Professional Documents
Culture Documents
A115 PDF
A115 PDF
University, Japan.
1. Introduction
1
Since 1971, Egypt has been providing investors, via its
unincorporated).
incentives.
2.1. Overview.
2
Egypt introduced its first tax law in 1939 which imposed
including:
1980);
- a new income tax law in 1981 (Income Tax Law No. 157 of
illustration.
Figure 1
3
Egyptian Tax System
as follows:
law;
4
- General Sales Tax Department which is in charge of the
3. Direct Taxes
The current income tax law is Law No. 157 of 1981 amended
1
Central Bank of Egypt statistics.
5
The Unified Income Tax that is applicable to individuals is
treatment.
investments in:
interest income;
6
− Interest bearing loans or returns on loans of all kind
Exemptions
7
Tax rate
Tax collection
The MCR tax withheld at source, which means that the payer
to the recipient.
Under Art. 49 of the Income Tax Law, salary and wage tax is
8
subject to Law No. 54 of 1975 (i.e. Private Insurance
Taxable income
example).
9
Deductions
follows:
EGP2,500;
special relief.
Tax relief
10
The law also provides for a special deduction in respect of
follows:
without dependents; or
without dependents; or
with dependents.
Tax rates
--------------------------------------
Up to 50,000 20%
The salary and wage tax rates are applied at source and
deducted by the employer, who will then remit the tax due
11
In order to understand the method of computing salaries tax
status is single.
------------
------------
------------
12
Tax Rate 20%Annual
carpenters, etc.);
13
− Sole deals2: gains arising from sole deals are fully
taxable;
professions;
Taxable income
2
The taxable sole deal is a business transactions (selling or purchasing ), which is related to a movable
property not assigned for private usage and it has to meet two conditions; first, it must be commercial or
industrial transaction, and its selling / purchasing price more than EGP 20,000 or its gross profit more
than EGP 4,000
14
not been collected. Similarly in order to apply the
Deductions
business;
15
− Incentive and bonuses, social insurance contributions,
advertising, etc.
tax legislation.
Exemptions
16
years beginning on the date when such activities are
activity in Egypt.
headquartered in Egypt
Taxable income
17
The taxable revenue is the annual turnover, on a cash basis,
related costs.
Deductions
Law as follows:
18
− Actual donations made to the government and/or related
Exemptions
Under the law (Art. 71, Income Tax Law), the following are
form; and
19
− Profits of members of the teaching staff in
university.
− agricultural lands;
− buildings.
Taxable income
20
− Revenue derived from agricultural land3: Rental value =
value x 80%;
Exemptions
faddan(acre).
3
Para 1 of Artc. 82 of income tax law stipulates that the revenues of agricultural land are to be evaluated
based on their rental value, which is in turn based upon the land tax according to Law No.113 of 1939.
Currently the land tax rate is 14% of rental value.
4
Article No. 83 of income tax law stipulates that revenues of buildings shall be determined based on their
values as it is used in assessing building tax according to Law No. 56 of 1954.
21
Tax relief for family burden
The tax relief for family burden is not applied where the
relief is as follows:
without dependents; or
without dependents; or
with dependents.
Tax rates
follows:
5
When a taxpayer has salary income and other incomes that driven from business, non commercial
profession and real wealth ( Unified Income Tax), he claims deduction for Family burden Relief only
under salaries tax. If the salaries income below family burden relief he can claim the difference from other
income(Unified Income Tax).
22
Annual taxable income (EGP) Rate
--------------------------------------
0 – 2,500 20%
Tax filing
partner.
The tax authorities may dispute the tax return and make
23
2003 must be filed by 31 March 2004). Failure to meet this
tax due.
The second volume of the income tax law deals with the tax
Art. 111A of the Income Tax Law defines the various forms
limited partnerships;
24
Taxable income
Deductions
25
− Depreciation of fixed assets that has been computed in
machinery;
to board members.
26
There is a number of incentives, etc. available to
include:
The general tax rate is 40% while a special tax rate of 32%
27
There is a development duty rate of 2% which is imposed on
1998.
Tax filing
financial period.
28
Offshore banks and subsidiaries of foreign companies must
4. Property Taxes
6
It is imposed pursuant to Law No 113 of 1939.
29
required to remit the estimated tax amount on an annual
tax.
tax authority.
7
It is imposed by Law No 56 of 1954.
30
The building tax is a progressive tax that ranges from 10%
to 40%.
5. Indirect Taxes
These are the general sales tax, stamp duties and customs
duties.
8
Central Bank of Egypt statistics.
31
customers and remit such amounts to the Sales Tax
Department.
Exemptions
consulates in Egypt;
32
− Scientific, educational and cultural products imported
Tax rate
Tax filing
33
5.2. Customs duty
34
The law also provides for exemptions from customs duty and
35
is calculated as a percentage (which is prescribed in the
9
Prior to Law No. 8 of 1997, the effective law was Law No. 230 of 1989
which had replaced Law No. 43 of 1974 (i.e. Investment Law for Arab and
Foreign Capital).
36
Tax incentives play a significant role in encouraging
taxes.
37
6.1.2. Types of tax incentives
Tax Holidays
sectors, etc.).
38
Tax rate reductions
revenue leakage.
investors the longer the period that they can benefit from
it.
39
− Accelerated depreciation: taxpayers are allowed to
costs.
40
− A flat investment tax credit: it is earned as a fixed
Financing incentives
41
may also be used to encourage investment. There are three
capital:
targeted activities;
and
than business-level.
42
incentives contained in the Income Tax Law and applicable
Art. 120 of the Income Tax Law sets out the general tax
two types, i.e. (i) tax holidays and (ii) tax incentives.
Tax holidays
follows:
43
accounts. When a company failed to meet this condition
in this year.
Tax incentives
44
− A joint-stock company listed in the Egyptian Stock
45
parent company if the subsidiary is liable to
policy in 1971 (i.e. Law No. 65 of 1971). The 1971 law did
Law No. 230 of 1989 could not meet the changing needs of
46
Income Tax Law. This meant that any corporation which
47
packing, as well as assembling parts and components,
end products;
preparation thereof;
silos;
48
− Infrastructure including potable water, wastewater
systems;
follows:
49
− Corporations established under the Investment Law will
years; and
50
commodities entering the free zone for storage in respect
as discussed in 3.1.2.
51
has not paid sufficient attention to the number of
52
companies established under investment laws (including
economy.
53
− Tax holidays do not confer any benefits on activities
and
neutrality.
54
7. Conclusion
55
With regards to investment tax incentives, the current
In Egypt, the problems that arise are not from the use of
56
comes to revitalizing economies in order to cope with
57
References
Egyptian Center for Economic Studies, Working Paper No. 35, February
1999
Income Tax Law No. 157 of 1981 amended by Law No. 187 of 1993.
Incentives”.
OECD Tax Policy: Corporate Tax Incentives for Foreign Direct Investment,
2001
187, 1989.
58