Social security contributions
The employee contribution percentage is 11% of the total social insurance salary.
The subscription wage has been determined with a minimum of 1000 EGP and maximum ceiling of 7000 EGP.
The maximum and minimum limits are increased by 15% in the 1st of January of each year for a period of seven years, starting from 1st of January 2020. These two limits to be increased by the rate of inflation as of 1st of January 2028, taking into account the approximation of the minimum and maximum limits to the nearest hundred pounds.
The employer contribution percentage is 18.75% of the total social insurance salary.
In addition to the above, any managers/board of directors whose names are included in the commercial register of the company will be socially insured as employers and would be subject to social insurance at a flat rate of 21% of the total maximum wage (i.e. EGP 7,000).
Value-added tax (VAT)
A new VAT law was issued on 8 September 2016, with immediate effect, which abolished the previously existent general sales tax (GST) law. The new VAT law differs from the abolished GST law as it is applied to a broader range of goods and services. However, it exempts a number of basic goods and services that affect low-income earners (in addition to other exemptions listed within the law). It also introduced the reverse-charge mechanism in Egypt for the first time, whereby transactions involving non-residents providing services/royalties to Egyptian resident entities have become subject to VAT in Egypt.
The standard VAT rate is 13% for the financial year 2016/17 (until 30 June 2017); however, starting from the financial year 2017/18 (i.e. as of 1 July 2017), the VAT rate has increased to 14%, applicable on all goods and services, except for machinery and equipment used for production purposes, which are subject to a 5% VAT (although buses and passenger cars are subject to different tax rates).
Businesses registered under the GST law will automatically be considered registered for VAT purposes, provided their annual turnover exceeds the new registration threshold of EGP 500,000.
Importers of taxable goods registered under the abolished GST law will automatically be considered registered for VAT purposes, regardless of their turnover.
Businesses not required to register under the GST law, and that are required to register for VAT purposes under the new law, must apply to the Egyptian Tax Authority (ETA) for their VAT registration within 30 days from the date of reaching the VAT registration threshold.
Businesses currently registered under the GST law with a turnover below the new VAT threshold shall be de-registered automatically, unless they specifically request to remain registered within 30 days from the effective date of the new law.
The new law grants businesses a three months transitional period for reconciling their VAT position, during which the ETA will not levy delay fines for errors or omissions.
It’s worth noting that the executive regulations of the Egyptian VAT law were published in the official gazette as of 7 March 2017, providing further clarifications regarding the application of the VAT.
Net wealth/worth taxes
There are no net wealth/worth taxes in Egypt.
Inheritance, estate, and gift taxes
There are no inheritance, estate, and gift taxes in Egypt.
The real estate tax law takes into consideration the different variables that can affect the value of a property, such as location, value of similar buildings, and the economic situation of the district in which the property is located. This is to be updated every five years.
Real estate tax is levied annually on all constructed real estate units. This covers land and building, excluding plant and machinery.
Such tax is assessed based on the rental value of the land and building, and these value assessments are set by the committees, after approval of the Minister or whomever the Minister delegates, and published in the Official Journal. Based on the announcement, any taxpayer can appeal the rental value assessment within 60 days following the publication date in the Official Journal.
The real estate tax rate is 10% of the rental value, and the calculation of the rental value differs for residential units and non-residential units. Specific percentages of deductions are provided by the law to account for all the expenses incurred by the taxpayer, including maintenance costs.
The real estate's definition was recently amended to replace the original land spaces’ provision by the following: “Actually exploited lands, whether independent or attached to buildings, fenced or not (as determined by the relevant executive regulations)”.
A new article was recently introduced to the real estate tax law, allowing by means of a decision from the Egyptian Cabinet, real estate tax exemption for the real estate actually exploited in the production and services activities stated by the Egyptian Cabinet, provided that the decision includes the below, for each production or service activity:
- The percentage of exemption; and
- its duration.
Luxury and excise taxes
The sales tax law includes an excise tax on some products, such as the tobacco, alcohols, and medicines.
Other non-income taxes
There is a 2.5% transfer tax on sales of built real estate or land prepared for building, assessed on the total disposal value of the property without any deductions except for villages under certain conditions mentioned in the law.
There are two distinct types of stamp tax, which are imposed on legal documents, deeds, banking transactions, company formation, insurance premiums, and other transactions, as follows:
- The nominal stamp tax is imposed on documents, regardless of their value. The tax rate for items such as contracts is EGP 0.9 for each paper.
- Percentage or proportionate stamp tax is levied based on the value of transactions.
A proportional stamp tax at the rate of 0.4% annually (i.e. 0.1% per quarter) is imposed on the bank's loan and shared by the bank and the client. This stamp tax is due on a quarterly basis on the beginning balance of each quarter of credit facilities and loans and advances provided by Egyptian banks or branches of foreign banks during the financial year in addition to the amounts utilised within this quarter.
Loans from other establishments are not subject to this tax.
In addition to the above, stamp tax is imposed on total proceeds realised from selling or buying securities without deducting any costs and that should be paid by each of the seller and buyer. The stamp tax imposed on the listed shares on the EGX should be at the rate of 0.075% for resident individual shareholders and 0.125% for the non-resident ones (for the transactions not exceeding the 33% of the company's shares).
It is worth highlighting that, the 0.075% stamp tax imposed on the resident seller/buyer upon disposing listed shares on the EGX should be abolished towards the end of 2021 (i.e. no longer apply in January 2022, upon applying the CGT 10% rate on the resident seller/buyers upon disposing their listed Egyptian shares as mentioned under the CGT section).
Resident investors trading in or holding shares/securities unlisted on the EGX should be subject to 0.075% stamp tax on the total proceeds realised without deducting any costs. As for the non resident investors, the stamp tax should be 0.125% imposed on the total proceeds realised (for the transactions not exceeding the 33% of the company's shares).
Please note that, the above rates were announced as part of the Covid-19 measures taken by the Egyptian government and the law should be enacted shortly. So currently, the official law is not yet issued.
For the transactions exceeding 33% of the company's shares (whether listed or unlisted) the rate should be 0.3% for both resident and non-resident shareholders.