Cairo GMT +2
EY
Ring Road, Zone #10A
Rama Tower
P.O. Box 20 Kattameya Cairo Egypt
+20 (2) 2726-0260
Fax: +20 (2) 2726-0100
International Tax and Transaction Services – International Corporate Tax Advisory
Heba Wadie
+20 (2) 2726-0260
Mobile: +20 (109) 991-6730 Email: heba.wadie@eg.ey.com
Karim Emam +20 (2) 2726-0192
Mobile: +20 (100) 777-7193 Email: karim.emam@eg.ey.com
Business Tax Services
Hossam Nasr
+20 (2) 2726-0260
Mobile: +20 (100) 777-7393 Email: hossam.nasr@eg.ey.com
International Tax and Transaction Services – Transaction Tax Advisory
Heba Wadie +20 (2) 2726-0260
Mobile: +20 (109) 991-6730 Email: heba.wadie@eg.ey.com
Karim Emam +20 (2) 2726-0192
Mobile: +20 (100) 777-7193 Email: karim.emam@eg.ey.com
Business Tax Advisory
Hossam Nasr
Tax Policy and Controversy
Ahmed El Sayed
Hossam Nasr
Hany El Gamal
People Advisory Services
Hossam Nasr
Indirect Tax
Hany El Gamal
+20 (2) 2726-0260
Mobile: +20 (100) 777-7393 Email: hossam.nasr@eg.ey.com
+20 (2) 2726-0260
Mobile: +20 (100) 444-0222 Email: ahmed.el-sayed@eg.ey.com
+20 (2) 2726-0260
Mobile: +20 (100) 777-7393 Email: hossam.nasr@eg.ey.com
+20 (2) 2726-0260
Mobile: +20 (100) 606-6799 Email: hany.el-gamal@eg.ey.com
+20 (2) 2726-0260
Mobile: +20 (100) 777-7393 Email: hossam.nasr@eg.ey.com
+20 (2) 2726-0260
Mobile: +20 (100) 606-6799 Email: hany.el-gamal@eg.ey.com
A. At a glance
Corporate Income Tax Rate (%) 22.5 (a)
Capital Gains Tax Rate (%)
Sales of Securities 10/22.5 (a)(b)
Sales of Other Assets 22.5 (a)
Branch Tax Rate (%) 22.5 (a)
Withholding Tax (%)
Dividends 10 (c)
Interest 20 (c)
Royalties from Patents, Know-how, etc. 20 (c) Services 20 (c)
Branch Remittance Tax 10 (d) Net Operating Losses (Years)
Carryback 0 (e)
Carryforward 5
(a) The standard corporate income tax rate is 22.5%. Exceptions to the 22.5% rate exist (see Section B). (b) For details regarding the 10% rate, see Section B. (c) This is the standard rate. The rate may be reduced to 5% under domestic law for dividends. It also may be reduced under a tax treaty. Exemptions may apply in certain circumstances. The tax is a final tax imposed on gross payments. Also, see Section B. (d) A branch remittance tax of 10% is payable within 60 days after the financial year-end.
(e) Only losses incurred in long-term projects may be carried back to offset prof its from the same project for an unlimited number of years.
B. Taxes on corporate income
Corporate income tax. Egyptian corporations are subject to cor porate profits tax on their profits derived from Egypt, as well as on profits derived from abroad, unless the foreign activities are performed through a permanent establishment located abroad. Foreign companies performing activities through a permanent establishment in Egypt are subject to tax only on their profits derived from Egypt.
Rates of corporate income tax. The standard rate of corporate income tax is 22.5%.
Exceptions to the 22.5% rate exist. Oil prospecting and produc tion companies are subject to tax on their profits at a rate of 40.55%. The Suez Canal Company, the Egyptian General Petroleum Company and the Central Bank of Egypt are subject to tax on their profits at a rate of 40%.
Capital gains
From the sale of securities by residents. The following rates apply to capital gains derived from the sale of securities by residents:
• A 10% rate applies to capital gains on securities listed on the Egyptian Stock Exchange that are sourced in Egypt and real ized by individuals and corporations (suspended for listed securities until the end of December 2021; gains realized from 2022 are taxable).
• The standard corporate tax rate of 22.5% applies to capital gains on unlisted securities that are sourced in Egypt and real ized by corporations, capital gains on securities realized abroad and capital gains on shares.
From the sale of securities by nonresidents. The following rates apply to capital gains derived from the sale of securities by nonresidents:
• Capital gains realized from the disposal of unlisted shares by nonresident corporations are subject to a 22.5% tax.
• Capital gains realized from the disposal of unlisted shares by nonresident individuals are subject to the tax brackets in Article 8 of Tax Law No. 91 of 2005, ranging from 0% to 25%.
• Capital gains realized from the disposal of listed shares or from the disposal of Treasury bills by nonresident individuals and corporations are exempt from tax.
From the sale of other assets. Tax on capital gains on other assets is calculated at the ordinary corporate profits tax rates in the same manner as ordinary business profits and is not calculated sepa rately. Trading and capital losses derived from sales of other assets are deductible against taxable capital gains.
Administration. Companies must file their annual tax returns, together with all supporting schedules and the original financial statements, before 1 May of each year, or four months after the end of the financial year. The tax return must be signed (elec tronically) by the taxpayer. Taxpayers can file a request for an extension of the due date for filing the tax return if the estimated amount of tax is paid at the time of the request. A request for an extension must be filed at least 15 days before the due date. An extension of up to 60 days may be granted. An amended tax return can be filed during the year following the due date set for submit ting the annual return, unless the taxpayer has evaded tax or received an inspection notification. If the amended return reflects lower tax due than the original return, the Egyptian Tax Authority (ETA) should review the amended return and approve the refund within six months from the date of application.
Any tax due must be paid when the tax return is filed.
A late penalty is imposed at a rate of 2% plus the credit and dis count rate set by the Central Bank of Egypt in January of each year.
A penalty of EGP3,000 up to EGP50,000 is applicable on noncompliance with the deadline for submitting the annual corporate income tax return for a period not exceeding 60 days from the due date for the tax return.
A penalty from EGP50,000 up to EGP2 million is imposed if an annual corporate income tax return is filed more than 60 days after the filing due date. If the noncompliance occurs for three annual corporate income tax returns, the taxpayer may also be subject to imprisonment for a period between six months and three years.
The law has set up appeals committees at two levels — the Internal Committee and the Appeal Committee. The Appeal Committee’s decision is final and binding on the taxpayer and the tax depart ment, unless a case is appealed to the court within 30 days of re ceiving the decision, which is usually in the form of an assessment. There is a new level that enables taxpayers to settle their tax dis putes by filing a settlement request to the ETA concerned for the disputed items, provided that the file is still under discussion and not yet held for the issuance of a decision by the Appeal Committee.
Dividends. Dividends paid by corporations or partnerships, in cluding companies established under the special economic zone system, to resident juridical persons, nonresident persons, or nonresident juridical persons that have a permanent establishment in Egypt are subject to tax on dividends.
Tax on dividends is imposed at a standard rate of 10% without any deductions or exemptions. However, this rate can be reduced to 5% if the shares are listed.
Under the law, foreign branches’ profits in Egypt are considered distributed profits within 60 days after the financial year-end. As a result, a branch must pay the dividend tax on its annual profits within 60 days after the financial year-end.
The tax law grants exemptions for investment funds.
Dividends in the form of free stocks are not subject to tax on dividends.
Withholding tax. In general, payments for all services performed by nonresident companies for Egyptian companies in or outside Egypt are subject to withholding tax at a rate of 20%. However, this withholding tax does not apply to payments related to the following activities:
Transportation
Shipping
Insurance
Training
Participation in conferences and exhibitions
Registration in foreign stock markets
Direct advertising campaigns
Hotel accommodation
Services related to religious activities
Foreign tax relief. Foreign tax paid by resident entities outside Egypt can be deducted if supporting documents are available.
Treaties entered into between Egypt and other countries provide a credit for taxes paid abroad on income subject to corporate in come tax in Egypt.
C. Determination of taxable income
General. Corporate income tax is based on taxable profits com puted in accordance with generally accepted accounting principles, modified for tax purposes by certain statutory provisions primarily concerning depreciation, provisions, inventory valua tion, intercompany transactions and expenses. Interest on bonds listed on the Egyptian stock exchange is exempt from tax if cer tain conditions are satisfied.
Taxable profits are based on actual revenues and costs. Consequently, unrealized revenues and costs are not included in the tax base.
Startup and formation expenses may be deducted in the first year.
The deductibility of a branch’s share of head office overhead expenses is limited to 10% of the taxable net profit. The expenses charged within the limits of this percentage may not include any royalties, interest, commissions or direct remuneration, and a
certificate from the head office’s auditor, duly endorsed and authenticated, must be submitted. Head-office expenses are fully deductible if they are directly incurred by the branch and are necessary for the performance of the branch’s activity in Egypt. Such expenses must be supported by original documents and approved by the head office auditors.
Interest paid on loans and overdrafts with respect to a company’s activities is deductible after offsetting interest income. Interest paid to individuals who are not subject to tax or exempt from tax is not deductible. Deductible interest is limited to the interest com puted at a rate equal to twice the discount rate determined by the Central Bank of Egypt.
Inventories. Inventory is normally valued for tax purposes at the lower of cost or market value. Cost is defined as purchase price plus direct and indirect production costs. Inventory reserves are not permissible deductions for tax purposes. For accounting pur poses, companies may elect to use any acceptable method of inventory valuation, such as first-in, first-out (FIFO) or average cost. The method should be applied consistently, and if the meth od is changed, the reasons for such change should be stated.
Provisions. Provisions are not deductible except for the following:
• Provision for up to 80% of loans made by banks, which is re quired by the Central Bank of Egypt
• Insurance companies’ provision determined under Law No. 10 of 1981
Bad debts are deductible if the company provides a report from an external auditor certifying the following:
• The company is maintaining regular accounting records.
• The debt is related to the company’s activity.
• The debt appears in the company’s records.
• The company has taken the necessary action to collect the debt.
Depreciation and amortization allowances. Depreciation is de ductible for tax purposes and may be calculated using either the straight-line or declining-balance method. The following are the depreciation rates.
Type of asset Method of depreciation Rate (%)
Buildings, ships and aircraft Straight-line 5
Intangible assets Straight-line 10
Computers Declining-balance 50
Heavy machinery and equipment Declining-balance 25
Small machinery and equipment Declining-balance 25 Vehicles Declining-balance 25
Furniture Declining-balance 25
Other tangible assets Declining-balance 25
The law allows a taxpayer to claim a deduction of 30% of the costs of new or used equipment and machines as accelerated depreciation if the assets are used for production purposes. This deduction applies only in the first tax period in which the equipment and machines are used.
Relief for losses. Tax losses may be carried forward for five years. Losses incurred in long-term projects may be carried back for an unlimited number of years to offset profits from the same project.
Losses incurred outside Egypt cannot be offset against taxable profits in Egypt.
If capital losses exceed capital gains realized from disposals of securities and shares in a tax year, the excess can be carried for ward for three years.
Groups of companies. Associated or related companies in a group are taxed separately for corporate income tax purposes. Egyptian law does not contain a concept of group assessment under which group losses may be offset against profits within a group of companies.
D. Other significant taxes
The following table summarizes other significant taxes.
Nature of tax Rate (%)
Value-added tax Various Customs duties
General, ad valorem Various
On value of machinery needed for investments by companies 5 Stamp duties on bills, promissory notes and letters of guarantee as well as most types of documents, contracts, checks and receipts (Treasury bonds and bills are exempt) Various Social insurance
On monthly gross salary with a maximum of EGP9,400 and a minimum of EGP1,400; paid by Employer 18.75
Employee 11 On contract labor force 18.25
E. Miscellaneous matters
Foreign-exchange controls. Egypt has a free-market exchange system. Exchange rates are determined by supply and demand, without interference from the central bank or the Ministry of the Economy.
Debt-to-equity rules. Under the new tax law, the maximum debtto-equity ratio is 4:1. If the debt exceeds such ratio, the excess interest may not be claimed as a deductible expense.
Transfer pricing. Egyptian tax law contains specific tax provisions relating to transfer pricing, which are based on the arm’s-length principle. Under these measures, the tax authorities may adjust the income of an enterprise if its taxable income in Egypt is re duced as a result of contractual provisions that differ from those that would be agreed upon by unrelated parties.
However, according to Egyptian tax law, it is possible to enter into arrangements in advance with the Tax Department regarding a transfer-pricing policy through an advance pricing agreement (APA). An APA ensures that transfer prices will not be challenged
after the tax return is submitted and, accordingly, eliminates exposure to penalties and interest on the late payment of taxes resulting from adjustments of transfer prices.
The ETA in association with the Organisation for Economic Cooperation and Development (OECD), issued transfer-pricing guidelines in 2010. These guidelines advise taxpayers on the application of the arm’s-length principle in pricing their intragroup transactions and outline the documentation that taxpayers should maintain as evidence to demonstrate their compliance with the arm’s-length principle.
On 22 May 2018, the Egyptian government issued Ministerial Decree No. 221 of 2018, which amended the Income Tax Law Executive Regulations to align Egypt’s rules more closely with the international consensus on transfer pricing reflected in the OECD transfer-pricing guidelines.
On 23 October 2018, the ETA issued a revised version of the 2010 transfer-pricing guidelines on its website. The new guide lines consist of the following two parts:
• Principles and Implementation
• Advance Pricing Agreements
The guidelines introduce a three-tiered transfer-pricing docu mentation approach and introduce the following significant new compliance obligations in Egypt:
• Local file: A taxpayer engaged in transactions with related par ties is expected to prepare local transfer-pricing documentation and submit it to the ETA within two months following the filing of the 2018 corporate tax return.
• Country-by-Country Report (CbCR): An Egyptian parent com pany of a multinational group with consolidated group revenue of at least EGP3 billion (EUR148 million) must file a CbCR in Egypt. The submission deadline is 12 months from the end of the reporting fiscal year.
• Master file: The master file must be prepared at the ultimate parent level of the group and must be made available to the ETA based on the parent entity’s tax return filling date in its home jurisdiction.
The APA program is designed to enable taxpayers and the ETA to agree on the proper treatment of the transfer pricing of potential controlled transaction(s) in which the taxpayer will engage for a specific period (typically more than one year) under certain terms and conditions. The APA program is intended to provide a cooperative process to resolve potential transfer-pricing disputes in advance.
The new guidelines provide the APA framework and other details regarding the APA program in Egypt.
On 19 October 2020, the Law No. 206 of 2020 was published in the Official Gazette. The law stipulates specific transfer-pricing penalties for noncompliance, thereby completing the transferpricing legislative framework. The penalty imposed by the Unified Tax Procedures Law is 1% of the total value of the related-party transactions that are not declared in the taxpayer’s corporate income tax return. In addition, the law introduced a filing threshold for master and local files. Under the law, a
taxpayer must prepare and submit the master file and the local file if its aggregate related-party transactions exceed EGP8 million for the year.
However, Law No. 211 of 2020, which was published on 3 December 2020, amended some provisions of Law No. 206, introducing stricter penalties for noncompliance relating to transfer-pricing documentation. The following are the penalties:
• Failure to declare the accurate value of related-party transac tions (Table 508) for corporate income tax returns due to be filed on or after 20 October 2020: 1% of the total value of the taxpayer’s undeclared related-party transactions (local and cross-border transactions) during the fiscal year
• Failure to submit a master file or local file on time: 3% of the total value of the taxpayer’s related-party transactions (local and cross-border transactions) during the fiscal year
• Failure to submit a CbCR (if the taxpayer is the ultimate parent entity of a multinational group) or notification (if the taxpayer is the constituent entity) on time: 2% of the total value of the taxpayer’s related-party transactions (local and cross-border transactions) during the fiscal year
F. Treaty withholding tax rates
The table below sets forth maximum withholding rates provided in Egypt’s double tax treaties for dividends, interest and royalties.
To benefit from the tax rates provided by double tax treaties with respect to dividends, interest and royalties, within six months after the date of receipt of the payment, a nonresident entity or its legal representative must submit to the tax authorities an application to apply the tax rate stated in the treaty and request a refund of the difference between the domestic rate and the treaty rate. The application must be submitted on the form designed for this pur pose together with required documents.
Egypt signed up to be a member of the Base Erosion and Profit Shifting (BEPS) Inclusive Framework from 2016.
In addition, in 2017, Egypt signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI).
The MLI needs to be ratified by both treaty jurisdictions. The effective date of implementing the changes in relation to with holding tax rates under the updated conventions is 1 January 2021.
The following is the treaty withholding tax rate table.
Dividends (a) Interest Royalties
From Egypt
From Belgium
Dividends (a) Interest Royalties (%) (%) (%)
Bulgaria 5/10 12.5 12.5
Canada 5/10 15 15
China Mainland 5/8 10 8
Cyprus 5/10 (d) 10 10
Czech
Republic 5/10 15 15
Denmark 5/10 15 20
Ethiopia 5/10 10 10
Finland
From Finland 10 0 20
From Egypt 5/10 20 20
France 0 15 15
Georgia 5/10 10 10
Germany 5/10 15 Trademarks 20 Other 15
Greece 5/10 15 15
Hungary 5/10 15 15
India 5/10 20 According to domestic law in each country
Indonesia 5/10 15 15 Iraq
From Iraq According to 10 One-half of tax domestic law rate in the country
From Egypt 5/10 20 10
Ireland 5/10 (e) 10 10
Italy 5/10 20 15
Japan 5/10 20 15
Jordan 5/10 15 20
Korea (South) 5/10 10/15 15
Kuwait 5/10 10 10
Lebanon 5/10 10 5
Libya 5/10 20 20 Malaysia 0 15 15
Malta 5/10 10 12
Mauritius 5/10 10 12
Morocco 5/10 20 10 Netherlands 0 (f) 12 12 Norway
From Norway 15 0 15 (or the domestic rate applied by Norway, whichever is lower)
From Egypt 5/10 20 15
Pakistan 5/10 15 15
Palestinian
Authority 5/10 15 15
Poland 5/10 12 12
Romania 5/10 15 15
Russian Federation 5/10 15 15
Saudi Arabia 5/10 10 10
Dividends (a) Interest Royalties (%) (%) (%)
Serbia and Montenegro 5/15 (g) 15 15 Singapore 5/10 15 15
South Africa 5/10 12 15
Spain 5/9 10 12
Sudan 5/10 10 10
Sweden 5 15 14
Switzerland 0 15 12.5
Syria 5/10 15 20
Tunisia 5/10 10 15
Turkey 5/10 10 10 Ukraine 5/10 12 12
United Arab Emirates 5/10 (h) 10 10
United Kingdom 5/10 15 15
United States 5/10 15 15
Yemen According to 10 10 agreed tax treatment between the two parties
Yugoslavia (b) 5/10 15 15 Non-treaty jurisdictions 5/10 20 20
(a) The rates depend on various conditions.
(b) The treaty with Yugoslavia applies to the republics that formerly comprised Yugoslavia.
(c) The 15% rate applies if the beneficial owner holds at least 25% of shares throughout a 365-day period that includes the day of the dividend payment. This is in accordance with the MLI because both Belgium and Egypt have approved the amendment. The 20% rate applies in in all other cases.
(d) The 5% rate applies if the beneficial owner holds at least 20% of shares throughout a 365-day period that includes the day of the dividend payment. The 10% rate applies in all other cases.
(e) The 5% rate applies if the beneficial owner holds at least 25% of shares throughout a 365-day period that includes the day of the dividend payment. The 10% rate applies in all other cases.
(f) The 0% rate applies if the beneficial owner holds at least 25% of shares throughout a 365-day period that includes the day of the dividend payment. For other dividends, the domestic withholding tax rates should apply.
(g) The 5% rate applies if the beneficial owner holds at least 25% of shares throughout a 365-day period that includes the day of the dividend payment.
The 15% rate applies in all other cases.
(h) The 5% rate applies if the beneficial owner holds at least 10% of shares throughout a 365-day period that includes the day of the dividend payment. The 10% rate applies in all other cases.
Egypt has signed double tax treaties with Armenia, Bangladesh, Kazakhstan, Mongolia, Oman, Senegal, Seychelles, the Slovak Republic, Sri Lanka, Tanzania, Thailand, Uganda and Vietnam, but these treaties have not yet been ratified. Tax treaty negotia tions are under way with Congo (Democratic Republic of), Korea (North) and North Macedonia.