Egypt Tax & Business Guride - Deloitte

/Home/E-F Countries/Egypt (Country Code 20)/Eqypt Tax Resources

Basic facts
Population 75.4m Inflation 7.7% (2006)
Main languages Arabic, English, French GDP per head US$1,430*
Currency Egyptian pound (EGP) GDP growth 6.8% (2006)*
Economic communities WTO
GDP sources 14.1% agriculture, 35.7% industry, 41.2% services
*Economist Intelligence Unit estimates.
Political environment

Egypt has a limited representative system of government. Executive authority is vested in the president, currently Hosni Mubarak, who is serving a fifth six-year term. Mr Mubarak also heads the National Democratic Party, which controls a majority in the legislative body, the Majlis al-Shaab (PeopleÌs Assembly). Dr Ahmed Nazif is the prime minister.
Foreign trade and investment
Exports US$21.0bn (2006)* Imports US$33.0bn (2006)*
*Economist Intelligence Unit estimates.

Major exports: Oil, mineral oils and products, and finished commodities.

Leading export markets: The US, Italy and Spain.

Foreign investment projects that pass through a review process may gain legal status and qualify for incentives. Some investments require additional approval, including investments in Sinai, military products and tobacco. Foreign ownership of agricultural lands is prohibited.
Business and financing
Business forms Joint stock company, limited liability company, branch and representative office

The favoured business entity for foreign investors is the joint stock company, but Egyptian law also provides for limited liability companies, joint partnerships and limited partnerships, and branches and representative offices of foreign companies. Branches may be established with approval from the General Authority for Investment if they conduct the same business as the head office and are entering contracts with a government body.

Companies formed under the Investment Law may be 100% foreign-owned.
Labour environment
Unemployment rate 9.4% (2006)* Minimum wage Various
*Economist Intelligence Unit estimate.

The government sets wages for public sector and government employees, while the private sector is subject to minimum wage laws. The National Council of Wages sets minimum wages for private industry, which differ by sector.

About 20% of EgyptÌs workers are union members (mainly employees in state-owned enterprises).

Employers must pay monthly social contributions covering old-age pensions and insurance for disability, death, work accidents, medical needs and unemployment.

Foreigners need a work permit from the local Manpower and Training office.
Taxation
Corporate tax
Main rate 20%

Egyptian companies are taxed on worldwide income; foreign companies are taxed only on Egyptian-source income. The corporate income tax rate is 20% for manufacturing, services and trading activities, and 40.55% for companies engaged in the exploration and production of oil and gas.

Employees are entitled to 10% of cash dividends paid to shareholders. However, amounts distributed under such profit sharing may not be deducted for corporate income tax purposes (and are not subject to salary tax).

Dividends received by companies from abroad are subject to tax at a rate of 20%. Foreign tax paid abroad may be deducted from the local income tax payable, but the deduction may not exceed the total tax payable in Egypt.
Individual tax
Progressive rates up to 20%

Salary tax is imposed on:

* Individuals working in Egypt regardless of whether the income is paid by an Egyptian or a foreign source;
* Egyptians working outside of Egypt where the income is paid or charged to an Egyptian company; and
* ExpatriatesÌ income, where work is performed in Egypt (regardless of where the income is paid), or where work is performed outside Egypt and the income is paid or charged to an Egyptian company.

Income from employment, commercial or industrial activities, and non-commercial activities (that is, the exercise of a profession) is subject to tax at progressive rates up to 20% on income over EGP 40,000 per year. Non-resident employees and resident employees who derive income from sources other than their original place of employment are subject to tax at a flat rate of 10%.

Mandatory profit sharing, pensions and end-of-service bonuses are not subject to salary tax.
Capital gains
Company gains taxed as income

Capital gains derived by companies are taxed as business income at the normal 20% rate. Individuals are subject to tax on capital gains if the assets are sole proprietorship assets (including real estate). If not classified as sole proprietorship assets, real-estate gains are subject to a separate tax of 2.5% on the gross gains.
Indirect tax
Sales tax rates range from 5% to 30%

Sales tax applies to most transactions. The 5% rate applies to some foodstuffs, fertilisers and locally produced medicines. The 10% rate applies to hotel and tourism services, certain international communications and specific services such as those of real-estate agents, security, cleaning and car rentals. The 25% rate applies to televisions (larger than 16 inches), radios, certain motor vehicles, cosmetics and video cameras. Exemptions from sales tax include natural gas, books and magazines, and goods used for scientific, educational and cultural purposes.
Tax administration and compliance
Tax year Companies: accounting year; Individuals: calendar year

Companies must file a tax return before May 1st or within four months following the end of the financial year. Tax is assessed on the basis of the details in the tax return.

Individuals must submit a declaration of income before April 1st following the end of the tax year and must pay tax based on the declaration. Employment income is taxed by withholding at source.
Additional tax information
Withholding taxes Dividends 0%, Interest and Royalties 20%. Interest paid on long-term loans (that is, loans for more than three years) is not subject to withholding tax.
Tax treaties Egypt has concluded about 50 tax treaties.
Dividends Dividends received from an Egyptian company are not taxable; dividends received from abroad are included in taxable profits and are subject to tax at 20%, with a deduction allowed for foreign taxes paid abroad (which may not exceed tax payable in Egypt). Income from investments in non-resident companies is taxed on the basis of equity accounting.
Revenue protection There are transfer-pricing and thin-capitalisation rules.
Groups There is no provision for group taxation.
Incentives Tax incentives are available for companies operating under the free-zone system, projects funded by USAID and companies established under Investment Law No. 8 that benefited from a corporate tax exemption before June 10th 2005, the date the new tax law was introduced (the 2005 law abolished incentives under Investment Law No. 8). Companies and establishments that were set up before June 10th 2005 but did not commence activities or production until the new law went into effect will enjoy the benefits of Investment Law No. 8, provided that they begin operations or production within three years of the enactment of the 2005 tax law.
Other taxes Development duties (except where it is for corporate and payroll tax), Import duties, Property tax, Stamp duty and Tax on real-estate wealth.