The Tax System in Egypt is operated by the Ministry of Finance. The Egyptian taxation framework is statutory based and tax administrators are given few discretionary powers. Courts are primarily responsible for the interpretation of statutes.

Taxes in Egypt may be divided into two categories. These are:
Direct taxation of individuals and legal entities on their income or profit
Indirect taxation of goods, services and events

NOTE: With the recent changes in Egypt, there have been many changes in its tax system. Given this trend, it is advisable to seek up-to-date advice on recent and future changes to the tax law.

Direct Taxation

Income Tax

Income tax is imposed on the worldwide income of Egyptian residents. Non-residents are subject to tax on income earned or realized in Egypt.

Residence – An individual is resident if he/she:

• Is present in Egypt for more than 183 days in a fiscal year
• Is deemed to have a permanent residence or a local commercial presence in Egypt under Executive Regulations
• Resides abroad but maintains income from Egyptian sources.

There are four recognized categories of income:
• Employment income
• Business income (which includes income from commercial and industrial activities)
• Non-commercial income
• Income from real estate assets

Salary tax is levied on salary paid in Egypt or abroad for services performed in Egypt. Taxable income includes the value of all benefits, apart from housing allowances given to expats.

Rates
• Up to 5,000 EGP of income - taxed at 0 percent
• 5,001 to 20,000 EGP of income - taxed at 10 percent
• 20,001 to 40,000 EGP of income - taxed at 15 percent
• Over 40,000 EGP of income - taxed at 20 percent

Other Taxes

Real Property Tax

Real Estate taxes are levied on the assessed annual rental value of improved and agricultural property at rates ranging between 10 percent to 40 percent.

Stamp Duty

Most classes of documents, contracts, checks, receipts, bills, letters of guaranty, various banking transactions, transfer of unlisted securities, leases and many other instruments require payment of stamp duties.

Inheritance and Gift Taxes

Succession tax is imposed on gifts and inheritances at rates between 3 to 15 percent. No tax is charged on an inheritance of less than 10,000 EGP. Resident foreigners are subject to inheritance and gift taxes on real estate and moveable assets. Non-residents are subject to these taxes only on real estate assets located within Egypt.

VAT

Value-added tax (VAT) or Goods and Services Tax (GST) applies to most goods and certain types of services, mainly tourism, telecommunications and entertainment services. The tax rate for goods is usually 10 percent, but can go up to 50% for certain specified goods. The tax rate for services ranges from 5 to 10 percent.

Reporting

Employers are responsible for withholding and paying the salary tax due to the relevant tax authorities on a monthly basis. However, if the employee is paid from an offshore source, the individual is required to declare it to the relevant authorities at the end of the year.

Individuals must submit a declaration of income before April lst, following the end of the tax year. They must pay tax based on this declaration. Employment income is taxed by withholding at source. A penalty of EGP 10,000 applies in cases of tax evasion.

Deductions

Available deductions depend on the type of income. Various allowances are available for items such as social security contributions and health insurance premiums.

Reciprocal Tax Agreements

Double tax treaties exist that may provide tax relief where a tax resident also pays income tax in another country. Egypt has signed double taxation agreements with many other countries. These include:

• Austria
• Canada
• Cyprus
• Denmark
• Finland
• France
• Germany
• India
• Iraq
• Italy
• Japan
• Libya
• Norway
• Oman
• Pakistan
• Romania
• Singapore
• Sudan
• Sweden
• Egypt
• Syria
• Tunisia
• United Kingdom
• United States

Note that Egypt does not levy withholding tax on dividends, so its tax treaties provide reduced withholding tax rates only for interest and royalties.

In the absence of a tax treaty, unilateral tax relief is available by way of deduction rather than by a tax credit. A taxpayer who derives foreign-source income which is subject to foreign as well as to Egyptian taxes will be allowed to deduct the amount of foreign tax paid in order to compute the taxpayer's taxable income for Egyptian tax purposes.

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