1. Taxes on income and profits
1.1 Taxes on corporations
Law No. 157/1981 amended by Law No. 187/1993.
An annual tax on accrued net taxable profits earned in Egypt by both foreign and domestic corporations (including limited partnerships, joint stock companies, and public sector enterprises) engaged in manufacturing, commerce, banking, mining, real estate brokerage, commercial leasing activities, and so forth. Tax year is calendar year unless stated otherwise in company’s articles.
Taxable profits include:
realized nonreinvested capital gains; and
ten percent of income from moveable capital (for joint stock companies, dividends received from Egyptian investment joint stock companies are exempt).
Forms of corporate business include:
joint stock company
limited liability company
partnerships limited by shares
They are governed by Companies’ Law No. 159/1981.
Deductions allowed cover all business expenses, including actual rent or estimated rental value of premises, wage and bonuses to be statutorily granted to workers, social security contributions on their behalf, savings fund and pension fund contributions (up to 20 percent of the wage bill), inventory costs, interest, royalties, remunerations to Board of Directors and allowances to major shareholders to attend general meetings, subscriptions to governments, contributions to charitable and social institutions (up to 7 percent of net profits), bad debt and loss reserves (up to 5 percent of net profits), and all other taxes paid.
Joint stock companies can deduct a portion of paid up equity equal to the interest rate declared by the Central Bank of Egypt.
Depreciation allowances are granted on depreciable assets mainly using the straight fine method at varying rates (the following act only as guidelines): buildings–2 percent, furniture–6 percent, hotel furniture–12.5 percent, and machinery–10 percent In addition, there is a depreciation allowance of 25 percent of the cost of new machinery and equipment in the first year.
In addition to the above deductions and allowances, executive regulations allow gifts and donations (up to 7 percent of chargeable profits) in lieu of entertainment expenses and other public relations expenses.
Losses are allowed to be carried forward for five years; losses from one source are not allowed to be offset against profits from another source.
There is no adjustment for inflation.
(1) Law No. 59/1979 provides a 10-year tax holiday in New Urban Communities (NUCs).
(2) Law No. 230/1989 provides an indefinite tax holiday for direct taxes (on corporate profits and dividends at the individual level) for investment in free zones (seven are currently operating; two more will be coming on stream shortly). For investments outside free zones, projects must fall under specific, though broad, categories, such as industry and tourism sectors. All qualified investments receive 5 to IS years holiday for corporate tax and individual income tax On dividends. All imported machinery and equipment is then subject to a 5 percent customs duty.
(3) Law No. 187/1993 provides a 5-year corporate income tax holiday for industrial corporations employing SO or more workers (dividends at the individual level are exempt from the tax on moveable capital).
Profits above LE 18,000 a year (subject co the above deductions, exemptions, and so forth) are taxed as follows:
Industrial and export profits 32 percent
Profits from oil exploration production 40.55 percent
Other profits 40 percent
In addition, a development duty of 2 percent is applied to all profits above LE 18,000 annually.
There are no withholding taxes on dividend distributions.
Corporations are required to withhold:
(1) Interest: 32 percent on the amount paid plus 2 percent development tax on interest in excess of LE 18,000 a year;
(2) Royalty payments:
32 percent on the amount paid if a company carries on activity in Egypt.
If the company does not practice any activity in Egypt, the gross amount of the royalty payments is subject to 32 percent withholding tax plus 2 percent development duty when the payment exceeds LE 18,000 annually.
If a company does not carry on an activity in Egypt, dividend distribution shall be subject to 32 percent withholding tax plus 2 percent development duty when the amount exceeds LE 18,000 annually.
There are no withholding taxes on dividend distributions if the company paying the dividends carries on the activity in Egypt and is subject to corporate income tax.
Individual taxes are based on the “Global Income Tax Law,” No. 187/1993. However, the law distinguishes five categories of income: immovable property income, commercial and industrial activities income, noncommercial/liberal professional income, moveable capital income, and salaries and wage income. The first three are calculated according to a graduated rate schedule. Salaries and wages are taxed according to a separate graduated rate schedule. Income from moveable (financial) capital is taxed separately as described below. The tax on Egyptians is Law No. 208/1994. Declarations must be sent to die tax directorate before April 1; wages and salaries tax is deducted at source. Law No. 208/1994 imposes a tax on income derived by Egyptians performing employee services abroad.
Unified tax is levied on five categories of income:
(1) Tax on wages and salaries
The base is labor compensation in the form of salaries, wages, allowances, gratuities, and benefits in kind.
(1) Tax on wages and salaries
Employment-related pensions are exempt as are wages of a daily worker provided the employment is not permanent and the worker has no other source of income. Annuities paid by insurance companies for policies with a period of (less than ten years are also exempt.
Allowances that do not in total exceed LE 4,000 a year are deductible from income. These include life insurance premiums, contributions to the Egyptian state social insurance and certain private insurance funds schemes, an occupational allowance, representation allowance, and production incentive bonuses. Personal allowances are LE 1,440 for single persons, and LE 1.680 for married couples without children or unmarried with children, and LE 1,920 for a married person supporting one or more children.
In addition, some other allowable deductions from the tax base include:
contributions to the Egyptian state social insurance;
life insurance premiums and certified private insurance funds scheme provided the total amount does not exceed 1 5 percent of total income or LE 1.000. whichever is less.
(1) Tax on wages and salaries
The tax rates on taxable incomes are:
Upto LE 50,000 20 percent
Over LE 50,000 30 percent
This tax is withheld at source, and incomes in excess of LE 16,000 are subject to an additional 2 percent development duty.
(2) “Unified” tax on income from commercial and industrial activities, professions, and real estate activities. The Egyptian firm subject to this tax includes sole partnerships, general partnerships, and simple limited partnerships.
For the tax on commercial and industrial activities income, the base is net profits, including capital gains, letting of commercial and furnished premises or plants, selling assets, building or dealing In real estate, exploitation of natural resources, poultry farms, animal husbandry, and land reclamations. Net profits also include 10 percent of moveable capital and real estate revenues.
The tax on noncommercial professions applies to income earned in Egypt or abroad.
The real estate wealth tax is applied to agricultural land revenues and building revenues. The revenues are based on the assessment used for property taxes under Law No. 56.
(2) “Unified” tax: Under the tax on commercial and industrial activities, the following deductions apply: rents of either owner-occupied or owned by the business; annual depreciation based on historical cost, net of initial allowances; direct taxes except those paid under this law; donations; actual and doubtful financial losses; social insurance payments: contributions for employees to special savings and pension funds (up to 20 percent of payroll); mobile capital revenue and taxes on agricultural land and real estate, with 10 percent of these revenues included in the base of the unified tax. Losses may be carried forward for five years. There are various exemptions, including profits from stock breeding and fishing and private insurance funds.
Under the real estate tax, a deduction of 20 percent is applied against “costs” (these are not defined by law but seem to imply rental payments). Losses may be carried forward for five years.
(2) “Unified” tax: The amount of tax owing on profits is calculated as follows:
Up to LE 2,500 20 percent
LE 2,501–7,000 27 percent
LE 7,001–16,000 35 percent
LE 16,001–27,000 40 percent
LE 27.001–68,000 45 percent
Over LE 68,000 48 percent
In addition, the development duty of 2 percent is applied to the unified income tax base above LE 18,000. Personal allowances are the same as those under the wage and salary tax.
(3) The tax on moveable capital is applied (at the source) on payments to both residents and nonresidents and includes interest payments (except for interest on savings accounts of banks supervised by the Central Bank of Egypt and debentures of public banks) and foreign dividends (net of foreign taxes).
(3) Besides interest on bank savings accounts, other exempt forms of income include proceeds of loans and credit facilities granted to the government and public agencies; proceeds due on balances of free foreign currency; proceeds of public issued debentures issued by joint stock companies that do not exceed the prescribed interest rate of the central bank: and cash or in-kind benefits related to lotteries done by insurance or savings companies.
(3) Income subject to the moveable capital tax is taxed at 32 percent For income above LE 18,000 annually, an additional 2 percent development duty is levied.
(4) Law 208/1994 established a tax on the earned income of nonresident Egyptians, except those who have emigrated permanently and who meet the requirements of Article (8) of Immigration Law No. 11 1/1983.
(4) Exemptions are social security payments: other savings payments deducted or in accordance with social security regulations of Egypt or the state where employed; family support; foreign taxes.
(4) The nonresident tax on annual earned income is:
Up to LE 20,000 1 percent
LE 20,00–40,000 2 percent
Over LE 40,000 3 percent
Law No. 208/1994 establishes a tax on the earned income of Egyptians performing employee services abroad.
1.3 Other taxes on individuals
Individuals are not subject to a tax on capital gains except for sales of real estate or building sites within the boundaries of Egyptian cities. Such gains are taxed at a rate of 5 percent of the value of the property, and gains are not subject to income tax.
Estate duty is payable at rates ranging from 5 percent to 15 percent. A number of exemptions apply.
Inheritance tax was abolished in 1989.
2. Social Security Contributions
Law No. 79/1975, as amended by Law No. 25/1977 and No. 47/1984.
Social security contributions are levied on both government employees and employees of publicly owned enterprises. Employee contributions are withheld at source. None of the revenues revert to the government but are retained by an off-budget pension fund. Revenue in excess of pension fund payments and operating costs are earmarked for public sector investment financing. Most private sector employees are covered by another fund.
Contribution by percent of payroll
On annual salary up to LE 3.600
On tradesmen and other workers employed by a contractor for the duration of a contract or part thereof.
3. Payroll Taxes
See Stamp duties.
(1) Agricultural land tax: Decree Law No. 53/1935 and Law No. 113/1939.
Besides the provisions of the income tax that apply to agricultural land and buildings, real estate taxes are levied on the assessed annual rental value of agricultural land and property.
(1) For the agricultural tax, 20 percent of estimated rental value is deducted, and properties of less than 3 feddans are exempt.
(1) The basic rate for agricultural land is 14 percent.
(2) Buildings tax: Decree 56/1954 as amended by Laws No. 129/1961 and No. 136/1981
(2) For the buildings tax, a deduction of 20 percent of the annual rental value is allowed for maintenance and other expenditures. Exemptions include residential buildings built after 1981 that are not “luxury” most rural buildings; buildings with a rental value of less than LE 10 a year; buildings used by schools, hospitals, and religious institutions: and buildings specifically exempt under various laws.
(2) The rates for the buildings tax range from 10 to 40 percent depending on the number of rooms. Cairo and Alexandria are taxed 2 percentage points higher.
5. Taxes on Goods and Services
Law No. 11/1991, Decree No. 180/91. No. 295/93, No. 304/93, No. 39/94.
A sales tax applied at the manufacturing level on imported and domestically produced goods (with exceptions) and specified services. Services included are tourism, telecommunications, electricity, and professional brokers.
Firms with turnover of less than LE 54,000 are exempt Input credit can be obtained by registered firms for goods only, except for “Table 1” goods as listed under rates. Exports are zero-rated. Untaxed goods are exempt. Free zones are exempt if the items are sold abroad or to other free zones.
Exempt items (schedule A): Milk products; edible oils made from seeds, fixed, liquid, hard or refined; products of mills with the exception of excellent flours or imported yeasted flours; products and manufactures canned or prepared from meat; products and canned manufactured or prepared fish except caviar and smoked fish; vegetables, fruits, beans, seeds, spices, prepared or packed, fresh or frozen or preserved except imported; halawa. tahini; food prepared and sold by restaurants other than tourist restaurants; all kinds of controlled bread; natural gas and butane gas for retail; waste of food manufactures, food for animals, birds, or fish except dogs, cats, and ornamental fish; popular clothes distributed by the Ministry of Supply and Trade; pastry, paper, scrap, and ancient products made of paper or paperboard used only in the manufacture of paper; paper for journals, printing, and writing: books, circulars, and printing of similar nature from some papers; newspapers, magazines, and printed circulars; paper money and coins except memorial coins; and macaroni from flour.
The rates range from 5 to 25 percent with most goods subject to the standard 10 percent tax on gross sales.
(1) 5 percent
Hotels, tourist services, and restaurants. Air conditioned transport between governorates.
Local telephone and telegraph services.
All flour products except controlled bread.
Soap and manufactured household cleaners.
Purification materials and insecticides.
Wood sawn lengthwise.
Telex and facsimile services.
Sound and light shows.
Telephone installation and connection services.
Private car rental.
Express delivery services.
Cleaning and security services.
Real estate brokering.
All other goods not taxed at other rates or exempt
(3) 25 percent
Color television sets.
Deep freezers of 10 cubic feet or more.
Sound recorders or reproducers.
Cameras and their parts.
Perfumes, cosmetics, preparations for the care of skin and hair.
Chandeliers and their parts.
Personal motor vehicles between 1600 and 2000 cc, passenger, cargo, cars, and jeeps.
“Table 1” Goods:
Item GST rate (percent)
Tea (basic) 6.71
Mineral water, soft drinks, and juices
Less than 250 cm 50.0
Above 250 cm 60.0
For water pipes 100.0
Cigar and pipe 200.0
Less than piastres 65 14141
More than piastres 65 60.51
Fuel oil 0.51
Lubricating oil 0.51
Lubricating preparations 0.31
Pure ethyl alcohol 375.01
Processed alcohol for fuel 17.71
Alcoholic beverages 100.0
Medicines (except exempt by decree)
Equipment for handicapped exempt
Vegetable oil (nonrationed)
Hydrogenated animal or vegetable fat/oil 1.71
Hydraulic cement 2.11
Law No. 147/1984 amended by Law No. 5/1986 and by Law No. 520/1994. See Development duty under income taxation.
Levy of taxes on selected goods and services.
25 percent on price of tickets issued in local currency for foreign travel.
20–40 percent on cost of parties and receptions held in hotels and public halls.
5 percent of auction price for auction sales.
LE 1 per item if price exceeds LE 15 bought at duty-free shops.
Passport fees at specific rates.
5.3 Selective issues on services See Stamp duties.
See stamp duties
1. Taxes on Income and Profits
2. Social Security Contributions
Local authority duty. Legal reference not available.
A local tax is levied on the same basis as See agricultural land and buildings tax in the agricultural land tax and the buildings central government, tax. The proceeds from this tax are earmarked for the individual governorate.
See agricultural land and buildings tax in central government.
See agricultural land and buildings tax in central government.
5. Taxes on Goods and Services
5.1 Selective tax on services
Legal reference not available.
A tax is charged on the total value of amounts charged to a hotel account
Tax is levied at 2 percent of the total hotel bill in Cairo. Rates vary from one governorate to another
6. Taxes on International Trade
6.1 Import duties
Customs Law No. 66/1963, as amended. Decree No. 351/1986; Law No. 186/1986; Law No. 187/1986: No. 304/1989; No. 305/1989; No. 178/1991; No. 294/1993; No. 38/1994.
Customs tariff consists of a single column based on the Brussels Tariff Nomenclature. Ad valorem duties are applied to a fair market c.i.f. import price. The valuation of imports for assessing customs duties is based on the free market foreign exchange rate as stated by the central bank.
Exemptions from customs duties include:
(1) imports by the Ministry of Defense, the companies, units, and organizations subject to the Ministry of Military Production; by the National Security Authority of special devices, necessary for its activity; by the Republic Presidency of articles for formal use; and by the Ministry of Interior;
(2) gifts and donations to the government;
(3) personal effects belonging to passengers;
(4) imports by the establishments authorized to be in free zones (except motor cars and furniture);
(5) articles and small riding motor cars equipped with special medical equipment;
(6) personal effects for members of the diplomatic corps, and imports by embassies;
(7) articles that are exempt by a decree of the President of the Republic.
Goods in transit and goods that enter specified free zones are exempt from import duties and excises. Duties may be refunded on imports that are embodied in exports if the reexportation takes place within one year after the duties were paid.
Under the program of investment incentives for approved undertakings, customs duties may be excused for specific periods, but a minimum unified rate of 5 percent is collected on all exempt imports.
The assembly industries may request permission that their assembled products be treated according to the following provisions:
(1) The completely knocked-down parts, imported by the factories to be assembled, under supervision of the customs administration are subject to the import duty rate imposed on the final product, less 20 percent
(2) In case locally manufactured parts are used, the imported parts are subject to the duty rates applicable to the finished product, after being reduced according to the following proportions (with a maximum limit of 75 percent) or the established import duty on the imported parts, whichever is lower:
All duties, with the exception of those levied on tobacco, are ad valorem.
Rates mainly vary between 5 percent and 70 percent. The rate of 1 percent is levied on 33 items of foodstuffs. Rates of 5 and 10 percent are levied on most other foodstuffs. Duties for many industrial supplies range from 5 percent to 20 percent. Eighteen categories of machinery and durable goods are subject to 10 percent tariff, the rest between 30 percent and 70 percent. Duties on consumer goods are generally higher: 40 percent to 70 percent, for example, color television sets, 70 percent, refrigerators, 50 percent to 70 percent.
Exceptions include alcoholic beverages, taxed at 600–3.000 percent (300 percent at tourist facilities), and passenger vehicles taxed at 135–160 percent.
Specific duties in the range of LE 6.1–9.0 per kilogram are levied on tobacco products.
Proportion of the locally manufactured parts to the parts entering in the finished product (in percent)
Reduction in import duty
Customs Law No. 66/1963, as amended, and Decree No. 351/1986.
Specific or ad valorem duties are levied on the export of a small number of commodities: raw hides and skins, molasses, metal waste and scrap, and antiques over 100 years old.
Illustrative export duties are LE 11 per metric ton of metal waste and scrap, LE 0.6 per 100 kilograms of molasses, and LE 1.2 per metric ton of raw hide. Antiques, 5 percent of their value.
Law No. 111/1980; Law No. 95/1986; Law No. 104/1987; Uw 224/1989.
Stamp duties are levied on a wide range of documents including deeds, applications, contracts, permits, registration, insurance premiums, checks, invoices, lotteries, education degrees, stocks, promissory notes, bearer notes of guarantee, publicity and advertisements, judicial papers, passenger tickets, water, electricity, gas. telephone, and salaries of government and public sector companies. Bank credits are also subject to annual stamp tax equal to 1 percent. Stamp duties may be dimensional, specific, proportional, or graduated. The tax is collected by means of stamped paper, stamps, a control plate, or in cash.
Under the program of investment incentives for approved undertakings, the tax may be excused or reduced. Stamp duties are not changed on interactions between government departments.
There are many varied rates.
LE 50 for registration of a company in the commercial register.
LE 0.1 on bank checks and vouchers carrying a signature as a development duty plus 0.3 stamp duty.
0.3 percent on bills of exchange, promissory notes and bearer notes as stamp duty plus 0.1 development duty.
LE 900 to 1.800 on the formation of a company. (Corporations: joint stock company, limited liability company of partnerships limited by shares governed by Law No. 159 of 1981)
LE 90 on the formation of partnerships.