Egyptian startups are facing challenges such as foreign currency shortages and bureaucratic obstacles, prompting many to consider moving overseas. In response, the government of Egypt has introduced a new incentive in the form of tax-free zones aimed at supporting tech companies and encouraging them to stay in the country. These tax-free zones offer simplified regulations, customs exemptions, and expedited licensing processes to help startups grow and thrive.
The General Authority for Investment and Free Zones (GAFI) has announced that startups in the service sector, particularly those specializing in software exports and artificial intelligence, can now establish their headquarters in designated free zones. These startups will benefit from complete customs and tax exemptions, streamlined business registration procedures, and access to various support services such as legal, consulting, and marketing firms.
The goal of this initiative is to position Egypt as a regional hub for tech entrepreneurship, taking inspiration from successful free zone models in countries like the UAE, Bahrain, and Morocco. Free zones are designated areas where companies enjoy special economic benefits such as lower taxes, simplified import-export processes, and reduced bureaucratic hurdles. For startups, these zones can significantly lower operating costs and facilitate expansion into international markets.
In Egypt, the free zones will allocate approximately 9,000 square meters for startup activities, with a focus on AI, fintech, and software development. GAFI CEO Hossam Heiba emphasized that this initiative is part of a larger strategy to enhance Egypt’s entrepreneurial ecosystem, which includes the establishment of government-supported organizations like Egypt Ventures and the Bedaya Center for Entrepreneurship.
To further streamline the process for entrepreneurs, GAFI has implemented a fast-track registration system that enables the creation of a single-person company online within two hours. This marks a significant improvement from the typically lengthy business setup procedures in Egypt.
The introduction of tax-free zones comes at a crucial time for Egyptian startups, as they navigate a challenging funding landscape. In the first quarter of 2025, startups in Egypt secured $61 million in funding, reflecting a 15.1% increase from the previous year. Sectors like logistics and e-commerce have been particularly active in attracting investment.
Experts have drawn parallels between Egypt’s initiative and successful free zone models in the Gulf region. For example, the UAE’s Ras Al Khaimah Economic Zone and Dubai Silicon Oasis provide startups with flexible licenses, visa services, and investor connections. Bahrain’s FinTech Bay offers tax exemptions and affordable startup costs to support companies in expanding across the GCC.
While the introduction of tax-free zones is a positive step, experts stress that the success of the initiative will depend on its implementation. Beyond tax incentives, startups also require access to funding, mentorship, and international markets to thrive. By incorporating venture capital firms and simplifying regulations, free zones in Egypt have the potential to retain startups and prevent them from relocating to other tech hubs.
In conclusion, Egypt’s move to establish tax-free zones demonstrates its commitment to nurturing a vibrant tech ecosystem and attracting investment. The success of these zones will hinge on the government’s ability to deliver on its promises of efficiency and support. As Egypt aims to position itself as a rival to regional tech centers, the effectiveness of its tax-free zones in retaining startups remains to be seen.
