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Egyptian society is processing comprehensive economic reform, and in this context the Ministry of Finance starts in the application of a package of policies and economic measures aimed to move the economy forward almost immediately through structural systems in each of customs, tax and financial systems so as to have a sustainable impact on the various economic sectors.
From this point came fiscal policy as one of the tools that seeks to achieve economic and social objectives in the country, which is headed by improving the investment environment to become more capable of attracting investment.
For all the above came the new Income Tax law and adopt the best practices and tax bases of the world as it does not only mean amending the VAT although this is a goal in itself, but for a sophisticated and integrated tax system serve the citizen and the simple employee as it serves the investor and the whole economic activity. |
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Important questions in the new income tax law No. 91 for the year 2005: |
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What is the difference between current law and the new law? |
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1 .Confidence in the taxpayers because the law intentionally to restore confidence between taxpayers and the Tax Authority, so that the taxpayers trust that the Tax Authority will treat him with fairness and respect, and the Tax Authority trust that taxpayers will be honest in the declaration of their real income. Therefore, approval will be deemed to the reports submitted by the tax-payers is the basis of tax. As well the screening sample system will be executed and toughening the punishment of tax evasion so as to preserve the rights of the state and society. |
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2 -Simplicity and the ease as the new law provides mechanisms and frameworks and concepts more easily than those are currently applied. |
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What are the taxes to be paid by employee? |
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• Net annual income = total annual salary - (share in the pension + participate in the insurance funds + participate in treatment funds + special allowances). |
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• The tax base = net annual income - (8000 pounds family exemption) as to latest amendment. |
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What about the entry of persons from outside Egypt? |
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Law takes the principle of regional tax for natural people; that is not to impose the tax except on individuals' net income achieved in Egypt. As for the resident corporate: tax is imposed on the total net profit, whether made in Egypt or abroad.
For the non-resident legal corporate, the tax imposed on profits achieved in Egypt.
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What is the tax treatment of personal companies? What is the rate of its tax? |
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As a result of the new draft law on the tax treatment Standard, has been the treatment of personal companies (partnerships and simple recommend companies) the same treatment as capital companies, whatever the legal form in which it is subject, by maximam 22.5% tax rate; the legister also approved some tax deductions after tax calculation according to specific tax categories. |
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What about individual deposits in banks? |
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Law exempts individuals from the proceeds of deposits and savings accounts with banks registered in the Arab Republic of Egypt, as well as deposits and savings accounts in mailboxes. |
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What about the output of dealing in securities? |
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The new law exempts the output deal and dividend distributions or securities registered in the Egyptian stock market for natural persons. |
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What aspects of development of the relationship between taxpayers and the Tax Authority and what do they benefit accordingly? |
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• Considering the tax-funded report submitted by the taxpayers is true until the contrary is proved. |
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• Inadmissibility of wasting books or records or cost items without a real bill to the Tax Authority. |
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• Taxpayer has the right to amend or correct the tax-funded reports, during a specified period after the end of the legal term for the submission of the original reports. |
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• Taxpayer is given the right to recover the increase in paid taxes than the taxes in due. |
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What about the treatment of long-term contracts in the construction?
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The long-term contracts in the construction sector and construction require special tax treatment, because of their different nature the law here keen to determine the percentage of the profits based on the proportion of finished work of the contract during each fiscal period. While allowing deduction of loss from the profits of the previous period with an amount not to exceed the profits. |
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Is there a tax on dispositions of built real estate or land? What is it? |
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There is a tax imposed at 2.5%, without any reduction in the total value of the disposition of the built estate or land within the city, whether has been disposed by the condition, or after the establishment and whether that conduct comprehensive property in whole or in part or unit. |
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Who needs to maintain books and records regularly? |
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• If the invested capital exceeds 50 thousand pounds. |
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• Or its annual production exceeds 250 thousand pounds. |
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• Or the annual net profit exceeded the annual net profit, according to the latest final tax the amount of 20 thousand pounds.
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What are the offences set in the law? What is the penalty? |
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The new law is based on the new philosophy and an integrated vision depends on reducing the tax burden on individuals, society and a more equitable distribution.
In this frame, and to preserve the right of the community and the public treasury, the law has stressed the penalties for stated offences, for example taxpayer is punishable by not less than two thousand pounds, and not to exceed ten thousand pounds, and doubling fines in the case of repeating the offence within three years; and that is as the following cases: |
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1 . Refrain from providing notice of practicing the activity. |
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2 . Refrain from providing tax-refunded report. |
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3 . Refrain from applying the deduction system and the tax collection and supply in the legal deadlines.
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What is the penalty of evading tax? |
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It was natural and logical toughening the penalty of tax evasion, especially after all the privileges granted by law to the taxpayer and therefore punished each taxpayer evaded tax imprisonment for a term not less than six months and not exceeding five years and a fine equivalent to twice the tax not functioned. |
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Brief on Value Added TAX (VAT) and its amendments: |
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Charged entities committed to report and pay the tax to the Tax Authority in accordance with the provisions of the law are: |
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A . Industrial producers. |
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B . Importers. |
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C . Service providers of services subject to the tax. |
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D . Distributors assistant to the charged entities. |
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E . Traders and trading dealers except dealers in goods showed in Table (1) only. |
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F . Free professionals. |
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Invoices, statements, notices and books and records: |
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The registrar should register all operations up to date in accounting books and records, which are: |
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1 . Purchases record. |
2 . Sales record. |
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3 . Returns record. |
4 . Exports record. |
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5 . Stores Record. |
6 . Original Journal. |
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7 . Inventory record for the Registrar. |
8 . VAT summary record. |
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Each registrar has to provide a monthly report to the duty office, of the tax due on sales of goods or services as the form prepared for this purpose during the two months following the end of each fiscal period compined with tax payment; and to provide the report of April and tax should be paid maximum by the fifteenth day of June.
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Current Tax rate as to latest amendment: |
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• 14 % for sales. |
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• 10 % for free professions. |
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Registration: |
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Each of the following should register themselves in the sales tax: |
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1 . Industrial producer or service, which reaches or exceeds the maximum registration limit. |
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2 . Importer whatever the size of his sales. |
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3 . Producer of goods in Table (1) regardless of sales volume. |
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4 . Deputy Registrar distribution whatever volume sales. |
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5 .Trader and trade agent reached or surpassed the registration limit. |
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6 .Free professions. |
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Brief on Stamp Tax: |
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All companies are subject to tax stamp law, and the examination is held by the competent tax offices annually note that the compulsory submission of monthly admissions in certain activities on certain tax forms. |
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Brief on Deduction Tax: |
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All companies and individuals had to be applied to the deduction tax systems and supply to the Tax Authority, each quarterly for every amount more than three hundred pounds and different bands the law clarified. |
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Important information for Arab and foreign investors: |
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In line with the country's policy for attracting foreign and Arab investments and in the light of new laws some procedures specific to Arab and foreign investors have been amended so as to process their investments easily with the clear clarifaction of all the tax liabilities for foreign nationals and ease of establishment procedure with their investment.
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Is it right that the establishment of foreign companies with a totally foreign capital? |
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Yes, there was nothing to prevent the establishment of foreign companies with foreign capital in full and enjoyment of all the rights with Egyptian companies including the same comprehensive tax brackets.
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