• Egypt Tax System

  • TAX RESIDENCY

    Tax Residency

    A company is considered to be tax resident in Egypt if its effective place of management is in Egypt.

    In addition, foreign corporations and partnerships are classified as tax residents of Egypt if they meet one of the following conditions:

    • The entity is established according to the Egyptian law.
    • The government or a public authority owns more than 50% of the capital of the entity.

    Taxable Basis

    Egyptian corporations are subject to corporate profits tax on their profits derived from Egypt, as well as on profits derived from abroad, unless the foreign activities are performed through a permanent establishment located abroad.

    Foreign companies performing activities through a permanent establishment in Egypt are subject to tax only on their profits derived from Egypt.

    Foreign tax credit: The foreign tax paid by a resident company on its profits earned abroad is deductible from the tax payable in Egypt; however, losses incurred abroad are not deductible.

  • TAX ADMIN

    Taxable Period

    The tax year in Egypt is the financial year of the taxpayer.

    Tax Returns

    Companies in Egypt must file their annual tax returns, together with all supporting schedules and the original financial statements, before 1 May of each year, or 4 months after the end of the financial year.

    Tax Assessments

    There is no fixed date for the issue of tax assessments in Egypt.

  • CORPORATION TAX

    Corporation Tax

    The standard rate of corporate income tax in Egypt is 22.5%. In addition, a 5% surtax is imposed on the taxable amount exceeding EGP1 million for 3 years beginning with the 2014 financial year.

    Exceptions to the 22.5% rate exist. Oil prospecting and production companies are subject to tax on their profits at a rate of 40.55%,10% for Special Economic Zones.

  • DIVIDENDS

    Dividend Income

    Dividends paid by corporations or partnerships, including companies established under the special economic zone system, to resident juridical persons, nonresident persons, or nonresident juridical persons that have a permanent establishment in Egypt are subject to tax on dividends. However, an applicable double tax treaty (DTT) between Egypt and the foreign country may result in the reduction of such tax rate.

    Tax on dividends is imposed at a standard rate of 10% without any deductions or exemptions. However, this rate can be reduced to 5% if both of the following conditions are fulfilled:

    • The recipient holds more than 25% of the distributing company's capital or voting rights.
    • The recipient holds the shares or commits to hold the shares for a period of not less than two years.

    Under the law, foreign branches' profits in Egypt are considered distributed profits within 60 days after the financial year-end. As a result, a branch must pay the dividend tax on its annual profits within 60 days after the financial year-end.

    The tax law grants exemptions for investment funds, mother companies and holding companies under some conditions.

    Dividends in the form of free stocks are not subject to tax on dividends.

  • INTEREST

    Interest Income

    Interest income in Egypt is taxable under corporation tax 25%.

    Interest Expense Deductibility

    Interest payments are generally tax deductible as long as they are incurred for the generation of income and after offsetting any tax-exempt interest income, The interest rate does not exceed twice the discount rate as determined by the Central Bank of Egypt at the beginning of the calendar year in which the tax year ends.

    The interest expense is in return for loans complying with the local thin capitalization rule: 4:1 debt-to-equity ratio.

    Withholding Tax on Interest

    The withholding tax on interest payments to foreign and local recipients is 20%. However, an applicable double tax treaty (DTT) between Egypt and the foreign country may result in the reduction of such tax rate.

  • ROYALTIES

    Royalty Income

    Royalty income is taxable under corporation tax in Egypt.

    Royalty Expense Deductibility

    Royalty payments are generally tax deductible in Egypt as long as they are incurred for the generation of income.

    Withholding Tax on Royalties

    The withholding tax on royalty payments to foreign and local recipients is 20%.However, an applicable double tax treaty (DTT) between Egypt and the foreign country may result in the reduction of such tax rate.

  • TAX LOSSES

    Ordinary Tax Losses

    Tax losses in Egypt can be carried forward for 5 years.

    Tax losses cannot be carried back except losses incurred in long-term projects may be carried back to offset profits from the same project for an unlimited number of years.

    Group Relief

    Associated or related companies in a group are taxed separately for corporate income tax purposes. Egyptian law does not contain a concept of group assessment under which group losses may be offset against profits within a group of companies.

  • CAPITAL GAINS

    Disposal of Shares by Foreign Shareholder

    The gain on the disposal of a Egypt company by its foreign corporate shareholder is subject to 10% tax in Egypt.

    Capital Gains

    Capital gains derived from the sales of securities realized by nonresident juridical persons are subject to tax at a rate of 10%.

    The following rates apply to capital gains derived from the sale of securities by resident juridical persons:

    • A 10% rate applies to capital gains on securities registered at the Egyptian Stock Exchange that are sourced in Egypt.
    • The standard corporate tax rate applies to capital gains on securities not registered with the Egyptian Stock Exchange that are sourced in Egypt, capital gains on securities realized abroad and capital gains on shares.

    From the sale of other assets: Tax on capital gains on other assets is calculated at the ordinary corporate profits tax rates in the same manner as ordinary business profits and is not calculated separately. Trading and capital losses derived from sales of other assets are deductible against taxable capital gains.

    Capital Losses

    Capital losses are tax deductible in Egypt, carry forward losses for securities is only for 3 years, carry forward losses for sale of other assets is only for 5 years,

  • PARTNERSHIPS

    Partnership Profits

    Partnership Profits is subject to tax as Juridical person.

  • BRANCHES

    Branch Profits

    A Branch is treated in the same manner as other types of companies in Egypt.

    There is no remittance tax on profits transferred by an Egyptian Branch to its foreign head office.

  • STAMP DUTY

    Stamp Duty

    There are main types of stamp tax, which are imposed on legal documents, deeds, banking transactions, company formation, insurance premiums, and other transactions. Stamp tax is imposed on advertisements at the rate of 20%.

  • GST

    Egypt currently levies Goods and Services Tax (GST).

    GST Taxable Transactions

    GST will be levied on the supply of goods.

    GST Standard Rate

    The standard general sales tax rate is 10% of the value of most taxable commodities and most taxable services (except for those referred to in special schedules of the law).

    GST Reduced Rate(s)

    Some commodities are 5% rated and for export is 0%.

    GST Exempt Transactions

    Educational services, health services, financial services and other profissional services.

    GST Registration Threshold

    • 1EGP for import and export.
    • 54,000 EGP for services and manufacturing.
    • 150,000 EGP for trading.

    GST Filing & Payment

    Payment of GST is made monthly.

Compare Egypt to other jurisdictions and see the difference in corporation tax rates, tax residency requirements, VAT rates, capital gain taxes, etc.

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