Joint Ventures/Licensing

The details of joint venture or licensing agreements between Egyptians and their foreign partners are a matter of mutual agreement, defined by their contract, not by special law. Invested capital may be repatriated without prior approval of the government’s investment authority, the General Authority for Investment and Free Zones (GAFI). Egypt can, and has in the past, restricted foreign investors’ ability to convert local currency into U.S. dollars or Euros, effectively blocking the repatriation of capital. Foreign equity in joint ventures can be as low as a few percentage points, depending upon mutual agreement. Egyptian Law No. 8, the Investment Incentives and Guarantees Law, allows foreign investors to own any amount, up to 100%, in projects in most sectors.

Approval is not required for licensing agreements involving trademarks and technical know-how other than “process secrets.” A stiff withholding tax is levied on royalty payments unless a double taxation treaty exists. There is a U.S.-Egyptian treaty for the avoidance of double taxation, which limits the tax on royalty payments to 15% of the gross amount of such royalty. Numerous government and private companies have licensing agreements with foreign firms under which royalties and other fees are freely transferred abroad pursuant to individual corporate agreements. Examples of licensed production in Egypt include name-brand clothing, personal care products, kitchen utensils, laser alignment equipment and military vehicles.