Its importance for startups is particularly evident because the Law distinguishes between several legal classifications that may overlap in practice, such as newly established enterprises, small enterprises, and entrepreneurship projects. Each classification has different conditions and legal effects.
How Does the Law Classify Enterprises?
Under the provisions currently in force pursuant to Law No. 152 of 2020, existing enterprises are classified primarily according to their annual turnover:
- Micro Enterprise: An enterprise with annual turnover of less than EGP 1 million.
- Small Enterprise: An enterprise with annual turnover of EGP 1 million or more but less than EGP 50 million.
- Medium Enterprise: An enterprise with annual turnover of EGP 50 million or more but not exceeding EGP 200 million.
For newly established enterprises, the Law establishes criteria based on paid-up or invested capital depending on the nature of the activity.
Newly Established Industrial Enterprises
- Micro: Capital of less than EGP 50,000.
- Small: From EGP 50,000 to less than EGP 5 million.
- Medium: From EGP 5 million to EGP 15 million.
Newly Established Non-Industrial Enterprises
- Micro: Capital of less than EGP 50,000.
- Small: From EGP 50,000 to less than EGP 3 million.
- Medium: From EGP 3 million to EGP 5 million.
The Law defines a newly established enterprise as an enterprise that has not been established, registered, or commenced operations for more than two years.
Is Every Startup Considered an “Entrepreneurship Project”?
No.
The term “startup” is widely used commercially, but it does not automatically correspond to the legal classification of an “entrepreneurship project” under the Law.
The Law defines an entrepreneurship project as a project that has not been operating or in production for more than seven years and that incorporates a degree of novelty or innovation in accordance with the criteria established by the Board of Directors of the Micro, Small and Medium Enterprises Development Agency.
This distinction is important because some incentives under the Law are specifically directed at entrepreneurship projects or particular activities and are not automatically available to every newly established business.
What Does the Law Actually Provide to an Enterprise?
The Law is not limited to classification, but provides several mechanisms to facilitate the establishment and growth of businesses, although access to these benefits depends on satisfying the conditions and procedures applicable to each incentive.
Facilitating Licensing Procedures
The Law and its Executive Regulations established a system of Service Delivery Units affiliated with the Micro, Small and Medium Enterprises Development Agency, through which a number of approvals, permits, operating licenses, and registration procedures required by the enterprise may be processed.
However, this does not mean that there is a “single license” replacing all sector-specific licenses for every activity. If the activity is industrial, food-related, medical, or requires specific environmental or regulatory approvals, the requirements contained in the relevant legislation remain applicable.
The benefit of the Agency’s units lies in consolidating and coordinating procedures and reducing the number of authorities with which the enterprise must deal, rather than eliminating the substantive licensing requirements.
Key Financial and Non-Tax Incentives
The Law establishes a range of incentives, some generally available to qualifying enterprises and others granted by the Agency’s Board of Directors to specified categories or activities.
Among the most notable are:
- Exemptions from stamp duty and certain notarization and registration fees applicable to enterprise incorporation agreements, credit facilities, and mortgages connected with their activities, subject to the statutory conditions and periods.
- Exemptions relating to registration of land required for establishing the enterprise in the cases regulated by law.
- Application of a unified customs duty rate of 2% on machinery, equipment, and devices imported by enterprises and required for their establishment, excluding passenger vehicles and subject to the prescribed rules.
- Exemption of capital gains arising from the disposal of certain assets, machinery, and equipment in cases where the statutory conditions are satisfied.
- The possibility of granting incentives relating to utility connections, technical training, allocation of land, and participation in exhibitions for certain enterprises satisfying the criteria under Articles 23 and 24 of the Law.
The Law also grants entrepreneurship projects exemptions relating to certain fees for registration of intellectual property rights, which may be particularly important for innovation- and technology-based companies.
Does the Law Guarantee Low-Interest Financing?
There is no automatic legal right for every enterprise to obtain a low-interest loan merely because it falls within the scope of Law No. 152 of 2020.
The Micro, Small and Medium Enterprises Development Agency does provide financing programs and technical, training, and marketing services and may cooperate with banks and donor institutions. However, access to financing remains subject to the available program, creditworthiness, the nature of the enterprise, and the requirements of the financing institution.
A distinction must therefore be made between incentives established by law and financing programs made available by the Agency or financial institutions from time to time.
An Important Change in the Tax Regime Since 2025
The original version of Law No. 152 of 2020 included a simplified tax regime specifically for small and micro enterprises.
However, this aspect changed substantially with the enactment of Law No. 6 of 2025 concerning certain tax incentives and facilitations for enterprises whose annual turnover does not exceed EGP 20 million.
The new Law repealed Articles 85, 86, and 87 and Articles 93 through 99 of Law No. 152 of 2020, which contained a principal part of the former simplified tax regime.
Accordingly, it is no longer accurate to present the former simplified tax regime under Law No. 152 as the current tax system applicable to enterprises.
What Is the Current Simplified Tax Regime?
Law No. 6 of 2025 allows enterprises whose annual turnover does not exceed EGP 20 million to apply for the Simplified Tax Regime, provided that they satisfy the conditions of the Law and do not fall within any of the prescribed exclusions.
Income tax under this regime is graduated according to turnover, ranging from:
- 0.4% for enterprises with annual turnover of less than EGP 500,000.
- 0.5% for certain enterprises with turnover starting from EGP 500,000.
- 0.75% in the next bracket.
- 1% for enterprises with turnover from EGP 3 million to less than EGP 10 million.
- 1.5% for enterprises with turnover from EGP 10 million up to EGP 20 million.
The regime also includes simplified tax procedures, quarterly rather than monthly VAT returns for persons subject to VAT, and tax examination of the enterprise after five years from the date of applying to benefit from the regime, subject to the prescribed conditions.
Access to this regime is not automatic merely because the enterprise is classified as small under Law No. 152. An application must be submitted to benefit from Law No. 6 of 2025, and the enterprise must comply with the electronic systems, tax returns, and other prescribed requirements.
The Difference Between Classification Under Law No. 152 and the Tax Regime Under Law No. 6 of 2025
This is a particularly important distinction.
An enterprise may be classified as “small” under Law No. 152 because, for example, its annual turnover is EGP 35 million, but it cannot enter the simplified tax regime under Law No. 6 of 2025 because the maximum turnover threshold for that regime is EGP 20 million.
Accordingly:
- Law No. 152 of 2020 determines the legal status of an enterprise as medium, small, or micro and regulates a broad range of incentives, licensing procedures, and development mechanisms.
- Law No. 6 of 2025 regulates a separate optional tax regime for enterprises whose annual turnover does not exceed EGP 20 million.
The two scopes should not be confused.
What About the Proposed Amendment to Enterprise Definitions in 2026?
In February 2026, the Council of Ministers approved a draft law amending the definitions of enterprises contained in Law No. 152 of 2020, proposing substantial increases to the thresholds in order to reflect inflation and economic changes.
The proposed definitions include:
- Medium enterprises: Annual turnover from EGP 100 million up to EGP 400 million.
- Small enterprises: Annual turnover from EGP 2 million to less than EGP 100 million.
- Micro enterprises: Annual turnover of less than EGP 2 million.
The draft law also provides for doubling a number of capital thresholds applicable to newly established enterprises.
However, government approval of a draft law does not itself mean that these thresholds have entered into force. As of the date of this article’s update, the final legislation in force and published in the Official Gazette must be consulted when determining the legal status of an enterprise, and the proposed thresholds should not be applied before completion of the legislative process and entry into force of the amendment.
Is Registration with the Micro, Small and Medium Enterprises Development Agency Mandatory for Every Startup?
Incorporation of the company and acquisition of legal personality take place in accordance with the law under which the company adopts its legal form. Registration with the Micro, Small and Medium Enterprises Development Agency does not replace incorporation procedures, commercial registration, or tax registration.
However, obtaining a classification certificate or registration with the Agency may be necessary or useful for proving the enterprise’s status and benefiting from certain incentives and services provided under Law No. 152.
The Agency should therefore be treated as a principal authority within the system for enterprise development and support, rather than as a substitute for the General Authority for Investment and Free Zones, the Egyptian Tax Authority, or the competent licensing authorities.
What About Informal Economy Enterprises?
The Law dedicates an important section to encouraging enterprises operating without having completed certain licensing requirements to transition into the formal economy, establishing a system for temporary licensing and regularization of status in accordance with the statutory rules.
The purpose of this framework is to provide an existing business with a lawful route to complete its licensing requirements rather than remaining permanently outside the formal system.
However, an enterprise operating without a license does not become licensed merely because its turnover falls within the definition of a small or micro enterprise. The prescribed procedures for regularization and licensing must still be completed.
Are There Penalties Merely for Failing to Register Under Law No. 152?
It is incorrect to establish a general rule that every company not registered with the Micro, Small and Medium Enterprises Development Agency automatically becomes subject to a fine or suspension of its activities.
Penalties depend on the nature of the violation and the legislation breached, such as carrying on an activity without the required license, tax or social insurance violations, or breaches of sector-specific laws.
However, if an enterprise obtains incentives under Law No. 152 without entitlement, or divides its activities or adopts sham arrangements for the purpose of falling within the scope of the incentives, it may lose the right to benefit from those incentives and be required to repay amounts obtained without entitlement in accordance with the Law.
Practical Steps for a Startup
- Select the appropriate legal form: A single-member company, limited liability company, joint-stock company, or another form depending on the nature of the enterprise, its investors, and its financing plan.
- Determine the enterprise classification: By reference to turnover or capital in the case of a newly established enterprise.
- Determine whether the enterprise qualifies as an entrepreneurship project: The mere fact that the company is newly established is insufficient unless the innovation requirements and prescribed criteria are satisfied.
- Complete the fundamental registrations: Commercial registration, tax registration, social insurance, and the necessary sector-specific licenses.
- Assess the available incentives: Without assuming that every incentive is automatically granted to all enterprises.
- Review Law No. 6 of 2025 separately: If annual turnover does not exceed EGP 20 million.
- Use the Service Delivery Units: To facilitate licensing and approval procedures where the relevant service falls within their jurisdiction.
- Maintain accurate financial records: Because turnover is a fundamental criterion for determining classification and the applicable tax regime.
Conclusion
Micro, Small and Medium Enterprises Development Law No. 152 of 2020 is no longer merely a statute defining a “small enterprise.” It represents a framework regulating licensing, incentives, entrepreneurship, integration of the informal economy, and facilitation of enterprises’ dealings with government authorities.
Proper use of the Law, however, begins with distinguishing between the legal classification of the enterprise, its status as an entrepreneurship project, incentives requiring approval or satisfaction of specific conditions, and the separate tax regime introduced by Law No. 6 of 2025.
The proposed amendment to enterprise definitions that emerged in 2026 should also be monitored, without treating its proposed thresholds as law in force until the legislative procedures for enactment and official publication have been completed.
Legal planning from the outset of the enterprise—from selecting the legal form and obtaining licenses to taxation and financing—gives a startup greater ability to benefit from available incentives without subsequently encountering classification or compliance issues.