Egypt: The Payable Tax Under The Egyptian Law

Last Updated: 4 April 2016
Article by Mayar Rashed

Under the Egyptian law there are different taxes that shall be paid for different transactions, estates' registration and income tax.

Those types of tax can be found under different laws which shall be emphasized as follows:

The Income Tax:

Definition: An income tax is a tax that governments impose on financial income generated by all entities within their jurisdiction. By law, legal persons and individuals must file an income tax return every year (before the 1stof April for natural person, and before the 1stof May for legal person) to determine whether they owe any taxes or are eligible for a tax refund. Income tax is a key source of funds that the government uses to fund its activities and serve the public.

The concerned law(s):

  • The Income Tax Law no. 91 for the year 2005, and its executive regulation, amended by the Presidential Decision No. 96 for the year 2015.

Whom shall be subject to this tax (the taxpayer):

  • Natural Persons: 'for their income earned in or outside Egypt if Egypt is the center of their commercial, industrial or professional activities whether resident or non- resident of Egypt'
  • Legal Persons: 'for the total net profits of all legal persons in spite of their purpose'.

How the tax shall be calculated:

The income tax shall be calculated according to different categories set by law as follows:

  • 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.

The Sales Tax:

Definition:The tax is imposed once the sale process or rendering of a service is done, and for the imported goods the tax is imposed upon discharging them from the customs, in other words, the tax is imposed when the ownership of the goods is transferred/the service is done.

The concerned law(s):

Law No. 11 for the year 1991 and its executive regulation.

Whom shall be subject to this tax (the taxpayer):

manufactures and service providers with turnovers exceeding EGP 54,000.

How the tax shall be calculated:

According to the Sales Tax Law, the tax is measured by 10%, imposed on the nationally manufactured products and the imported products, and shall not be imposed on the exported products stipulated at the executive regulation of this law 'different categories for different products'.

Penalties for violations:

  • The tax is imposed on the imported goods once it is delivered and the clearance take place, and if the tax is not paid, then an additional tax shall be imposed.
  • If the tax was not paid and the goods were released from the customs, without the customs clearance, it shall be considered as an evasion crime.
  • All the money acquired to the state's treasury shall have the privilege of superiority over any other outstanding money, debts, the taxpayer is liable for.
  • The Tax Authority has the right to make an administrative impound to obtain the outstanding tax.

Stamp Duty (stamp tax):

Definition:

It is tax levied on documents.

Concerned law(s):

Law No. 111 for the year 1980, amended by the Law No. 143 for the year 2006 and its executive regulation.

The subject matter:

  • Applied to the deeds, publications, certificates and statements, abstracts, requests, contracts and alike, personal documents, judicial issuance, banking transactions, insurance, commercial advertisement, incorporation, and all governmental document etc.
  • The stamp duty mainly applied to all kinds of transactions with a very small rate difference from one transaction to another depending on the transaction value.

Penalties:

  • In case the taxpayer didn't pay the outstanding tax for the acquired documents or the transactions made by him, the Tax Authority shall estimate the tax to be paid and notify the taxpayer with it.
  • In case the taxpayer abstained from paying the tax to the judicial officers shall have the right to access and investigate all the taxpayer's documents and papers at the governmental authorities and all public and private legal entities, if necessary. And the same rule applies in case the taxpayer intentionally damaged or got rid of the documents over which the tax shall be paid.
  • In the pre- mentioned cases the judicial officer shall issue a detailed report over a document specially made for this purpose with all the violations made by the taxpayer.

Customs duty (customs tax):

Definition:

It is the tax applied on the goods and products imported to the Arab Republic of Egypt.

Concerned law (s):

Customs Law No. 66 for the year 1963 and its executive regulation.

Whom shall be subject to this tax:

  • This tax shall be applied on the imported goods or products into Egypt unless otherwise specified by the law.
  • The customs law prescribed certain schedules or lists for the goods and products with the percentage that shall be paid for it.

How the tax shall be calculated:

  • To determine the amount of tax to be paid the customs officers shall estimate the value of the goods and the products first.
  • The custom tax as a rule must be paid along with the sales tax before the release of the products, but the capital goods the clearance is allowed upon the approval of the tax research department to pay the sales tax on installment, on the condition of submitting a letter of guarantee with the same amount of the unpaid tax.

Penalties for violations:

  • According to the law a smuggler is whoever brings in or takes out the goods without paying the outstanding custom tax and all related fees.
  • Subject to any stricter penalty prescribed by any other law, whoever commit the crime of smuggling shall be liable to a penalty of imprisonment and a fine not less than five hundred pounds and not exceeding ten thousand pounds, or either penalty. If the crime of smuggling goods is committed for trade purposes, then the penalty to be inflicted shall be an imprisonment term not less than two years and not exceeding five years, and a fine not less than one thousand pounds and not exceeding fifty thousand pounds, or either penalty. Whoever possesses smuggled goods for trade purposes while knowing that they are smuggled, shall be liable to a fine less than one thousand pounds and not exceeding Fifty Thousand Pounds. In all cases a court ruling shall be pronounced inflicting on the perpetrators, their accomplices and the juridical personalities in whose favor the crime was committed jointly; the payment of a compensation equivalent to the amount of the due customs duties. If the goods, subject of the crime are of the prohibited kinds or their import is banned, the compensation shall be equivalent to twice.

The Real Estate tax:

Definition:

It is the tax applied on the real estate.

Concerned law(s):

  • Law No. 196 for the year 2008 and its executive regulation.

Whom shall be subject to this law:

this law shall be applied on the real estate property more specifically :

1- The revenues of the rented property.

2- The revenues of the furnished units.

How the tax shall be calculated:

1- The tax rate is 10% on the value of the annual rent if the value doesn't exceed 20,000 EGP, and 20% of the annual rent value if the value exceeded 20,000 EGP.

2- The previous percentage shall only be applied after deducting 30% from the rental value of for the buildings specified for residential purpose, and 32% for the buildings specified for non- residential purpose, and that is for all the expenses that the taxpayer endures including the maintenance fees.

  • Note: the rental value of the property shall be estimated each five years by the committee established for this purpose.

The tax report:

  • The tax report shall be submitted before the 1stof January each year.
  • The tax shall be collected over two installments, the first installment shall be for the period until the end of July, while the second shall be for the period until the end of December.

Penalties for violations:

  • The tenants shall be held jointly liable for paying the outstanding tax within the amount of the rent (rent values).
  • The 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.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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