Taxation (Income, VAT, Salary, Stamp)
Taxation tests Egyptian income tax, value added tax, salary tax and stamp duty at the level needed to compute liabilities, adjust accounting profit and identify compliance obligations. The principal sources are Income Tax Law 91/2005, VAT Law 67/2016, the salary tax rules in the income tax law, and Stamp Duty Law 111/1980.
Income tax
- Corporate taxable profit starts from accounting profit, then adjusts for non-deductible expenses, exempt income, and tax depreciation.
- The general corporate income tax rate is 22.5%; the law applies withholding tax to specified payments and requires instalment payments.
- Tax losses may be carried forward for a limited period, subject to the law's conditions.
- Salary tax is withheld by the employer under a progressive schedule, after the personal exemption and allowed deductions.
VAT and stamp duty
- Standard VAT is 14% on taxable supplies of goods and services; exports are zero-rated and specified goods and services are exempt.
- VAT is levied on the value added: output VAT less input VAT on purchases supported by valid tax invoices.
- Stamp duty is imposed on defined documents and transactions under Law 111/1980 at fixed or ad valorem rates.
Worked example
A company has accounting profit of EGP 1,000,000. It paid a fine of EGP 50,000, which is non-deductible, and earned EGP 30,000 of exempt dividend income. Taxable profit = 1,000,000 + 50,000 − 30,000 = EGP 1,020,000. Corporate tax at 22.5% = EGP 229,500. For VAT, if taxable sales are EGP 200,000 and input VAT is EGP 10,000, output VAT = 200,000 × 14% = EGP 28,000; net VAT payable = 28,000 − 10,000 = EGP 18,000.
Traps that cost marks
- Deducting fines, penalties or private expenses that the law expressly disallows.
- Applying VAT to exempt supplies or failing to zero-rate an export with the required documentation.
- Ignoring the difference between accounting depreciation and tax depreciation.
- Treating salary tax as a company expense rather than a withheld liability.
- Using an incorrect stamp duty base or rate for a contract.