Egypt – Amendments to the Income Tax Law
The Income Tax Law No. 91/2005 (“Income Tax Law”) has recently witnessed major amendments by virtue of Amendment Law No. 30/2023 (issued on 15 June 2023) and Law No. 175/2023 (issued on 30 October 2023).
These amending laws seek to establish an integral system to restructure income tax in Egypt with the aim of preserving social justice, support investments, and enhance digital transformation and the electronic tax system.
Definition of Permanent Establishment
The definition of a permanent establishment (“PE”) has been widened to include non-resident companies operating in Egypt. As per the Amending Law, the following, inter alia, shall be considered a PE:
- activities carried out in Egypt related to exploration, extraction, and exploitation of natural resources for period(s) exceeding 90 days during a year.
- services, including consultancies, provided for period(s) exceeding 90 days during the year.
- insurance project affiliated with any country. in case premiums were collected in Egypt or insured risks were in Egypt.
- a person who works for an affiliated project; and
- if a person in Egypt undertakes work in Egypt on behalf of a project exists outside Egypt or he/she signs contracts of behalf of this project.
Updating the Income Brackets and Applicable Progressive Taxes
Individual income tax rates are progressive and subject to gradual rates ranging from 10% to 27.5% depending on the amount of the annual income. Pursuant to Article 8 of the Income Tax Law (as amended), the current applicable income brackets and their corresponding tax rates are updated as follows:
|Income Tax Rate||Annual net income not exceeding EGP 600,000||Annual net income of more than EGP 600,000 and up to EGP 700,000||Annual net income of more than EGP 700,000 and up to EGP 800,000||Annual net income of more than EGP 800,000 and up to EGP 900,000||Annual net income of more than EGP 900,000 and up to EGP 1,000,000||Annual net income of more than EGP 1,200,000|
|0%||From EGP 1 to EGP 30,000||_||_||_||_||_|
|10%||From EGP 30,001 to EGP 45,000||From EGP 1 to EGP 45,000||_||_||_|
|15%||From EGP 45,001 to EGP 60,000||From EGP 45,001 to EGP 60,000||From EGP 1 to EGP 60,000||_||_|
|20%||From EGP 60,001 to EGP 200,000||From EGP 60,001 to EGP 200,000||From EGP 60,001 to EGP 200,000||From EGP 1 to EGP 200,000||_|
|22.5%||From EGP 200,001 to EGP 400,000||From EGP 200,001 to EGP 400,000||From EGP 200,001 to EGP 400,000||From EGP 200,001 to EGP 400,000||From EGP 1 to EGP 400,000|
|25%||More than EGP 400,000||More than EGP 400,000||More than EGP 400,000||More than EGP 400,000||More than EGP 400,000||From EGP 1 to EGP 1,200,000|
|27.5%||_||_||_||_||_||More than EGP 1,200,000|
Costs and expenses must be supported by electronic invoices and receipts in order to be eligible for deduction for tax purposes. This requirement is effective for invoices as of July 2023, and from January 2025 for receipts (such periods can be extended for one year).
Increasing the Exempted Amount of Insurance Premiums
The annual exempted amount of the premiums paid for life insurance and health insurance is increased to EGP 10,000 (instead of EGP 4,000) or 15% of the net income, whichever is less.
Dividend Tax and Withholding Tax
Dividends received by a natural resident from private companies will be subject to a 10% tax, without deducting any expenses. Profits, interests, and dividends received by residents from investment funds, venture capital funds, real estate funds and/or holding funds – established by virtue of the Egyptian Capital Market Law – will be subject to withholding tax (5% for natural persons and 15% for juridical persons).
Capital Gain Tax
The Capital Gain Tax is determined at 10% applied on natural and juridical persons reside in Egypt who dispose shares registered with EGX.
New Tax Exemptions
The following are new exemptions – subject to the stipulated requirements:
- capital gains resulting from public companies’ debt settlements.
- profits of funds invested in debt instruments,
- profits of holding investment funds,
- profits of securities investment funds,
- profits of venture capital companies and funds,
- profits of charity investment funds, and
- profits of real estate funds.