from real estate giants such as Emaar Properties and DAMAC properties…the former are already in the development process for massive luxury developments in Cairo for example and the latter have literally just announced multi billion dollar plans to develop a mega resort across 320 million square feet of land in the north of Hurghada. The Gamsha Bay development will comprise 55,000 housing units across nine distinctive residential zones with construction taking place over the next ten years. The development of resorts such as these ties in with Egypt's plans for revolutionizing its travel and tourism economy.

Currently Egypt is popular - but plans are in place to liberalize the aviation routes into the nation and the World Travel and Tourism Council (WTTC) have conservatively estimated that this will push up international arrivals to in excess of 13 million annually and boost tourism generated GDP by a further 12%. Egypt has ambitious plans to become one of the most popular tourism hotspots by 2011 and the WTTC support their ambitions. This increase in tourism demand and the general profile raising awareness activities being undertaken by Egypt of its nation's desirability for investment, for a holiday, as a second home or a great place to buy property will have a dramatic effect on a market where currently prices are attractively affordable and investment activity is beginning to take off. So in conclusion, Egypt's new property market is emerging and about to witness strong price gains, it is a market with all the right ingredients for long term success and therefore property in Egypt in 2007 makes an exceptionally interesting investment choice.

Africa property market - Egypt
The Egypt property market was in a year long recession heading into 2006. The market was hit because of the threat of terrorism and other economic and political factors. However, with the Dubai based developer Emaar taking an interest in the Egypt property market things are starting to look up. Egypt has always had a decent tourism sector which provided the economy with a boost, but it was flagging in recent years until the government really decided to put an emphasis on tourism and attracting visitors to the country. Thanks to promotions making the concept of Egypt a viable vacation spot, the Egypt property market’s coastlines along the Red Sea and the Mediterranean Sea have begun attracting a lot of foreign investor interest. With the current low prices for properties in Egypt, it is a very good time for people wanting to invest in a low risk proposition. The current real estate prices may be low now, but they have started rising. Although the Egypt property market is just starting to pick up, the short term rental market is definitely thriving. The short term rental property market in Egypt has been giving investors the best returns so far. However, with new legislation being introduced to make it easier for overseas buyers to purchase housing in the Egypt property market is will not be long before the real estate sector in this ancient land catches up to its short term rentals market.

Egypt has always been laden with mystery and history. It has been ruled by ancient dynasties lost to us in the mists of time. Its streets were trod by the ancient Greeks, the Romans and a whole slew of other peoples. It has always been an international country where spirituality, commerce, art and beauty have met up in symbiotic harmony. With its growing tourism sector, the Egypt property market is sure to soon attract the same interest and attention that is has known historically. For foreign investors looking for a low risk place in which to invest their money, Egypt property is definitely a good bet. It has already one of the best high-end, medium haul destinations for Europeans travelers. Once word spreads that Egypt is more than just history and culture, the Egypt property market is sure to get a big boost- and when that happens, investors who got into the game now are sure of making a very good return on their low risk investment.

EGYPT INVESTMENT GROWTHTop of page

Egypt has long been a popular travel destination. Today, due to encouraging economic trends, the property market in Egypt is becoming more popular as a location amongst worldwide purchasers and recent years have seen a growth rate of an encouraging 20-30% per annum in some key locations. Property investment in Egypt, as in many emerging markets, relies heavily on the success of Egypt’s ever increasing tourism industry. Beautiful, well established tourist hotspots are already in existence, particularly along the Red and Mediterranean Sea coasts and cater for a wide variety of modern tourist requirements, from excellent diving and snorkeling, five star hotels and golf courses to cultural and historical activities.

New off-plan opportunities from heavy weight international developers are now springing up, attracting overseas investors looking for a secure investment with good growth potential at rock bottom prices. Due to increased tourist numbers, these buyers are also safe in the knowledge there will be a strong market for their investment. Furthermore, the imminent opening of the newly modernized Cairo international airport in early 2007 is set to bring a new influx of visitors to complement Egypt’s new look 21st century tourist industry. Egypt’s Prime Minister, Ahmed Nazif is concentrating on the country’s potential as a promising investment hub, especially in major infrastructure sectors, which will inevitably have a direct result on the attraction of Egypt to foreign investors. During the Middle East Travel and Tourism Summit of 2006 in Jordan, Munir Nassor told more than 400 leaders of from the international tourism industry that Egypt and the Middle East as a whole, can expect to attract new investment in the hotel, spa and airport sectors. He added, “The cooperation we’ve had so far between private and public sectors is giving the right kind of push forward”. Due to recent reforms to streamline purchasing procedures in Egypt, the country now attracts more overseas property purchasers than ever before. This can also be put down to its relatively simple purchase system with lower taxes than in many other countries and no capital gains or inheritance tax.

CAPITAL GROWTH PREDICTIONSTop of page

Based on a steady increase in investments in the tourist sector and a resulting surge in visitor numbers, Egypt offers promising growth potential to all types of investors, while some areas of the Red and Mediterranean Sea coasts as well as certain areas of Cairo and Alexandria, are currently attracting as much as 25% annual capital growth. Investment in Egyptian property is offering great opportunities for purchasers while it waits during the infancy of an exciting emerging market.

Rental Yield Predictions
Rental income from Egypt based property is of great interest to investors as high rental yields are already achievable from property located in the current tourist hotspots. It is expected that mortgage payments and bills can be covered for the year from the rental income achieved. A fantastic year-round climate attracts a reliable tourist trade throughout the year.

Egypt Economy
Egypt’s economy is undergoing steady growth and in the last quarter of 2005 the annual growth rate in Egypt has risen for the first time to 6.1% and inflation dropped dramatically from a huge 18.1% in 2004 to only 3.1% in 2006

Due to a number of economic reforms, private business has increased to represent some 80% of the economy today. Experts agree that the current economic climate should improve the economy of the country, create more opportunity for employment and domestic wealth growth, and increase the attraction of the country from an overseas investor’s point of view. With direct foreign investment continuously on the up, Egypt’s economy shows enormous potential over the long term.

Reasons Why Egypt is an Intelligent Property Investment Location

• Low property prices starting at around £30k
• Year-on-year capital appreciation of between 20-30%.
• Beautiful, well established tourist hotspots suitable for varied touristninterests, from excellent diving and snorkeling to cultural and historical locations
• Stunning natural and unspoilt landscape
• Steady annual growth in tourist figures
• High rental market demand.
• Less property tax than paid in the UK.
• No capital gains tax
• British residents avoid inheritance tax on any Egyptian properties
• Warm desert climate with temperatures ranging from 14°C in winter to 30°C in summer and sunshine all the year long.
• Year-round tourist season
• Politically stable country
• Strong economic growth and inward investment creating a rich investment climate.
• Well renowned developers creating luxury resorts to cater for Egypt’s new influx of international tourists
• Easy air access from many European destinations makes Egypt an ever popular medium haul holiday location
• Cairo International airport is being modernized and a new terminal is to be built by early 2007
• Relatively low cost of living and maintenance costs
• English is widely spoken, after Arabic

REAL ESTATE INVESTMENT POTENTIAL IN EGYPTTop of page

Interest in the investment property market in Egypt is beginning to awaken as the wider world becomes aware of the excellent investment opportunities and incentives available for investors in Egypt. The key factors attracting overseas investor interest include

• Egypt’s fast growing tourism sector, over 1 million UK tourists alone visited Egypt in 2006 and Egypt is on course to welcome 16million tourists worldwide by 2014
• The government is continuing to commit to legislative initiatives designed to enhance the investment climate
• Property prices in Egypt remain low and affordable whilst demand for quality property for sale and short term let is increasing. The majority of real estate investment interest is currently centered upon the Red Sea resort areas of Egypt and the major cities like Cairo and Alexandria.

In the resort areas on the Red and Mediterranean Sea coasts property investors are tapping into the increasing tourist demand for short term rental accommodation; this market is currently returning the best rental yields countrywide. The second home resale market in the resort areas is also beginning to present profit potential on the underlying capital investment made because more overseas buyers are seeking holiday homes or second homes in these areas. Egypt is close at hand for European holiday makers, less than 5 hours flying time and therefore owning a holiday home in this exotic location makes perfect sense for many European travelers. In Egypt’s main cities like Cairo and Alexandria overseas property investors are again seeking to profit from rental returns, and with the creation of brand new luxury residential property districts like Cairo Heights and Damac’s new project called Hyde Park in New Cairo international interest is increasing.

Overall the future prospects for the property market in Egypt are positive. Egypt is a politically stable country and one currently enjoying the best relationships with many of the world’s most influential economies that it has ever enjoyed. The economic climate in Egypt is open for investment and investors are being actively encouraged by taxation breaks, low labor costs and a country that has a growing middle class who are beginning to exercise their increased purchasing power. Overseas real estate investors are aware that the growth in the purchasing power of the domestic market is fantastic for the long term profitability of all investments in Egypt’s property sector. The overseas tourism and second home markets will account for good yields and returns but a growth in domestic demand and purchasing power will allow investors to more aggressively target Egypt safe in the knowledge that they have a wider market to potentially profit from.

INVESTMENT STRATEGIESTop of page

There are a great number of potential investment strategies available dependent on the property investors' objectives for it to be a short, medium or long term investment, differing levels of complexity, as well as the investor's attitude to risk.

For illustrative purposes the two most common strategies are described below.

• Short term - (18 – 24 months (this is also known as a Flip strategy)
• Medium term - (3-5 years (also known as a buy to let strategy or buy and hold strategy)

It is important to be clear what the investment is trying to achieve AND by when it must be achieved. In this way it helps focus the investment decision. For example if the objective is to double the investment within 2 years then a flip strategy would be favoured. Provided the investment has been chosen wisely it is more likely to produce the expected return than a buy and hold strategy in the chosen time period. More experienced investors may start to look at portfolio investments across different areas or countries in order to spread the investment risk and achieve a more balanced return.

Short Term Investment Strategy
This strategy involves purchasing an off-plan unit i.e. a property that has either not commenced construction or is currently under construction and then selling the property prior to completion. In reality this is not a property purchase as the property has not been completed but is a purchase and sale of an option to purchase the property. A key factor is the time taken to identify the investment opportunity as this is critical to the strategy's success.

Opportunity
The opportunity to purchase a property at a low initial price or in the case of a new country at potentially an extremely low initial price before market forces lead to significant capital appreciation. Then sell the option whilst demand is increasing, taking advantage of normal supply and demand economics which means the price is increasing as more people want to buy.

Timescale
Typically the time period involved will be between 18 to 24 months, although this is dependent on factors such as the stage of construction of the development, the speed of construction for that particular country, etc... Level of Complexity This strategy is attractive to the investor because of its simplicity, the low initial investment typically 10% to 20% of the purchase price and some basic legal fees. The short payback period allows the investor to recover their cash relatively quickly for reinvestment in other developments. In addition the investor has not been left with a long term liability that needs to be serviced such as mortgage payments.

Risks
The critical element and therefore the highest risk element to the success of this strategy is the sale of the property prior to completion otherwise the investor will be forced to complete on the purchase with all its associated legal and financial consequences. The investor must be clear on the mechanisms available to resell the option, whether that be privately through an existing database of buyers, a private advertisement, a website or through more commercial means such as estate agents, website portals etc.

Return
This type of investment is a speculation of capital appreciation and therefore returns can fluctuate greatly dependent on how popular the country, the area and even the development becomes. A good investment based on an annual growth rate of 10% could lead to returns of in excess of 50%.

Case Study:

• An off plan investment is made at a purchase price of $150,000
• The deposit required is $45,000 with expected legal costs of $1000.
• Completion is expected to be in 24 months.
• The area has shown a growth rate of 10% pa.
• The initial investment will be ($45,000+ $1000) = $46,000.
• When the option is sold in say, 18 months (i.e. prior to actual completion) the price is ($150,000 * 10% growth) = $173,250.
• Therefore the gross profit is ($173,250 - $150,000) = $23,250.
• Gross Return $23,250/$46,000 = 50%

As the property is under construction and has not yet been completed, it therefore cannot be legally registered. It has still to pass all the relevant planning directives and licence requirements and as such does not provide adequate security for the lenders and therefore it is not possible to raise a mortgage upon it. The initial investment will have to be raised from the investor's own sources be it cash funds or by releasing equity from an existing property by way of a further advance or re-mortgage or alternatively bridging facilities may be available. Taxation rules are very different country to country, therefore specific expert advice should always be sought regarding the subject.

Medium Term Investment Strategy
This strategy involves the purchase of either an off-plan unit or resale property, completing on the purchase and holding onto the property for a period of typically 2 to 5 years although it could be longer, before ultimately selling. During this period the property is rented either on a holiday rental or long term rental basis in order to generate income. When considering this strategy it is important to be clear as to whether income generation or capital appreciation is the key objective and tailor your investment accordingly. Although possible, it is extremely difficult to achieve a high return for both income generation and capital appreciation with the result often leading to average or below average returns. It is usually better to focus on one specific objective in order to maximise the return. Typically investors look for capital appreciation and use any rental income to negate the cost of financing and maintenance. Avoid emotional purchases as this type of strategy is a medium to long term investment which requires careful analysis of the returns and critically the investor needs to be able to afford the cost of maintaining and financing the investment.

Opportunity
The strategy is to either maximise the possible capital appreciation by holding the investment until market conditions change, i.e. sell at the highest possible price. Alternatively, maximise the income generated by the investment via rental means at perhaps the expense of capital appreciation. Additionally the property may be available for the investors own holidays!

Timescale
The time period for holding the property is typically 2 to 5 years in order to ensure there is sufficient capital growth to cover the initial purchase expenses, such as taxation, legal costs etc.

Level of Complexity
Fundamentally this is a normal property purchase therefore a very simple concept; however one must bear in mind the need to maintain a second property in another country involves more management than a property close to home. There will be physical, economic and legal requirements to adhere to, ranging from basic maintenance of gardens, pools etc, rental administration, perhaps financing mortgage payments, community charges, annual legal returns and taxes.

Risks
Depending on whether income generation or capital appreciation is chosen one of the two key factors is the identification of a property which will be attractive for that particular strategy. If a rental strategy is chosen then the type of property will determine the type of tenant. One bedroom apartments will appeal to younger singles or couples, should be located near to lively nightlife locations, bars, nightclubs etc. The rental for this type of property will be lower than a three bedroom property attracting families but they require different facilities such a proximity to beaches, supermarkets, children's amusements etc. Also the type of tenant will become a factor when considering the quality of furnishings to be purchased and importantly the condition the property is left in following a rental. The location of the property is always important as it will determine the amount of rent achievable and the level of capital appreciation achievable, remember that the initial price of the property will also reflect this. It is important to continually monitor the market to ensure that when the property is sold it does not happen during a market downturn such as a change from a sellers market to a buyers market, which would of course reduce the sale price. One must bear in mind this is more difficult to achieve when the investment is in a different country. Return

In holding a property for a longer period it is possible to achieve more significant returns as the example below demonstrates. This of course assumes that the market growth rate remains constant and that a mortgage In the example below capital appreciation is the objective therefore the rental income is designed to cover the annual finance and maintenance costs. Please see the example below.

• An off plan investment is made at a purchase price of $200,000 with completion in 24 months.
• The deposit required is $60,000 with expected legal costs and taxes of $24,000. A mortgage can be arranged for 70% i.e. $140,000. The total cash investment is ($60,000 + $24,000) = $84,000
• The area has shown a growth rate of 10% pa. Rental income is expected to cover at least the mortgage expense and annual maintenance costs When the property is sold in 4 years after completion i.e. 6 years after the initial contract to purchase, the price is ($200,000 * 10% growth * 6 years) = $354,312.
• Therefore the gross profit is ($354,312 - $200,000) = $154,312.
• Gross Return $154,312 / $84,000 = 83%

COMMERCIAL AND LARGE SCALE INVESTMENT OPPORTUNITIESTop of page

Egyptian Reality can provide a specialists service for investors looking for larger investment opportunities in Egypt. We have expertise across all real estate sectors and can prepare detailed studies for clients looking for investments in office, industrial, retail, hotel, leisure, specialist commercial and residential property. For investors with the means to consider large scale investments, there are many opportunities to acquire real estate to meet investment strategy whether for capital growth, yield, discount turnaround or even development.

Discount Purchases
Working with a large number of developers across Egypt, we are able to source significant discounts for investors purchasing multiple units. The level of discount offered varies but is approximately 10% We are able to offer discount purchasers on many of our current developments. Early stage developments offer the best opportunities and we are able to negotiate an option for investors to re-sell their properties alongside the developer’s retail stock.

INVESTMENTTop of page

Investment Incentives & Law
On May 11, 1997, Egypt's new Investment Incentives and Guarantees Law (Law No. 8 of 1997), which repeals and replaces Investment Law No. 230 of 1989, was legislated. The new law aims to boost production and foreign and domestic investment and offers potentially good incentives for investors, including:

• The prohibition of nationalization, confiscation, and freezing of assets;
• The right to own buildings and land for project purposes regardless of investors' nationality and place of residence;
• The right to maintain foreign currency bank accounts;
• The exemption of manufacturing projects from price controls or profit limitations;
• The right to repatriate capital and profits;
• The right of 100 percent foreign ownership of ventures.

In addition, the new law provides extended tax holidays for projects in target areas. It allows companies, once established, to gain their tax incentives automatically without receiving the prior approval of any administrative authority. It also provides incentives for exporters. Whereas the previous law extended tax incentives for any capital increase or any project expansions, however, the new law provides no such tax concessions. The law specifies a list of priority sectors that automatically benefit from its guarantees and incentives. These sectors include land reclamation, manufacturing and mining, transport, software and computer systems development and production, medical services, certain financial services, oil field services, agriculture and tourism. For these and for most other projects, investments are automatically approved.

The new law expressly preserves the benefits and incentives, as well as investment guarantees granted under law No. 230 for companies established under that law or existing prior to the promulgation of the new law under Law No. 230, all foreign investment projects are exempted from taxes and duties applied in Egypt for a period of five years which may be extended by another five years, regardless of the location of the project. The new law has also abolished the highly bureaucratic General Authority for Investment (GAFI). The entity that will replace GAFI and its functions are to be determined by a presidential decree. Pending issuance of the decree, GAFI will remain the authorized administrative agency. Law 3 of 1998, amending law 159 of 1981, covers investors in any sector not covered by Law 8 of 1997; including shareholders, joint stock, and limited liability companies and representative and branch offices. It allows for automatic registration of a company upon presentation of the application to the Companies Department and for acquisition of legal status 15 days after annotation in the Commercial Register. The Administrative Authority can challenge the establishment of the company within 10 days of its notification in case of non-compliance with procedures; the company’s objective contradict with laws or public order; or lack of qualifications requisite to operating a business (Article 17 & 18).

Founders of joint stock companies must submit a bank certificate showing a 10% deposit of the issued capital to the Companies Department, and to be increased to 25% within three months (Article 32); as for the limited liability companies, the issued capital should be fully paid. Law 3 of 1998 amending law 159 provides for the right of petition for denial of incorporation, removes the restriction that 49% of shareholders must be Egyptian, allows 100% foreign representation on the board of directors, and redefines accounting standards.

TAX INCENTIVESTop of page

Law No. 8 of 1997 grants the projects working under its rubric a tax holiday that includes provisions of interest to investors. Profits on projects and shareholder shares are exempted from the tax on industrial and commercial profits and from the corporate tax for a period of five years starting from the first fiscal year following the beginning of production or activity. The exemption may be extended to ten years for projects established in new industrial zones, new urban communities, remote arand those projects financed by the Social Fund for Development. Profits on projects operating outside the Old Valley and profits of shareholder shares shall be exempted from tax on industrial and commercial profits and from the corporate tax for a period of twenty years starting from the first fiscal year following the beginning of production or activity. An amount equivalent to a percentage of the capital paid in, to be determined by the Egyptian Central Bank for Lending, and discount rates, for the year of fiscal treatment, shall be exempted from the corporate tax, provided that the company is a JSC and its stocks are registered at one of the stock exchanges.

Yields of bonds, finance share warrants and incomes of the other similar securities portfolios as issued by the JSCs shall be exempted from the tax on revenues of movable capitals, providing they are placed for public subscription and registered at one of the stock exchanges. A customs tax at a unified rate of 5 percent of the value is levied on the value of all imports (machines, equipment and instruments) imported by such projects. The profits resulting from the merger, division or the change of the legal entity of a project are exempted from the taxes and duties payable on the merger, division or change of legal entity. Such projects shall enjoy the exemptions prescribed before the merger, division or change of legal entity, until the relevant exemption periods expires. The merger, division or change of the project's legal entity shall not result in any new fiscal exemptions. The result of assessing the in-kind portions forming the foundation of JSCs, Partnership Limited by Shares and LLCs shall b exempted from the tax on revenues of commercial and industrial activities or the tax on corporate companies' profits according to each case. Tax Exemptions of The New Tax Law (91/2005)

General Tax Exemptions

• Profits of land reclamation or cultivation establishments for a period of 10 years.
• Profits of establishments of poultry production, bees breeding, cattle breeding, fattening pens, fisheries and trawlers projects for a period of 10 years.
• Profits of securities investment listed in the Egyptian Stock Exchange.
• Interests of all kinds of debentures and finance bonds listed in the Egyptian Stock Exchange.
• Dividends of the shares of the capital of the joint stock, limited liability companies and partnerships limited by shares obtained by individuals.
• Dividends of the investment securities issued by the investment funds.
• Returns from deposits, savings accounts…etc. in Egyptian banks.
• Profits realized from the new projects established by finance from the Social Fund for Development for a period of 5 years.
• Interest on loans and credit facilities obtained by the government from sources abroad.
• Interests obtained on securities issued by the Central Bank of Egypt.
• Revenues from writing and translating religious, scientific, cultural and literary books and articles.
• Revenues of members of teaching staff in the universities, institutes and others as realized from their books & compilations.
• Revenues of members of the plastic artists association from production of works of photography, sculpture and craving arts.
• Revenues of free professionals that are registered as active members of trade unions in their field of specialization for a 3-year period.

Tax Exempted Entities

• Ministries and government administrations
• Non-profit educational establishments
• Non-governmental organizations established according to law 84 of 2002
• Non-profit entities that are exercising social, scientific, sporting or cultural activities
• Profits of private insurance funds under law 54 of 1975
• International organizations

Educational establishments under government supervision

TAXATIONTop of page

General
Taxes in Egypt may be divided into two categories. The first one concerns direct taxation of individuals and legal entities on their income or profit. The second involves indirect taxation of goods, services and events. The Egyptian taxation framework is statutory based. Tax administrators are given, under the relevant legislation, few discretionary powers. Courts are primarily responsible for the interpretation of statutes. The nature of the Civil Law system operating in Egypt allows precedent to have an influential but not necessarily a binding effect. Over the last several years, Egypt has made many changes in its tax system. Some of these changes are merely cosmetic while others are rather substantial. Given this trend, it is advisable to seek up-to-date advice on recent and future changes to the tax law before pursuing commercial plans in Egypt.

Taxation of Companies
The Egyptian corporate tax regime applies to joint stock companies, limited liability companies, partnerships limited by shares, foreign companies and branches of foreign companies whose head office is situated abroad. This tax is also applicable to banks and public sector companies. As of January 1, 1994, companies are subject to corporate profit tax at a standard rate of 40 percent. Special rates, however, apply to companies engaging in the following activities: (1) Petroleum companies - 40.55 percent; (2) Companies with export activities - 32 percent; and (3) Industrial (manufacturing) companies - 32 percent. Corporate income tax is based upon taxable profits computed according to generally accepted accounting principles and certain modifications as provided by statute, the most important of which involve depreciation, inventory valuation and inter-company transactions. Capital gains arising from the sale of fixed assets are treated as ordinary profits. Dividends received by resident companies from foreign sources are subject to tax on income from moveable capital at a rate of 32 percent, but foreign taxes paid on such dividends are deductible. Interest derived from securities listed on the Egyptian Stock Exchange is exempt from income tax.

Virtually all legitimate business expenses are deductible including depreciation, other taxes and duties, interest and royalties, bad and doubtful debts, rent, director's remuneration, profit sharing payments to employees, legal expenses, pension and Egyptian state social insurance contributions. Losses may be carried forward and applied against future profits for up to five years. All operations owned by the same company must be aggregated for reporting purposes. If operations are carried out by separate companies which are owned or controlled by one parent company, however, consolidation is not permitted. It should be noted that general partnerships and simple limited partnerships are not taxable entities under Egyptian law. The partners in such partnerships, are personally liable for the tax due on their respective shares in the partnership's profit. Partners, therefore, are taxed in the same manner as individuals.

Taxation of Individuals

Income Tax
Law No. 187 of 1993, also known as the Unified Tax Law, abolished the general income tax previously levied on individuals pursuant to Tax Law No. 157 of 1981. Under the new Unified Tax Law, individuals, including partners in partnerships, are subject to tax at various rates on income from five sources:

• Income from Movable Capital: This tax is levied at a rate of 32 percent of gross income usually collected through withholding. This category refers to interest (other than interest on deposits), foreign-source dividends (less foreign taxes paid), executive director's fees and attendance fees.
• Income from Immovable Capital: This tax is levied at rates ranging from 20 percent to 48 percent. This category applies to net income derived from land and buildings.
• Commercial and Industrial Profits: This tax is charged on a sliding scale at rates ranging from 20 percent to 48 percent. This category applies to net commercial and industrial profits of enterprises which are not subject to corporate tax.
• Professional Fees: This tax includes rates that range from 20 pto 48 percent. This category covers the net incomof professionals such as engineers, accountants and lawyers.
• Salaries: This is a tax imposed on salaries paid in Egypt or abroad for services performed in Egypt. Taxable salary includes the value of all benefits, apart from housing allowances given to foreign experts. The salary tax is levied at 20 percent on the first £E50,000 of net taxable salary, after deductions and allowances, and 32 percent on the excess.

General Tax on Income
In addition to the specific taxes that are levied on specific types of income as mentioned above, the Egyptian legislature has imposed a general tax on income which is applicable to individuals. This tax is an additional tax, and the tax base is regarded as the total net income that the individual receives during the year. Only income that is subject to a specific tax is included in the tax base for the general tax on income. The general tax on income is progressive and reaches 65 percent for income in excess of £E200,000 per annum. It should be noted that foreign employees in Egypt are subject to this tax unless there is a particular statutory or regulatory provision exempting them from the tax.

OTHER TAXESTop of page

Real Property Tax
Real Estate taxes are levied on the assessed annual rental value of improved and agricultural property at rates ranging between 10 percent to 40 percent.

Stamp Duty
Most classes of documents, contracts, checks, receipts, bills, letters of guaranty, various banking transactions, transfer of unlisted securities, leases and many other instruments require payment of stamp duties. For example, between £E150-£E300 of stamp duty is charged upon the formation of companies, £E50 is charged for the registration of companies in the Commercial Registrar and £E0.01 is levied on bank checks.

Withholding Taxes
There are no withholding taxes as such in Egypt, apart from scheduled income taxes which are withheld at source in many cases. Dividends distributed by an Egyptian company are not subject to withholding tax. The main instances where taxes are withheld are summarized below. Tax on income derived from moveable capital is withheld in many cases, including payments to a foreign company that has no branch in Egypt and payments to non-resident individuals. Royalties and technical assistance fees paid to a foreign company with no branch in Egypt are normally subject to the 40 percent corporate income tax rate. The tax is imposed on the net amount after an arbitrary deduction for expenses. Amounts are also withheld on account of taxes due at 10 to 15 percent on the amount payable for professional services, at 3 percent on commercial services and at 10 percent on commissions paid to commercial agents. Lastly, employers must withhold the scheduled tax on salaries and wages from their employee's pay.

Inheritance and Gift Taxes
Succession tax is imposed on gifts and inheritances at rates between 3 to 15 percent. No tax is charged on an inheritance of less than £E 10,000. Resident foreigners are subject to inheritance and gift taxes on real estate and moveable assets. Non-residents are subject to these taxes only on real estate assets located within Egypt.

Development Duty
A 2 percent development duty is levied on the annual taxable income of individuals and companies that exceeds £E 18,000. Social Insurance Contributions Employers and employees must pay social insurance contributions to the Ministry of Social Insurance and Social Affairs. The social insurance laws do not apply to expatriates. The rate paid is based on the employee's monthly salary and is contributed to at a rate of 26 percent by the employer and 14 percent by the employee.

Sales Tax
Law No. 11 of 1991 provides for a general tax on sales. The tax applies to most goods and certain types of services (mainly tourism, telecommunications and entertainment services). Goods imported from abroad for commercial purposes are also subject to the tax. The tax rate for goods ranges from 10 percent (the general rate) up to 50 percent for certain specified goods. The tax rate for services ranges from 5 to 10 percent. The tax is added to the price of the goods or services in question and is payable by the consumer at the point of sale and remitted by the billing entity to the tax authorities.

Treaties for the Prevention of Double Taxation
Egypt has concluded treaties for the prevention of double taxation with a number of countries, including: Austria, Canada, Cyprus, Denmark, Finland, France, Germany, India, Iraq, Italy, Japan, Libya, Norway, Oman, Pakistan, Romania, Singapore, Sudan, Sweden, Switzerland, Syria, Tunisia, the United Kingdom and the United States. Draft treaties which have not yet been ratified were concluded with Indonesia, Korea, Malaysia and Morocco. It is notable that since Egypt does not levy withholding tax on dividends, its tax treaties provide reduced withholding tax rates only for interest and royalties. In the absence of a tax treaty, unilateral tax relief is available by way of deduction rather than by a tax credit. A taxpayer who derives foreign-source income which is subject to foreign as well as to Egyptian taxes will be allowed to deduct the amount of foreign tax paid in order to compute the taxpayer's taxable income for Egyptian tax purposes.

INVESTMENT RETURNTop of page

Market Drivers: Location
This is always a major factor with any property investment. The location of an investment is directly linked to the return on investment an investor can expect from both capital growth and rental yields. We recommend that investors look at current property and rental prices in the direct and surrounding areas of any proposed investment to gain first hand knowledge of pricing and, where possible, they should personally visit the area.

Cost/Value
A property purchase is only an investment if it is purchased at the correct price, allowing for its value to appreciate and/or generate solid rental returns in proportion to its cost.

Economy
The economic condition of the country should be taken into account because a country or region that relies more heavily on tourism will be prepared to invest more into the infrastructure of the area to promote construction and tourism. The down side may be that too much planning consent may be allowed.

Nature of The Location
Needless to say that if the investment is primarily for summer holiday makers then the climate needs to be warm and sunny, in a ski resort there must be plenty of snow. An emerging market has significant business attraction. e.g. Businesses looking to invest in an area by relocating production facilities due to lower labour costs etc. In these areas buy and hold strategies may be very rewarding.

Logistics
To be attractive the area must be easy to reach! Look out for new low cost airline routes, nearby airports, good road infrastructure.

Infrastructure
An excellent sign of an investment property hotspot is when there are considerable infrastructural improvements being made to an area. Generally this includes local attractions, services and amenities, but also, and often most importantly, additional airports, ports and roads, as well as secure signs of growth and firm commitment by a local government to help improve an area.

Natural Factors
These are often the most obvious "market drivers". Many locations base their bid to increase tourism and property demand on the fact that the area enjoys excellent weather conditions and can offer stunning beaches, tropical views or are positioned next to a mountain ranges offering quality skiing conditions. These factors are obviously very important, but it is essential that other "market drivers" are also considered in association with these as follow:

Tourism
Tourism is the primary factor that enables many emerging property investment locations to create a successful property market. With increasing low cost flight destinations and the world becoming effectively smaller, the door is open to many relatively unknown destinations that are beginning to offer new and exciting holiday destinations to tourists around the world. Today's tourist is after all willing to try new places after experiencing the same traditional locations for too many years.

Political Stability
With terrorism around the world on the increase and many political, religious and legal implications to consider it is essential that the stability of an investment location is considered prior to any investment. Political stability of a location can act as a very strong investment market driver.