Doing
Business
in Egypt
2024
A Tax and Legal Guide
Table of content
Welcome to the Egypt “Doing Business Guide”
Introduction
Establishing a business in Egypt
Taxation
03
04
05
12
Additional legal considerations
Key tax indicators in the Egypt
About PwC Middle East
Contacts
25
30
31
32
Doing Business in Egypt – Tax and Legal Guide
2
This broad base coupled with a large population, renewed political stability and the impact
of a wide ranging programme of economic reform is driving consistent actual and forecast
growth in GDP in excess of 4.4% per annum. This is creating an environment which is
positive for both innovation and foreign direct investment (‘FDI”).
PwC Egypt combines in-depth knowledge of the Egyptian economy, tax regulations, local
business standards, and customs with extensive coverage, breadth of resources, and quality
assurance. Being part of a worldwide network enables us to combine a coherent global
vision with a robust local identity.
This guide is intended to provide an introduction to the taxation and legal aspects of doing
business in Egypt, particularly from the perspective of an inbound investor.
We hope you find the guide useful.
Jochem Rossel - Middle East Tax and Legal Services Leader
Sherif Shawki Abdel-Fattah - Kuwait & Egypt Tax Leader
Your journey begins
Presence
Location
Objectives
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Welcome to
this guide
Doing Business in Egypt – Tax and Legal Guide
3
4
Introduction
Overview
Egypt, officially the Arab Republic of Egypt has a recorded
history that dates from approximately 3200 BC.
The population of Egypt is some around 100 million, making
it the most populous country in the Middle East
The Egyptian Government’s policies are now focusing on
economic recovery and growth through the following five
channels:
• mega infrastructure projects
• tourism
• improvements to economic policy
• increasing private sector investments attracting GCC
investments.
Sectors seen by the Government to be of particular focus for
foreign investors in the short to medium term include energy,
construction and real estate, transportation, and
telecommunications.
Egypt made remarkable economic progress during the recent
years; according to a report issued by the World Bank, Egypt
has moved up 8 spots to rank 120 out of 190 countries. In
2020, Egypt made another improvement by ranking 114.
Egypt’s economic growth has been strong and resilient during
the COVID-19 pandemic. In 2020, Egypt did record a positive
growth at a rate of 3.6%, despite the impact of the pandemic
which is considered the second largest growth rate in the
word. Egypt ranking improved in other sectors such as Global
Knowledge index 2020 by ranking 83 out of 138 countries.
The currency of Egypt is the Egyptian pound (EGP). Due to
the flotation of the Egyptian pound that took place in
November 2016, the Central Bank of Egypt has relaxed the
restrictions and limitations on the transfer of foreign
currencies.
Arabic is the primary language of Egypt. Most international
business people there speak English, French or both.
Simplified Vendor Registration System
Every non resident and unregistered person who does not
practice an activity through a permanent establishment in Egypt
and sell goods or provide services to a person who is not
registered inside the country, is obliged to apply for registration
under the simplified vendor registration system.
Incentives for foreign investors
The Investment Law no.72/2017 (“Investment law”) that was
issued on 31 May 2017, canceled/replaced the previous
investment Guarantees and incentives Law no.8/1997.The
Investment Law introduced new incentives for investors.
The Executive Regulations followed on October 2017.
The Investment Law introduced notable amendments such as
returning back the private free zone which was previously
abolished, moreover it provides several incentives such as tax
incentives, unified customs rate and free lands.
Legal and regulatory framework
Egypt is a civil law country, with a legal system based on the
Islamic Shari’a and Napoleonic Codes.
The Islamic Shari’a have historically been more relevant in
personal matters. As for commercial activities, legislation have
been enacted to regulate them.
The key laws for the establishment of a legal entity are the
Investment Law, the Companies Law no. 159/1981 as amended
in 2018 by virtue of Law No. 4/2018. the Capital Market Law no.
95/1992 and their Executive Regulations. and the Antitrust Law
no. 3/2005.
The Constitution (of 2014) is the supreme legislative source of
law, followed by the relevant Laws and the Executive
regulations, which are issued to clarify, complete, and/or
explain the law.
The court system in Egypt is as follows:
• Common Court System: which is constituted of three tiers:
courts of first instance,, courts of appeal and courts of
cassation; having jurisdiction over the disputes arising
between private persons/entities.
• Administrative courts: (State Council); having jurisdiction
over the disputes that the government or any of its bodies/
authorities (acting as a sovereign power) is a party in.
• Courts of special jurisdiction: (Supreme Constitutional court,
Economic courts, family courts, and Military courts).
As with other civil law systems, whilst there is not a system of
legally binding case law precedents, previous judicial decisions
do have persuasive authority. Certain courts can be de facto
bound by the principles and precedents of the Court of
Cassation for civil, commercial, and criminal matters, and the
Supreme Administrative Court for administrative and other
public law matters.
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Establishing a Business in Egypt
Forms of business
The main forms of legal entities to establish a business in
Egypt are:
1) Joint stock company (JSC)
Save as necessary permit and license that may be required in
relation to certain types of activities, (e.g. industrial projects
which require an approval by IDA after establishing the legal
entity). Generally, there are no restrictions on the purposes of a
JSC provided that it does not conflict with public order or
morality in Egypt.
Shareholders
JSC must be established with at least three shareholders at all
times which may be judicial or natural persons. As a general
rule, JSC may be fully owned by foreign investors with the
exception of some activities explicitly mentioned by law and
requires a specific percentage of Egyptian national ownership.
Capital Requirement
The minimum capital of a JSC is EGP 250,000 (Two hundred
and fifty thousand Egyptian Pounds). A JSC shall be
incorporated upon depositing at least 10% of its issued capital,
and subsequently, this percentage must be increased to 25%
within 3 (three) months from the date of issuing its commercial
register. The remaining amount of the issued capital must be
paid within a period of 5 (five) years from the date of
incorporation. However, a higher capital may be required for
specific activities such as importation for trading activity.
Management
JSC is managed by a board of directors which should be
composed of at least 3 (three) members who are in charge of
the daily operation of the JSC. The board of directors could be
judicial or natural persons. They could also be non-Egyptians
or Egyptians. (save for activities requiring the appointment of
Egyptian nationals to be appointed such as commercial
agency).
Depository and registration of JSC’s shares at Misr
for Central Clearing, Depository System (M.C.D.R)
JSC’s are required to be registered at the MCDR upon
registration of the company in the commercial register. The
Shareholders must deposit their shares with a custodian
company listed at MCDR.
Quota-holders
LLC is established with at least two quota-holders which may be
judicial or natural persons. LLC could be fully owned by
non-Egyptians with the exceptions of some activities explicitly
mentioned by law and requires a specific percentage for
Egyptians.
Capital Requirement
Generally, there is no minimum capital requirement for LLC
incorporation. with the exception of certain activities, such as
importation for trading activity.
Management
LLC is managed by one or more managers who should be in
charge of the daily operation of the company. There is no
restrictions on the nationality of the managers unless for certain
activities (e.g. importation for trading) in which an Egyptian
manager is required.
2) Limited liability company (LLC)
LLC is permitted to engage in all business activities with the
exception of banking, insurance, saving, receiving or investment
of funds for the favor of third parties, or any other activities
explicitly restricted by law.
3) Representative office (RO)
The activity of a RO is limited to conducting a market study
without performing any commercial activities.
A foreign company is allowed to establish a RO or a scientific
office in Egypt to carry out a market study.
A RO is managed by a manager which his/her authorised
powers are determined by its parent company.
RO compliance requirements
• The ROs in Egypt must submit a report to the General
Authority for Investment and Free zones (GAFI) at the
beginning of each year. The report should include detailed
information on all its employees, its market study, any
decisions made from the parent company in that regard, and
a time frame for the remaining studies. The parent company
of the RO has to take a decision to establish a legal entity in
Egypt, or a branch within (3) years as of the date of its
registration.
• The RO shall be accorded a registration certificate from the
date of its registration that shall not exceed one year. This
certificate is renewed annually subject to the RO’s
compliance with the applicable laws and regulations.
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4) Foreign Branch
A foreign company could operate in Egypt by establishing a
foreign branch. The purpose of the branch is limited to
implementing a specific contract in Egypt.
Capital Requirement
The minimum capital required to establish a branch is EGP
5,000 (five thousand Egyptian pounds).
Management of the branch
A foreign branch is managed by one or more managers and is
responsible for its daily operation. Their authorized powers are
conferred by the parent company.
5) Sole Partnership Company (SPC)
SPC’s have almost the same features of LLC’s.
Partner
SPC’s are established with one partner at all times which may
be a judicial or natural person.
The partner may be Egyptian or foreigner. However, there are
certain activities that the SPC may not carry out except if it is
fully owned by Egyptians.
Capital Requirement
The minimum capital of the SPC is EGP1,000 (One thousand
Egyptian pounds). The SPC capital must be paid in full upon
incorporation.
Management of the company
The day-to-day management of SPC’s may be vested to one
manager or more. The manager(s) of the SPC could be a
foreigner or Egyptian unless the activity of the SPC requires
an Egyptian nationality.
Process and Time for Establishment
Incorporation process
Below are the main steps for incorporating a new company in
Egypt (i.e. JSC, LLC, SPC):
• Issuance of a certificate of “non-confusion” from the
Commercial Registry certifying that the chosen name of
the company under formation does not conflict with the
name of any other registered company.
• Prepare and review the new company’s draft articles of
association from GAFI.
• Open a bank account in the name of the new company
(under incorporation).
• Apply for security clearance approval for any non-Egyptian
founder/shareholder and board member/manager.
• Authenticate and notarize the articles of association.
• Issue the commercial register, tax card and VAT certificate.
As evidenced above and in conjunction with the standard
incorporation process, please note that each form of business
has its own prerequisites that should be duly noted for its
establishment.
Increase/reduction of the capital
The company’s capital is approved by GAFI at the incorporation
date. It’s permissible to increase or reduce it following the
incorporation based on the company’s needs and after acquiring
GAFI’s approval.
Foreign investment reporting requirements
Any corporate entity in Egypt, with direct or indirect foreign
investment is required to submit to GAFI the following:
• Quarterly financial reports that should be submitted within a
maximum of 45 days from the end of every quarter.
• Annual report which must be submitted within maximum four
months following the end of the company's financial year.
• Occasional reports for any changes regarding the company’s
capital, objective, shareholding structure or the board of
directors’ structure. Such a report should be submitted within
30 days as of the changing incident.
Non-compliance with such reporting requirements shall expose
the company to a fine not exceeding EGP 50,000.
Profit repatriation
According to the Central Bank Law No.194 of 2020, any person
is entitled to transfer foreign currency inside or outside Egypt,
provided that such transfers are: (a) effected through institutions
duly licensed in Egypt to undertake such services and (b) in
accordance with the rules/decrees issued by the board of
directors of the Central Bank of Egypt (CBE). Hence, in general
there are no restrictions on repatriation of profits as long as
supporting documentation can be provided.
Egyptian Investment Law
The Investment Law No. 72 of the year 2017 allows companies
established pursuant to it to benefit from a set of incentives,
equal opportunities and enhances competitiveness to avoid
monopolization.
It also focuses on simplifying the incorporation process and all
corporate procedures through electronic systems.
The investment law covers different sectors such as industrial
activities, trade sector, health sector, agriculture, education,
transportation, tourism, housing, construction & building, sports,
electricity & power, petroleum, water, and communication and IT
etc.
Recently, the Egyptian parliament issued law No.160 of 2023
with the intentions to create a more appealing and trustworthy
environment for investors. Law 160, introduces amendments to
the current Investment Law No. 72 of 2017.
According to the cabinet resolution dated January 3 2024, the
eligibility of the investment projects to benefit from the
Investment Incentives has been extended for a further 3 years
starting October 2023.
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Investor’s Services Centre
• To facilitate the procedures of obtaining all the approvals,
permits, and licenses required by the investor for the
purposes of the investment project, an administrative unite
has been established within GAFI and its branches under
the name of "Investor Service Centre" (the "Centre"). This
Centre hosts representatives from all competent/relevant
authorities and will provide incorporation, post incorporation
services and permits electronically for all types of legal
entities & whether subject to Companies’ Law or Investment
Law.
• The Centre shall examine the submitted investment
application and issue its decision within maximum of 60 days
from the date of the investor’s submission of the application
along with all required documents. In the event this period
expires with no decision issued, this shall be deemed as
acceptance of the investor’s application.
• With regards to the approvals/permits, the Investment Law
has provided 2 business days as a grace period for the
Centre’s representatives to request any additional
documentation from the investor, calculated from the date of
submitting the application and the documents, otherwise the
application shall be deemed compliant.
Doing Business in Egypt – Tax and Legal Guide
Investment systems
The Investment Law governs several investment systems that
are classified according to the area and activity of the project.
Such classification is as follows:
A. Internal investment
• The strategic projects that contribute to the community
development with regard to public utilities and
infrastructure, new and renewable energy or roads and
transportation and ports, may be granted a sole
approval on the project establishment and operation,
this approval will be enforceable without any further
procedures.
• The approval is granted by virtue of the board of
ministers’ resolution and may include granting some of
the law incentives.
B. Investment zones
• With regards to some developing areas, the Prime
Minister may resolve setting up specialised investment
zones in different activity sectors, where the resolution
shall determine the location, type of activities to be
practiced, and any other conditions.
• Investment areas shall benefit from the investment
incentives and guarantees provided in the Investment
Law, and each investment area shall be managed by a
board of directors, which shall be competent in
granting the license to the compliant investors.
C. Technological zones
• The Prime Minister may, upon a proposal from the
competent minister, license the establishment of
Technological zones in the field of communication and
information technology industry.
• All tools, equipment & machines required to conduct
the licensed activity will be exempt from taxes &
customs and shall enjoy the “Special Incentives”.
D. Free zones
• In addition to the Public Free Zones, the Investment
Law reinstated “Private Free Zones”, which are
established upon the issuance of a Prime Minister’s
decree and each zone shall include several projects
practicing similar activities.
• The following industries are prohibited from being
established in a free zone: Petroleum industry (not
including refining). Fertilizers, Iron & Steel, Alcoholic
substances, Weapons, ammunition and explosives,
Production, liquidation and transportation of natural
gas.
• Under the issued Law No. 160 of 2023, it is now
possible, with the approval of the Supreme Council of
Energy, to establish projects related to the
manufacturing of Petroleum, fertilisers, iron and steel
along with the liquefaction and transportation of natural
gas and energy-intensive industries, in a free zone.
Energy intensive industries
• Goods exported from free zone projects and goods, tools
and equipment imported (for operation purposes) are
exempted from custom taxes.
• Necessary Equipment imported to the Egyptian lands for
industrial purposes shall enjoy a suspension according to the
amendments of law no.3. Since such equipment will be
imported from an offshore entity to a Freezone one (same
case if they were between two offshore entities), it will be out
of VAT scope as well as other taxes and fees.
• The projects established in the free zone are subject to the
following fees:
‒ Free zone fees: 1% or 2% of the goods value/gross
revenues according to the nature of the project.
‒ Annual fees: 1/1000 of the capital with maximum
amount EGP 100,000.
E. Economic zones
• The economic zone of a special nature has a special law
(i.e. law No. 83 of 2002) and a sole governing body (i.e. the
Economic Zone Authority) that supervises its
implementation, overseeing investment matters within each
zone. This body is competent to carry all government
mandates and issue required licenses.
• The economic zones aims to form integrated industrial
economic segments and serve as international business
hubs.
• All machines, equipment, devices and materials raw
materials, gear, spare parts and production requirements are
exempt from customs duties, and other duties including cars
and vehicles necessary for the project activity.
• VAT does not apply to products and services that are
produced within the zone. No further fees or stamp tax shall
apply.
Investment incentives
The Investment Law provides several incentives some of
which are general for all projects established under the
Investment Law, others are special incentives only applicable
to investment projects of certain activities.
A. General incentives:
The following general incentives are applicable to all
investment projects except free zones projects:
• The articles of association, loan agreements and
pledge contracts are exempted from the stamp duty
tax, notarization, and publication fees for 5 (five)
years from the date of registering the company. The
registration of the project land contract is exempted
from the registration fees.
• A unified customs duty rate of 2% (two percent) of the
value of all imported equipment necessary for
establishing the project (a new decree has been
issued to reduce this 2% to 0% for the technological
zones).
B. Special incentives:
Depending on the location of the investment project and the
satisfaction of certain conditions, the investor could be
granted a discount of 30% or 50% to be calculated from the
investment setting up cost. Said discount should not exceed
7 (seven) years from the date of initiating the activity.
Moreover, in all cases, the investment incentives shall not
exceed 80% of the paid-up capital of the project until the
startup of the activity. Further decrees have been
promulgated to specify the types of projects and investment
areas that should benefit from such discount.
Moreover, Law No. 160 of 2023 introduced a new cash
incentive for investments, applicable to both, new projects
and the expansion of ongoing projects related to industrial
activities covered by the existing special incentives program.
This incentive offers investors the opportunity to reclaim a
percentage, ranging from 35% to 55% of taxes paid on the
income generated from business operations. To be able to
benefit from such incentive, project owners must meet the
following conditions:
1. At least 50% of the project funds must consist of
foreign currency from abroad.
2. The activity must begin within six years following the
enforcement date of Law No. 160. The Egyptian
Cabinet may expand maximum for additional six years.
The Egyptian Ministry of Finance must grant refunds, related
to the new cash incentive, to the investor within 45 days
from the cut-off date of the tax return filing. Failing to do so
will make the government liable for a late payment fee, to be
paid to the investor.
It is worth mentioning that, the recently established Law No.
160 of year 2023, extends the time frame during which an
investor can benefit from the special incentives, provided
that the company is founded within three years following the
enactment of the Executive Regulations of the Investment
Law. This extension can be granted by the Egyptian cabinet,
which now has the authority to provide an extension limited
to 9 years, instead of 3 years.
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Doing Business in Egypt – Tax and Legal Guide
Accreditation offices
One of the investment facilitation methods introduced by the
Investment Law is the "Accreditation Offices". The main
purpose of such offices is to assure the quick issuance of the
certificates required to confirm the status of investment
projects. Such offices must be (a) established in the form of a
JSC, and (b) duly licensed by GAFI as an "Accreditation
Office".
The Accreditation Office shall have the right to issue for the
investor, at its own responsibility, a certificate of accreditation
that indicates the status of conditions required to be satisfied
by the investment project. This certificate of accreditation shall
be (a) valid for one year, (b) acceptable before all other
competent authorities, to the extent that these authorities have
valid reason to reject it, and (c) deemed an official instrument.
Investment guarantees
The Investment Law provides the following guarantees for all
investment projects (irrespective of the governing law thereof:
• All investors shall receive fair and equal treatment.
• Foreign investors (being shareholder, founder, or owner)
will be given a residence permit throughout the term of their
investment project.
• The investor must receive proper justification in relation to
any investment decision.
• The invested funds cannot be seized except by virtue of a
final court judgment.
• The license issued for the investment project shall not be
revoked or suspended and the real estate properties
allocated for the investment project shall not be reclaimed
before issuing a warning to the investor indicating the
violation committed and after the elapse of the grace period
granted to rectify the causes of the breach.
• Foreign investor shall have the right set up, establish,
expand, and funds his investment from abroad with foreign
currencies.
• Investors are entitled to own, manage, use, and dispose of
the project. They could make profits and transfer those
profits abroad.
• Facilitating the liquidation procedures, to be finalized within
120 days from the date the liquidator submits an application
in this regard.
• Investors subject to the investments law could benefit from
importing the necessary raw materials, equipment, spare
parts, machinery, production supplies that suit the nature of
their activities and necessary for the operation of the project
without the need to be registered at the Importers Register,
moreover it can export its products without the need to be
registered at the Exporters Register.
• The investors have the right to appoint expats with a
maximum amount of 10% of the total work force. However,
this rate could increase 20% of the total work force in case
that it is not possible to appoint national workers who have
the adequate qualification of the project. Additionally, for
some strategic projects may be exempted from such quota.
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Doing Business in Egypt – Tax and Legal Guide
C. Additional incentives:
By virtue of a decision issued by the Cabinet, some
investment projects could be granted additional incentives
provided that it started the operations of its activity within 6
years as of the effectiveness of the Investment Law and have
Egypt as one of its principal places of business, or the main
source of its funds is the foreign currency transferred from
abroad, or exporting at least 50% of its production, or its
activity transfers an advanced technology to Egypt.
• Allowing the investment project to have its own
customs gates that should be dedicated for the
investment project’s import or export.
• The government bears in whole or part of the utilities
cost of the real-estate property dedicated to the
investment project upon its operation.
• The government to provide a share in the costs of the
employees’ technical training.
• Refund of 50% of the value of the land allocated for
industrial projects which started its activity within 2
(two) years from the date of receiving the land.
• Allocate lands free of charge for some strategic
activities prescribed in the law.
It is worth noting that, recently Law No. 160 of year 2023 was
introduced exempting the following, if certain approvals
obtained, as part of the additional incentives:
1. Usufruct charges for lands designated for project
establishment, applicable for up to a maximum of 10
years from the beginning of operations.
2. Contributing to the expenses related to infrastructure,
public services and utilities, capped at a percentage
not exceeding 50%.
3. Expenses, up to a maximum of 50%, for the project's
utilization of essential utilities, for a period not
exceeding 10 years.
Customs and VAT for equipment
Reduced Customs Rate
The unified customs rate is 2% on imported tools, equipment,
and machinery necessary for the establishment of new
business (reduced to 0% for projects in the technological
zones).
Value Added Tax (VAT)
The new amendments suspended the payment of the VAT due
on machinery and equipment whether imported or purchased
from the local market for industrial purposes, for a period of one
year from the date of their custom release or purchase from the
local market.
This period may be extended by a maximum of an additional
one year and it is important to mention that such suspension is
not applicable to services providing companies.
When proven by the ETA that such machinery and equipments
were used in industrial production during that period, it shall be
exempt from VAT.
If without using the machines and equipments in industrial
production the period ended, then the VAT and additional tax
become due.
Considering that refund on machines and equipments is no
longer applicable.The paid inputs' Value Added Tax (VAT) is
deductible if the company's activities are subject to VAT
Simplified incorporation procedures
GAFI shall decide upon the incorporation request within no later
than one business day from the date of submitting the request.
Each legal entity shall have one official unified number for
dealing with all governmental sectors.
Feasibility of transferring the incorporation shares during the
first 2 financial years, after obtaining the competent minister’s
approval.
Lands allocation
Competent administrative authorities shall prepare to GAFI
detailed map for all lands available for investment, which shall
be updated every 6 months.
Disposing such lands shall be upon the investor’s request or an
invitation from GAFI.
Disposal is through sale, rent, rent ended by ownership, or
license to use.
Disposing lands to investors satisfying certain criteria, free of
charge by virtue of presidential decree, against paying a
monetary guarantee not exceeding 5% of the project’s
investment costs to be refunded after 3 years of starting
activity.
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Doing Business in Egypt – Tax and Legal Guide
Supreme Investment Council
A supreme council shall be founded, headed by the president
in order to take all the necessary actions for having a better
investment climate, legislative reform, approving investment
policies and plans, following up the implementation of the
investment plans and programs highlighting the investment
opportunities, studying and finding solutions for investment
drawbacks, and resolving the disputes that may arise between
different governmental authorities with regards to investment
area. The resolutions of such council are binding to all
governmental authorities.
General Authority for Investment and Free Zones
“GAFI”
GAFI, being the competent authority for regulating and
enhancing the investment and executing this Investment Law
and the Companies' Law, shall publish annually a list of the
companies benefiting from the incentives (as well as
governmental lands) stipulated in the Investment Law.
Investment areas shall benefit from the investment incentives
and guarantees mentioned above, and each investment area
shall be managed by a board of directors, which shall be
competent of granting the license to the compliant investors.
The Investment law No.72 granted the Cabinet the authority
to approve certain projects related to infrastructure and
renewable energy, if such projects are of a strategic nature.
The conditions for obtaining such approval is determined by
the cabinet.
Amendments to Egypt's Importer's Register Law
On 29 October 2023 Law No. 173 of 2023 (referred to as the
"Law") was officially enacted and published in the Official
Gazette. This Law introduces amendments to the importer's
register law, No. 121 of 1982. This amendment to the Law
includes the provision for foreign investors to become eligible
candidates for registration. This change will come into effect on
the day immediately following its publication. which is october
30,2023.
Eligible Entities for Importer's Register Registration:
The Provision of the Law permits joint-stock companies,
partnerships, limited by shares, limited liability companies, and
partnerships.
Importantly, these entities can now register even if foreign
partners hold ownership stakes exceeding 51% and Egyptian
partners possess less than 51% of the capital.
Duration of the registration:
Under the new regulations, the maximum registration period
shall not exceed 10 years. Extensions are also possible,
subject to a decision made by the cabinet based on
recommendations from the responsible minister overseeing
foreign trade affairs. An Additional term may be granted upon
approval.
Closing Business
For JSCs and LLCs a liquidator needs to be
assigned to finalize the liquidation process;
the process can be summarized as follows:
• The company will convene an extraordinary general
assembly meeting to put the company under
liquidation and appoint the liquidator.
• Authenticating the minutes of meeting from GAFI.
• Putting the company under liquidation and
registering the liquidator’s name in the commercial
register.
• Finalizing the liquidation process.
• Deregistering the company from the commercial
register.
• Closing the tax and social insurance files.
• The customs authority, tax authority and social
insurance authority will be notified by GAFI and the
liquidator that the company became under
liquidation and those authorities.
For foreign branches
• Prepare and submit the required documents to
GAFI and the commercial register office.
• Obtain the commercial register approval on
deregistering the branch from GAFI.
• Obtain GAFI’s approval on the deregistration.
• De-register the branch from the commercial
register.
• Obtain an official extract of the commercial register
confirming the deregistration.
For representative offices
• Prepare and submit the required documents
needed to GAFI.
• Obtain a certificate from GAFI.
• Indicating that the Representative Office has been
closed, addressed to the competent
authorities/entities.
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Doing Business in Egypt – Tax and Legal Guide
Key Considerations
• There are a number of alternative forms of entities
open to investors.
• Restrictions do exist concerning Egyptian
stakeholders and management.
• The time taken and the processes required for
business establishment differs depending on the
type of entity to be established. The new
Investment Law and the operation of the GAFI is
intended to streamline processes and provide
incentives.
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Doing Business in Egypt – Tax and Legal Guide
Taxation
Corporate income tax
In Egypt, companies are generally liable to corporate income
tax (“CIT”) at a flat rate of 22.5%; excluding the Suez Canal
Authority, the Egyptian Petroleum Authority and the Central
Bank of Egypt, which are liable for CIT at the rate of 40%; as
well as the companies operating in the oil and gas exploration
and production activities; which are liable for CIT at the rate of
40.55% in Egypt.
Corporate income tax is imposed on:
• Companies that are resident in Egypt on all profits
realized from Egypt and abroad.
• Companies that are non-resident in Egypt with regard to
profits realized through a permanent establishment in
Egypt.
The income of a company may include any, or all, of the
following:
• Profits from a commercial and/or industrial activity.
• Income from the use and/or disposal of buildings or
assets.
• Amounts received on shares of associations of capital
yield paid by the government, local government units,
public juridical persons.
• Rental amounts, license fees, royalties received.
• Income from any other activity performed in Egypt.
Tax return and tax payments
Companies are required to submit a tax return within four
months of the end of their financial year where they are
required to assess the amount due in the form of a
self-assessment.
Corporate taxpayers are likely to have a credit balance arising
from local withholding taxes suffered (see further details in the
Withholding tax section). Credit is given for such advance
payments made on the taxpayer’s behalf against the total tax
liability arising from the tax return.
The balance of the tax is due and payable on the date on
which the return is submitted.
Taxpayers have the right to submit an amended corporate
income tax return within one year of the original submission
date. However, in case of tax evasion or receiving a tax audit
notification from the Egyptian tax authority (“ETA”), the
taxpayers would not be entitled to submit such amended
return.
In case the amended tax return provides a lower tax due than
the original return, the taxpayer should submit a refund request
to the ETA. The ETA will review the case and respond to the
taxpayer within six months of the request’s submission date.
E-filing of corporate income tax returns
Taxpayers are currently required to submit their income tax
returns electronically on the ETA’s website; whereby, the hard
copies are no longer acceptable by the ETA.
When it comes to individual taxpayers, they still have the option
to pay their annual income taxes due electronically or manually.
Taxpayers (i.e. other than the individuals) are accordingly
required to register on the ETA’s website to create an account
and to obtain a username, password and a specific code to be
provided to their tax advisor(s). Following the registration
process, taxpayers shall prepare their annual income tax returns
on the ETA’s website, and then have them reviewed/ verified by
their tax advisor(s). Prior to electronically submitting the income
tax return(s), both the taxpayer and the tax advisor are required
to sign-off the income tax return.
Upon submitting the income tax return, the taxpayer will be
required to pay the tax due through one of the following
methods:
• Bank transfer through the taxpayer’s own bank; or
• Using smart card to pay/ transfer the tax due to the ETA; or
• Through the banks/ the National Post Authority with which
the ETA has specific agreements.
E-invoicing system in Egypt
As part of the digital transformation for the tax government
practice in Egypt and following the introduction of the e-filling
mechanism, the ministry of finance has released decree no 188
of 2020 for introducing the new e-invoicing system.
In July 2021, ministerial decree no 1206 of 2021 was issued
obligating all governmental bodies not to accept any paper
invoices from any of their suppliers as of October 1, 2021.
Therefore, any company dealing with any governmental body
must apply the e-invoicing system before that date.
That as of April 1, 2023, paper invoices will not be considered in
proving costs or expenses when submitting tax returns for
income tax, as well as when deducting or refunding value-added
tax, and electronic invoices will be considered only.
Recently, law 30 was introduced requiring taxpayers to submit
electronic invoices or receipts for costs and expenses ,to be
considered eligible for deduction. This requirement shall be
effective for invoices starting from July 2023, and from January
2025 for receipts. The periods can be extended for a maximum
of one year. However, the finance minister may exempt
specific costs and expenses from such proof.
Deductions allowed while calculating the
taxable income
Deductions are allowed for any costs/expenses that are
necessarily incurred in realising them; noting that in order for
such deductions to be certified by the ETA, certain conditions
must be met.
Insurance PE: A new definition has been added for non-resident
entities collecting premiums or insuring risks in Egypt through
agents.
PE Exclusions: There are limitations to the PE exclusions, which
may increase PE risk triggers for non-residents. The "Closely
related person" provisions have been introduced, affecting certain
preparatory or auxiliary activities.
In addition to the above, a person working on account of a
non-resident company of Egypt shall create a PE for the
non-resident company in Egypt, if such person has the authority
or the power to conclude/ratify the contracts in the name of such
company, unless the aspects of his/her activity are limited to
purchasing commodities or goods for the non-resident company.
Also a person working on behalf of a non- resident company
should create a PE for such company in Egypt if he dedicates
most or all of his time for it.
Losses (changed font to match headings)
Prior year losses can be used to reduce the taxable profit of a
company in a subsequent year. In other words, if there is a
remaining portion of a loss incurred, it can be transferred
annually to the following years. Losses can be carried forward for
up to 5 years.
Carry forward of tax losses will be denied, if the following
conditions are collectively met within the time period of three
years:
● If a change in the company’s ownership takes place and the
percentage of change of ownership exceeds 50% of shares,
quotes, or voting rights of the company, and
● The company’s activities are changed, and
● The company is either a Joint Stock Company or a Company
Limited by Shares whose shares are not listed on the Egyptian
Stock Exchange.
If none of the above mentioned conditions are met, the company
has the right to carry forward the losses provided that those
conditions, or any of them, do not occur over the subsequent
three years.
It is worth noting here that capital gains (i.e. gains arising from
the sale of securities) cannot be offset against the operational
carried forward tax losses, discussed above. Please refer to the
“capital gains and losses on securities” section, for more
information in this regard.
Withholding tax (“WHT”)
Any Egyptian entity has a liability for WHT against any payments
in excess of EGP 300 made to any local supplier of goods or
services at the time of payment.Payments made to local
entities.The rates of WHT applicable to local payments for local
services and supplies are as follows:
● Contracting and supplying 1%
● All types of services 3%
● Commissions 5%
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Doing Business in Egypt – Tax and Legal Guide
Deductions are particularly allowed for the following:
• Interest on business loans, or the portion of a loan used
for business purposes; provided that certain conditions
are fulfilled.
• Tax depreciation and tax paid and borne, except that
paid or payable under the Income Tax Law,
• Social Insurance premiums paid on behalf of workers
and the company;
• Private saving, or pension plans, but not exceeding 20%
of the total salaries of the workers per year;
• Insurance premiums against the ill health of the business
owner, to a maximum of EGP 10,000 per year or 15%,
whichever is lower; and
• Donations to the Egyptian Government, local
administrative units and other public juridical persons.
Deductions are not allowed for the following:
• Reserves and appropriations,
• Financial fines and penalties,
• Income tax payable,
• Loan interest, which exceeds twice the credit and
discount rate announced by the Central Bank of Egypt or
not complied with the arm’s length principle; and
• Loan interest and other debts paid to non-taxable or
tax-exempt natural persons (i.e. individuals).
Permanent Establishment (“PE”)
A PE should mean every fixed place of work, through which
all or some works of projects of a person not residing in Egypt
are executed; comprising in particular the following:
• Headquarter,
• Branches,
• Building used as a sale outlet,
• Office,
• Factory,
• Workshop,
• Mine, oilfield or gas well, quarry, or any other place for
extraction of natural resources, including timber, or any
other product from the forests,
• Farm or saplings; and
• Building site, construction or assembly project,
installation, or supervisory activities associated with any
of that.
Recently, law 30 was issued and introduced certain updates
as follows:
Fixed Place of Business PE : A new 90-day threshold has
been introduced. A "Fixed Place of Business" PE is triggered
if certain activities occur in Egypt for an aggregate period of
90 days within any 12-month period. This includes
construction projects and natural resource-related activities.
Service PE: This is a newly added definition. A Service PE
exists when a non-resident entity provides services in Egypt
for an aggregate period of 90 days within any 12-month
period. It's triggered when services are delivered through
employees or entities engaged by the non-resident.
Agency PE: The definition of Agency PE has been broadened
to include individuals working in Egypt on behalf of a foreign
enterprise, and it provides further clarity on the PE triggers.
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Doing Business in Egypt – Tax and Legal Guide
Withholding tax (“WHT”)...(cont’d)
These payments of WHT are prepayments of the provider’s/
supplier’s liability to Income Tax. The amounts received are
included in the provider’s / supplier’s income and subject to
income tax under the prescribed rates. However, a tax credit
is provided for the WHT already paid against the total tax
liability.
Payments made to non-residents
Egyptian resident companies making payments of interests,
royalties or services to non-resident ones, should generally be
subject to WHT in Egypt at the rate of 20%, at the time of
making such payments.
However, the 20% WHT rate applied on such payments may
be reduced or even eliminated as per the provisions of the
relevant double tax treaty (“DTT”) signed between Egypt and
the country where the recipient of such payment is resident (if
any).
It is worth mentioning that in the past, interests paid regarding
loans with a loan term of 3 years or more used to be exempt
from WTH. This exemption has been abolished by the new
amendments.
Dividend distributions
Dividend distributions made by an Egyptian resident company
to resident/non-resident individuals or companies, are subject
to WHT at the rate of 10% in Egypt, provided they are unlisted
on the Egyptian stock exchange.
Additionally, dividend distributions made by Egyptian listed
companies to tax residents or non-residents should be subject
to WHT at a flat rate of 5%.
Having said that, it is notable that the WHT applied in Egypt on
dividend distributions made by Egyptian resident companies to
non-resident ones, could be further reduced or even
eliminated as per the provisions of the relevant DTT concluded
between Egypt and the country where the recipient of such
dividends is resident (if any).
Dividends income received by Egyptian resident companies
from resident or nonresident ones, should be subject to the
participation exemption rule; whereby, 90% of the dividends
income received would be exempt from CIT (i.e. only 10% of
the dividends income would be taxable); which in turn means
that such dividend income would be subject to effective CIT
rate of 2.25% upon applying the participation exemption rule
(upon meeting the participation exemption conditions).
It is important to note that, the recently introduced, Law No.30
stipulated that the tax due on dividends paid by a resident
distributor to a resident entity shall be deducted from the tax to
be paid (i.e., tax offset) on dividends distributed by the resident
entity to a third resident entity, provided certain conditions are
met.
The egyptian tax authority intends to mitigate tax inefficiencies
related to resident multilayer structures, for the purpose of
reducing the tax leakage caused by the distribution of
dividends through a multi-layered structure in Egypt. Law
No.30 eliminates/reduces double taxation on dividends
distributed through a multi-layered structure.
Capital gains tax (“CGT”)
Capital gains on securities
Sale of listed securities: Capital gains realized from the sale of
listed Egyptian securities by resident shareholders are subject to
10% capital gains tax (“CGT”).
On the other hand, in case of non-resident shareholders, capital
gains realized on the sale of listed securities should be exempt
from CGT.
Also, it is important to note that the newly introduced law 30,
exempts capital gains realised upon a share swap between a
listed and a non-listed company. In case of sale of such shares,
the acquisition cost before the swap will be the base to calculate
the capital gain.
Sale of unlisted securities: Capital gains realized from the sale
of unlisted Egyptian securities by both resident and non-resident
shareholders, are subject to CGT at the rate of 22.5% in Egypt.
However, such tax may be eliminated as per the provisions of a
relevant DTT (if any) in case the supporting documents are
provided.
However, new CGT guidelines have been introduced relating to
the sale of shares by non-residents, published in December 2020.
The Guidelines have set down the required procedures and
documentation for CGT filing by non-residents, along with the
financial penalties and legal sanctions for non-compliance.
Moreover, in case of individual shareholders, the capital gains
realized from the sale of unlisted securities should be added to
their taxable income; hence, subject to personal income tax (“PIT”)
with the highest tax bracket being 27.5%, as tackled in the PIT
section.
It's worth mentioning that the newly amended tax law 30
introduces a range of incentives for capital gains and establishes
specific regulations, outlined below:
If shares are offered on the EGX for the first time (IPO):
● Within two years from the date of issuance of the revised
tax law (before June 15, 2025), 50% of the actual capital
gains will be exempt. While, after two years, only 25% of
the capital gains will be exempt from taxation.
● If additional tranches of shares are offered after the
issuance date of the revised tax law (after June 15, 2023),
25% of the realized capital gains will not be subject to
capital gains tax, provided certain conditions are met.
EGX trading incentives:
● Additional cost (capped by 0.5% of both selling and buying
transactions) would be allowed as a deductible cost, thus
decreasing gains subject to tax on capital gains.
● Under certain constraints and limitations, a natural person
will be allowed to reduce capital gains by cost equivalent to
interest cost calculated based on shares acquisition cost
and Central Bank of Egypt’s interest rate.
:
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Doing Business in Egypt – Tax and Legal Guide
Capital losses on securities
Capital losses realized from the sale of securities can be offset
against the capital gains arising during the same tax year from
the sale of securities to the extent that they both arise in the
same tax year.
Non-compliance penalties
Non-compliance of capital gains will result in imposing an
annual delay fine, calculated as the credit and discount rate
announced by the Central Bank of Egypt (which is currently
20.25%) plus 2%, divided by 12 months for each month or
portion of a month late.
Personal income tax
In general, this tax is withheld at source from payments to
Egyptians and foreign nationals working in Egypt regardless of
the source of payment and for payments made by an Egyptian
source regardless of where the work is performed.
A tax is imposed on the total net income of the resident
individuals for income earned in Egypt as well as the income
earned outside Egypt for resident individuals whose center of
commercial, industrial or professional activities is in Egypt.
Investment income (i.e. dividends and capital gains) realized
by Egyptian tax residents from sources outside Egypt (i.e. from
their investments abroad) is taxable in Egypt, as it is defined,
under the Egyptian income tax law, as a commercial income.
Tax is also imposed on the income of non-resident individuals
for their income earned in Egypt.
Rates of tax
Employees are taxed according to progressive tax brackets;
and are entitled to annual salary tax exemptions (EGP 15,000):
Non-resident employees are subject to tax at the same tax
brackets mentioned above with also the annual exemption of
EGP 15,000.
The tax due is to be calculated at the rate noted for each
bracket. Per Law No.30 the personal income tax brackets have
increased up to a maximum of 27.5%, for taxpayers with
annual income exceeding EGP1.2 million.
The first income tax bracket (subject to 0% tax) is broadened
from EGP 15k to 30k.
Taxable income
Taxable income is defined as payment from employment,
including salaries, wages, overtime, bonuses, paid leave,
commissions, profit shares and all cash and in-kind benefits.
Reimbursement for expenses of spouses and dependents is
also considered taxable income. In addition, school tuition
fees, long-term living expenses, and overseas and hardship
allowances are taxable.
The Income Tax Law exempts some payments of expenses
and benefits paid to individuals, including:
●Severance pay
●Meals distributed to workers
●Employees’ subscriptions to special insurance funds
●End of service payments and pensions
●Employees’ payments of Social Insurance
Administration
Egyptian resident employers are required to withhold the tax
payable from the employees’ salaries according to the PIT rates,
and remit it to the tax authority within 15 days of the end of the
month in which the payment has been made.
The resident company is also required to complete quarterly
salary returns and submit them to the tax authority, in addition to
an annual reconciling return that should be submitted by the
end of January of each year.
If the employer is not resident in Egypt, or has no centre or
establishment in Egypt, the obligation to deliver the tax
transfers to the employee, who must calculate his Egyptian tax
liability and submit an individual tax return to the appropriate
tax district office.
The individual tax return should be submitted by the employee
on an annual basis during the period starting the 1st of January
until the 31st of March of each year.
Value Added Tax (VAT)
General Overview
VAT is a consumption tax imposed at each stage in the chain of
production and distribution (transaction-based tax), which
should be collected by businesses on behalf of the ETA. VAT is
reported on a self-assessment basis.
The VAT law replaced the previous General Sales Tax (“GST”)
law no. 11 for the year 1991. As the standard rate is 13% for FY
2016 – FY 2017 (June 30th). Starting from July 1st 2017, the
VAT rate was raised to 14% applicable on all the goods and
services.
The above should apply except for machinery and equipment
that are used in producing goods or rendering service that will
be subject to 5% (except for buses & passenger cars) upon
fulfilling the criteria.
VAT is applied to a broader range of goods and services, while a
number of basic goods and services which affects the
low-income earners are exempt, in addition to other exemptions
listed in the law.
New VAT amendments have been issued by virtue of law no.3
of 2022 published in the official gazette on January 2022 and
its executive regulation issued by the MoF decree No. 24 on
March 2023 which includes key updates to the VAT law no.67 of
2016:
1) Machinery and equipments
• Suspension of VAT applicable on machinery and
equipments whether imported or purchased from the local
market for “industrial purposes” for a one year period from
the date of custom release or purchase, noting that such
period might be extended for an additional year maximum -
It’s important to highlight that this is not an applicable option
for service providing companies.
• If proved by the ETA that such machinery and equipments
were actually used for same purposes it was purchased for
“industrial production” during this period, then it shall be
exempt from VAT.
• If such a period ended without the use of machines or
equipments in the industrial production then VAT and the
additional taxes become due from the date of
purchase/custom release till payment date.
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Doing Business in Egypt – Tax and Legal Guide
Starting from December 24, 2023, as directed by the Head of
the Egyptian Tax Authority, companies must declare their foreign
currency invoices in USD. If invoices are in a currency other
than USD, companies should declare the equivalent amount in
USD until the ETA's portal includes more currency options in
future updates.
General considerations mentioned in Law
no.3.
Advertising Services
Advertising services have become subject to VAT at the general
rate of 14%, except for the following types which are exempt
from VAT:
• The advertisements issued for the purpose of notifying the
public of the orders issued by a public authority or raising
awareness including the advertising issued by government
tourism and information service departments
• The advertisements of donations for medical treatment and
health care at hospitals and governmental institutes
• Mandatory sale, election, job seekers and lost people
advertising
• The advertisement pertaining to regulating work within
establishments
Schedule Tax
The new amendments have rephrased the provisions related to
some goods and services. However, the same schedule tax
rates are maintained.
The new item that was added is the commercial identity and
customer relationship that shall be subject to schedule tax at
10% which is calculated on 10% of the rental and/or selling
value as a tax base.
Exemptions
The new amendments have rephrased the provision related to
some goods and services.
Reverse charge mechanism
The VAT law introduced the reverse charge mechanism in Egypt
for the first time, whereby transactions involving non-residents
providing services to resident entities have become subject to
VAT in Egypt.
The non-resident persons, selling or providing taxable
commodities or services to resident persons in Egypt, must
appoint a fiscal representative or an agent, in order to assume
all the undertakings, including registration, payment of the tax,
the additional tax and any other due taxes; otherwise, the
resident person will be liable to settle the tax and such other due
taxes through the reverse charge mechanism.
2) Simplified Vendor Registration System
• Every non-resident and unregistered person who does not
practice an activity under a permanent establishment, sell
goods or provide services to a person who is not
registered inside the country, is obliged to apply for
registration under the simplified vendor registration
system.
• Such system should be enforced within six months for
services and within two years for commodities starting
from effective date of the law.
• Entities registered do not have the right to deduct their
input VAT. However, they have the right to refund their
input VAT that is necessary to perform their activities inA)
Business-to-Consumer (B2C) Services:
• The ministry of finance has issued the decree no 160 of
the Y 2023 that includes guidance for the VAT on the
digital & other remote services (the services) provided by
non-residents.
Non-resident entities providing services directly to
consumers (B2C), are required to follow the steps below:
1. Simplified VAT Registration: Non-resident service
providers must complete a simplified VAT registration
with the Egyptian Tax Authority.
2. VAT Collection and Remittance: Once registered,
non-resident entities are obligated to collect the
applicable VAT on the services they offer to consumers.
They must also remit the collected VAT to the tax
authority.
3. Registration Deadline: Non-resident entities must
complete the registration process by June 22, 2023.
For services provided to other businesses (B2B), the
following rules apply:
1. Reverse Charge Mechanism: The responsibility for
VAT payment shifts to the service recipient (the
business receiving the services) through the reverse
charge mechanism. This means the recipient business
calculates and pays the VAT on behalf of the
non-resident service provider.
2. Voluntary Registration: Non-resident entities have the
option to voluntarily register for the simplified VAT
registration process. If they choose to do so:
- They must collect the applicable VAT on their
services.
- They must remit the collected VAT to the tax authority.
- In this case, the service recipient (the business) is
not responsible for accounting or settling the VAT.
Additionally, a recent Ministry decree, no. 538, has canceled
the "second" paragraph of article (52 bis) from the executive
regulations of decree no. 518. This paragraph allowed
companies to pay VAT in Egyptian Pounds for amounts
initially collected in foreign currency, provided certain
conditions were met.
Now, any invoices related to services or goods issued and
collected in a foreign currency must be sent to the Egyptian
Tax Authority (ETA) in the same foreign currency through the
ETA's portal.
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E-filing of VAT returns
The ETA has introduced a new e-filing system for the
submission of the VAT returns, hence taxpayers will be required
to submit their VAT returns (i.e. monthly VAT and/or schedule
returns) electronically through the ETA’s website, starting from
January 2019. Accordingly, the manual filing of VAT returns will
not be acceptable as of the latter date mentioned.
The account created by taxpayers for the e-filing of corporate
income tax returns shall be used to access the ETA’s website.
Such account will provide taxpayers the access for the e-filing
of all relevant taxes, including VAT. Taxpayers will be required
to prepare their monthly VAT returns online by uploading the
required excel sheets (i.e. sales, purchases and adjustments
sheets) on the ETA’s website.
Customs duty
Custom duty is a liability that rests with the person who is
importing the goods from abroad.
There are two types of importation in Egypt, and these are:
1) Temporary importation
A contractor who intends to re-export plants and equipment after
expiration of a contract may import the plant and equipment into
Egypt free of customs duties if certain requirements were met.
Under all circumstances, a fee at a rate of 2% monthly and up to
20% annually of the amount of customs duty due is imposed for
each year or partial year the plant or equipment remains in
Egypt before re-export. Noting that it is effective for a period of
one year and may be renewed after the approval of the
Customs Authority.
Also, Customs tax amounting to (1%) of the stipulated customs
tax on the date of the temporary release shall be collected for
every month or part thereof with a maximum of (10%) annually
for equipment, new and renewable energy components and
their spare parts
2) Final release
Customs duties are imposed on imported goods at rates that
vary according to official categories. Average rates of duties
range between 0% and 60% of the cost, insurance and freight
(CIF) value.
Higher rates (up to 135%) are applied for passenger cars,
nonessential and luxury consumer goods, and alcoholic
beverages.
With regard to the importation of machines and equipment to
be used for industrial purposes, the rate of customs duty that
applies in this case ranges from 0% to 5% depending on the
exact type of the good (determined according to its customs
code). However, it is worth noting that trucks and heavy
equipment are generally subject to customs duty between the
rates of 10% to 20%.
The applicable import VAT imposed on such machines and
equipment shall be a reduced rate of 5% VAT in case of
providing the documentation that confirms the usage of such
machines/equipment in the production or service provision.
In Egypt, the government is flexible with importing
second-hand equipment, with an aim to encourage foreign
investment. .
Input VAT deduction
The registrants whom are providing a taxable commodities or
services have the right to deduct the input VAT incurred on all
of their direct, indirect costs and inputs.
The credit balance in the return will be carried forward to the
subsequent periods until the deduction is fully covered.
Starting from 1 July 2022, companies will only have the right to
deduct their input taxes based on the availability of e-invoices
received.
Tax exemption
One of the government’s purposes of the tax exemptions is to
give incentives to some activities, such as the education
services. The government exempts the educational services,
books, and the pamphlets.
In addition, there are some other exemptions, such as the
products and services for armament, defense and national
security, as well as the agreements concluded between the
Egyptian government and foreign countries, the international
and regional organizations, the oil & Gas, and mining
agreements.
There are some exempted commodities and services which
are used on a daily basis, such as dairy products, banking
operations, and transportations for passengers.
Registration requirements
• Businesses supplying taxable goods and services,
reaching the threshold (i.e. EGP 500K for any 12-month
period) under the VAT law are obligated to register within
30 days from the date of reaching the VAT registration
threshold.
• The tax inspectorate must notify the taxpayer of his
registration within fourteen days following the date of
submission of the registration application. The taxpayer
shall be governed by the provision of the law as of the
date of registration.
• Every producer, provider or importer of a commodity/
service subject to the schedule tax should have himself
registered as per the Egyptian VAT Law, regardless the
volume of sales or production (regardless of the level of
turnover).
Administration
The VAT returns must be submitted on a monthly basis, and
the deadline for submitting the tax returns is within one month
from the end of each tax period based on the Unified Tax
procedures Law.
As mentioned earlier, all companies must register through the
tax authority’s website to be a able to submit all their kinds of
tax forms online as hard copy tax returns are not acceptable
anymore. Regarding the ETA’s online portal usage -
subscription, renewal fees of 325 EGP should be paid annually
to renew the subscription.
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Doing Business in Egypt – Tax and Legal Guide
Customs Agreement with The EU and GAFTA
The import / customs duty could be eliminated or reduced
depending on the country of origin of the imported goods.
There are several agreements in place signed by Egypt, which
are designated to serve this purpose. The most famous
agreements are:
The European Union (“EU”) free trade agreement, where the
presence of EUR 1 certificate (along with other documents to
prove country of origin) could lead to applying 0% customs
duty rate.
The "Greater Arab Free Trade Area" (GAFTA) is a free trade
zone that came into existence in 1997. It was founded by the
GCC countries, Egypt, Iraq, Lebanon, Libya, Morocco, Sudan,
Syria and Tunisia. Goods originating from one of these
countries should not be subject to customs duty rate.
Other taxes
There are two distinct types of taxes:
• Nominal Stamp Tax, which is imposed on certain
documents, regardless of their value; at the rate of approx
EGP 1 per paper per each copy of the document. and,
• Proportional Stamp Tax, which is imposed at prescribed
rates on the values of certain financial transactions.
The main situations in which stamp tax can arise are:
• Land registration/property transfers/transfer of deeds
(including lease agreements)
• Banking Transactions
• Payments by Governmental Bodies
• Securities’ sale transactions.
Stamp tax on banking transactions
The stamp tax on Banks’ loans is applicable on the Egyptian
banks and the branches of foreign banks in Egypt with the
exception to the non-resident banks. The stamp tax is
imposed at the rate of 4 per thousand (i.e. 0.4%) annually, and
is applied on the beginning balance of each quarter during the
year, in addition to the amount of utilization (the amount of
utilization from the credit facilities balance granted by banks
during each quarter). It is worth noting that such stamp tax is
due within 7 days following the end of each quarter during the
year.
Stamp tax on sale/purchase of securities
The stamp tax is applied on the total proceeds realized from
selling any kind of securities regardless they are Egyptian or
foreign, listed or non-listed and without deducting any costs
(i.e. value of the transaction).
There are very limited exemptions provided in the stamp tax
law. In such case, the buyer and seller each should apply the
stamp duty on the total proceeds based on the following rates
(for the sale transaction less than 33%):
• In case of non-resident buyer/seller (listed or unlisted
shares on the EGX), 0.125%
• In case of resident buyer/seller (unlisted shares) 0.05%,
while listed shares are exempt from stamp tax.
However, if the sale transaction exceeds 33%, then such
transaction would be considered as an acquisition transaction,
thus should be subject to 0.3% stamp tax.
The 0.3% is imposed on each of the buyer and the seller (i.e. a
total of 0.6% for both of them) with respect to the acquisition or
existing investment, where either of the following conditions is
met:
• If the sale and purchase transaction involves 33% or more
of the value or the number of shares or voting rights in a
resident company; or
• If the sale and purchase transaction involves 33% or more
of the assets or the liabilities of a resident company by
another resident company in return of shares in the
acquiring company.
In both cases above, the buyer and seller should each pay the
0.3% stamp duty on the gross transaction value without
deducting any cost. If the sum of sale and purchase
transactions performed by one person in one entity has
reached the limit mentioned above (i.e.,33% or more) through 2
years from the first transaction by such a person and from the
date of this law, the whole transaction should be considered as
one transaction and consequently be subject to the 0.3% stamp
duty. The seller shall pay 0.3% if he reaches the exit limit and
the buyer shall also pay 0.3% when he reaches the acquisition
limit and after deducting any stamp duty paid before.
It is worth noting, that this type of stamp tax is non deductible
for corporate income tax purposes.
Other types of stamp tax
Payments made by governmental entities are subject to a 2.4%
stamp tax (with certain exemptions), and it should be borne by
the recipient, by means of withholding.
There are other types of stamp taxes, which are imposed at
nominal rates and others that are imposed at proportional rates,
depending on the nature of the transaction that has been
undertaken and /or the document being exercised.
Other stamp taxes include the following:
● 1% on each life insurance premium and 2% on each
premium on illnesses, bodily injuries or related civil liability,
and on compulsory insurance premiums of any kind.
● 11% of the insurance consideration for land, river, sea, and
air transport, with a minimum of one pound.
● 11% on each premium of other insurances and the
consideration of these insurances, including insurance
against war risks, with a minimum of one pound.
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Doing Business in Egypt – Tax and Legal Guide
Real estate tax
Real estate tax is levied on all constructed real estate units
across the country with annual rental value exceeding EGP
1,200 for commercial units, and EGP 24,000 for residential
units.
The tax rate is 10% of the annual rental value of the taxable
real estate.
Committees, called “assessment committees”, are formed in
every governorate, to be responsible for assessing the market
value of the constructed real estate units. The assessment
shall be based on a qualitative classification of these real
estate units, according to the building standard, the
geographical position and the annexed utilities.
The annual assessment is applicable for a five year term and
then reassessment procedures will be initiated from one year
to three years before the end of each term. However, based on
recent amendments, the application of the annual rental value
assessed for the last five years (i.e. from 2013 to 2018) will be
extended for three more years until 2021.
In determining the annual rental value, a certain percentage
(which differs for residential and non-residential / commercial
realities) can be reduced for allowable deductible expenses
which are borne by the taxpayer for maintenance, etc.
The tax is assessed in January of each year and can collected
in two equal installments at the end of June and December of
the same year. Nevertheless, the taxpayer has the option to
pay the whole tax amount on the date of the first installment
(i.e. at the end of June).
A new article was recently introduced to real estate tax law,
allowing by means of a decision from the Egyptian Cabinet,
real estate tax exemption for the real estate actually exploited
in the production and services activities stated by the Egyptian
Cabinet; provided that the decision includes the below, for each
production or service activity:
• The percentage of exemption; and
• Its duration.
Penalties
On October 2020, the Egyptian Government issued the Unified
Tax Procedures Law amending certain articles of the income tax
law, VAT, stamp tax, state tax and other similar taxes.
The new law stated financial penalties that should apply if the
taxpayer failed to comply with the tax laws (in addition to a delay
fine that should also apply for each month late in paying the
taxes due). The financial penalties are as follows:
Penalty of EGP 3K up to EGP 50K applicable in the
below cases:
Non-compliance with the deadlines of submitting the different
types of tax returns (such as: corporate income tax, payroll tax,
VAT, and state development tax) for a period not exceeding 60
days from the tax return due date.
• Including false information in the tax returns.
• Non-cooperation during tax audits.
• Non-compliance with Transfer Pricing three-tier filing
requirements.
• The above-mentioned penalty could be doubled or tripled in
case of recurrence.
Penalty of EGP 50K up to EGP 2 million applicable in
the below cases:
• Non submission of tax returns for a period exceeding 60
days following their due date.
• The above-mentioned penalty could be doubled or tripled in
case of recurrence within a three year period.
Penalty of EGP 20K up to EGP 100K applicable in the
below cases:
• The taxpayer not notifying the ETA of change(s) in the
company's tax registration information within a period of 30
days of such change.
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Doing Business in Egypt – Tax and Legal Guide
Transfer pricing (“TP”)
Since the issuance of the 2005 law, corporate tax returns have
had a disclosure requirement for related party transactions and
TP In 2010, the Egyptian Tax Authority (“ETA”) issued the first
part of the TP Guidelines, which followed the Organization of
Economic Cooperation and Developments (OECD) TP
Guidelines.
The first part of the Egyptian TP Guidelines (“ETPG”), provided
guidance on the following points: the arm’s-length principle, the
method of establishing comparability, the choice of the most
appropriate TP method(s) and documentation requirements.
The Egyptian Minister of Finance has issued a Ministerial
Decree published in the official Gazette on the 22 of May 2018,
amending some provisions of the executive regulations of the
income tax law that relates to TP.. Such amendments were a
prelude to the Final ETPG which were released on the 23 of
October 2018 with the latest amendments being made in
December 2020.
The headline changes presented in the updated ETPG are the
three- tiered approach to TP documentation and the introduction
of the advance pricing agreement (“APA”) program.
The Egyptian Tax Authority has issued comprehensive
explanatory guidelines to provide clarity to taxpayers on specific
aspects of Transfer Pricing. These guidelines aim to clarify the
implications of Articles 12 and 13 within the Unified Tax
Procedure Law (UTPL) No. 206 and 211 of 2020.
The Three-tiered approach to Transfer
Pricing documentation
The updated ETPG introduced the three tiered approach to
Transfer Pricing documentation and it includes the mandatory
filing of namely, the master file, local file and the country by
country (“CbCR”) reporting. The ETA confirms that the new
documentation requirements shall be implemented for fiscal
years ending the 31 December 2018, and it shall be applied on
the consolidated reporting periods ( for financial statement
purposes) and not the taxable years or the financial reporting
periods of subsidiary entities.
The CbCR facilitates the reporting process for multinational
enterprises (“MNE”). The CbC report provides a template for
MNEs to report annually and for each jurisdiction the necessary
information relating to the MNE’s global allocation of income,
taxes paid, and other indicators regarding the economic activity
in order to assess the overall related party transactions taking
place between affiliated enterprises within the same group.
The threshold for the CbCR are set out in the ETPG as follows:
• Egyptian parented groups with a foreign subsidiary(s) with
an annual consolidated group revenue of equal or
exceeding Egyptian Pounds (“EGP”) 3 billion (145 million
Euro) will be required to prepare and file a report with the
ETA.
• Egyptian subsidiaries of foreign parented groups will be
subject to the OECD threshold of 750 million Euro and
required to file a report with the jurisdiction in which the
ultimate parent entity is resident and there is no secondary
submission requirements for the CbCR in Egypt in this
case.
• The ETPG confirms that the taxpayers are required to
prepare and submit their TP documentation on an annual
basis.
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Documentation filing deadlines
• The master file should be prepared in accordance to the
taxpayer group’s ultimate parent’s tax return filing date and
made available to the ETA in “due course”.
• The local file must be submitted to the ETA within two
months following the date of filing the tax return.
• The CbCR should generally be submitted one year
following the close of the relevant financial year that it
covers. The first CbCR should be prepared for the group’s
financial year ending December 2018.
• All CbCR notifications should be made no later than the
last day of the fiscal year to which the CbCR relates.
• Free zone entities are required to prepare and submit
CbCR notifications in case these entities are being
consolidated and included in the CbCR that will be
submitted by the ultimate parent entity. If a parent or a
holding company is located in a free zone area and is
transacting with other taxable entities outside the free
zone areas, the entities (located outside the free zone) are
obligated to prepare and submit Master File and it shall be
submitted alongside the Local File (within two months of
the submission of the CITR).
Non-compliance penalties
Effective 20th of October, 2020, taxpayers are subject to a
penalty of EGP 3k up to EGP 50k for non-compliance with the
TP three-tier filing requirements (Master file, Local file, and
CBCR). This penalty would be doubled or tripled in case of
recurrence. Additionally, non-disclosure of the related party
transactions within the annual corporate tax return is now
subject to a penalty of 1% of the value of the undisclosed
related party transactions.
Furthermore, the following penalties shall apply, effective 4th of
December 2020:
• 3% of the total value of the related party transactions in
case of not submitting the local file.
• 3% of the total value of the related party transactions in
case of not submitting the master file.
• 2% of the total value of the related party transactions in
case of not submitting the CbCR or the CbCR notification.
In case of multiple breaches to the above listed TP filing
requirements, the penalty shall not exceed 3% of the value of
the related party transactions.
Advance Pricing Agreement (“APA”)
The APA system provides Egyptian taxpayers with the benefit
of agreeing in advance with the ETA on the methods to be
followed by the taxpayer to determine arm’s length
arrangements acceptable for tax purposes when it comes to
related party transactions.
Such APA program should deliver benefits to the taxpayers
such as the certainty on TP methods, tax outcomes, increased
transparency and reduced risks of audit and penalties.
The APA program is introduced for the first time in Egypt and
accordingly, the ETA decided to restrict its application to the
unilateral APA(s) at this stage and to introduce the bilateral and
multilateral APA(s) in the future. In addition, the option to apply
for the APA is open to all the taxpayers subject to the
provisions of the law including the Permanent establishments
(“PE”).
The process of applying for and concluding the unilateral APA
may take between 3 to 6 months and this may vary according
to the case at hand. The stages of APA administration and
application process include:
• A written request for a pre-filling meeting by the taxpayer at
least 6 months before an APA is proposed to take effect,
including an information package containing information
prescribed by the ETA.
• Notification of consensus from the ETA following the
meeting followed by submission of an APA application form
• and accompanying documentation by the taxpayer.
• Review of the APA application and the documentation
package by the ETA.
• Evaluation and negotiation of the APA terms followed by
APA acceptance and signing (or declining the application)
• Annual filing of an APA compliance report by the taxpayer
within 2 months of the tax return filing.
As per the Final Transfer Pricing guidelines, the acceptable
methods are listed as follows:
• Comparable Uncontrolled Price Method;
• Cost plus Method;
• Resale Price Method;
• Profit Split Method; and
• Transactional Net Margin Method.
Following the updated guidelines, the hierarchy is no longer
applicable in applying the transfer pricing methods. In addition,
the updated ETPG allows taxpayers to use other methods in
the event that none of the listed methods can be applied on the
considered transactions.
However, the ETA expects the taxpayers to first maintain and
prepare sufficient documentation to explain the reason why
those methods cannot be reliably applied on the transaction.
Moreover, the updated ETPG includes a statement the ETA
considers the “Global Formulary apportionment” as the least
reliable method to be used in determining the arm’s length price
of the controlled transaction. And in any case, the comparability
analysis should be performed to select the appropriate transfer
pricing method.
Base Erosion and Profit Shifting (“BEPS”)
It is notable that Egypt joined the BEPS Project that was
launched by the member states of the OECD and the G20
countries. Such initiative aimed at stopping multinational
companies from evading taxes, and specifically targets
situations which may result in aggressive tax planning.
“Aligning the tax outcomes with value creation” is the main
objective of the BEPS project that it is aiming to achieve.
Egypt has signed the inclusive framework agreement with the
OECD; which entails the adoption of four minimum standard
actions as a necessity in a specific time-frame agreed upon with
the OECD.
The four minimum standard actions are as follows:
1. Harmful tax practices: This action focuses on the harmful
tax competition in light of the tax systems such as
preferential tax regimes as well as tax havens.
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Doing Business in Egypt – Tax and Legal Guide
Base Erosion and Profit Shifting (“BEPS”)...(cont’d)
1.
2. Treaty abuse: This action includes specific measures that
aim at combating the abuse of double tax treaties to avoid
taxation. This includes the Limitation of Benefits (“LoB”)
test which mainly limits benefiting from treaty provisions in
case the taxpayer failed to meet certain requirements
(such as substances, etc.); and the Principal Purpose Test
(“PPT”) which denies the treaty benefits if ‘one’ of the
principal purposes of such transaction/arrangement was to
avoid tax.
3. TP documentation: Transfer pricing is one of the main
issues that the BEPS project aimed to focus on. This
action has introduced a three tiered approach for proper
transfer pricing documentation; comprising the local file,
master file and the country by country reporting. Please
refer to the Transfer pricing section.
4. Dispute resolution: The main purpose of this action is to
introduce the mechanisms/procedures that would facilitate
the process of dispute resolution between taxpayers and
tax authorities, via adopting an exchange of information
mechanism that would help to interact with the relevant
authorities to gather information about taxpayers and to
determine the country which has the taxation rights under
certain transactions/structures.
Multilateral instrument (“MLI”)
The MLI has been put in place by the OECD as a mechanism
to apply the changes that resulted from the BEPS project into
actual application through updating the DTT network
automatically. This means that countries that sign the MLI will
adopt the changes that are made to the DTT articles without
having to re-negotiate those treaties. Its main purpose is to
apply the changes brought by the BEPS project into action on
a global level simultaneously so that international tax standards
would become gradually unified.
Egypt has signed the MLI on the 7th of June 2017; which has
been ratified and was effective as of 1st of January 2021.
Egypt has opted to apply the Principle Purpose Test (“PPT”),
accordingly, if the Egyptian Tax Authority views that the main
purpose of a specific arrangement/transaction or structure is
tax evasion, then treaty benefits would be denied.
General Anti Avoidance Rules (“GAAR”)
The GAAR is a tool to manage the risk of tax avoidance and
combat abusive tax arbitrage arrangements, and has been
introduced in Egypt in 2014, long time before becoming a
member of the BEPS project. It was mainly introduced to
strengthen the ETA’s anti-avoidance strategy and help it tackle
abusive tax avoidance schemes.
The primary objective of the GAAR is to deter taxpayers from
entering into abusive arrangements for the purpose of obtaining
a tax advantage without having proper business rationale or
substance in place; hence, similar to the PPT test that has been
introduced by the BEPS Project.
Under the GAAR rules, the ETA has the right to disregard a
transaction/structure, if its main purpose was revealed to get tax
advantage of tax treaty benefits.
In brief, the GloBE Rules have been designed with an objective
of accommodating a diverse range of tax systems, including
different tax consolidation rules, income allocation and entity
classification rules, as well as rules for specific business
structures such as joint ventures and minority interests.
The GloBE Rules contemplate three different mechanisms for
assessing tax on a MNE’s income, and MNEs will have to
comply with the filing requirements for each applicable rule. The
first opportunity to collect the top up tax is the so called
Qualified Domestic Minimum Top-up Tax (QDMTT) which gives
the choice for the low tax jurisdiction itself to collect the tax
(relating to this country). Second in line is the so called Income
Inclusion Rule (IIR), which generally imposes tax on the parent
entities within the MNE group to the extent that the foreign
subsidiaries of the Group are taxed at a rate less than 15%
(after the application of the QDMTT in their respective countries,
if any).
These two mechanisms are accompanied by a ‘backstop’ rule,
known as the Undertaxed Profits Rule (UTPR) which permits
the collection of any remaining Top-up Tax (after QDMTT and
IIR are applied) globally by any country where the MNE is
active, meaning where there are people and/or tangible assets
on the ground. Under certain conditions, the QDMTT could be
elevated to a safe harbour that switches off the IIR and UTPR in
other jurisdictions.
Status of Pillar Two in Egypt
As a member of the OECD Inclusive Framework, Egypt has
committed to implement Pillar Two. However, no official
announcement has yet been made on how and when Egypt will
be implementing Pillar Two.
What to expect?
Whilst Egypt levies corporate income tax at a rate of 22.5%,
there is currently no visibility as to how the Pillar Two rules are
expected to interact with the domestic tax rules in Egypt and
further details should be expected in the near future once Egypt
makes an official announcement on its implementation plan.
However, even if the rules will not be implemented in Egypt in
2024, Egypt headquartered MNEs with consolidated
subsidiaries in at least one implementing jurisdiction, may still
be required to undertake the GloBE calculations for all the
jurisdictions and may have specific compliance requirements.
Further guidance is expected from the OECD with respect to
filing obligations / location of submission of the GloBE
Information Return (GIR), in cases where the ultimate parent
entity jurisdiction such as Egypt does not implement the rules in
2024.
As per the existing Pillar Two administrative guidance, where a
MNE is headquartered in a location that has not implemented
the rules, GIR filing would be made in a different location, i.e.
the location of a ‘designated filing entity’, where the MNE has
operations and the respective location has implemented the
rules earlier than the MNE’s headquarter location.
Pillar Two
Background
On 1 July 2021 and 8 October 2021, the Organisation for
Economic Cooperation and Development (OECD)
Inclusive Framework (IF) issued a ‘Statement’ focused on
addressing the remaining key challenges of base erosion
and profit shifting (BEPS) arising from the digitalization of
the global economy.
The Statement proposed a ‘Two Pillar’ Solution, comprised
of (i) Pillar One which aims to ensure a fairer distribution of
taxing rights is established with respect to the profits of
large multinational enterprises (MNEs); and (ii) Pillar Two
which implements a new global minimum Effective Tax
Rate (ETR) of 15% for MNEs.
Pillar Two
Pillar Two aims to ensure an appropriate level of tax is paid
by MNEs through a series of measures aimed at
modernising the international tax system for modern
businesses. The Subject to Tax Rule (STTR) and the
Global Anti-Base Erosion (GloBE) are the two components
of Pillar Two.
STTR
The STTR is a treaty based rule that applicable to
intra-group payments from source countries that are
subject to low nominal tax rates in the country of the
payee. The STTR focuses on where a source country has
given up taxing rights on certain outbound intra-group
payments, and it should be able to recover some of those
rights where the income in question is taxed in the state of
the payee at a nominal rate below 9%. The STTR applies
to interest, royalties and a defined set of other payments
made between ‘connected persons’, including services.
The OECD IF members have committed to adopt the
STTR when requested by other IF members that are
developing countries, as well as developed countries. In
October 2023, the OECD IF issued a multilateral
instrument (“MLI”) that brings into effect the STTR by
allowing for multiple bilateral tax treaties to be amended at
the same time. Signature of the MLI is underway and
applicability of the STTR expected to be commence in the
near future.
GloBE
The GloBE Rules are designed to ensure that in-scope
MNE Groups are subject to a minimum level of tax on the
income arising in each jurisdiction where they operate.
Over 140 countries have committed to implementing the
GloBE measures, and for the rules to have effect,
individual jurisdictions must implement them into domestic
law.
The GloBE Rules require implementation into domestic law
by individual countries before they become effective. The
rules came into effect on 1 January 2024, and over 30
countries have introduced tax rules that put into force a
15% effective tax rate on in scope entities, as well as over
100 being expected to also introduce rules that will come
into effect in 2024 or 2025.
Doing Business in the Egypt – Tax and Legal Guide
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Alignment with IFRS
EAS has made significant progress in aligning with IFRS,
particularly with the recent amendments.
Amendments worth mentioning, include Egyptian Accounting
Standard No. (10) for fixed assets and Egyptian Accounting
Standard No. (23) for intangible assets. These amendments,
reissued in 2023, allowing for the use of the revaluation model in
subsequent measurements of fixed assets and intangible assets.
Furthermore, amendments related to the use of fair value in
investment property standards have been introduced, bringing
EAS closer to IFRS standards.
It is important to note that there are certain updates in IFRS that
have not yet been adopted by EAS.
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Doing Business in Egypt – Tax and Legal Guide
Audit and Financial Reporting Guidelines
Auditor Appointment
During the incorporation process, it is mandatory for a company
to state the name of the auditor who will perform the audit in its
Article of Association. Certain types of businesses, including
banks and insurance companies, are required to have two
auditors mentioned in their Articles of Association.
An auditor registered in the Registry of Accountants & Auditors
(RAA) must be appointed by the general assembly of
shareholders
Financial Year:
Financial statements and tax returns should typically be
prepared annually for each financial year, which is usually a
12-month period. However, if a company is incorporated more
than 7 days after the start of its financial year, it is allowed to
have an extended financial year of up to 23 months. This
provision allows flexibility for companies that are incorporated
outside the usual financial year timeframe.
Filing Accounts:
Filing accounts must be prepared in accordance with the
Egyptian Accounting Standards and submitted to the following
authorities: the Egyptian Stock Market (mandatory for banks),
the General Authority for Investment and Free Zones (GAFI),
and the tax authority.
(There are no filing fees associated with these submissions)
Additionally, certain businesses, such as banks, are obligated
to publish their annual financial statements in two national
newspapers. These statements should be prepared in
accordance with the Egyptian Accounting Principles. However,
International Financial Accounting & Reporting Standards may
be used for internal management purposes only.
Legal Books
To comply with the legal requirements, it is essential to
maintain local books and records in handwritten Arabic.
Electronic recording of the books and registers is also
permitted.It is important to keep supporting documentation for
all entries
Statute of Limitations:
The Egyptian Tax Law has stipulated a statute of limitation for a
period of five years. In case no assessment takes place within
the five years period, the Company’s self-assessment is
considered the final one (i.e. the corporate tax return).
Statutory financial statements :
Statutory financial statements in accordance with the Egyptian
Accounting Standards (EAS) must be issued at least once a
year.
Key considerations
• In Egypt, companies are generally liable to corporate income tax
(“CIT”) at a flat rate of 22.5%
• Taxpayers should submit their tax returns electronically through
self-assessment. An e-invoicing system came into effect as of
April 1, 2023 .
• In Egypt, there are different aspects that should be considered to
determine the PE status. Residency position is determined based
on several criteria that should be taken into consideration.
• Generally, PIT is withheld on payments made to Egyptians and
foreign nationals against work performed in Egypt and it is taxed
at progressive tax brackets .
• Businesses that reach the threshold (i.e. EGP 500K) are
obligated to register on the Egyptian VAT system. VAT is charged
at a 14% rate (exemptions apply) and, it is reported on a
self-assessment basis. A simplified vendor registration system
and reverse charge mechanism are in place in Egypt.
• Customs duty, stamp tax, and real estate tax are all levied in
Egypt subject to different mechanisms and separate conditions .
• Disclosure requirements are in place for related party
transactions and a three-tiered approach to transfer pricing
documentation must be complied with.
• New amendments on the Egyptian Income Tax Law are
introduced in law no.30 amending some provisions of the tax law.
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Doing Business in Egypt – Tax and Legal Guide
Additional legal considerations
Employment law
Employment contract
Employment contracts are required to be in writing, with three
copies maintained in Arabic. The employer, employee and
social insurance office each keep one copy of the employment
contract, which must include certain information as specified in
the Labour Law.
The labour contract should include the following contents:
• Name of the company and the employer “himself or the
representative” and the address of the workplace.
• Name and personal details of the employee (name,
address, date of birth, place of birth, ID, qualifications).
• Compensation (salary, bonuses, annual raises, benefits).
• Duration of the contract and its renewal regulations.
• Working hours, days off, leave.
• Confidentiality agreements and code of ethics, if any.
• Regulation for termination of the contract.
Annual leave
An employee is entitled to a minimum annual paid leave of 21
days for every full year of service and a proportional amount if
the period of service is less than one year (eligible to be used
after 6 months of employment). This annual leave is increased
to 30 days after the employee has worked for10 consecutive
years or is over 50 years old.
Public leave
In addition, every employee is entitled to full pay for official
holidays designated by the Ministry of Manpower and
Immigration, not to exceed 14 days a year.
If employees are required to work during official holidays, the
employees are entitled to overtime (Paid at twice their normal
rate). The weekly days off and the official holidays shall not be
counted as part of the annual leave.
The employer is not entitled to terminate the employee’s
service due to sickness, unless the employee is absent due to
sickness for more than 180 days in a year. After the employee
utilizes all his entitled sick leave, a governmental medical
committee should evaluate the employee’s ability to work. The
committee takes the final decision related to the employee’s
ability to work or not.
Performing pilgrimage or visiting Jerusalem
Regarding religious respects, the Labour Law stated that an
employee who has spent five consecutive years in the service
have the right to full paid leave for a period not exceeding one
month for performing pilgrimage or to visit Jerusalem and such
a leave shall be enjoyed only once during the entire period of
service.
Maternity and child care leave
A female having spent 10 months in the service of an employer
or more shall be entitled to a maternity leave of 90 days with full
wage payment including the period preceding giving birth. The
female employee is not entitled to this maternity leave for more
than twice during her working period.
During the 24 months following the date of child birth, she has
the right to be excused from work for one hour daily for feeding
her child.
Probation period
If an employee is hired on probation, the employment contract
should indicate the probationary period, which cannot exceed
three months. Neither shall an employee be appointed under
probation more than once for the same employer.
Types of employment contract
1. An indefinite employment contract is a contract which is
not restricted to a limited period and does not have an
expiration date (i.e. only includes the starting date). If the
period of a definite employment contract expires and the
company does not renew or terminate it before its end
date, the contract is automatically becomes an indefinite
contract (with no end date). This applies to Egyptian
employees.
2. A definite employment contract is a contract which is
issued for a definite period of time, has a start and an end
date and will be terminated with the expiry of its period,
although it may be renewed by express agreement
between the two parties for one or more other periods
through a new definite period contract according to Article
No.106 from the Labour Law No.12 for year 2003.
Working hours
As per the Labour Law, employees should not work more than
eight hours a day or 48 hours over a six day working week.
It is common practice that private sector employees work 5
days a week, usually Sunday to Thursday. The number of
working hours may be increased to 9 hours a day including a
one hour break.
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Doing Business in Egypt – Tax and Legal Guide
Benefits/ Rights
The social security system
On 1st of Jan 2020, a consolidated pension and social
insurance law (Law no. 148 for year 2019) have been applied
to workers in Egypt’s private and public sectors, executive
regulations will provide further details on implementation of the
law.
Contributions are required at the following rates:
Employee contributions
• The employee contribution percentage is 11% of the total
social insurance salary.
• The subscription wage in 2024 has been determined with
a minimum of EGP 2,000 and maximum limit of EGP
12,600.
Overtime pay
The minimum overtime premiums are 35 percent of normal pay
for overtime worked during daylight, 70 percent for that worked
at night, and 100 percent on weekends and 200 percent on
official holidays.
Bonuses
There is no obligation to pay annual bonuses.
Minimum wage
As of 1 January 2024, the minimum wage is 3,500 EGP per
month.
Recruitment resources
There are two key types of labour available for recruitment:
• Readily available number of new graduates who are
looking for new jobs.
• A number of employees who wish to leave their original
employers looking for better advantages and benefits.
Usually foreign companies use professional firms to undertake
a market survey and guide the employer on how to ensure
competitive advantage among competitors recruiting in the
same field.
Other commonly used methods for recruitment are as follows:
• Web advertisement
• Selecting resumes though professional sites
• Using external recruitment agencies
• Internal referrals.
Unions
There are professional syndicate unions representing the labour
rights in the private sector to bargain with the government in
different areas, for example:
• Annual salary increase
• Special salary increase
• Minimum level of wages
• The labour disputes between employers and employees.
Termination of employment
During probation period
The probation period should not exceed three months and
neither shall an employee appointed under probation more
than once.
In case the employee proves unsuitable for the job during the
allotted period. This allows the employer to cancel the contract
during the period.
Employer contributions
The employer contribution percentage is 18.75% of the total
social insurance salary.
In addition to the above, any managers/board of directors
whose names are included in the commercial register of the
company will be socially insured as employers and would be
subject to social insurance at a flat rate of 21% of the total
maximum wage (i.e. EGP 12,600 in 2024).
Contractual social security system
This system applies to all companies which by nature are most
likely using seasonal and temporary workers who are usually
not socially insured in carrying out certain assignments.
Those workers are to be registered under the competent
contractual social insurance office, in which the company is
responsible for paying the percentage applicable to the given
assignment to the concerned social insurance office.
Annual increment
Employees are entitled to a periodical annual increment of not
less than (3%) of the employee’s social insurance salary, in
which the calculated minimum mandatory increase should not
be less than EGP 60.
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Doing Business in Egypt – Tax and Legal Guide
Dismissal under “Definite” contract
The employer has the right to terminate the employment
contract upon its expiry without any indemnity to be paid to the
employee. In the event of dismissing the employee within the
period of the contract, the employee will be entitled to
compensation equal to the equivalent salary of the remaining
period of his/her signed contract.
To illustrate, if the contract is issued for one year and the
employer decides to terminate the hiring after 8 months, he has
to pay the remaining 4 months’ salary in the contract.
Dismissal under “Indefinite” employment contract
Any of the two parties may terminate the contract at any time
in case the contract is indefinite, taking into consideration,
proper notice time, proper working conditions, stating reasons
whether on the employer’s or employee’s behalf.
The employer may not dismiss the worker unless due to
reasons as stated in the provisions of the Article No. 69 of the
Labour Law.
An employee is entitled to 60 days’ notice period for dismissal
if his period of service does not exceed 10 years, and 90 days’
notice period if that period exceeds 10 years. (Should the
employer desire to dismiss the employee without giving him the
relative notice period, the employee shall receive two or three
month’s salary payment instead of such notice).
Court decisions have tended to award payments of not less
than the wage of two months’ salary for each year of
employment for unjustified dismissal.
Legal obligations
There are other legal obligations to consider, including the
legal annual increase and profit share. Under the profit share,
employees of a Joint Stock Company, Limited Liability
Company, or Foreign Branch are entitled to a share in the
distributable profits. The share is fixed at an amount not less
than 10% of distributable profits and not more than the total
annual salaries of the employees.
However, Limited Liability Companies with capital less than
EGP 250,000 are not subject to this distribution of profit share.
Customary benefits
Customary benefits that can be paid to employees and varies
from one company to another include the following:
• Bonus or performance pay
• Allowances
• Profit share
• Private medical insurance
• Tuition reimbursement
• Fellowship fund
• Stock Options.
Foreign employees
As a general rule, any foreign employee working in Egypt
whether for a long or short term should obtain a work permit. An
Egyptian legal entity must sponsor the foreign employee and
respect the ratio prescribed by law which is 10 Egyptian
employees for every foreign employee.
The foreigner’s qualification and expertise must be adequate for
the position and must have an experience certificate for the
latest 3 (three) years in the same profession.
There should be a real need of the foreign expertise in the
Egyptian market.
Two Egyptian assistants must be hired for each foreign
employee.
Work residency for board members of a joint stock
company and managers of a limited liability company
A. Work Residency for the Board Members of a Joint
Stock Company (JSC):
Under the companies’ law No. 159 of year 1981, the board of
directors of a JSC should either have a percentage in the
shares of the company or be a representative of one of the
shareholders of the company. Moreover, the following capital
should be paid in the bank account as follows:
• For the appointment of a foreign board member, the capital
should be USD 35,000;
• For the appointment of 3 (three) foreign board members, the
capital should be USD 50,000; and
• For the appointment of 6 (six) foreign board members, the
capital should be USD 100,000.
B. Work Residency for the managers in the
commercial register of a Limited Liability company
(LLC):
Under the companies’ law No. 159 of year 1981, a work
residency of the managers of an LLC mentioned in its
commercial register is issued when the following capital is
deposited in a bank account in Egypt:
• For the appointment of a foreign manager, the capital
should be USD 35,000;
• For the appointment of 3 (three) foreign managers, the
capital should be USD 50,000; and
• For the appointment of 6 (six) foreign managers, the capital
should be USD 100,000 or more.
The board members in a JSC and managers in an LLC are not
included within the quota as the above-mentioned requirements
must be adhered to issue their work residency.
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Doing Business in Egypt – Tax and Legal Guide
Introduction of the Health Insurance System in Egypt
The new healthcare system is being implemented over six
phases.
The health insurance system is financed through several
sources and among them are the following:
• A contribution of 0.25% of total annual revenues to be paid
by all entities and such contribution cannot be deducted as
an expense for corporate income tax purposes.
• EGP 0.75 of the value of each pack of cigarettes sold
(local/foreign) and such value shall be increased every
three years until it reaches EGP 1.50.
• 10% of the value of each unit sold from tobacco cut-filler
products (other than cigarettes).
• Fees, ranging between EGP 1,000 and EGP 15,000, paid
by hospitals, medical clinics, treatment centers,
pharmacies and pharmaceutical companies to subscribe
to the new health insurance system.
• Individuals who wish to benefit from the health insurance
system are required to pay a subscription fee, depending
on the category they fall in, as detailed below:
• The employer will pay a subscription of 4% of the
employee’s total comprehensive salary (regardless of the
maximum ceiling of the social insurance salary) and the
employee will pay a 1% of that portion to reach a total of
5%.
• The employee will pay a subscription of 3% of the above-
mentioned total comprehensive salary to insure his wife in
case of her unemployment (or no stable fixed income).
• Business owners or self-employed professionals or
Egyptians working abroad will pay a subscription of 5% of
the portion of salary/ wage subject to social insurance or of
their income reported in the income tax return, whichever is
greater.
• The foreign expats residing in Egypt may also be allowed
to subscribe in the new health insurance system, according
to certain conditions and in case there is a reciprocal
treatment with their home country.
The above mentioned subscription fees will only be paid when
the new health insurance system is applied in the relevant
governorate (i.e. for example, no fees should be paid by Cairo
citizens/individuals until the last phase of implementation of the
system). The party collecting such subscription fees will be
required to submit them within 30 days from the date of
collection.
Any non-compliance with the new health insurance system may
result in financial or imprisonment penalties.
Key considerations
• As a general rule, any foreign employee working in Egypt whether
for a long or short term should obtain a work permit and certain
conditions must be met.
• Employees have the right to enjoy several benefits which include
but are not limited to social security, minimum wage, unions etc.
• There are prerequisite legal obligations on the employer where
foreign individuals are employed in Egypt.
• A new healthcare system has been introduced in Egypt over six
phases that local entities should comply with .
• New amendments on the Egyptian Income Tax Law are
introduced in law no.30 amending some provisions of the tax
law.Those amendments affected the PE definition, CGT,
Dividends as well as the PIT.
• The offshore WHT rates may be reduced under the relevant DTT
between Egypt and the concerned country (provided that certain
conditions are met (e.g. the beneficial ownership requirements to
be met).
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Doing Business in Egypt – Tax and Legal Guide
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Doing Business in Egypt – Tax and Legal Guide
Key Tax Indicators in Egypt
* Not tax resident in Egypt and no permanent establishment in the Egypt.
Tax indicators Resident Non-resident *
Fiscal year end Calendar year Calendar year
Companies
Income tax General tax rate is 22.5%. For companies
engaged in exploration and production of oil
and gas, the tax rate is 40.55%.
Not applicable, unless the foreign
company has a permanent
establishment in Egypt (refer to
comments opposite).
Tax on capital gains Generally, 10% if shares are listed on the Egyptian
stock exchange.
For the unlisted shares, the capital gains are subject
to 22.5% tax.
Generally, non-resident are exempt from
CGT on gains realised from the sale of
listed shares on the Egyptian stock
exchange.
For the unlisted shares, the gains are taxed
at 22.5%.
Value added tax A standard rate of 14% is applied to all goods and
services, except for machinery and equipment,
VAT that is due on such machinery would be put
on hold for one year from the importation date
and such machinery and equipment may be
exempt from VAT in case it has been proved that
they are only used for the industrial production
activities.
Every non resident and unregistered person
who does not practice an activity through a
PE in Egypt and sell goods or provide
services to a person who is not registered
inside the country, is obliged to apply for
registration under the simplified vendor
registration system.
Individuals
Individual marginal tax rate
(max)
Progressive rates of up to 27.5%. Progressive rates of up to 27.5%.
Basis of taxation Worldwide income Egyptian-source income only
Withholding tax
Dividends 10% from unlisted shares
5% from listed shares
10% from unlisted shares
5% from listed shares
Interest Not Applicable 20%.
Royalties Not Applicable 20%
Management service fees 3% local WHT (advance payments for CIT purposes) 20%
Customs
Goods : 0% to 60% depending on the specific nature of the goods. Tobacco products are
subject to specific customs duties based on the quantity/ weight.
Exchange controls
Theoretically, there are no foreign exchange controls in Egypt. In practice there may be
constraints on cash and cheque deposits in other currency. Due to the current circumstances, this
should be further confirmed with the relevant bank.
Thin capitalisation
A 4:1 debt to equity ratio applies for the year 2023, for the years 2024-2027: The debt-to-equity
ratio will be 3:1, Lastly, 2028 and 2:1 onwards. Any interest on debt exceeding this ratio will be
disallowed in addition to other conditions that would be met.
Transfer pricing
Related party transactions must be carried out at arm’s length terms and conditions.
Double tax treaties
Albania, Algeria, Austria, Bahrain, Belarus, Belgium, Bulgaria, Canada, China, Cyprus,
Czech Republic, Denmark, Ethiopia, Finland, France, Georgia, Germany, Greece,
Hungary, India, Indonesia, Iraq, Ireland, Italy, Japan, Jordan, Korea, Kuwait, Lebanon,
Libya, Macedonia, Malaysia, Malta, Mauritius, Morocco, Netherlands, Norway, Oman,
Pakistan, Palestinian Territories, Poland, Romania, Russia, Saudi Arabia, Serbia &
Montenegro, Singapore, South Africa, Spain, Sudan, Sweden, Switzerland, Syria, Tunisia,
Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uzbekistan and
Yemen.
Treaties awaiting
conclusion or ratification
Armenia, Croatia, Mongolia, Slovakia, Slovenia, Thailand, Vietnam.
31
Doing Business in Egypt – Tax and Legal GuideDoing Business in Egypt – Tax and Legal Guide
Established in the region more than 40 years, PwC has more than 7,500 people in 12 countries across the region:
Bahrain, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, the Palestinian territories, Qatar, Saudi Arabia and the
United Arab Emirates.
About PwC Middle East
10,800+
people
including 450
partners, in 12
countries
The largest
professional
services firm in
the
Middle
East
Supporting clients
in the region for
over 40
years
5
Doing Business in Egypt – Tax and Legal Guide
32
Jochem Rossel
Middle East Tax & Legal Services Leader
Mobile: +971 (0) 50 225 6909
Email: [email protected]
Contacts
Taking this #journeywithyou
Sherif Shawki, Cairo
Egypt Tax Leader
Mobile: +201210696969
Email: [email protected]
Doing Business in Egypt – Tax and Legal Guide
Ashraf Ahmed, Cairo
Financial Accounting and Administrative Services
Partner
Mobile : +201001850057
Email: [email protected]
Maged Ezzeldeen, Cairo
Country Senior Partner | Deals Leader Mobile:
+20122 3421 386
Email: [email protected]
Ahmed Osama, Cairo
Indirect Tax Services Partner Mobile:
+201001580884
Email: [email protected]
Nesreen Maher, Cairo
Tax Compliance Services Partner Mobile:
+201007100257
Email: [email protected]
Ahmed Ali, Cairo
Tax Compliance Services Partner
Mobile: +201001410161
Email: [email protected]
Hany ElGamal, Cairo
Tax Partner
Mobile: +201006066799
Email:hany[email protected]
32
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