Commercial taxes

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1. Corporate Income Tax

The corporate tax is imposed on the annual taxable net profit. The taxable net profit is determined based on the audited financial reports’ net profit after adjusting it with certain adjustments based on the income tax law.

Taxpayers are required to file annual corporate income tax return which should be signed by a local external tax advisor. Tax return under the Egyptian Tax Law is a self-assessment. Accordingly, any understatement of tax liabilities in the tax return will result in the imposition of penalties

Corporate income tax rate is 22.5% on net taxable income.

Tax losses can be carried forward for five subsequent years maximum

A serial of tax law amendments has been issued during the years 2013 – 2015 and the major issues of such amendments on the corporate tax are about the Capital gains and Profits distributions

2. Salary Tax:

Under the Egyptian Tax Law, it is the employer responsibility to withhold the salary tax due on each employee and remit the tax to the Tax Authority on a monthly basis within fifteen days following the month of payment.

Nonresident employees are subject to same salary tax rules, however if they are resident in a country which has tax treaty with Egypt, then tax treaty provisions should apply.

3. Withholding Tax on Domestic Transactions:

The withholding tax would applies to payments in excess of EGP 300.

The rates are 2% on services, 0.5% on supplies & contracting activities and 5% on commissions & brokerage fees.

Entities which are required to withhold tax under the existing tax law are required to apply the above rules and to file a quarterly withholding tax form within one month following the end of each quarter and remit the tax along with the tax form.

4. Withholding tax on Cross-Border Transactions:

A withholding tax of 20% is imposed on the following payments made to overseas parties by resident sole proprietorships, partnerships and companies:

  • Royalties
  •  Interest
  •  Services
  •  fees

The tax treaty provisions can be applied if applicable.

Meanwhile the treaty country resident recipient may apply for tax refund for the difference between 20% and the treaty rate form the Tax Authority after providing certain documents and following certain procedures.

5. Stamp Tax:

Stamp tax law classifies the stamp taxes into physical and proportional taxes. The physical stamp taxes are imposed on a variety of documents such as the contracts for example. The proportional stamp taxes are imposed on the values of certain transactions e.g. advertisements at 20% tax rate.

6. Sales Tax:

Sales tax is imposed by Law No. 11 of 1991 on manufactured goods whether imported or locally produced, and it is also imposed on some specific services.

The standard sales tax rate is 10% however; some goods are exempt from the tax and some other goods attract lower or higher tax rates. Export activity is subject to sales tax at 0%.

Taxpayers are required to register with the Sales Tax Authority and file monthly sales tax returns, which should be submitted within the following 2 months after the reporting month.

7. Property Tax:

Property tax is imposed on all buildings in Egypt. Tax is borne by the owner whether a natural person or a corporate body.

The tax rate is 10% on the annual rental value of the taxable buildings after the deduction of 32% (30% for residential units) allowed for maintenance.

The tax is due as from the fist of July 2013 and afterwards; and to be collected on two equal instalments (the end of June and the end of December of the same year).

Taxpayers are required to file a tax return and failure to do so will expose the taxpayer to pay a penalty.

Social Insurance

According to the social insurance law there are two kind of social insurance as follow:-

a)Standard social insurance

Legal entities working in Egypt should register for social insurance with the competent social insurance office.

Social insurance on employees’ salaries is imposed on the employee and the employer as well, the employer share of social insurance is 26% of basic salary and 24% of variable salary, on the other hand, the employee share of social insurance is 14% of basic salary and 11% of variable salary.

The employer is obliged to remit the above monthly contributions to the competent social insurance office before the fifteenth of the following month to avoid the delay interest which approximately 1% monthly.

b)Contacting social insurance

Contractor working in Egypt should notify the Social Insurance Authority with their contracts and paying the related social insurance contributions due on these contracts.

The contributions due will be determined according to the total value of the contract and the nature of work, there are rates specified for most of the nature of works.