⇒ Payroll Tax
I. Payroll Tax Scope
The tax applies to all earnings by a taxpayer resulting from work for third parties, with or without a contract, on a regular or irregular basis, regardless of such dues names, forms or reasons, whether they are for works performed in Egypt or abroad, and the consideration thereof was paid from a source in Egypt, including wages, bonuses, incentives, commissions, grants, additional payments, allowances, dividends or shares in profits and *cash and in-kind benefits of all types.
Salaries and remunerations of non-shareholding chairpersons and board members of public sector and public business sector companies.
Salaries and remunerations of chairpersons, board members and managers of corporations in return for their administrative work.
* Cash and in-kind benefits include amounts received by an employee in cash or in-kind that are not a reimbursement for costs associated with the job, which represent a personal benefit. The value of the benefit in-kind is the market value of the item given; it is worth nothing that the Executive Regulations specifically determines value of some such benefits as follows:
* Cash and in-kind benefits include amounts received by an employee in cash or in-kind that are not a reimbursement for costs associated with the job, which represent a personal benefit. The value of the benefit in-kind is the market value of the item given; it is worth nothing that the Executive Regulations specifically determines value of some such benefits as follows:
- Company cars at the personal disposal of the employee: The benefit value is equal to 20% of the cost of fuel, insurance, and periodic maintenance with respect to such cars, whether owned by the company or leased.
- Cellular Phones: The benefit value is equal to 20% of the related phone expenses throughout the year.
- Loans and advances offered by employers: The value of the benefit is determined at 7% of the loans and advances in the case of a loan in any form that exceeds the gross income received by an employee during the six months immediately prior to the receipt of the loan. Or
- Life insurance policies for the employee, his family or his properties: The benefit value is equal to the amount of the premiums paid by the employer each year.
- The company's stocks granted at a value less than the stock market value:
II. Annuity of Taxation:
If a change occurs in the taxable base, the calculation of the base shall be adjusted from the date of change based on the new or old base, whichever is less, after transferring such to annual revenue. The employer may calculate the tax base on the basis of the new revenue, provided the employer shall maintain the due tax on the difference between the new and old revenue to the account of the employer with the purpose of making the adjustment at the end of the financial year.
Block salaries, wages and the like paid in a single payment in a specific year must be apportioned among the years of entitlement, after excluding payments in lieu of vacations. Income included in the tax base must be recalculated for each year, and the tax due shall be adjusted accordingly.
- Cellular Phones: The benefit value is equal to 20% of the related phone expenses throughout the year.
- Loans and advances offered by employers: The value of the benefit is determined at 7% of the loans and advances in the case of a loan in any form that exceeds the gross income received by an employee during the six months immediately prior to the receipt of the loan. Or
The difference between value of the interest under the given loan and the 7%, stipulated by law, if the interest rate charged is less than 7%.
- Life insurance policies for the employee, his family or his properties: The benefit value is equal to the amount of the premiums paid by the employer each year.
- The company's stocks granted at a value less than the stock market value:
The benefit value is determined on the difference between the stock market value and the value required to be paid by the employee, taking into account that the restricted benefit shall not be included in the income of the employee until those restrictions have expired or are otherwise removed.
II. Annuity of Taxation:
- Tax on salaries and the like is annual revenues included in the taxable base shall be determined for each part of a year in which any taxable revenue was earned in proportion to a year, based on the monthly revenue after transferring it to annual revenue.
If a change occurs in the taxable base, the calculation of the base shall be adjusted from the date of change based on the new or old base, whichever is less, after transferring such to annual revenue. The employer may calculate the tax base on the basis of the new revenue, provided the employer shall maintain the due tax on the difference between the new and old revenue to the account of the employer with the purpose of making the adjustment at the end of the financial year.
Block salaries, wages and the like paid in a single payment in a specific year must be apportioned among the years of entitlement, after excluding payments in lieu of vacations. Income included in the tax base must be recalculated for each year, and the tax due shall be adjusted accordingly.
III. Tax Rate
% | Net Income not Exceeding 600,000 | Net Income Exceeding 600,000 but less than 700,000 | Net Income Exceeding 700,000 but less than 800,000 | Net Income Exceeding 800,000 but less than 900,000 | Net Income Exceeding 900,000 but less than million | Net Income Exceeding one million |
|---|---|---|---|---|---|---|
0% | from 1 L.E up to 15.000 L.E | |||||
2.5% | from 15.001 L.E up to 30.000 L.E | from 1 L.E up to 30.000 L.E | ||||
10% | from 30.001 L.E up to 45.000 L.E | from 30.001 L.E up to 45.000 L.E | from 1 L.E up to 45.000 L.E | |||
15% | from 45.001 L.E up to 60.000 L.E | from 45.001 L.E up to 60.000 L.E | from 45.001 L.E up to 60.000 L.E | from 1 L.E up to 60.000 L.E | ||
20% | from 60.000 L.E up to 200.000 L.E | from 60.000 L.E up to 200.000 L.E | from 60.000 L.E up to 200.000 L.E | from 60.000 L.E up to 200.000 L.E | from 1 L.E 200.000 L.E | |
22.5% | from 200.000 L.E up to 400.000 L.E | from 200.000 L.E up to 400.000 L.E | from 200.000 L.E up to 400.000 L.E | from 200.000 L.E up to 400.000 L.E | from 200.000 L.E up to 400.000 L.E | from 1 L.E 400.000 L.E |
25% | More than 400.000 L.E | More than 400.000 L.E | More than 400.000 L.E | More than 400.000 L.E | More than 400.000 L.E | More than 400.000 L.E |
- As an exception to the foregoing tax rates:
1. Tax is imposed on amounts earned by residents from other than their *original place of employment at a rate of (10%) without any reduction to cover costs, and without further deductions under Form/2 Salaries.
1. Tax is imposed on amounts earned by residents from other than their *original place of employment at a rate of (10%) without any reduction to cover costs, and without further deductions under Form/2 Salaries.
2. The entity where an employee earns more than 50% of his income shall be deemed his original place of employment. Such entity shall withhold the tax at the rates mentioned on the previous schedule after granting the employee all exceptions under Form/3 Salaries.
* The orignal place of the empolyee is the body where he is employed and obtains his orignal salary.
1. Pensions: exempted from tax under Law No. 79 of 1975.
2. End-of-service allowances that are determined by the company's bylaws. In case there are no regular bylaws, they are determined by provisions of the Labour Law.
3. Amounts exempted by special laws.
4. An amount of EGP 9000 as the annual personal exemption for the taxpayer (in case of working for less than one calendar year, the exemption shall be proportioned).
5. Employer's share in social insurance contributions according to the provisions of the Egyptian social insurance laws or any alternative systems thereto in accordance with the provisions of Law 64 of 1980.
6. The following collective in-kind benefits:
I. Meals offered to employees in work site.
II. Collective transportation of employees or a category of them, whether owned or leased.
III. Health care for all employees.
IV. Tools and clothing necessary for performing the work.
V. Accommodation provided by an employer to employees, whether owned or leased, whenever necessary for the performance of work.
7. Employees' dividends distributed according to the law.
8. Life and health insurance premiums for the taxpayer or in favor of his wife or minor children; or any insurance premiums for pension entitlement (provided that insurance is made with a company registered with the Egyptian Insurance Supervisory Authority (EISA)).
9. Employees' contributions to private insurance funds, established under the provisions of Law No. 54 of 1975.
To benefit from the last two exemptions, contributions of the private insurance funds, life or health insurance premiums, or pension to the taxpayer must not exceed EGP 10,000, or 15% of the taxpayer's net revenue (after deducting the remaining exemptions) or the amount actually paid, whichever is less.
To benefit from the last two exemptions, contributions of the private insurance funds, life or health insurance premiums, or pension to the taxpayer must not exceed EGP 10,000, or 15% of the taxpayer's net revenue (after deducting the remaining exemptions) or the amount actually paid, whichever is less.
V - Employer and employee's Obligations:
1. Employer 's Obligations:
- Bodies paying taxable amounts shall withhold and remit tax to the competent tax office within the first fifteen days of the month following the month in which the amounts are paid.
- Bodies paying taxable amounts shall withhold and remit tax to the competent tax office within the first fifteen days of the month following the month in which the amounts are paid.
- Employers shall also submit a quarterly return (Form/4 Salaries) in January, April, July, October every year.
- Preparing a tax return at the final settlement at the end of the year and submit it during January of each year.
2. Employee's Obligations:
If an employer or a person required to pay taxable revenue is a non-resident of Egypt, or does not have a headquarters or an establishment therein, the obligation to remit the tax falls on the person entitled to such taxable revenue. Hereunder are two cases:
Nonresident Person Entitled to Revenue
↓ | Resident Person Entitled to Revenue ↓ | |
Tax Department Joint Stock Companies in Cairo or Alexandria, as the case may be ↓ | ← Competent Tax Department → | The Tax Department where his Residence is located ↓ |
Submitting a statement of the amounts that he received and the tax due thereon, before cessation of a taxpayer’s residency year on Form 5 | ← Returns and Deadlines → | Submitting a statement in January each year, which includes total amounts received during the year on Form 5 |
*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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