Individual income tax is imposed on the total net income of the resident individuals for income earned in Egypt, as well as the income earned outside Egypt for resident individuals whose centre of commercial, industrial, or professional activities is in Egypt. Also, tax is imposed on the income of non-resident individuals for their income earned for work provided in Egypt, regardless of the source of payment, as well as the income earned from an Egyptian source.
Reimbursement for expenses of spouses and dependants is considered taxable income. In addition, school tuition fees, long-term living expenses, and overseas and hardship allowances are taxable.
The current tax law exempts severance pay, pension payments after the fulfilment of specific conditions, and employees’ profit share.
The following benefits are tax exempted, provided that the benefits are in kind and given for a group of employees. The benefits are:
- Meals distributed to the workers, provided that they are provided at the workplace.
- Group transportation of workers or equivalent transportation costs.
- Health care.
- Tools and uniforms necessary for performing the work.
- Residence provided by the employer to the workers for performing their work, provided that the residence is owned or leased by the owner. However, it is worth noting that housing is a bit of a grey area in the Egyptian Income Tax Law as there is no clear-cut definition for the conditions to qualify for the exemption.
Tax is due upon exercise on the difference between the fair market value (FMV) of the shares and the purchase price paid by the employee when the employee obtained beneficial ownership of the stock. Hence, there will be Egyptian payroll tax due in Egypt as the shares are exercised.
For self-employment income, the employer is taxed at the normal tax brackets.
The new law defines capital gains as the difference between the acquisition cost and the fair value/selling price of the share. As for listed shares acquired before 1 July 2014 and sold after that date, the capital gain will be calculated as the difference between either the acquisition price or the closing price on 30 June 2014 (whichever is higher) and the selling price.
Capital gains tax (CGT) treatment applicable to resident individuals
- Capital gains realised by resident shareholders from the disposals of listed shares on the EGX should be subject to CGT at the rate of 10%; however, such tax should be on hold till the end of 2021 and should be applicable starting 1 January 2022. This suspension of tax is not extended to the T-bonds.
- On the other hand, capital gains realised from the sale of unlisted shares/securities should be subject to the individual income tax brackets.
- Foreign shares/securities (invested abroad): Capital gains realised from shares invested abroad would be subject to the individual income tax brackets (if Egypt is the centre of commercial industrial or professional activity of such individual).
Capital gains tax treatment applicable to non-resident individuals
- Capital gains realised by non-resident shareholders from the disposals of listed shares on the EGX should not be subject to CGT (including T-bonds).
- Capital gains realised from the sale of unlisted shares/securities should be subject to personal income tax (PIT) with progressive rates going up to the rate of 25% with the exception of the gains realised from the T-bills that are not taxable.
- Capital gains realised from shares invested abroad should not be taxed in Egypt.
As mentioned in the Significant developments section of the Corporate tax summary, CGT imposed on the listed shares on the EGX (for resident and non-resident shareholders) is part of the announced changes made to the law as part of COVID-19 measures.
Dividend income treatment applicable to resident individuals
A 10% WHT will be imposed on dividends paid by Egyptian companies unlisted on the EGX to resident shareholders. A 5% WHT will be imposed on dividends paid by Egyptian companies listed on the EGX to resident shareholders.
Dividend income treatment applicable to non-resident individuals
A 10% WHT will be imposed on dividends paid by Egyptian companies unlisted on the EGX to non-resident shareholders. A 5% WHT will be imposed on dividends paid by Egyptian companies listed on the EGX to non-resident shareholders.
For more details, please refer to the Significant developments section of the Corporate tax summary.
Interest income received from local banks is not taxable for residents in Egypt.
Interest income received from treasury bonds and treasury bills are subject to WHT at the rate of 20%.
The reduced rate from double taxation treaties (DTTs) applies for non-residents.
According to article 39 of the Egyptian Income Tax Law, taxable revenue shall be determined on the basis of the actual rental value after deducting 50% there from in return for all costs and expenses concerning the revenues resulting from renting any realty or part of it according to the provisions of the Civil Code.
The normal tax brackets are imposed on the rental amount after the deduction of the 50% mentioned above.
Income from pensions and end of service bonuses are exempt from income tax.