Chapter One

Tax on Revenues of
Commercial and Industrial
1

Activities
• C O N D I T I O N S F O R L E V Y I N G T H I S TA X
• S C O P E O F TA X A B L E P R O F I T S
• TA X B R A C K E T S D E T E R M I N AT I O N
• TA X E X E M P T I O N S
 Conditions for levying this tax
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1- The existence of the firm:

The word firm means that there should be a
place in which a taxpayer performs his activity.
However, it was a case in question, that a
person was using his personal car in transporting
people and goods, and the taxpayer, claimed that
his activity was considered in law as not a firm,
but the Appeal Court stated that a firm in the tax
law is all what brings income or interest to its
owner(s). Even if it is a rented car, it is regarded
as a firm The usage of the car is regarded as a
commercial activity as transporting people and
goods
 Conditions for levying this tax
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2- Carrying on the activities

independently
 Independence means, that a person or a firm
performs an industrial or commercial activity
in an independent way. In other words, having
an independent entity.
 It is very important to determine whether the
taxpayer is working for himself and bearing
all the responsibilities, or an employee,
working for others.
 ..
 Conditions for levying this tax
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If a person is working in a certain firm to promote its

products, and his reward is calculated as a percentage
of his overall sales, this person is regarded as a
depended person, because he is employed at that firm,
working according to its orders, and having a salary.
Consequently, his earnings are subjected to salaries
tax, rather than the tax on revenues of the industrial d
commercial activities
The same is applied to the firm's director, who may
have all the authorities of the firm owner. He appears in
front of the public, as if he is the owner of the firm,
despite being an employee, having a salary. This
manager's earnings are subjected to the salaries tax,
even if his salary includes an rest percentage.
 Conditions for levying this tax
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3- The firm should be working in Egypt

(Regional tax base)
 The regional tax base means that, the tax authority is to
collect taxes from firms working in Egypt.

 The concept of regional tax base is related to the firm,

and not to its owner(s) as the wording of the article
means that the tax is to be imposed on all firms working
in Egypt, whether their owners are Egyptians or
foreigners, living in Egypt or not, working in an authorized
work or not, fulfilling its legal form and procedures or not.

 We can conclude from what has been already discussed
that a foreign branch working in Egypt is regarded as an
independent firm, its transactions in Egypt are subjected
to tax, regardless of the overall results of these
transactions, also the Egyptian branches working outside
Egypt are not subjected to the Egyptian Tax.
 Conditions for levying this tax
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4- Intention of realizing profits

 Meaning that taxpayer performs his activity for
making profits.
 The legislator does not make any distinction between
profits accrued from legal or illegal activity, both are
subject to the tax.
 Scope of taxable revenues
The activities that are
7 subject to the tax
1- Profits of commercial and industrial firms:
 This tax is imposed on net profits realized during to year,
resulting from any industrial or commercial activity even if it is
one sole transaction. Any dealing of goods for the purpose of
resale, modifying them in another form, or renting them for
use, is respected as taxable revenue for this tax.

 There are two kind of industries; Conversion industries and

Extracting industries. Conversion industries convert or alter
some materials or things from one shape to another. However,
extracting industries carry on process of extracting natural
wealth resources such as; mines, quarries, resources of oil, gas
etc. for selling them.
 Scope of taxable revenues
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 According to an explanatory instruction
year 1957 dealing with profits of the
agricultural crops, where it declared that
selling of the crops owned by the farmer
is not regarded as a trading act, but if
the activity exceeded the nature of the
agricultural act, then in this case, it is to
be dealt with as a trading act, and has to
be subjected to the tax.
 Scope of taxable revenues
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 If the farmer transported the crops to sell them in a

city, and specialized in this activity then he performed
some work which may, increase the value of the
product, in this case he combines more than one sort
of activities. The fact is that he is a farmer-exempted
from tax-and a trader who risks his capital. He is
subject to tax for the second sort of activity which is
considered to be trading. The exempted agricultural
work has a certain limit, if it exceeds this line it is to
be subject to commercial and industrial profits tax.

 The same rule is applied to trading in flowers, tax is t

be imposed on it, not in the place of its cultivation, but
if it is moved to shops where it is arranged and packed
for resale
 Scope of taxable revenues
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2- Crafting and small activities.
 Handicrafts, refer to performing a activity by hand, without
competing with others. This is applied on tailor, carpenters,
plumbers, watch repairmen, opticians, mechanics, leather-
makers, shoe manufacturers and repairmen.

 A craftsmen can hire some others to help him, on a condition that
they should work by their hands. He can also use machines, but
he should not use them to perform his personal work.
 We can conclude the following bases on which differentiation
between the craftsmen and others can be made:

1- The craftsman works (mainly) by his hands.

2- He should not buy materials, unless he needs them, urgently in
his handicraft, and he should not gain profits from selling them but
their price must be included in his service fees.
3- He should practice a handicraft that needs special technical
knowledge. He should be mainly work by himself
 Scope of taxable
11 revenues
3- Profits of single deal
"Isolated transaction is every purchasing occurred by
taxpayer resident in Egypt for a movable asset not for
personal use conditioned that this transaction would be
commercial or industrial and it is for resale through a
duration of 12 months from the purchasing date of such
assets".
if a person bought machines and equipment to start a
factory, but he could not attain the license, so he sold
those machines. We believe he should not pay taxes for any
resulting profits as far as the intention of resale was not
there when he bought these machines.
 The deal should result from a commercial or an industrial
act, but if it is related to cultivation or profession, it is not
subject to the tax.
 Scope of taxable revenues
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4- Profits of operations of brokers,

commission agents and other middlemen:
It means any profits realize by any person
company, or brokerage office for the
purchase, sale, or lease of a real estate
or any kind of commodities, services, or
movables.
 Scope of taxable revenues
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5- Profits of lease of shops and

machineries:
The tax applies to profits resulting from leasing
commercial or industrial premises, whether the lease
includes all or part of its material, as furniture,
machines, equipment, trade name, and trade mark
necessary to operate or immaterial elements. The tax
also applies to profits resulting from the lease of
mechanical, electrical, and electronic machines.
 Scope of taxable revenues
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6- Profits of transportation activities:

The profits from transport activity of all
types including land, sea and air with all
kind of transportation to move people or
objects.
 Scope of taxable revenues
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7- Profits of dividing lands and Construction of Real Estate with the Aim of
Resale:
 Tax is imposed on profits realized by whoever practices the job of
constructing or purchasing real estate with the aim of selling them
habitually, and on the profit. Accordingly, if a person buys a real estate
with intention of using it, then certain circumstances dictated his to sell it,
which he has actually done at a profit, this would not be subjected to tax
according to the context of this article because of the non-existence of
speculation or trading intent.
 its resulting from allocation and disposal of construction lands and the
Minister of Finance determines the accounting rules and criteria for the
determination of net profits.
Accordingly, if a person buys a real estate with intention of using it, then
certain circumstances dictated his to sell it, which he has actually done at a
profit, this would not be subjected to tax because of the non-existence of
speculation or trading intent.
 Scope of taxable revenues
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8- Profits of erection or buying realties in a

customary way with the intention of
selling them
 Scope of taxable revenues
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9- Profits of land reclamation or

plantations firms:
In compliance with requisites of food
security, the legislator provided that
profits of such firms be exempt of the tax
for a period 10 years
 Scope of taxable revenues
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10- Profits of animal and fisheries projects.

The legislator provided that profits of such
firms be exempt of the tax for a period 10
years