Tax system : As a result of enactment of the Tax Law 91 for the year 2005, and its amendment by the Presidential Decision No. 96 for the year 2015, the taxation system in Egypt has been transformed. Mainly, for today two types of taxes apply:
- Individual income tax
- Tax on company profits
Individual Income Tax
The income of natural persons residing in Egypt is subject to income tax for a total period of 183 days in the year. The following sources of income are taxable:
- Income from commercial and industrial activity
- Salaries and wages
- Income from non-commercial activities
- Income realized from real estate property
Income from commercial and industrial activity
Income from commercial and industrial activity is a tax imposed on the net profit of the business gained as a result of any commercial or industrial activity.
Moreover, we are talking about the gains attained by brokers and agents as well as any individual, agency or organization that operates as a broker, intermediary party or agent for all the possible business transactions related to goods, services and stocks. Also included are the profits that come from the real estate development and rent of property.
Salaries and Wages
This type of taxes is related to the remunerations, wages, additional benefits and annuities after the deduction of pension and social insurance deposits. The individuals have to either reside in Egypt or work abroad on account of services provided for Egypt.
Income from non-commercial activities
In case the areas of profession of an individual is related to a non-commercial field, the tax on income from non-commercial activities is applied. These taxes pertain for the taxpayers working abroad with the main center of practice being in Egypt. Taxes on any profession or activity not mentioned in the Egyptian Law falls under this category.
Income realized from real estate property
Taxes on income realized from real estate property includes returns from utilization of lands and buildings.
- The tax rates for the income of the natural persons:
- -the first tranche: up to 6,500 pounds per year is exempted.
- -the second tranche: more than 6,500 pounds to 30,000 pounds per year (10%).
- -the third tranche: more than 30,000 pounds to 45,000 pounds per year (15%).
- -the fourth tranche: more than 45,000 pounds to 200,000 pounds per year (20%).
- – The fifth tranche: more than 200,000 pounds per year (22.5%).
- The net taxes of the year is approximated to the nearest less 10 pounds while calculating the taxes.
The tax rate for the legal persons:
The assessment of income basis is approximated to the nearest less 10 pounds, and is subject to tax rate (22.5%) from the net annual profits.
The tax applied on the dividends:
The assessment of dividends made by capital and partnership companies is subject to tax rate (10%) without any costs deduction, including companies constructed at the economic areas with special nature to the not-resident natural person and the legal not resident and resident person, including the profits of the not-residents natural persons which it obtains from a permanent facility except for the assessment which is done in the form of free stocks and its tax rate is (5%), and this without any costs deduction.
The tax report:
- For natural persons: it shall be submitted before the 1stof April of each year following the end of fiscal year.
- For legal person: before the 1stof May or within four months following the fiscal year end date.
Penalties for violations:
- Imprisonment and a fine not less than 10,000 EGP for a registered accountants or auditors for concealing facts which are necessary for the taxpayer or which may give false impression of decreased profits or increased losses.
- Imprisonment for a period not less than six months and not more than five years in addition to a fine equivalent to the tax that shall be paid, or any of the pre mentioned penalties.
General Tax on Sales
The tax on sales applies to the sales of goods and a number of services, such as touristic, telecommunication and entertainment along with imported goods. The tax rates for goods fluctuate from 10 to up to 50 per cent in special cases with the tax rates for services falling in between 5 and 10 per cent. The taxes are payable by the customer at the time of sale transaction and passed on to the tax authorities.
Sales Tax Authority has concluded an agreement with the Egyptian Federation for Construction and Building Constructors in order to agree upon a set of rules and regulations regarding the tax on sales of construction services. The main topics discussed in the agreement are pertinent to the contracting works, such as buildings equipment and petroleum sector and the tax rates applicable for different sectors with the tax base which are also called added value of the works. The involvement of a sub-contractor affects the tax rates with a possibility of a 2 -3 percent increase in case of sub-contractor existence.
Real Estate Tax
The real estate property falls under the real estate tax law No. 196 for the year 2008. The mentioned tax benefits the real estate owners and individuals that hold the utilization and development rights. The concerned forms of real estate are primarily buildings, but also lands. The taxations base is the value of the property.
Penalties for violations:
- The tenants shall be held jointly liable for paying the outstanding tax within the amount of the rent (rent values).
- The Egyptian Tax Authority has the right to administratively impound the property over which the tax is outstanding.
- Additionally, the public treasury shall has usufruct right to collect the outstanding tax.
- An amount shall be estimated for the delay period starting from the first of January for the year following.
- In case the taxpayer didn’t submit his report shall pay a fine not less than 200 EGP and not exceeding 2,000 EGP, or, if the information given was misleading affecting by more than 10%.
- Any taxpayer intentionally evading the tax shall pay a fine not less than 2,000 EGP and not exceeding 5,000 EGP