Tax evasion is quite common in Egypt because of the complicated and largely ineffective collection system. Employers have developed numerous strategies for sparing their foreign workers the grief of wading through Egyptian tax law – many are paid in cashable checks or employed as “consultants,” the idea being to leave the responsibility for deciding about tax payments to the employee himself.
If you are paid by cashable check, or as a consultant, you should know that chances of the Egyptian government ever coming to collect taxes are somewhere near zero. If, however, you make a significant amount of money (e.g. LE1,000,000 a year or more) you may want to pay closer attention to your tax liabilities – as a high-income earner, you are more likely to end up on the government’s radar.
Income taxes
It does not take a very thorough investigation to uncover why tax evasion is so popular. There are two forms of income tax in Egypt: one levied on individual sources of income and another general income tax on total income.
Sources are classified as follows:
- Income from movable capital: Earnings from interest, executive fees, et cetera, taxed at 30%
- Income from immovable capital: Earnings from land and other real estate investments, taxed at a rate between 20%-48% depending on the nature of the properties
- Commercial and industrial profits: Earnings from business enterprises that are not covered under the corporate tax system, taxed between 20%-48%
- Professional fees: Simply a term used to describe the earnings of professionals such as lawyers and engineers. These, too, are taxed at a rate between 20-40%.
- Salaries: Earnings from a salary paid to you in Egypt or from abroad for services you perform in Egypt. Housing allowances provided by companies for foreigners living in Egypt are exempt from this tax. LE50,000 of salaries are taxed at a flat rate of 20%, and the amount over that at 32%
Once you have paid taxes on your individual sources of income, you can look forward to paying general income tax, levied on your aggregate earnings. General income tax is applied at a variable rate, at a maximum 65% for earnings totalling over LE200,000 per year.
Finally, a thoroughly infuriating “development tax” is levied on all individual and corporate earnings in excess of LE18,000 per year.
Other taxes
If you own any rental or improved agricultural property (essentially if you have invested in real estate), these holdings are taxed at 10% of their annual rental value.
Stamp duty is levied on official documents, generally in a mercifully insignificant amount. Contracts for company formation come with an LE100-300 tax and company registration costs around LE50.
Egyptian sales tax ranges from 10-50% on goods and 5-10% for services. It is usually built into the advertised prices of goods and services.