The new Income Tax Law No. 91 of 2005 drastically amended the
previous income tax rules in Egypt. Law 91 introduced a 50 per cent
reduction in personal and corporate taxes, to a maximum rate of 20
per cent, and abolished all the income tax exemptions stipulated in
Investment Law No. 8 of 1997 in relation to establishments that are
incorporated after the law's entry into force (i.e. unified tax
exemptions and legislation).
Main Provisions Regarding Natural Persons
Law No. 91 did not change the basic structure of the tax imposed
on the total net income of natural persons residing in Egypt and
those residing outside Egypt with incomes derived from permanent
establishments in Egypt. The law states that this total net income
is derived from the following sources:
- Salaries and wages of individuals
- Commercial and industrial activities of individuals
- Professional and non-commercial activities
- Income derived from immovable property
Income tax brackets are restructured into three categories, with
tax rates set at 10, 15 and 20 per cent. Existing tax exemptions
for annual earnings of under EGP 5,000 are doubled. Working spouses
are eligible for an exemption of EGP 5,000 on wages, while civil
servants receive a personal exemption of EGP 4,000 annually.
Main Provisions Regarding Juristic Persons
The definition of "juristic persons" includes all types of
companies, as well as foreign banks and foreign establishments,
even if their headquarters are situated outside Egypt and their
branches are in Egypt. For juristic persons residing in Egypt the
tax is imposed on net yearly profits from all activities, both in
Egypt and abroad; for juristic persons not residing in Egypt the
tax is imposed on net profits derived from a permanent business
establishment in Egypt only.
The taxable profit of juristic persons consists of the total
revenue minus the costs and expenses necessary for obtaining the
profit, as detailed in the law.
The law defines in some detail the "permanent establishment,"
which was not mentioned in the previous Income Tax Law No. 157 of
The law decreased the income tax rate on the net yearly profits
for juristic persons from 40 per cent to 20 per cent, with the
exception of companies that are prospecting for oil and gas (which
will be subject to a rate of 40.55 per cent).
The law also provides for phasing out tax exemptions for newly
established companies. Companies listed on the Stock Exchange will
also lose the tax-exempted status of their paid-in capital.
Additionally, the law grants a general amnesty for taxpayers who
have cases before the court in which there is disagreement between
the taxpayer and the Tax Authority on the estimation of the amount
of tax owed, provided that the contested amount does not exceed EGP
Moreover, the law provides for a settlement process in tax
evasion or other cases upon request from the concerned person
within one year of the law's entry into force.
Over the longer term the government will develop the
administrative capacity of the state to collect taxes. A plan has
been set forth to promote awareness among taxpayers and encourage
them to take part in the reform.
The various tax exemptions provided in the previous income tax
law for companies listed on the stock exchanges and employing a
certain number of workers have been abolished, on the understanding
that the lowering of the income tax rate by 50 per cent (i.e. 20
per cent instead of 40 per cent) provides fair compensation for the
abolition of tax exemptions.
Exemptions Provided by the New Tax Law
The following types of profit and revenue accruing to juristic
persons are exempt from taxes under Law No. 91:
- Profits from reclamation or cultivation of reclaimed land for a
period of 10 years starting from the date of beginning the
- Profits from animal, poultry and fish production for a period
of 10 years starting from the date of beginning the activity
- Revenues from investments in securities that are listed on the
Egyptian stock exchanges
- Returns on bonds and securities listed on Egyptian stock
exchanges and returns on investment funds established in accordance
with the Egyptian stock exchange law
- Distributions and profits obtained by Egyptian-domiciled
persons from their participation in other-domiciled juristic
- Returns on securities issued by the Egyptian Central Bank and
held by juristic persons or the returns from dealing in those
Sales Tax Law
The Sales Tax Law No. 11 of 1999 was amended by Law No. 9 of
2005. The amendment aims at alleviating the tax burden by granting
more exemptions to certain goods that are important to low-income
groups. The amendment also reconsiders tax categories on some goods
and seeks to resolve tax problems concerning used goods and the
absence of regular bookkeeping and reporting methods.