Egypt

A 10% or 5% WHT is imposed on dividends paid by Egyptian companies to resident corporate shareholders. See Dividend income in the Income determination section for further information.

Payments of dividends, interest, royalties, and services by a domestic corporation to foreign or non-resident bodies are subject to WHT as follows.

Dividends to non-residents

A 10% WHT is imposed on dividends paid by Egyptian companies to non-resident corporate shareholders from shares unlisted on the EGX (see Dividend income in the Income determination section for further information). 

A flat rate of 5% WHT is to be imposed on dividends paid to non-resident corporate shareholders from shares listed on the EGX.

However, an applicable double tax treaty (DTT) between Egypt and the foreign country may result in the reduction/elimination of such tax rate.

Interest to non-residents

The WHT exemption of interest on loans of more than three years has been abolished for private, public, and general public sectors; however, this exemption still applies for government, local government units, or other public juridical persons.

Loans existing before the newly amended tax law may continue enjoying the exemption of WHT as long as one interest payment was paid prior to the issuance date of the newly amended tax Law No. 30 on 16 June 2023.

Royalties to non-residents

Royalty payments are subject to 20% WHT. However, an applicable DTT signed between Egypt and the foreign country may result in a reduction in this rate. Please see below for the ministerial decree affecting the treatment of interest and royalty payments.

Service payments to non-residents

Service payments are subject to the 20% WHT. However, an applicable DTT signed between Egypt and the foreign country may result in the exemption of these payments if the services are performed abroad and not through PE in Egypt (based on each DTT).

For payments withheld on behalf of non-resident entities, tax shall be remitted to the tax authority the day following the withholding of the amount.

Tax treaties

Egypt has concluded DTTs with over 50 countries, which could change the tax treatment of transactions carried out between Egyptian entities and residents of a treaty country.

Notes

1. Dividends paid out by a company resident of Egypt to an individual of the other contracting state shall not be taxed more than the maximum amount mentioned. 15% in all other cases.
2. Reduced rate of the gross amount of dividends is applied if the beneficial owner is a company that holds at least 25% of the company’s capital. Higher rate applies in all other cases.
3. In the absence of specific provisions, dividends may be taxed under the local law at 10% in case of unlisted shares, or a flat rate of 5% in case of listed shares.
4. Lower rate applies if the foreign company holds more than 25% of the capital in the company.
5. Lower rate applies if the beneficial owner is a company.
6. This rate is based on the new DTT that is signed and that came into effect in January 2022. This rate should apply under certain conditions mentioned by the DTT (e.g. owning at least 10% of the shares during 365 days including the date of dividends distributions). 
7. The reduction in the rate does not apply if the recipient is engaged in a trade or business in the United States through a PE that is in the United States. However, if the income is not effectively connected with a trade or business in the United States by the recipient, the recipient will be considered as not having a PE in the United States to apply the reduced treaty rate to that item of income.
8. Reduced rate of the gross amount of dividends is applied if the beneficial owner is a company that holds at least 20% of the company’s capital. Higher rate applies in all other cases.
9. Reduced rate is applied if the beneficial owner is a company that holds at least 20% of the company’s capital for a duration of 365 days. Higher rate applies in all other cases.
10. Reduced rate in case the gross amount of such interest is related to a loan or debt claim for a period exceeding three years. Higher rate applies in all other cases.
11. Reduced rate is applied if the beneficial owner is a company that holds at least 10% of the company’s capital. Higher rate applies in all other cases.
12. See Dividend income in the Income determination section for descriptions of instances when the 5% rate applies.

It's worth noting that Qatar and Oman have both signed a DTT with Egypt, but theses treaties are not in force yet.

Procedures for applying the WHT on payments to non-residents

Ministerial decree no. 771 for 2009 dictates that the reduced rate of WHT on interest or royalties provided by an applicable DTT should not be automatically applied. The rate of 20% (Egyptian tax rate) should be imposed upon deduction. However, under certain conditions, the foreign recipient of payments will be able to get a refund for the amount resulting from the variance between the normal rate of 20% and the reduced treaty rate.

Certain documents should be submitted to the tax authority along with the refund claim.

A special unit responsible for interest and royalty WHT refunds is tasked with reviewing each refund case and with issuing refund letters (subject to compliance with the requirements of the 2009 ministerial decree). A refund letter is required to be able to get a refund of excess WHT from the tax office to which the taxes were actually paid.

Please note that free zone entities are obligated to withhold tax when dealing with non-resident entities and shall remit the tax to the tax authority.

In 2015, amendments were made to certain articles of the executive regulations of the Egyptian Income Tax Law no. 91 of 2005, among which was amending the article that forms the basis of the ministerial decree no. 771, whereby some provisions of this article were abolished.

However, it is still a controversial issue whether (i) the decree is abolished and so the reduced rate of the DTT should apply automatically or (ii) the decree stands and the refund mechanism should apply. Practically, the ETA still applies the pay refund mechanism and the resident companies would still need to deduct the 20% WHT as applied by the domestic law and the non-resident party should request the refund from the ETA.

We are of the opinion that taxpayers must have the necessary documents available at all times, as the ETA, upon tax audit, may seek to ensure that the recipient of the income is the beneficial owner of it and is a tax resident of the relevant state, to approve benefiting from a relevant DTT's privileges.

WHT on local payments

The rates of WHT applicable to local payments against local services and supplies in excess of EGP 300 have recently been updated as follows:

• Contracting and supplying: 1.0%
• All types of services: 3.0%
• Commissions: 5.0%

This type of WHT is considered as an advance payment of the CIT and should not represent an additional cost.