Tax Declaration In Egypt

Tax Declaration In Egypt: Step-By-Step Guide

Navigating the tax declaration process in Egypt is essential for individuals and businesses alike to ensure compliance with the country’s tax laws. Need to know more about this? Don’t Worry! We’ve got you covered for this!

From understanding which forms to fill out to knowing which deductions and credits you’re eligible for, filing your tax declaration accurately can save you time, money, and potential legal issues. Let’s unravel the intricacies of tax declaration in Egypt and empower you to fulfill your tax obligations effectively.

Let’s dive in!

What Is A Tax Declaration?

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Employers seek a tax declaration from their employees at the beginning of a financial year. 

This declaration lists all tax-saving investments an employee commits to make in that particular year. 

Based on the information in the tax declaration, the employer calculates and deducts tax at source (TDS) proportionately from the employee’s monthly income. 

TDS on salary payments is governed by Section 192 of the Income Tax Act, 1961.  

Declaring tax-saving investments is not all! Employees must submit proof of expenses or assets during the year to support their declaration.

If they fail, the employer must recover the tax shortfall from the employee’s salary in the remaining months. 

Employers managing payroll traditionally use spreadsheets to collect investment proofs in physical copies or via email. 

Then, the concerned team verifies the details and approves the tax declarations. The whole process becomes cumbersome and confusing. 

But, this process can be simplified for employers and their employees through automation. 

Who Has To File Taxes In Egypt?

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Egypt levies taxes based on residency. This implies that while non-residents are taxed on income originating from an Egyptian source, Egyptian residents are taxed on their worldwide income.

Income taxes will be deducted at the source of employment income from an Egyptian employer; an annual tax return need not be filed separately. 

Filing a tax return would only be necessary if you were to receive any other type of taxable income, like:

  • Foreign Income
  • Self-employment income
  • Rental income

Who Qualifies As A Tax Resident In Egypt?

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The Egyptian government will consider you a resident for tax purposes if any of the following are true:

  • You are present in Egypt for at least 183 days in any twelve months (these days do not have to be consecutive)
  • You have a permanent home in Egypt
  • You have a local commercial presence in Egypt

If you do not meet these standards, you will be considered a non-resident for tax purposes.

What Types Of Taxation Does Egypt Have?

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Income

Egypt taxes residents’ worldwide income at progressive rates ranging from 0% to 27.5%. 

Non-residents are taxed at the same progressive rates as residents. However, unlike residents, non-residents are only taxed on their Egypt-source income. 

Additionally, residents and non-residents are entitled to an annual salary tax exemption of EGP 15,000. 

It’s important to note that these tax rates came into effect starting July 1, 2023, with the introduction of the new bracket of 27.5%

Capital Gains

Capital gains generated from property sales are only taxed if the real estate was used in a trade or business (including a sole proprietorship). Otherwise, capital gains are not taxed.

Transfer Tax

A 2.5% transfer tax applies to selling any built real estate or land prepared for building. The value of the sale is assessed on the total disposal value of the property.

Stamp Tax

Egypt imposes a stamp tax on certain documents, such as:

  • Legal forms
  • Deeds
  • Banking transactions
  • Insurance premiums

The rate for this tax varies depending on the type of document. For example, the rate for banking transactions is 0.04%, while the rate for insurance premiums ranges from 0.08% to 10%.

Real Property Tax

All property in Egypt is subject to a real estate tax. 

The rate for this tax is 10% on the annual rental value after a 30% deduction for residential property or a 32% deduction for nonresidential property. 

Residential units with a rental value of less than 6,000 EGP are exempt.

Value-Added Tax

Egypt applies a value-added tax (VAT) to certain goods and services. 

The standard rate for this tax is 14%. Some goods and services are subject to a reduced rate of 5%. Others are exempted entirely.

Corporate Tax

Corporate income is taxed at a flat rate of 22.5%. This applies to the company’s net taxable profits. 

The only exception is oil exploitation companies, which are taxed at 40.55%.

Egyptian corporations are generally taxed on their worldwide income, while foreign companies operating in Egypt are only taxed on income derived from Egypt.

When Are Taxes Due In Egypt?

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Egypt’s tax year coincides with the calendar year, just like in the US. 

The first day of the tax year is January 1, concluding on December 31. March 31 is when annual tax returns are due. 

You won’t need to file a return if your employment income from an Egyptian employer is your only source of income, though, as income tax will be deducted at the source.

Individuals are required to submit an annual tax return to the tax authorities. 

Tax on employment income is withheld at source every month. Employers are required to file quarterly tax statements in January, April, July, and October of each year.

Employers should submit an annual tax reconciliation to the tax authority on January 1 each year, showing each employee’s yearly salaries and wages and the unpaid payroll tax amounts.

Where To Declare Taxes In Egypt?

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The Egyptian Tax Authority (ETA) has introduced a new e-filing system for the submission of VAT returns.

Consequently, taxpayers must submit their VAT returns (i.e., monthly VAT and schedule returns) electronically through the ETA’s website starting from January 2019

Accordingly, the manual filing of VAT returns will only be accepted on the mentioned date.

The account created by taxpayers for the e-filing of CIT returns shall be used to access the ETA’s website. Such an account will provide taxpayers access to the e-filing of all relevant taxes, including VAT. 

Taxpayers must register on the ETA’s website to create an online account for the e-filing procedures. 

Upon filing the online VAT return, taxpayers should pay the VAT amount due through regular bank transfers and then enter the payment details on the ETA’s website to finalize the VAT e-filing process.

Conclusion

Fulfilling your tax declaration obligations in Egypt is not just about compliance—it’s about ensuring financial transparency and contributing to the country’s development. By accurately reporting your income, deductions, and credits, you play a vital role in maintaining a fair and efficient tax system.

Stay informed, seek professional advice when needed, and take control of your tax responsibilities to build a stronger financial future for yourself and your country.

Declaration Mastery!

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