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Cairo Egypt
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Heba Wadie
Karim Emam
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Karim Emam
Tax Policy and Controversy
Ahmed El Sayed
Ahmed Abo El Fotouh
Hossam Nasr
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Ahmed Abo El Fotouh
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Ahmed El Sayed
Ahmed Abo El Fotouh
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of Tax Law No. 91 of 2005, ranging from 0% to 27.5%. These gains should be declared in the individual’s income tax return (for non-commercial professions and real estate wealth), which is filed within three months from the financial year-end.
• The capital gains realized by corporations will be part of their normal annual corporate income tax return, which is filed within four months from the financial year-end.
Capital losses resulting from the sale of securities can be offset against the amount of capital gains realized from the sale of securities during the same tax year. If the realized capital losses exceed the realized capital gains during the tax year, it is permissible to carry forward the excess losses from the sale of securities in subsequent years, up to the third year.
From the sale of securities by nonresidents. The following rates apply to capital gains derived from the sale of securities by nonresidents:
• Capital gains realized from the disposal of unlisted shares by nonresident corporations are subject to a 22.5% tax.
• Capital gains realized from the disposal of unlisted shares by nonresident individuals are subject to the tax brackets in Article 8 of Tax Law No. 91 of 2005, ranging from 0% to 27.5%.
• Capital gains realized from the disposal of listed shares or from the disposal of Treasury bills by nonresident individuals and corporations are exempt from tax.
The capital gains tax should be paid and filed using the designated form and submitted to the Egyptian Tax Authority (ETA) within 60 days from the transaction date.
From the sale of other assets by residents. Tax on capital gains on other assets is calculated at the ordinary corporate profits tax rates in the same manner as ordinary business profits and is not calculated separately.
Administration. Companies must file their annual tax returns, together with all supporting schedules by 30 April of each year, or four months after the end of the financial year. The tax return must be signed (electronically) by the taxpayer. Taxpayers can file a request for an extension of the due date for filing the tax return if the estimated amount of tax is paid at the time of the request. A request for an extension must be filed at least 15 days before the due date. An extension of up to 60 days may be granted. An amended tax return can be filed during the year following the due date set for submitting the annual return, unless the taxpayer has evaded tax or received an inspection notification. If the amended return reflects lower tax due than the original return, the ETA should review the amended return and approve the refund within six months from the date of application.
Any tax due must be paid when the tax return is filed.
A late penalty is imposed at a rate of 2% plus the credit and discount rate set by the Central Bank of Egypt in January of each year.
A penalty of EGP3,000 up to EGP50,000 is imposed for noncompliance with the deadline for submitting the annual corporate income tax return for a period not exceeding 60 days from the due date for the tax return.
Foreign tax relief. Foreign tax paid by resident entities outside Egypt can be deducted if supporting documents are available.
Treaties entered into between Egypt and other countries provide a credit for taxes paid abroad on income subject to corporate income tax in Egypt.
C. Determination of taxable income
General. Corporate income tax is based on taxable profits computed in accordance with generally accepted accounting principles, modified for tax purposes by certain statutory provisions primarily concerning depreciation, provisions, inventory valuation, intercompany transactions and expenses. Interest on bonds listed on the Egyptian stock exchange is exempt from tax if certain conditions are satisfied.
Taxable profits are based on actual revenues and costs. Consequently, unrealized revenues and costs are not included in the tax base.
Startup and formation expenses may be deducted in the first year.
The deductibility of a branch’s share of head office overhead expenses is limited to 10% of the taxable net profit. The expenses charged within the limits of this percentage may not include any royalties, interest, commissions or direct remuneration, and a certificate from the head office’s auditor, duly endorsed and authenticated, must be submitted. Head-office expenses are fully deductible if they are directly incurred by the branch and are necessary for the performance of the branch’s activity in Egypt. Such expenses must be supported by original documents and approved by the head office auditors.
Interest paid on loans and overdrafts with respect to a company’s activities is deductible after offsetting interest income. Interest paid to individuals who are not subject to tax or exempt from tax is not deductible. Deductible interest is limited to the interest computed at a rate equal to twice the discount rate determined by the Central Bank of Egypt.
Inventories. Inventory is normally valued for tax purposes at the lower of cost or market value. Cost is defined as purchase price plus direct and indirect production costs. Inventory reserves are not permissible deductions for tax purposes. For accounting purposes, companies may elect to use any acceptable method of inventory valuation, such as first-in, first-out (FIFO) or average cost. The method should be applied consistently, and if the method is changed, the reasons for such change should be stated.
Provisions. Provisions are not deductible except for the following:
• Provision for up to 80% of loans made by banks, which is required by the Central Bank of Egypt
• Insurance companies’ provision determined under Law No. 10 of 1981
Bad debts are deductible if the company provides a report from an external auditor certifying the following:
• The company is maintaining regular accounting records.
• The debt is related to the company’s activity.
• The debt appears in the company’s records.
• The company has taken the necessary action to collect the debt.
• Master File: The Master File must be prepared at the ultimate parent level of the group and must be made available to the ETA based on the parent entity’s tax return filing date in its home jurisdiction.
• Country-by-Country Report (CbCR): An Egyptian parent company of a multinational group with consolidated group revenue of at least EGP3 billion (EUR90 million) must file a CbCR in Egypt. The submission deadline is 12 months from the end of the reporting fiscal year. A constituent entity of a multinational enterprise group that is a tax resident in Egypt and has annual consolidated group revenue of EUR750 million or more must notify the ETA. This notification should clarify whether it is the ultimate parent entity. All notifications must be submitted no later than the last day of the fiscal year to which the CbCR relates.
The APA program is designed to enable taxpayers and the ETA to agree on the proper treatment of the transfer pricing of potential controlled transaction(s) in which the taxpayer will engage for a specific period (typically more than one year) under certain terms and conditions. The APA program is intended to provide a cooperative process to resolve potential transfer-pricing disputes in advance.
The new guidelines provide the APA framework and other details regarding the APA program in Egypt.
On 19 October 2020, Law No. 206 of 2020 was published in the Official Gazette. The law stipulates specific transfer-pricing penalties for noncompliance, thereby completing the transferpricing legislative framework. The penalty imposed by the Unified Tax Procedures Law is 1% of the total value of the related-party transactions that are not declared in the taxpayer’s corporate income tax return. In addition, the law introduced a filing threshold for master and local files. Under the law, a taxpayer must prepare and submit the Master File and the Local File if its aggregate related-party transactions exceed EGP8 million for the year. However, as per the Ministerial Decree No. 52 that was issued on 21 February 2024, the minimum threshold has been amended. The new requirement for filing the Master File and the Local File is now an aggregate of EGP15 million in related-party transactions, instead of the previous EGP8 million.
Law No. 211 of 2020, which was published on 3 December 2020, amended some provisions of Law No. 206, introducing stricter penalties for noncompliance relating to transfer-pricing documentation. The following are the penalties:
• Failure to declare the accurate value of related-party transactions (Table 508) for corporate income tax returns due to be filed on or after 20 October 2020: 1% of the total value of the taxpayer’s undeclared related-party transactions (local and cross-border transactions) during the fiscal year
• Failure to submit a Master File or Local File on time: 3% of the total value of the taxpayer’s related-party transactions (local and cross-border transactions) during the fiscal year
• Failure to submit a CbCR (if the taxpayer is the ultimate parent entity of a multinational group) or notification (if the taxpayer is the constituent entity) on time: 2% of the total value of the
(a) The rates depend on various conditions.
(b) The treaty with Yugoslavia applies to the republics that formerly comprised Yugoslavia.
(c) The 15% rate applies if the beneficial owner holds at least 25% of shares throughout a 365-day period that includes the day of the dividend payment. This is in accordance with the MLI because both Belgium and Egypt have approved the amendment. The 20% rate applies in in all other cases.
(d) The 5% rate applies if the beneficial owner holds at least 20% of shares throughout a 365-day period that includes the day of the dividend payment. The 10% rate applies in all other cases.
(e) The 5% rate applies if the beneficial owner holds at least 25% of shares throughout a 365-day period that includes the day of the dividend payment. The 10% rate applies in all other cases.
(f) The 0% rate applies if the beneficial owner holds at least 25% of shares throughout a 365-day period that includes the day of the dividend payment. For other dividends, the domestic withholding tax rates should apply.
(g) The 5% rate applies if the beneficial owner holds at least 25% of shares throughout a 365-day period that includes the day of the dividend payment. The 15% rate applies in all other cases.
(h) The 5% rate applies if the beneficial owner holds at least 10% of shares throughout a 365-day period that includes the day of the dividend payment. The 10% rate applies in all other cases.
Egypt has signed a double tax treaty with Qatar, but it is not yet effective.