Taxation-Services | KPMG | EG

Taxation Services

Taxation Services in Egypt

Corporate tax is imposed on the annual taxable net profit.

Our Tax Services

 

i. Taxation Services include:


- Reviewing Corporate Income Tax Returns.
- Providing practical tax audit services for all tax types to help our clients comply, manage risk, increase efficiency and unlock the value of their data.
- Tax consulting to help clients build and operate leading tax functions and manage their tax risk, reputation and compliance in a market that is increasingly regulated.
- Tax due diligence to identify the tax exposure of a deal and how it may be mitigated, with a clear focus on risk assessment.
- Assisting organizations entering new markets or undergoing corporate transactions, such as restructuring, mergers and acquisitions.

 

A brief about each type of Tax:

Corporate Income Tax:


- Corporate tax shall be imposed on the annual taxable net profit.
- The taxable net profit is determined based on the net profit of audited financial
reports after making certain adjustments as per the Income Tax Law.
- Taxpayers are required to file an Annual Corporate Income Tax Return signed
by a local external tax advisor.
- Tax Returns under Egyptian tax law are regarded a
self-assessment. Accordingly, any understatement of tax liabilities in the Tax
Return will result in the imposition of penalties and delay fines.
- The Corporate Income Tax rate, as of year 2015 is 22.5 percent on net taxable income.
- Tax audits are carried out by the Tax Authority on a random/sample basis.
- The statute of limitation is 5 years unless the period is interrupted by any of the reasons of limitation interruption stipulated in the Civil Law, by the notification of the tax assessment details, by reminding the taxpayer to pay the tax or by a transfer to the tax appeal committees.
- Tax losses can be carried forward for a maximum of five years.
- A serial of Tax Law Amendments was issued; these amendments were primarily related to capital gains and profit distributions.

Salary Tax:


• Under the Egyptian Tax Law, it is the employer’s responsibility to withhold the salary tax due on each employee and remit the tax
to the Tax Authority on a monthly basis within fifteen days following the month of payment.
• Nonresident employees are subject to the same salary tax rules; however, if they are residents of a country, that has a tax treaty with Egypt, then the tax treaty provisions should apply.


The salary tax rates are based upon the level of Egyptian Pounds (‘EGP’) as follows:

First EGP 7,200 0%
From EGP 7,200 until EGP 30,000 10% with a discount 80%                    
From EGP 30,000 until EGP 45,000  15% with a discount of 40%
From EGP 45,000 until EGP 200,000 20% with a discount of 5%
Exceeding EGP 200,000 22.5%




- Withholding Tax on Domestic Transactions:

The Egyptian company shall apply the local WHT system to each local transaction invoice issued exceeding EGP 300 in the following areas with the below rates:

• Supply of goods and contracting activities   0.5%.                        
• Services & import support 2%.
• Individual Consultancy, commission, and Brokerage fees    5%.

- WHT does not apply on local bank interests or local insurance premiums.
- Entities that are required to withhold tax under the existing tax law need to apply the above rules to file a quarterly withholding tax form within one month, following the end of each quarter, and remit the tax along with the tax form.
- At the same time, any invoices received from other companies will also be subject to the same above rules (partial tax payments in the favour of the company in Egypt).
- Another option would be to apply the pre-paid tax system. This should only be implemented after submitting a request to the appropriate Tax Authority where the Tax Authority must reply within 60 days from the submission date.
- The taxes withheld from the company under any of the above WHT mechanisms will be offset against the company's income tax liability at the annual income tax return at the end of the tax period.

- Withholding Tax on Cross-border Transactions:
A withholding tax shall be imposed on the following payments made by resident entities to non-resident entities having no Permanent Establishment (‘PE’) or Tax Registration in Egypt as follows: Royalties
• Interest
• Services fees
• Dividends
• Capital Gains
- However, the tax treaty provisions may apply.


Stamp Tax:


Stamp tax law classifies the stamp taxes into fiscal and proportional taxes as follows:
• The fiscal stamp taxes are imposed on a variety of documents such as contracts.
• The proportional stamp taxes are imposed on the values of certain transactions, e.g. advertisements at a tax rate of 20 percent.


VAT:


The government of Egypt has released the VAT Law on 7 September 2016 and enacted the following day of being published in the official Gazette. VAT is to be levied on all commodities and services including the local or imported commodities and services listed in the table attached to the tax law in all its circulated stages.
Property Tax:
• Property tax is imposed on all buildings in Egypt. Tax is borne by the owner, either a person or a corporate body.
• As of year 2008, the tax rate is 10 percent on the annual rental value of the taxable buildings after the deduction of 32 percent (30 percent for residential units) allowed for maintenance.
• The tax is due from 1 July 2013, and paid in two equal instalments (at the end of June and the end of December in the same year).
• Taxpayers are required to file a tax return; failure to do so will result in a penalty.

Social Insurance:


The social insurance system is a relatively modern system introduced to the international community and aims at protecting the workers against the social risks and maintaining the dignity of the worker. Egypt has known the social insurance systems & pensions since the mid of the nineteenth century and it commenced issuing their governing legislations to cover the workers & citizens segments consecutively in order to expand the implementation scope, improve the benefits & achieve the greatest possible levels of social welfare & peace through out several stages that covered at the end all segments of society.
- The main three social insurance schemes are as follows:


1.2 Standard Social Insurance Social insurance on employees
Standard Social Insurance is applied on the employee's salary by virtue of law no. 79/1975 and its amendments.
This means that, any entity operates in Egypt should be registered with the competent social insurance office.
The Social Insurance law has set a limit to monthly salary which is subject to social insurance as follows:
- Insurable basic salary EGP 1,370.00 starting from first of July 2017 and it will increases by 10% in July each year.
- Variable salary EGP 2,800.00 starting from first of January 2018 and it will increases by 15% in January each year.
Most of the expats will subject to the 3% (work injury only) for the insurable basic and variable salary.
The Social Insurance Rates are 40% of the insurable basic salary and 35% of the insurable variable salary and it is calculated as follows:
- Employer’s share: 26% of the insurable basic salary plus 24% of the insurable variable salary.
- Employee’s share: 14% of the insurable basic salary plus 11% of the insurable variable salary.
The employer is obliged to:
- Provide the competent social insurance office, within two weeks form the inception date, with all the entity's documents like Tax Card, Commercial Register, Lease Contract, Companies’ Gazette, Investments Gazette, Employment contracts of his employees along with their documents,….etc.
- Withhold the monthly contributions from the employees’ salaries and remit them together with the employer’s share to the competent social insurance office by the fifteenth of the following month. Payments made after the deadline will be subject to a monthly delay interest of approximately 1.80%.
- Notify the competent social insurance office with any changes happen to the employees or the entity itself.


2.1 Social Insurance on Employers


As per Employers Social Insurance Law no. 108/1976 and its amendments, self-employed persons as well as managers in LLCs and BOD members in joint stock companies are considered as “Employers” at the Social Insurance. Employer is obliged to submit an application form to the competent social insurance office supported by the required documents like birth certificate , ID, Commercial Register, …etc.
The employer selects his wage category upon which the monthly contributions will be calculated and at the same time should not be less than the highest salary of his employees with the maximum of EGP 4200 per month starting from first of January 2018 and this maximum will increase yearly bases.
Contribution rate is 15% applied on the selected wage category. The employer is obliged to:
- Remit the above monthly contributions to the competent social insurance office by the fifteenth of the following month. Payments made after the deadline will be subject to a monthly delay interest of approximately 1.80%.
- Notify the competent social insurance office with any change happens to the entity or his wage.

2- Contracting Social Insurance

Any contractor operating in Egypt is obliged to notify the competent Contracting Social Insurance Office with any contract and pay the related social insurance contributions due on this contract.
Herein under the obligations of each the Contractor and the Awarding Party:


3.1. The contractor's obligations


- Notify the competent Contracting Social Insurance Office (in the jurisdiction where the contract will take place) about the contract once it is signed, before its implementation and submit the required documents like copy of the contract, letter from the Awarding Party showing summary of the contract(its value, nature of work, and so on) ,…etc. He is also liable to notify the office about any change that occurs in the value, nature of work,...etc. The subscription rates are then determined by the SI Office based on the nature of works included.
- The contractor should pay the contributions due on each payment or invoice- accrued for paying no later than the fifteenth day of the following month to approve the invoice and in case of delay, the contractor shall pay monthly delay interest of approximately 1.8 % of the outstanding contributions and have not been paid.


3.2. The Awarding Party’s Obligations:


- Notify the Competent Contracting Social Insurance Office with the entire contract before the beginning of the implementation and every change in the size of the contract and attach with the notification a copy of the Contract.
- Notify the Competent Contracting Social Insurance Office with the statement of each payment or invoice-accrued for paying, indicating the date of receipt of the notification date as well as the final invoice.
- Hold any payment of invoice to the contractor before getting a temporary certificate from the Contracting Social Insurance Office evidencing the payment of contributions due on the subject invoice.
- Hold the final payment to the contractor before getting a final certificate from the Contracting Social Insurance Competent Office evidencing the settlement and payment of the contributions due on the entire contract. - If the awarding party violates any of the above obligations, he will be jointly liable with the contractor for the payment of contributions and interests.

3.3. Notes:


In case of subcontractors, the rates shall be determined based on the scope of work included in each sub-contract, which may be higher than those applied on the main contractor. Moreover, any contributions paid by the subcontractor shall be deduct from the contributions due on the main contractor.


Dedicated partners to assist you:

Mohamed Alaam  Malaam@Kpmg.Com (202) 35362200 / 11 Ext 1643
Mohamed Mostafa Mkhalifa@Kpmg.Com (202) 35362200 / 11 Ext 1663
Saleh Rewaished  Srewaished@Kpmg.Com (202) 35362200 / 11 Ext 1650
Adel Soliman Asoliman@Kpmg.Com  (202) 35362200 / 11 Ext 1693
Maged El Meniawy Melmenyawi@Kpmg.Com  (202) 35362200 / 11 Ext 1652
Khaled Balbaa  Kbalbaa@kpmg.com (202) 35362200 / 11 Ext 1676
Amr Fawzy Amabdallah@Kpmg.Com  (202) 35362200 / 11 Ext 1673

 

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