Egyptian legal and accounting and tax considerations in 2023
Since 2003, Healy Consultants Group PLC assists our Clients with the accurate, complete and timely compliance of their annual Egyptian legal, accounting and tax obligations.
Tax ratesResident companies are taxed on worldwide income. Non-resident corporations and partnerships pay tax on income derived through their permanent establishments (PEs) in Egypt.
Activity / Entity type Resident company Non-resident company Partnership Representative office Oil & gas company Corporate tax rate 22.5% 22.5% N/A * N/A 40.55% Subject to withholding tax on interest remitted out of Egypt? No Yes Yes N/A Yes Withholding tax (WHT) rate N/A 20% 20% N/A 20% WHT rate on dividends 5% or 10% 10% 10% N/A 10% WHT on short term loans (less than a three-year term) 20% 20% 20% N/A 20% WHT (interest on loans with more than a three-year term) N/A N/A N/A N/A N/A WHT on royalties 20% 20% 20% N/A 20% Interest income taxable rate 22.5% 22.5% 22.5% N/A 22.5% Royalties income taxable rate 22.5% 22.5% 22.5% N/A 22.5% Monthly social security contribution rate 18.75% 18.75% 18.75% N/A 18.75% Capital gains tax rate (CGT) for gains on sales of unlisted shares/securities) 22.5% N/A 22.5% N/A 22.5% CGT for gains from the sale of listed shares 10% N/A 10% N/A 10% VAT rate (standard) 14% 14% 14% N/A 14%
* In the Partnership structure, the profit of a business earned directly through partners and declared through their personal income tax returns
Value Added Tax (VAT)
- VAT in Egypt applies to all goods and services, except for machinery and equipment used to produce a commodity or render a service. In this case, the rate is 5%.
- Every Egyptian company must submit monthly electronic VAT returns.
Filing due dates (corporate income tax)
Mode of Filing Filing Deadline e-Filing Four months from the end of the company’s financial year Paper Filing Four months from the end of the company’s financial year
Consequences of late / non-filing of tax returnsFor late filing of i) corporate income tax ii) payroll tax iii) value added tax (VAT) and iv) state development tax, a penalty of between EGP 3,000 (US$191) and EGP 50,000 (US$3178) is imposed. For recurring delays, the penalty may be doubled or tripled.
Tax exemptions and rebatesEgypt has a network of Double Tax Treaties (DTTs) with over 50 countries, including Canada, China, India, Korea, Norway, Singapore, South Africa, UAE, the United Kingdom and United States. These treaties help reduce withholding tax suffered by companies in Egypt on their overseas income.
Egypt tax relief and business grant schemesEgypt offers no tax incentives, except for free zone entities, which follow a Special Economic Zones law.
Tax reporting, accounting and auditing considerations
- Egyptian companies follow generally accepted accounting principles (GAAP).
- The World Bank ranks Egypt low for the ease of paying taxes. It states that, on average annually i) paying taxes in Egypt takes 370 hours and ii) 27 payments are required. Consequently, meeting statutory obligations in Egypt is stressful and time-consuming.
- Tax returns must be filed annually with the Egyptian Tax Authority (ETA).
- Tax on employment income is required to be filed quarterly by employers in January, April, July and October.
- According to Egyptian Income Tax Law, the statute of limitations is five years and can be extended to six years in the case of tax evasion.
- Healy Consultants Group PLC’s Compliance Department assists our Clients to efficiently and completely discharge the annual accounting and auditing obligations of their Egyptian company through the following: i) documenting and implementing accounting procedures ii) implementing financial accounting software iii) preparation of financial accounting records and iv) preparing forecasts, budgets and sensitivity analysis to better manage financial obligations and ease the process of reporting to the Egyptian accounting authorities.
Monthly bookkeeping serviceHealy Consultants Group PLC will be happy to provide a monthly bookkeeping service for your Egyptian company. Typically, our Accounting & Tax Department (ATD) team will receive a Dropbox of data from our Client and will immediately thereafter timely supply our Client with i) a general ledger ii) trial balance iii) monthly and quarterly management accounts and iv) monthly and quarterly government reporting, including sales tax and payroll.
For further details of our bookkeeping services and our fees, visit this page.
Maintaining accounting, secretarial and corporate structure data
- An Egyptian entity should maintain proper books of accounts and also record all invoices and receipts for their company expenses and income. The ETA can (and does) review company records from time to time. Examples of receipts include those related to business purchases, for example i) assets ii) general business and iii) travel expenses.
- Egyptian entities should also maintain the secretarial records such as board resolutions and meeting minutes of all the important management decisions taken by the Directors.
- Under Egypt’s legal system for business, information related to the corporate structure, such as shareholders, directors, shares and secretaries, is centralised by the General Authority for Investment and Free Zones (GAFI). Any change in corporate structure must immediately be notified to the company secretary, to update GAFI records.
Legal and compliance
- All Egyptian companies must appoint a manager, who must be resident in Egypt, but can be any nationality.
- According to Egyptian Company Law, companies are not permitted to have more than 10% of their employees as foreigners, regardless of business entity type.
- All foreign companies in Egypt are required to have an Egyptian auditor. Annual financial statements must be audited and submitted to the Companies Department.
- The Memorandum of Association is a contract between the shareholders and comprises i) company activities ii) registered office address iii) shareholder and director details iv) share capital and v) profit distribution method.
- All Egyptian businesses must lodge an annual return confirming relevant details of the company for the public register including i) names and addresses of all directors ii) address of principal place of business and iii) details of shareholders and their shareholdings. A company is exempt from this obligation if they have no relevant accounting transactions in the financial year.
- De-registering an Egyptian company takes at least six months. During this six-month period, it is mandatory to maintain a resident company secretary and a legal registered office in Egypt.
ConclusionIt is important that our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile and they will fulfil those obligations annually. Let us know if you need Healy Consultants Group PLC’s help to clarify your annual reporting obligations.