How to set up as an independent contractor in Egypt

If you’ve decided to go it alone as an independent contractor, then congratulations: you’re about to embark on a journey as daunting and fascinating as the great pyramids themselves.

Being your own boss isn’t easy, but it can certainly be rewarding. And in Egypt — one of Africa’s largest economies — there’s plenty of opportunity to make a genuine living on your own terms.

Before you can start your self-employment journey, though, you’ll need to know how to:

• Register your business in Egypt

• Avoid misclassification as an employee

• Create compliant contracts that protect you

• Invoice and collect payments from around the world

In this article, we’ll cover all these things, and help you navigate your tax responsibilities as a self-employed worker. We’ll also discuss some of the other risks and liabilities you should be aware of.

First, it’s important to clarify how Egypt defines independent contractors.

What is an independent contractor, according to Egyptian law?

Independent contractors are workers who provide paid services (or products) to another party. However, they are classified differently to employees, and are usually not entitled to the same benefits, such as paid leave, sick days, and minimum wage. On the flip side, contractors have more freedom and flexibility in the way they work.

See also: Why businesses hire contractors vs. international employees

As in most countries, Egypt does not explicitly define the difference between employees and independent contractors in law. Instead, the distinction is made based on the nature of the working relationship, and the degree of control exercised by the client/employer.

Based on these guidelines, and the definitions of employment in the Egyptian Labor Code, you are generally considered to be an independent contractor if you:

• Determine your own work schedule and working hours

• Perform work for other companies

• Set your own rates and scope of work

• Provide your own tools or equipment

• Are not integrated into one specific company and its operations (i.e. you don’t have an internal email address)

• Are able to delegate or subcontract work

• Work without direction or supervision

When you work with clients, it’s important to be correctly classified to avoid penalties and fines, and to ensure that you are paying the right taxes.

Business registration in Egypt

In Egypt, many independent contractors — particularly in tech and marketing fields — operate as freelancers. However, there is a gray area around the taxation of freelancers, as well as their recognition by the government.

Alternatively, you can operate your business under a formal legal structure. As an independent contractor, the two most suitable models are:

• One-person company: Under this model, you retain full control of the enterprise, and are considered as a separate legal entity. This means that your personal finances and assets are not at risk if something goes wrong. A one-person company now also only requires a minimum startup capital of EGP 1,000 (around $32) (down from the previous requirement of EGP 50,000). However, there is a lot of administration involved in the setup and maintenance of the company.

• Sole proprietorship: This model is similar to the one-person company, with one key difference — there is no legal separation. As a result, you are personally liable for any debts or monies owed. On the flip side, a sole proprietorship requires far less maintenance.

You can register either of these company types through the Egyptian government’s online portal.

How do I get paid as an independent contractor in Egypt?

As an independent contractor, it’s down to you to handle your invoices and payment collection. Unfortunately, this means billing each client individually and collecting payment through their preferred payment method — which can be inefficient and time-consuming.

Some of the most common ways to collect payments include:

• Bank transfers

• Direct deposits

• Paper checks

• Money orders

• Virtual wallets

• Digital transfer services

These methods all have their own pros and cons. For instance, bank and digital transfers can be pretty quick, but often come with hefty service fees. And if you have clients in other countries besides Egypt, the payment collection process can be even more complicated. 

Alternatively, you can use a trusted solution like Remote. Our platform is a simple, secure, and reliable way to get paid quickly in Egyptian pounds — and with no hidden fees. Learn more about how our platform can help.

Independent contractor taxes in Egypt

As an independent contractor, you’re responsible for filing and paying your own taxes

If you operate as a sole proprietor, your business profits are taxed as personal income (as you are not considered legally separate from your business). In Egypt, you will be taxed at the rate of anywhere between 0% and 25%, depending on your level of income. You must submit your annual tax return by March 31 each year.

If you operate under a one-person company, you must pay corporate tax on your business profits. This is set at the flat rate of 22.5%, regardless of your income. You must submit your annual tax return by the end of April each year.

In both cases, you are not required to make social security contributions. However, it’s generally advisable to make voluntary contributions, either privately or to the relevant state agencies.

VAT information for independent contractors in Egypt

If your annual business income exceeds EGP 500,000 (around $16,200), you will need to register for and charge VAT. You will also need to make monthly VAT payments to the government.

The standard VAT rate in Egypt is 14%, although some goods and services are charged at the lower rate of 5%.

Liability considerations for independent contractors in Egypt

As an individual entrepreneur, you are personally liable for finance and tax debts, which means your private assets can be forcibly used to settle your business debts. Many independent contractors purchase liability insurance to help mitigate this risk.

It’s also important to cover yourself when drafting and signing agreements with clients. Our legal experts can provide you with fully compliant contract templates, for both Egyptian and international clients.

Accounting requirements for independent contractors in Egypt

If you are operating as a sole proprietorship, you do not need to publish annual financial statements. However, as a one-person company, you will need to prepare key statements as requested by the authorities, such as a balance sheet, income statement, and cash flow statement.

In either case, you should keep organized, accurate records of all your income and expenditure (including client invoices, purchase orders, bank statements, and receipts). This will help you correctly file your taxes, give you a stronger picture of your financial situation, and generally make life easier if you are audited by the tax authorities.

You can either manage these records yourself using an accounting or bookkeeping tool, or hire a professional bookkeeper or accountant. 

The dangers of contractor misclassification in Egypt

As we’ve mentioned, independent contractors are classified differently to employees in Egypt. Many of the protections and benefits employees enjoy do not typically apply to contractors.

As a result, companies may deliberately misclassify you to circumvent their legal obligations, while at other times, it may happen accidentally. Whether it’s intentional or not, misclassification can result in penalties and fines for both you and your client.

As an independent contractor, you can work with your clients to ensure this doesn’t happen. Discuss your role and responsibilities with them, and review the working arrangement regularly.

If your working relationship changes over time and you become more integrated into a client’s company, you can ask to be converted into an employee.

Use our Contractor Compliance Checklist to avoid misclassification

Work through this checklist to help determine if a new hire should have a contractor or employee relationship.

Download

How do I ask the company I’m working with to convert me to an employee in Egypt?

Open a dialogue with your client and carefully discuss the risks and benefits of moving to an employer-employee relationship. In particular, be clear about how it can benefit both parties — not just you.

You can even suggest the help of a third-party solution, such as Remote, to ease the transition. Our global employment services help both parties stay compliant by taking care of key HR functions (like payroll management and benefits administration) in line with Egyptian law.

4 ways Remote makes life easier for contractors and their clients

As you can see, there’s a lot to take on board when setting up as an independent contractor. Remote can help you with many of these challenges, allowing you to focus on growing your business and delivering to your clients. Here’s how:

1. International payments in countries around the world

Navigating all of your clients’ different invoicing, approvals, and payments systems can be complicated and time-consuming. And manual methods of invoicing and collecting payments can increase the risk of fees, errors, and delays.

Remote gives you access to a highly secure, streamlined dashboard that makes invoice management and international payments cost-effective and efficient. You can use our platform to get paid in Egyptian pounds (or other currencies), without any hidden fees.

2. Localized in-app contracts and advice

When you draft agreements and contracts for your clients, you run the risk of non-compliance with local labor laws — especially when working with international clients. Remote offers localized contracts tailored to Egyptian laws, ensuring that you stay compliant. Our legal experts can also provide guidance on complex issues, such as local classification and intellectual property protections.

3. Invoicing automation

With Remote, you no longer need to rely on spreadsheets and other manual tools to invoice for payments; we remove many of the inaccuracies and delays caused by archaic processes and manual management. Our platform lets you create invoices, submit them for approval, and subsequently get paid in your local currency without needing to switch to any other tool or software.

4. Tax management

Tax management is notoriously complex work. Remote helps you quickly and efficiently deal with tax management by compiling data about your income based on your invoices and payments received.

Setting up as an independent contractor in Egypt

Having the freedom and flexibility to work on your own terms is liberating. But your administrative responsibilities can distract from what you really want to be doing: helping your clients, delivering great work, and collecting invoices.

By using a stable, trusted platform like Remote, you can manage these obligations quickly and efficiently, allowing you to focus on your business goals. Specifically, we can help you:

• Avoid intermediary fees and delays with international client payments

• Draft compliant contracts for Egyptian and foreign clients

• Enhance your invoice management and avoid manual processes

• Comply with local labor laws regarding work practices

Our platform makes it quick, simple, and seamless to get started as an independent contractor. Learn more about how our expertise can save you time and resources today.