Under the Egyptian law, there are different taxes that shall be paid for different transactions; such taxes are stipulated under different laws mainly the Income Tax Law No. 91 of 2005, VAT Law No. 67 of 2016, Customs Law No. 66 of 1963, etc.
Income tax is the tax imposed on the income generated by a natural or juristic person; and it is regulated by the Law No. 91 of 2005 promulgating the Income Tax Law. Regarding the tax rates of the income tax, a distinction is made between the tax rates imposed on natural persons and those imposed on juristic persons.
1.1 Tax Rates
1) Natural Persons:
Tax rates on the income generated by natural persons are classified into 5 tranches as follows:
First tranche: up to EGP 7,200 pounds per year is exempted.
Second tranche: more than EGP 7,200 to EGP 30,000 per year (10%).
Third tranche: more than EGP 30,000 to EGP 45,000 per year (15%).
Fourth tranche: more than EGP 45,000 to EGP 200,000 per year (20%).
Fifth tranche: more than EGP 200,000 per year (22.5%).
2) Juristic Persons:
Juristic persons are subject to tax rate (22.5%) of their annual net profits.
The net taxes of the year is approximated to the nearest less 10 pounds while calculating the taxes. Tax losses can be carried forward for five subsequent years maximum.
1.2 Tax Report
The tax report for natural persons shall be submitted before the 1st of April of each year following the end of fiscal year. For legal person’s, it shall be submitted before the 1st of May or within four months following the fiscal year end date.
1.3 Penalties for Violations
- Imprisonment and/or a fine not less than EGP 10,000 and not exceeding EGP 100,000 is imposed on the registered accountant or auditor in case of concealing important incidents concerning the taxpayer’s activity or in case of concealing facts that 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 and/or a fine equivalent to the tax that shall have been paid in case of tax evasion.
According to VAT Law No. 67 of 2016, all local and imported goods and services are subject to VAT except those specifically exempted.
2.1 Exempted Goods
There are 57 exempted goods and services under the VAT Law, they include, interalia:
- Tea, sugar and milk;
- Gas, electricity and water;
- Banking services that are legally restricted to banks only;
- Medicines and the active substances used in the manufacture of medicines, whether locally manufactured or imported;
- Health services except plastic surgery and weight loss services other than for medical purposes;
- Public education and scientific research services, including schools offering international curricula;
- Public hospitals, public Medicare services, public clinics, and non-profit organizations;
- Free radio and TV transmission services;
- Sale and lease of vacant plots, agricultural lands, buildings and housing and non-housing units;
- Advertisement services.
2.2 Registration Threshold
The annual turnover registration threshold for natural and juristic persons, for VAT purposes, is EGP 500,000. A natural person or legal entity, meeting this threshold after the enactment of the VAT law is obligated to register within 30 days from the date of reaching the VAT registration threshold. Voluntary registration is available for who so ever desires.
2.3 Tax Rates
The general VAT rate is 14%. Machinery and equipment used in producing taxable or non-taxable goods or rendering services are subject to a 5% VAT. Exported goods and services are subject to a zero VAT rate. Special rates apply to a number of goods and services listed in table attached with the VAT Law.
The real estate property falls under the real estate tax law No. 196 of 2008. The taxpayer is the natural or legal person who owns usufructs or uses the property. The lessee is not responsible for paying the tax; nevertheless, he is in solidarity with the taxpayer in paying the tax within the limits of the lease value.
The real estate unit taken as a private residential home for the taxpayer and his family shall be exempted from the real estate tax as long as the net annual rental value of which is less than EGP 24,000. Each unit used for a commercial, industrial, administrative or professional purpose is exempted from the foresaid tax as well, if its net annual rental value is less than EGP 1200.
3.2 Tax Rate
The tax rate is 10% of the annual rental value after deducting:
- 30% of such value for residential properties, 32% for the non-residential properties; such deductions cover all the expenses incurred by the taxpayer, including maintenance expenses.
- Tax threshold, which is EGP 24,000 for the private residential homes; and EGP 1200 for units used for commercial, industrial, administrative or professional purposes.
Example: Tax calculation for a non-residential (administrative / commercial) unit whose annual rental value is EGP 2700 is as follows:
Net Annual Rental Value = Annual rental value – 32%
Net Annual Rental Value = 2700 * 68% = EGP 1836
Tax Base = Net Annual Rental Value – Threshold
Tax Base = 1836 – 1200 = EGP 636
Tax = Tax Base * Tax Rate
Tax = 636 * 10% = EGP 63.6 per year
3.3 Tax Report
The tax report shall be submitted before the 1st of 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.
It is a tax levied on documents. Stamp duty is regulated by the Law No. 111 of 1980, amended by the Law No. 143 for the year 2006 and its executive regulations. It applies to the deeds, publications, certificates and statements, abstracts, requests, contracts and alike, personal documents, banking transactions, insurance, commercial advertisement, incorporation, all governmental documents, etc.
The stamp duty mainly applies to all kinds of transactions with a very small rate different from one transaction to another depending on the transaction value.
It is the tax applied to the goods and products imported to the Arab Republic of Egypt. Custom duty is regulated by the Customs Law No. 66 of 1963 and its executive regulations. The custom duty has no unified value or rate and it varies from one imported good to another.