CORPORATE TAXES
SIGNIFICANT DEVELOPMENTS
There have been no significant tax or regulatory developments in the past year.
TAXES ON CORPORATE INCOME
Corporate tax/Corporate tax at the rate of 40% plus 2% development duty on taxable income in excess of ￡E18,000 per annum is applicable to the entire taxable profits of all corporations and branches of foreign corporations operating in Egypt, except as follows.
1.Profits of industrial activities of industrial companies and export activities-34% (includes 2% development duty tax).
2.Profits of oil exploration and production companies-42.55% (includes 2% development duty tax).
3.Subcontractors of oil and gas companies-42% (includes 2% development duty tax).
The 2% development duty tax applies to corporations and individuals. The computation is identical for corporations and individuals, and there is an exemption on the first ￡E18,000.
Corporations are subject to movable property taxes only after deduction of actual related expenses. Dividends, interest and other sorts of movable property income recvived by corporations are subject to corporate tax at a reduced rate of 32% without any deduction allowed. The 90% exclusion is no longer allowed.
No other tax is levied on profits distributed to corporate bodies. The general income tax was abolished effective January 1,1994.
CORPORATE RESIDENCE
Corporate residence is determined either by place of incorporation or place of central management. Corporations doing business actually within Egypt are subject to taxation regardless of their nationalities. Taxation should be considered in light of relevant tax treaties.
OTHER TAXES
Sales tax/All natural person and leagl entities are to collect the general sales tax and submit it to the Sales Tax Department. This includes manufacturers, traders and providers of taxable services, and every importer of commodities or taxable services.
Sales tax is assessed on sales of locally produced goods and imported goods, except for those exempted by a special decree. The tax rate is about 10% of the value of commodities (except for those referred to in special schedules of the law) and 5% to 10% for services.
Stamp taxes/Stamp tax is imposed on legal documents, deeds, banking transactions, company formation, insurance premiums, and other transactions. There are two distinct types of stamp tax. A specific stamp tax is imposed on documents, regardless of their value. This tax is applied to such items as invoices and contracts at very nominal rates. The other form of stamp tax is a percentage or proportionate stamp tax. This tax is levied on the basis of value. Representative rages according to
Stamp tax Law 224 of 1989 are as follows.
%
Life insurance premiums………………………… 3.00
Bank transactions………………………… 0.002-0.010
Real estate taxes/Real estate taxes are levied as a percentage of annual rental revenue.
BRANCH INCOME
Branches of foreign corporations operating in Egypt receive tax treatment identical to that of corporate entities for the results of their activities in Egypt.
Treaties allow Egypt to tax only those business profits attributable to permanent establishments of foreign enterprises in Egypt. A company's income is taxable even if not distributed to shareholders.
INCOME DETERMINATION
Income per the tax return generally agrees with income per books.
Inventory valuation/Inventories are normally stated at the lower of cost or market. Cost is determined by the average cost or the FIFO method. The chosen method must be consistently applied. Inventory reserves are not permissible deductions for computing taxes. Inventory valuation per books may not be the same as accepted by the Tax Department, so tax adjustment
on the tax return may be required.
Capital gains/Capital gains are exempt from tax if the proceeds of the sale of the capital asset are used to acquire another capital asset within a period of two years from the date of sale and the investment leads to an increase and improvement in production during the same year or during the next two years.
Intercompany dividends/Profits of a corporation are subject to corporate tax. Distribution of such profits to another corporation does not attract any additional taxes. Dividends received by a corporation for investments in another corporation are subject to the following.
1.Full exemption from taxes if:
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