How do Egyptian free zones work?

Free Zone in Egypt: How It Works and Who Qualifies

If you're weighing where to set up an export-oriented business in the region, a free zone in Egypt is probably on your shortlist. Here's what the regime actually looks like in 2025 — the tax breaks, the catch, and who gets in.

Quick answer

A free zone in Egypt lets you incorporate a company that's exempt from customs duties, VAT, and most corporate income tax on export activity. The regime is governed by the Investment Law No. 72 of 2017 and administered by the General Authority for Investment and Free Zones (GAFI). You pay an annual fee — usually 1% or 2% of revenue depending on activity — instead of standard tax. At least 80% of production must be exported. Approval takes 30 to 60 days on average.

What "free zone" actually means here

Egypt runs two kinds. Public free zones (in fixed locations like Nasr City, Alexandria, Damietta, Port Said, Suez, Ismailia, Media Production City, and Shebin El Kom) and private free zones (a single project granted free zone status on its own site, usually for large industrial investments).

Both sit outside Egypt's customs territory. That's the legal fiction that makes the tax treatment work. Goods entering a free zone in Egypt aren't "imported" into Egypt in the customs sense, and goods leaving it aren't "exported" from Egypt either — until they cross into the domestic market.

The framework comes from Investment Law No. 72 of 2017 and its executive regulations (Prime Minister Decree 2310 of 2017), which replaced the older Law No. 8 of 1997 regime.^[1][2] GAFI is the one-stop shop for licensing, and the Ministerial Committee for Free Zones signs off on new projects.^[3]

What you actually save

Three real benefits, and one you should ignore.

Customs duty: zero on machinery, equipment, raw materials, and components brought into the zone. You also skip the 14% VAT on those imports.

Corporate income tax (22.5%) and dividend tax: exempt on activity conducted inside the zone. This is the big one. A standard Egyptian LLC pays 22.5% corporate tax under Law No. 91 of 2005. A free zone company pays none on qualifying export revenue.^[4]

In lieu of tax, an annual fee: 1% of the value of goods entering the zone for storage projects, or 1% of the value of goods leaving the zone for manufacturing and assembly projects. Service projects pay 2% of total annual revenue.^[1]

The one to ignore: people sell "no labor law obligations" as a benefit. Not true. Egyptian labor law (Law No. 12 of 2003) still applies to workers, though foreign-worker quotas are relaxed — a free zone company can hire up to 25% foreign staff, versus 10% under the general rule.

Annual free zone fees (2025):

• Manufacturing/assembly: 1% of goods leaving the zone
• Storage: 1% of goods entering the zone
• Services: 2% of gross annual revenue
• GAFI service fee: 0.001% of investment cost (min USD 100, max USD 1,000)
• Public free zone rent: varies by zone, roughly USD 3.50–7 per m² annually for land

Who qualifies — and who doesn't

Not every business gets to play. The Investment Law explicitly bars certain activities from the free zone in Egypt regime, and the list grew after 2015 amendments.

Excluded activities include petroleum refining, fertilizer manufacturing, steel production, natural gas liquefaction and transport, energy-intensive industries, wine and alcohol production, and weapons and ammunition. Financial services, real estate development for domestic sale, and telecom infrastructure are also outside the regime.^[1][2]

The 80% export rule: at least 80% of your production or services must be directed to markets outside Egypt. You can sell up to 20% into the local Egyptian market, but that portion gets hit with full customs duties, VAT, and — depending on structure — corporate tax on the corresponding profit.

Capital requirement: no fixed statutory minimum for most activities, but GAFI expects a realistic capitalization tied to the project's scope. In practice, private free zone projects usually involve investments of USD 10 million or more, because the Ministerial Committee wants to see genuine industrial substance.

Trading companies pure and simple? Frankly, harder to get approved now than a decade ago. The regime is being steered toward manufacturing and value-added services.

How to actually set one up

The process runs through GAFI's investor service center. Rough sequence:

1. File the application with GAFI including a feasibility study, articles of association, shareholder documents, and site preference (public zone) or site plan (private zone).
2. Ministerial Committee review for private free zones — this is the bottleneck and can take 45–90 days.
3. Company incorporation in parallel, usually as a joint stock company or LLC under the Companies Law No. 159 of 1981.
4. Free zone license issuance once the committee approves and lease is signed.
5. Operational registrations: tax card, commercial register, social insurance file, import/export card.

Realistic timeline start to operational: 3 to 6 months for a public free zone project, 6 to 12 months for a private one.^[3]

The 80% export ratio is measured annually and audited. Miss it two years running and GAFI can revoke your free zone status — which retroactively exposes you to customs and tax liabilities on everything you brought in duty-free. This is where projects blow up. Build export contracts before you build the factory.

Free zone vs. investment zone vs. SEZone

Quick clarification because the terminology gets muddled.

A free zone in Egypt is what this article covers — customs-exempt, export-focused, under Law 72/2017.

An investment zone (also under Law 72) is a designated industrial park inside Egypt's customs territory. You get regulatory streamlining and some incentives, but no customs or VAT exemption. Suits companies selling into the Egyptian market.

A Special Economic Zone (SEZone) operates under its own law — Law No. 83 of 2002 — the flagship being the Suez Canal Economic Zone (SCZONE). SCZONE offers a 10% flat corporate tax rate, 5% personal income tax for employees, and customs benefits, but it's a distinct regime with different rules and its own authority.^[5]

If you're export-focused and want maximum tax efficiency, a free zone in Egypt is usually the answer. If you're building a mega-project along the Suez corridor with a mix of export and domestic sales, SCZONE often fits better. Run the numbers both ways.

For related setup questions, see our overview of company formation in Egypt.