MAJOR DEVELOPMENTS
A new Investment Guarantees and Incentives Law No. 8 for 1997 includes:
q Consolidates tax incentives;
q Sets out activities supported by the government, especially outside the Nile Valley.
The changes are reflected in item 34.
INCOME TAXES ON CORPORATIONS
1. Rates
The rate of tax on annual net profits is 42%, except for oil
exploration and producing companies, for which the rate is 42.55%, and industrial and export activities, for which the rate is 34%. In all cases, profits less than LE.18,000 per annum are subject to a 2% exemption. Several activities are tax-exempt (see item 34).
2. Local Income Taxes
None.
3. Capital Gains Taxes
Capital gains are treated as part of ordinary business income and are taxed accordingly. Asset replacement may, under certain conditions,attract tax exemption.
4. Branch Profits Taxes
Branches of foreign corporations and entities operating in Egypt are taxed at 42% on their annual net profits earned in Egypt, except for oil exploration and production companies, which are taxed at 42.55%.
5. Foreign Tax Reliefs
Branches of foreign banks and corporations and other entities operating in Egypt are liable for corporate tax only on the profits arising from activities in Egypt. Consequently, relief for foreign taxes is not relevant, and there is no double tax relief given in Egypt for taxes paid abroad on profits generated in Egypt. However, entities with a permanent establishment in Egypt are subject to corporate tax at 42% on
net profits. Interest earned outside Egypt, net of foreign taxes, is subject to the 34% rate. (See item 9, tax on Moveable Funds.?
Companies resident in countries with double taxation agreements with Egypt (see item 19) are treated in accordance with the provisions of those agreements.
7. Payment of Taxes
Corporate tax based on audited financial statements must be paid within one month of the shareholders?annual meeting approving the accounts or within a month of the date in the company articles on which the annual meeting must approve the accounts. Branches of foreign companies must submit their tax returns within six months of their financial year-end date. The payment of tax must be accompanied by:
q An audited tax declaration.
q A copy of the audited financial statements and several other schedules.
q An extract of the resolution at the annual meeting approving the profit distributions.
In addition, any board of directors?resolution relating to profit distributions must be sent to the Tax Administration within one month of the board meeting.
8. Other Matters
Workers?Participation in Profits. Ten percent of the distributable profits of branches of foreign companies operating in Egypt and of the distributable profits of Egyptian corporations must be set aside for distribution to labor working for the branch or corporation.
Tax Cards. Every entity operating in Egypt must have a tax card issued by the Tax Administration as evidence of having a tax file and must keep proper books of account (some in Arabic) as specified by law.
Entities operating in Egypt may only deal with other entities in possession of a tax card, which states that tax returns have been filed annually, and report to the Tax Administration on a quarterly basis all payments and contracts entered into with individuals or companies.
Tax Administration. Any business operating in Egypt must advise the Tax Administration of any payments made to any contractor or supplier of goods or services and of any contract entered into with any of the above, must withhold the following percentages from all payments over LE.10, and pay the tax deducted quarterly to the Tax Administration for
the account of such persons (rates subject to change):
Contracting and supplying 1%
Services 3%
Commissions (with certain exceptions) 10%
Professional fees over LE.500 15%
Professional fees less than LE.500 10%
Corporate entities, branches of foreign corporations, and several other named enterprises that lease property or sell goods for the purpose of trading or manufacturing must add a percentage, ranging from 1% to 5%, to the amounts collected on account of the payee tax liability.
Every entity starting or terminating operations in Egypt must advise the Tax Administration accordingly within one month of the start or termination of its activities.
INCOME TAXES ON INDIVIDUALS
9. Rates
Income tax is first levied on the various sources of individual income as follows:
Tax on Moveable Funds. This tax usu
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