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Egypt

General Information

Country Name: Arab Republic of Egypt
Currency: Egyptian Pound (EGP)
Primary Tax Authority: Egyptian Tax Authority (ETA)

Key Legislation

  • Egyptian Constitution: Provides the foundational principles for taxation and fiscal policy.
  • Income Tax Law: Governs personal and corporate income taxation.
  • Value Added Tax Law: Regulates VAT.
  • Customs Law: Governs customs duties on imports and exports.
  • Social Insurance Law: Regulates social security contributions.

Fiscal Authority Allocation

Egypt has a centralized tax system, with the Egyptian Tax Authority (ETA) responsible for the administration and collection of taxes.

Taxes Collected by Central Authorities:

  • Income tax (personal and corporate)
  • VAT
  • Customs duties
  • Social security contributions

Taxes Collected by Local Authorities:

  • Local taxes, including property taxes, are managed by municipal authorities.

Revenue Sharing Mechanisms:

Most tax revenues are collected centrally and allocated to local governments based on allocations from the central government budget.

Corporate Income Tax (CIT)

  • Standard CIT Rate: 22.5% (for tax year 2023).
  • Taxable Income Definition: All worldwide income of resident corporations is subject to CIT. Non-resident companies are taxed on Egyptian-sourced income.
  • Deductible Expenses: Business-related expenses, including salaries, utilities, and cost of goods sold, are deductible.
  • Loss Carryforwards: Losses can be carried forward for up to five years.
  • Tax Incentives: Investment incentives are available for certain sectors, including manufacturing and export activities.

Value-Added Tax (VAT)

  • Standard VAT Rate: 14% on most goods and services.
  • Reduced Rate: Certain essential goods and services, such as basic foodstuffs and healthcare, may be exempt or subject to a lower rate.
  • Exemptions: Education, healthcare, and certain financial services are exempt from VAT.
  • Refunds: VAT refunds are available for registered businesses, including exporters.

Personal Income Tax (PIT)

  • PIT Rates: Progressive rates ranging from 0% to 25%. The top rate applies to income exceeding EGP 400,000 (for tax year 2023).
  • Taxable Income Thresholds: Income below EGP 15,000 is tax-free; income above this threshold is taxed progressively.
  • Deductions and Exemptions: Various deductions are available, including for health insurance, charitable donations, and certain personal expenses.
  • Treatment of Foreign Income: Residents are taxed on worldwide income. Relief through tax credits or exemptions is provided under Double Tax Treaties (DTT).
  • Special Rules for Expatriates: Certain expatriates may benefit from special tax regimes or exemptions.

Additional Mandatory Contributions

Social Security Contributions:

  • Rate: Contributions are made to the National Social Insurance Fund.
  • Contribution Rate: Employees contribute 14% of gross salary; employers contribute 26%.
  • Mandatory Participation: All employees and self-employed individuals are required to participate.

Withholding Taxes

  • Dividends: 10% withholding tax, which may be reduced under DTT.
  • Interest: 20% withholding tax, potentially reduced under DTT.
  • Royalties: 20% withholding tax, with reduced rates available under DTT.
  • Payments to Non-Residents: Generally subject to withholding tax, with reduced rates under DTT provisions.

Transfer Pricing Rules

Egypt follows the OECD guidelines for transfer pricing. Companies must maintain documentation for related-party transactions and comply with the arm’s length principle.

Special Tax Regimes

  • Free Zones: Egypt has special economic zones with preferential tax rates and incentives for foreign investment.
  • Investment Incentives: Tax incentives are available for investments in specific industries, such as technology and renewable energy.

Other Taxes

  • Property Tax: Levied by local authorities based on the value of real estate properties.
  • Customs Duties: Applied to imports based on the Customs Law.

Double Taxation Agreements (DTAs)

Egypt has signed 60 DTAs to avoid double taxation and provide reduced withholding tax rates on dividends, interest, and royalties.

Compliance and Reporting

  • Corporate Tax Filing Deadline: Annual corporate income tax returns must be filed within four months of the end of the fiscal year.
  • VAT Filing: VAT returns are filed quarterly or annually, depending on the size of the business.
  • Penalties for Non-Compliance: Penalties for late filing and non-compliance include fines and interest on unpaid amounts.

Recent Developments

  • Tax Reforms: Egypt is undergoing tax reforms to simplify the tax system and enhance compliance.
  • Economic Challenges: The country is addressing economic challenges through tax policy adjustments and incentives for foreign investment.
  • Digital Taxation: Efforts are being made to improve tax administration and increase the efficiency of tax collection processes through digitalization.

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