Egypt’s recorded history started in 3200 BC. It’s an ancient country with much of civilization sprouting from there. However, it’s tax laws are far from ancient.
When the Monarchy was overturned during the 1952 Revolution and the new Republic of Egypt emerged, the country experienced decades of substantial economic turmoil. Finally, at the start of the Egyptian government introduced tax and investment reforms, putting the country firmly back on the map as one of Africa’s largest economies.
Today, Egypt has an attractive tax regime and other incentives to lure domestic and international investors to set up shop within the country’s borders. In 2015, the government introduced investment law amendments with this purpose in mind. Among the measures included in the amendments is reduced sales taxes and customs duties specifically for foreign investors. Sales tax on imported tools, equipment, and machinery necessary for establishing a business is 5%, instead of the usual 10%, while customs duties are at a reduced 2% instead of 5%.
The country also allows profit repatriation, as long as a company can provide supporting documents for it.
Corporate tax rate
Egypt applies a corporate income tax flat rate of 22.5% for most industries outside of the oil and gas sectors, with tax returns submissible within four months of a company’s financial year-end. A corporate would apply tax credits for local withholding taxes, like employee tax paid to the tax authority during the tax year, which runs from 1 January to 31 December, and social security payments.
Certain deductions are allowed on commercial profits for costs and expenses incurred in realizing the profits. Examples of typical deductible expenses are:
- Import costs.
- Set-up costs within the country.
- Administrative and related expenses.
Another important component of tax is employee tax and to whom the responsibilities fall to ensure accurate and timeous payment of employee tax.
The employer is responsible to file quarterly tax returns, with a one-month leeway after each quarter-end to file the returns.
The employer must additionally file annual salary tax reconciliations, containing salaries paid to each employee, deductions and exemptions that apply, the income tax due, and the net salary paid to each employee. You have until April of the next tax year to submit the recon.
Employers are required to calculate and deduct tax on all employee salaries, and pay over the required amount within 15 days of the following month. This is known industrywide as withholding tax payments.
Where an employee has a temporary residence permit or no citizenship, the employer needs to file a tax return on 1 January of each year in addition to the quarterly tax returns.
Any late submissions carry an obligatory penalty.
The Egyptian tax system is based on residency status. Therefore residents pay tax on income earned within Egypt as well as abroad, while non-residents are taxed only on income earned within Egypt.
The Egyptian tax brackets on individuals’ annual salaries are as follow:
|Income Earned||Tax Rate|
|Up to EGP15,000||0%|
|More than EGP400,000||25%|
Every individual taxpayer qualifies for an annual tax exemption of EGP9,000
In addition to the tax regime, the Egyptian constitution prescribes that the government ensures social and health services, retirement, unemployment, and retirement pensions for all citizens.
Social Security payments include insurance for:
- Old age, disabilities, and death.
- Social care for pensioners.
- Occupational accidents insurance.
- Sickness insurance.
- Unemployment insurance.
Interestingly, Egypt currently offers the highest and most comprehensive social security program among developing economies, covering about 80% of all employees.
Egyptian social security employer contribution is 18.75% of the total social insurance salary, while employees contribute 11% of the total social insurance salary.
Since 1 January 2021, the contributions apply to monthly salaries of at least EGP1,000 and up to EGP7,000.
Employers must make the social security payments every month, within 15 days after the end of the month or penalties apply.
In payroll, employers in Egypt deduct the income tax and social security of each employee before paying employees their net income for the month. These withholding payments are remitted to the tax authority and Social Insurance Organisation within 15 days of the end of the payment month.
This means that employers have a responsibility to register new employees at the local tax authority and social security office within 15 days of commencement of employment. When an employee leaves a company, the employer must notify the tax and social security offices of the changes.
For foreign employees, a relevant working visa would be a requirement for employment.