Egypt: Taxes Types In Egypt

Taxation is the most important resource for economic reforms, economic growth, and financing of the public treasury in the Arab Republic of Egypt. It is the backbone of society's development. In light of the economic prosperity of Egypt and the new policies prevailing in society, Egypt's tax system has become one of the most accessible for all categories of society, companies, and organizations. Below is an overview of the Egyptian tax system.

Egypt's tax policy has been regulated by Law № 206 of 2020, promulgating the Uniform Tax Procedure Act, and the Executive Regulation of Law № 206 of 2020, promulgated by Act № 286 of 2021.

At the outset, it is necessary to explain the legal concept of the notions “tax” and “tax payer” who are obliged to pay the tax on the income from their business:

- Tax: Regardless of the tax base or the governing law, a tax is a financial obligation, which is assessed and collected by the Egyptian Tax Authority (hereafter “Authority”) from payers.

- Taxpayer: Any natural or legal person subject to the payment of the tax imposed by the tax law, whether a producer, merchant, or provider of a taxable commodity or a service realizing gross revenue exceeding the tax limit set by law.

- Tax law includes income tax, VAT (commercial, industrial, professional, non-commercial activity or real estate wealthi.e. taxes for owning multiple real estate units), State financial resources development fee, stamp duty, employment earnings, or any other law establishing or replacing other sums of money of a similar nature or intrinsically compatible with or superseding such taxes.

- The tax is paid for the tax period provided by the law. It is paid through a tax return, which is a form or statement prepared by the Authority, including all the data and information specified for a tax assessment for a specific tax period.

- Scope of tax application:

Taxes apply to the total net income of a natural or a legal person, in relation to their income generated in or outside Egypt, where the head office of business (commercial, professional or industrial activity) is located. Taxes apply to wages (employment earnings) on revenues realized from the task performed by a worker for third parties, including salaries, bonuses, and cash or in-kind benefits obtained by employees for a work performed for the public or private sector. The employer shall pay and deduct this tax from the employee's wage.

- The obligations and rights of the taxpayer and the third party, subject to tax administration, are as follows:

1. The Authority shall undertake to raise awareness of the provisions of the Tax Law, the tax forms to be completed by the taxpayer, and the applicable procedures. It shall enable the taxpayer to access their tax file, keep confidential all tax and technical information, and recover tax paid in excess or resulting from any error. And he shall be committed with other rights stipulated by Law or Tax Law.
2. Where a payer makes any tax transactions that are regulated by the Taxes Authority such a payer has the right to apply to the Authority to know the tax assessment of such transactions. The tax competent office and the head of the Authority shall respond within 30 days of the date of submission of the application if all requirements are properly met and documents are completed.
3. The taxpayer shall notify the Authority of the commencement of their business and to register with the Authority, to maintain commercial books and paper or electronic records within the period prescribed by law. The payer shall issue tax invoices or electronic receipts on the tax e-portal and to code all goods and services according to the codes of each activity that are stipulated by the Taxes Authority before the issuance of the electronic invoice.
4. The payer shall submit a tax return, including income, VAT, and employment earnings, in the form prepared by the Authority for that purpose and submit the same on the Authority's tax e-portal.
5. The payer shall assist the Authority's tax officers and employees in performing their work of informing, examining and controlling the company's tax and financial transactions as specified in the tax legislation. The payer shall also notify the Authority of any amendment to the activity or company`s documents within the legally specified period. The payer (owner of the company) shall identify the person responsible for representing the company before the tax authority, whether the concerned person or the legal representative.
6. The payer shall not conceal any tax transactions and shall issue electronic invoices within the legally specified periods, and calculate the tax correctly in accordance with the tax law and its Executive Regulations and decisions. The payer shall pay the tax within such legally specified periods and in a legally specified manner.
7. The payer shall include the tax registration number of the company on all correspondence, transactions and invoices, whether in dealing with the Authority or with third parties, according to the provisions of the tax law.

- Tax Registration: A tax payer or a person responsible for performing the service shall submit to the competent tax office an application for registration, whether manually or by any electronic means with the legal authoritative evidence and in such a form prepared for that purpose, whether they are a natural or a legal person. The e-registration shall be conducted in accordance with regulations on the electronic circulation of documents specified by law.

The registration application shall include the details and information of the payer and every practised activity. The payer shall notify and register within the legally specified periods. Where the documents are not completed, they shall be corrected and submitted within 15 days starting from the date of notification.

Where the payer fails to apply for registration, the competent authority registers the same based on the provided data or information and notifies the payer of the registration in the form prepared for that purpose.

- Every payer shall register the electronic invoice and code their activity (according to the codes that are stipulated by the Taxes Authority) on the tax e-portal.

- A payer who engages in business, industrial, or non-commercial activity, shall hold the tax card which is issued by the competent office to the payer upon notification of the tax registration with the Authority. The tax card shall bear all the company's tax information, including the name and address of a company, tax activity code (according to the codes that are stipulated by the Taxes Authority), the company's tax registration number, and the date of commencement and termination of the activity. The payer shall renew the tax card at the prescribed expiry period. If the tax payer did not submit a notarized 5-years rent contract for the company`s headquarter, then the tax card will be valid for only one year. However, if he submitted a notarized 5-years rent contract then he will obtain a tax card valid for 5 years.

There are two types of taxes in Egypt (direct taxes and indirect taxes): The difference between them is as follows:

1. Direct taxes: It is the tax that is paid by the taxpayer himself and not by third parties. It is the same as income taxes and real estate taxes.

The tax is imposed on income, which shall be paid by the employee through the employer by deducting the prescribed percentage from the basic salary of the employee. Such a deduction shall be collected based on papers or accounting books; as per official tables.

2. Real estate tax is imposed on the real estate property of the payer. An owner or beneficiary of a property, in the event of renting the same, shall notify the competent authority within 30 days from the date of a lease, otherwise, they shall bear the legal liability. The unit shall be subject to real estate tax if the market value of the unit exceeds EGP 2 million. Real estate tax shall be deducted when calculating the real estate wealth tax, as there are two types of real estate taxes: first one is a real estate tax for selling units, and second one is a real estate wealth tax for renting multiple units of property.
3. Indirect taxes: It is the tax which obligation may be transferred by the taxpayer to third parties. It is paid to the government, indirectly by imposing it on expenses and trading, on goods and services and sales, including sales tax, value-added tax, and customs duties on imports.

- General income tax: It is a tax imposed annually on a natural or a legal person's total net capital gain on the income, resulting from their commercial, industrial, or non-commercial activities inside or outside Egypt, provided that the head office of the company shall be based in Egypt.

- Any natural person shall submit an annual tax return for total annual revenues, using online form prepared for that purpose, and shall submit the same to the tax e-portal before April 1^st of each fiscal year.

- Any legal person shall submit a tax return on total revenues from capital gains generated annually, using online form prepared for that purpose, and shall submit the same to the tax e-portal before May 1^st of each fiscal year.

- Banks that are wholly owned by the State, public sector companies, the public business sector, and public legal persons engaging in a taxable activity, shall submit a final tax declaration within 30 days from the date of approval of their accounts by the General Assembly of the company which will submit the tax declaration, using the Form 29 and shall pay the outstanding tax differences accordingly.

- The tax return shall be certified by a chartered accountant registered in the General Register of Accountants and Auditors or by the Central Auditing Organization (CAO), as the case may be, recognizing that net taxable profit or loss as stated in the tax return was provided under the provisions of the tax law, as well as for trust companies and cooperative societies, regardless of their turnover. Also, natural persons and partnerships shall be subject to taxes if their turnover exceeds EGP 2 million annually.

- Income tax rates have been amended by Law No. 175 of 2023 amending certain provisions of the Income Tax Law promulgated by Law No. 91 of 2005. The tax rate is calculated as follows:

- Upon tax calculation, the total annual net income is rounded to the nearest ten Egyptian pounds less.

- The tax is imposed on legal persons (companies) at 22.5% of the total revenues generated annually.

- Value-added tax (VAT): It is the tax paid by the consumer on purchased goods and services, including machinery, equipment, and services related to the sale of a good or the provision of a taxable service. It is charged at 14% of the value of a good or for a service provided.

- Table tax (percentage): It is a tax applied at special rates or with specific values on the sale or import of local or imported goods and services as stipulated by Law No. 67 of 2016; 10% of the value of a good or for a service provided.

- Additional tax: It is a tax applied at 1.5% of the value of the unpaid tax or the table tax, including the tax resulting from amendment (if any) to the tax return, for the whole or part of a month as of the end of the period set for payment until the actual date of payment.

- The payer shall register for the payment of the sales tax (VAT - table tax) if the total amount of supplied goods and services amounts to EGP 500,000 (Five hundred thousand). The payer shall apply for registration to the competent authority to obtain the registration certificate, regardless whether it is the head office or the branch of a company.

- A payer providing a service, for example, consultations and supply, shall register for the payment of the sales tax from the first day of engaging in such activities.

- The payer shall collect tax and submit the relevant tax return to the Authority within the legally prescribed deadline, i.e. 30 days from the month following the end of the tax period. The payer shall submit the tax return even if no revenues have been generated in the relevant tax period. If the payer fails to file the tax return in the tax system within the legally prescribed deadline, in that case, the payer shall be subject to significant financial penalties.

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.