An Overview of Tax Compliances in Egypt

There are various taxes in Egypt. A personal tax of 0-25% is levied on individuals. The corporate tax rate on companies is levied at 22.5%. VAT is levied on the sale of goods and supply of services at a standard rate of 14%. A capital gains tax is levied at a standard rate. Other taxes, such as Payroll and real estate taxes, are also there. A stamp duty ranging from 0.1–10.08% is levied.

Different Types of Taxes in Egypt

1. Individual Tax

The global income of residents is taxed in Egypt, whereas for non-residents, the source income is taxed in Egypt. Individual income tax is levied on the total net income earned. Tax is levied at a progressive rate. The progressive slab rate is as follows:

This tax slab is also applied to non-residents' income from the Egyptian treasury or for work in Egypt.

2. Corporate Income Tax

Like individuals, resident companies are also taxed on their worldwide income, and non-resident companies are taxed on their profits derived from permanent establishments in Egypt. The corporate income tax in Egypt is 22.5% of the company's net taxable income. This rate applies to all activities except for oil companies. For oil companies, the profit is taxed at 40.55%. Additionally, the profits of the Suez Canal Authority, the Egyptian Petroleum Authority, and the Central Bank of Egypt are taxed at 40%.

3. Value-Added Tax (VAT)

The standard rate of VAT is applicable at the rate of 14%. The standard rate applies to almost all goods and services. Sometimes, a reduced rate of 5% or even 0% is applied. Mainly, the reduced rate is applied to the production equipment. Under the VAT Act, some goods and services that affect low-income people are exempt. These exemptions are in addition to the exemptions listed under the law. Non-residents providing services to Egyptian resident entities are subject to VAT in Egypt under the reverse-charge mechanism.

4. Withholding Tax
   1. Dividends: A withholding tax of 10% is imposed on dividends paid by Egyptian companies to non-resident corporate shareholders on shares not listed on the Egyptian Exchange. A flat rate of 5% withholding tax applies to dividends paid to non-resident corporate shareholders from the shares listed on the Egyptian Exchange.
   2. Interest: Interest on loans to private sector companies for more than three years is exempt from withholding tax, whereas a withholding tax of 20% is levied for loans of less than three years 
   3. Royalties : A 20% withholding tax is levied on royalty payments.
   4. Payment for services: A 20% withholding tax is levied for payments for services. However, for all listed income from sources in Egypt, the applicable withholding tax rate may be reduced or eliminated under the Double Taxation Treaty.

5. Real Property Tax

The property tax law is based on various factors such as the property value, its location, the value of similar buildings, and the economic situation of the area where the property is located. A property tax is levied on all constructed properties other than schools, orphanages, charities, and private homes with a market value of less than EGP 2,000,000. This tax also applies to land and buildings other than machinery and equipment. Property tax is levied annually at the rate of 10% of the value of the real estate. The real estate's value calculation will vary for residential and non-residential properties.

Electronic Invoicing

As per the Ministry of Finance Decree No. 188, taxpayers must issue bills electronically conforming to the technical and legal requirements issued by the head of the Egyptian Tax Authority (ETA).

Transfer Pricing

Under transfer pricing, it is ensured that the transaction between related parties may be concluded on the market value at the arm’s length price. However, the Egyptian IRS may adjust the prices of transactions between related parties if the transaction includes elements that would be excluded from transactions between the unrelated parties and whose purpose is to shift the tax burden to non-taxable entities. In such cases, the tax authorities will determine the taxable income on a price-neutral basis.

Tax Reporting

The tax period in Egypt is the financial year of the taxpayer. The taxpayer has to assess taxes due for the financial year and settle them by filing the tax return. The taxpayers must calculate and file the income tax return for each financial year. Income tax returns should be filed within four months from the end of the financial year. Thus, if the company's financial year ends on 31^st December, the tax returns should be filed by the end of April of the succeeding year. VAT return is filed monthly. For dividends, the tax is withheld by the party executing the transaction and remit it to the ETA on form no. 44. This form can be submitted manually or electronically via the ETA's website. Concerning capital gains tax, the party settling or executing the transaction must notify the ETA of the transaction not later than the fifth business day of the following month of the transaction. Additionally, the capital gains tax should be remitted by the taxpayer to the ETA not later than the fifth business day of the following month of the transaction.