EgyptTax Obligations Detailed

Discover employer and employee tax responsibilities in Egypt

Employer tax responsibilities

In Egypt, employers have various tax obligations, including social security contributions, income tax withholding, and value-added tax (VAT).

Employee Contributions: 11% of the employee's social insurance salary. As of January 1, 2025, the minimum monthly salary for social security calculation is EGP 2,300, while the maximum is EGP 14,500.
Employer Contributions: 18.75% of the employee's social insurance salary. Managers/board members listed in the commercial register are insured as employers at a flat rate of 21% of the maximum social insurance salary (EGP 14,500 as of January 1, 2025).

Income Tax (Salary Tax)

Withholding: Employers withhold income tax from employees' salaries monthly based on a progressive tax system.
Personal Exemption: EGP 15,000 annually.
Tax Brackets (Effective 2024):
- 0% on annual income up to EGP 21,000
- 10% for EGP 40,001 to EGP 55,000
- 15% for EGP 55,001 to EGP 70,000
- 20% for EGP 70,001 to EGP 200,000
- 22.5% for EGP 200,001 to EGP 400,000
- 25% for EGP 400,001 to EGP 1,200,000
- 27.5% for income exceeding EGP 1,200,000.
Filing: Employers must file quarterly salary tax returns in January, April, July, and October, and an annual reconciliation in January.

Value-Added Tax (VAT)

Standard Rate: 14%.
E-Invoicing/Receipts: Required for cost deductions. Effective from July 2023 for invoices and January 2025 for receipts.

Corporate Income Tax

Standard Rate: 22.5% for most companies.
Oil and Gas Companies: 40.55%.
Dividend Exemption: 90% of dividends received by a resident parent company from a resident or foreign subsidiary are exempt.

Other Taxes

Real Estate Tax: Levied annually on the rental value of properties. Rates and exemptions vary based on property type and rental value. As of January 2025 the threshold is EGP 24,000 for residential property
No net wealth/worth, inheritance, estate, gift, payroll, or capital duty taxes exist in Egypt.

It's important to note that these figures and regulations are based on the latest available information as of February 5, 2025, and are subject to change. Consulting with a tax professional is recommended for the most up-to-date information and personalized guidance.

Employee tax deductions

Employee tax deductions in Egypt involve income tax, social security contributions, and allowable deductions, impacting an employee's net income.

Income Tax

As of 2025, Egypt employs a progressive income tax system with varying rates and brackets. The tax rate is determined by an individual's annual taxable income. The following are the tax brackets for 2025:

0%: First EGP 40,000 (in addition to a personal allowance) for annual incomes up to EGP 1,200,000.
2.5%: EGP 15,001 to EGP 30,000.
10%: EGP 30,001 to EGP 45,000.
15%: EGP 45,001 to EGP 60,000.
20%: EGP 60,001 to EGP 200,000.
22.5%: EGP 200,001 to EGP 400,000.
25%: EGP 400,001 to EGP 1,200,000
27.5%: Over EGP 1,200,000.

Personal Allowance: An annual personal allowance of EGP 20,000 is deductible from the taxable income.

Example: An employee earning EGP 350,000 annually would have a taxable income of EGP 330,000 after deducting the personal allowance.

Social security contributions are mandatory for both employees and employers.

Employee Contribution: 11% of the monthly salary. The minimum monthly salary subject to contribution is EGP 2,300, and the maximum is EGP 14,500 as of January 2025.
Employer Contribution: 18.75% of the monthly salary within the same minimum and maximum limits.

Example: An employee earning EGP 10,000 monthly contributes EGP 1,100, while their employer contributes EGP 1,875.

Allowable Deductions

Certain expenses can be deducted from the taxable income, reducing the overall tax burden. Some common deductions include:

Life and Health Insurance Premiums: Premiums paid for the employee, spouse, or minor children are deductible.
Private Pension Fund Contributions: Contributions made to private pension schemes registered with Egyptian authorities can be deducted.

Deduction Limit: The combined total of life, health, and private pension contributions cannot exceed 15% of net revenue or EGP 10,000, whichever is less.

Tax Deadlines and Procedures

Quarterly Returns: Employers are responsible for filing quarterly salary tax returns within one month of the end of each quarter.
Annual Reconciliation: Employers must submit an annual salary tax reconciliation, detailing employee salaries, deductions, taxes, and net salaries paid.
Electronic Documentation: From January 2025, electronic receipts are required for cost and expense deductions.

It is important to note that tax regulations are subject to change, and this information is valid as of February 5, 2025. For the most current details, consulting a tax advisor or referencing official government resources is recommended. Understanding employee tax deductions is vital for both employers and employees in ensuring compliance and accurate salary calculations.

VAT

In Egypt, the Value Added Tax (VAT) is a consumption tax levied on most goods and services.

VAT Rates

Standard Rate: 14% applies to most goods and services.
Reduced Rate: 5% applies to certain machinery and equipment necessary for production, though this is currently suspended (as of July 2017). A 10% rate applies to professional and consultancy services.
Zero Rate: Applies to exports and related services.
Exempt: Financial services, medical supplies, healthcare, public broadcasting, education, domestic energy, basic foodstuffs, and the sale and leasing of real estate are exempt. Specific foodstuffs like baby milk, dairy products, eggs, tea, sugar, coffee, and certain grain products are also exempt.

VAT Registration

Threshold: Mandatory registration is required for businesses exceeding EGP 500,000 in annual turnover. However, professional and consultancy service providers must register regardless of turnover. Non-resident providers of digital services also have a threshold of EGP 500,000.
Simplified Registration: Available for non-residents without a permanent establishment in Egypt selling goods or services to unregistered individuals.
Required Documents: Business Registration Certificate, Tax Identification Number (TIN), Articles of Incorporation, Bank Account Details, Power of Attorney (if applicable), Identity Proof of Business Owners, Financial Statements.

VAT Filing and Payment

Returns: Filed monthly through the electronic system.
Deadline: By the end of the month following the tax period.
Payment: Due upon submission of the return.
Currency: Egyptian Pound (EGP) and US Dollar (USD) are accepted. Other currencies may be accepted.
Penalties: Apply to late filings and incorrect declarations (1.5% of the outstanding amount monthly for late VAT payments).

VAT Refunds

Available within 45 days of application for specific cases like exported goods and services, credit balances exceeding specified limits, and cessation of activities in Egypt under certain conditions. A delay fee applies to incomplete refunds, based on Central Bank rates plus 2%.

Imports and Exports

Imported goods are generally subject to VAT, though exemptions and tax benefits exist. Input VAT deduction is available to the designated importer with proper documentation. Specific rules apply to re-importation of temporarily exported goods for processing or repair, with VAT applied only to the value added. A 0% rate applies to free zone transactions.

General Notes

Electronic filing of VAT returns is mandatory.
A standardized tax invoice format is in use.
A reverse-charge mechanism applies to services and royalties from non-residents to Egyptian residents.
This information is current as of February 5, 2025, and is subject to change. Consulting official government resources and tax advisors is recommended for the most up-to-date information.

Tax incentives

Egypt's government has implemented several tax incentives and reforms to stimulate investment, boost economic growth, and simplify the tax system.

Tax Incentives and Relief Measures

Tax Incentives and Facilitation Package: Aimed at reducing the burden on taxpayers and promoting trust between businesses and the tax administration. Includes:
- Waiver of penalties for filing or amending tax returns from 2020 to 2024.
- Settlement options for tax disputes related to estimated assessments before 2020.
- Installment plans for tax payments.
- Capping delay fees and additional taxes.
- Expansion of sample-based tax inspections.
Simplified Tax Framework for Startups and SMEs: For businesses with annual revenues up to EGP 20 million, offering:
- Reduced tax rates ranging from 0.4% to 1.5%.
- Exemptions from capital gains tax, dividend tax, stamp duty, and registration fees.
- Quarterly VAT filings instead of monthly.
Stimulus Package (2024): Supports startups, freelancers, and small investors. Key features:
- Delayed first tax audit (5 years).
- Inclusion of payroll tax in the annual settlement.
- Exemptions from withholding tax and advance payments for startups and small businesses.
- Reduced VAT filing requirements (four annually).
- Tax exemptions across various categories.
- Central clearing system for offsetting government receivables and debts.
- Capped late penalties.
- Voluntary compliance programs.
Cash Incentive Program: A refund between 35% and 55% of corporate tax paid on income from business operations. Eligibility criteria:
- At least 50% of project funds must be foreign currency from abroad.
Incentives for Strategic Industries: Exemption from all taxes except VAT for up to five years for projects in strategic industries that commence operations within three years.
Electronic Invoice Incentive: Up to 5% of income tax for individual taxpayers using electronic invoices for expenses.

General Tax Information for Individuals

Taxable Income: Includes income from employment, commercial activities, professional services, and real estate.
Exemptions: Annual salary tax exemption of EGP 20,000.
Tax Rates: Progressive rates up to 27.5%.

Further Tax Reform Initiatives

Simplified taxation for SMEs and startups, including reduced rates and exemptions.
Centralized clearing system for tax settlements.
Capped tax penalties.
Encouragement of voluntary tax registration.
Extension of tax dispute resolution mechanisms.
Streamlined VAT refunds.
Enhanced pre-approval systems for tax matters.
Unification of tax rulings and guidelines.

It's important to consult official government resources and tax advisors for the latest updates and specific details regarding these incentives and regulations. As of today, February 5, 2025, this information is believed to be current but is subject to change.