⇒ Corporate Tax
I. Corporate Tax Scope
An annual tax shall be levied on the net aggregate profits of juridical persons whatever their objectives are.Tax shall apply to:
1- Juridical persons residing in Egypt, with respect to all profits whether realised in Egypt or abroad, with exception of the Agency of National Service Projects of the Ministry of Defense.
2- Non-resident juridical persons, with respect to the profits through a permanent establishment in Egypt.
II. Residency
Juridical person is deemed a resident of Egypt in any of the following cases:
1- If established according to Egyptian law.
2- If its main or effective managing headquarters is in Egypt.
3- If it is a corporation in which the State or any State-owned juridical person holds more than 50% of its capital.
III. Applicable Tax Rate
The tax base is rounded to nearest lower ten pounds and it shall be subject to tax at the rate of 22.5% of the net annual taxable profits.
With exception to the rate mentioned in the preceding paragraph, the profits of Suez Canal Authority, the Egyptian General Petroleum Corporation and the Central Bank are subject to tax at the rate of 40%, and the profits of oil and gas exploration and production companies are subject to tax at the rate of 40.55%.
The following are not deductible costs:
1. Debit interests paid by juridical persons on loans and advances that they have obtained, and that are more than four times the average of equity rights according to the financial statements prepared according to the Egyptian Accounting Standards. This provision does not apply to banks and insurance companies, as well as those companies engaged in financing activity that are to be determined according to a ministerial decree.
2. Amounts that are set aside for the purpose of forming or funding different types of reserves and provisions, with the exception of the following:
(a) 80% of the provisions for loans that banks are committed to form according to the rules of the preparation and presentation of financial statements and the assessment principles issued by the Central Bank.
(b) Technical provisions which insurance companies are obliged to form in applying the provisions of the Supervising and Monitoring Insurance Law in Egypt promulgated by Law No. 10 of 1981.
3. Distributed shares of profits and dividends and attendance fees paid to shareholders for attending the General Assembly Meetings.
4. Membership remuneration and allowances received by chairmen and members of the boards of directors.
5. Employees' profit shares, which are distributed according to the Law.
7. The income tax due according to this Law.
8. Interest paid on loans, which exceed double the credit and discount rate declared by the Central Bank at the beginning of the calendar year in which the tax period ends.
9. Interests on loans and debts of different types paid to non-taxable or tax exempt natural persons.
10. Cost of financing and investment related to juridically exempted revenues.
IV. Tax Withheld at source
i. Non-resident Bodies
Tax at the rate of 20% is due on amounts, paid by owners of individual firms, juridical persons residing in Egypt and non-resident bodies, which have permanent establishments in Egypt, to non-residents in Egypt without deducting any costs from them.
The said amounts include the following:
2. Royalties.
3. Service charges: The share of the permanent establishment operating in Egypt of the administrative expenses and the control and supervision expenses borne by its head office overseas shall not be considered service charges. Upon determining the profits of the permanent establishment, the approved administrative expenses and the control and supervision expenses borne by the head office overseas shall not exceed 10% of the taxable net profit of the establishment. The expenses borne within this percentage shall not include any royalties, returns, commissions or direct wages, provided that an approved and authenticated statement shall be submitted by the auditor of the head office.
4. Charges for the activity of a sportsman or artist, whether paid direct to him or through any entity.
ii. Resident Bodies
Bodies and establishments set out below shall withhold a percentage of every amount more than 300 pounds, which they pay by way of commission, brokerage, or for procurement, supply, contracting operations, or services rendered to any private sector person. percentage shall not exceed 5% of the amount, as an advance against the tax due of such persons, excluding premiums paid to insurance companies.
Government ministries and agencies, local authority units, general authorities, national economic or service authorities, public sector companies and units, public business sector companies, corporations, establishments and companies subject to investment laws, partnerships with capital exceeding fifty thousand pounds, regardless of their juridical status, companies established by virtue of special laws, companies and projects established under the free zones system, branches of foreign companies, pharmaceutical warehouses and import offices, cooperative societies, press institutions; educational institutions, syndicates, leagues, clubs, youth centers, unions, hospitals, hotels, non-governmental organisations and associations of different purposes, vocational offices foreign representation offices, cinema production firms, theatres and entertainment houses; private insurance funds established by virtue of Law No. 54 of 1975 or any other law.
V. Dividend Distribution
- Dividend recognised in Egypt distributed by corporations or partnerships, are subject to tax including companies established under the economic zones of special nature for the natural person, juridical person, including profits of non-residing juridical persons, which are realised through a permanent establishment in Egypt, with an exception to common tax rate. The rate of such tax shall be 5% of the dividend distributions if the securities are listed with EGX without deduction any costs. 10% if the securities are not listed.
VI. Capital Gain
- Capital gain, which are recognised by natural and juridical persons in Egypt, shall be subject to tax. With an exception to common tax rate, the tax rate shall be 10% on the capital gain resulting from dealing on listed securities, without deducting any costs.
- However, the law suspends the application of the tax on capital gain, realised by residing natural and juridical persons from securities listed with EGX, until the end of December 2021 and an exemption granted for the nonresidents.
*Disclaimer: This material has been prepared for general informational purposes only and is not intended to be relied upon as legal, accounting, tax or other professional advice.
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