Global Mobility Services: Taxation of International Assignees - Egypt

Transcription

1 Global Mobility Services: Taxation of International Assignees - Egypt Taxation issues & related matters for employers & employees 2016/17

2 Last Updated: March 2017 This document was not intended or written to be used, and it cannot be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer.

3 Country: Egypt Step 1: Understanding basic principles 4 Step 2: An overview on the Egyptian income tax system 5 Step 3: Immigration and social security highlights 7 Step 4: Reporting and filing obligation 8 Appendix A: Personal income tax rates and social security rates 9 Appendix B: Egypt IAS contacts 10 Additional Country Folios can be located at the following website: Global Mobility Country Guides Global Mobility Country Guide (Folio) 3

4 Step 1: Understanding basic principles Liability to tax in Egypt 1. The Egyptian income tax law provides the below treatment where tax is imposed on either; Individuals (Egyptians and foreigners) on salaries earned from work performed in Egypt, regardless of where the payment is done, and On payment received from Egyptian source regardless of where the service is performed. Tax year in Egypt 2. It is the calendar year which ends by December 31. Determination of residence 3. A person is considered resident in Egypt for tax purposes if: He has a permanent domicile in Egypt, or He resides in Egypt for more than 183 continuous days, or intermittent days, within a 12 month period, or He is an Egyptian, who is working for an Egyptian Company outside Egypt. The scope of taxation in Egypt 4. An individual working in Egypt will, in general, become liable to Egyptian tax income from the following sources; Salaries and the like. Commercial/Industrial activity. Vocational/Noncommercial activity. Real Estate Wealth. 4 People and Organisation

5 Step 2: An overview on the Egyptian income tax system Employment income 5. Any amount paid to the individual during his employment in Egypt is considered a taxable income and added to his basic salary received. 6. The following are considered types of employment income received by the employee: a. Payments received by a taxpayer (an employee) based either on a contractual or noncontractual relationship in return for services performed inside or outside Egypt, including salaries, wages, etc.and all cash and benefits in kind. b. Payments from overseas sources in return for services performed within Egypt. c. Reimbursement for expenses of spouses and dependents. d. School tuition fees, long term living expenses, and overseas and hardship allowances. Exemptions 7. There are some exemptions by the Egyptian Income tax law granted to the employees. 8. Where there is a fixed amount of EGP 7,000 as an annual personal exemption for each employee. 9. The Egyptian income tax law has also exempted some items received by the employees upon fulfillment of some conditions. Example; Collective benefits provided to all employees, for example: 10. Food meal offered to the employee, employees collective transportation, etc. Taxable Benefits 11. Benefits granted to the employee are considered taxable, and added to the employee s taxable salary, where such amounts (cash or in kind) are those that represent a personal benefit for him. The values of benefits in kind are generally determined on the basis of the market value. However, certain ones are estimated at specific tax rates such as; 12. Company car placed at the employee s disposal, mobile phones, (where 20% of the value of benefit is subject to tax) and loans etc. Worldwide Taxation 13. The scope of taxation for Egyptian tax resident individuals has been extended to include not only Egyptian sourced income, but also income from foreign sources. Under the new law, Egyptian tax resident individuals whose center of commercial, industrial or professional activities is in Egypt will be subject to income tax on their worldwide income. Global Mobility Country Guide (Folio) 5

6 Dividends 14. Dividends distributed by resident companies to resident or non-resident individuals or companies are subject to a 10% withholding tax. The withholding tax rate is reduced to 5% for qualifying dividends (dividends earned from participations representing more than 25% of the shares or voting rights of the subsidiary company, subject to a two year minimum holding period) The taxability of dividends on hands of a resident individual will differ depending on whether or not the individual performs a commercial or industrial activity. Capital gains 16. Capital gains realised from the sale of listed Egyptian shares by resident and non-resident shareholders were subject to a 10% withholding tax in the old law. However, the application of this tax is suspended for two years, as of the 17th of May Capital gains realised from the sale of unlisted Egyptian shares by resident shareholders are subject to the regular personal income tax rate (progressive rates of up to 22.5%), Also for non-resident individuals, capital gains realised from the sale of unlisted Egyptian shares are subject to normal personal tax rates and goes through the progressive brackets with top marginal rate 22.5%. Exchange controls 18. Generally from a tax perspective in Egypt there are no exchange control limitations on cash repatriating Egypt. However, currently there are measures conducted by the local banking system to combat money laundering which should be confirmed with your local bank(s). There might be some restrictions on the amount of cash exiting the country at the end of the assignment and this will depend on the Egyptian central bank limitations then as well as limitations set by other banks. 19. The Central Bank of Egypt ( CBE ) has recently issued decrees stating a ceiling for cash or cheques. 20. Supporting documents should be available when doing transfer from or to Egypt. It is recommended contacting your local bank to further clarify the most updated policy and instruction of the CBE as the practice around foreign currency policy is updated regularly. Tax for residents vs non residents 21. The tax rates applied on nonresidents have been amended to the normal tax brackets with the top marginal tax rate of 22.5% for annual income above EGP 200,000. Please refer to Appendix A reflecting the current tax brackets applied for the employment income of residents and non-residents 6 People and Organisation

7 Step 3: Immigration and social security highlights Immigration formalities in Egypt 16. Employees working in Egypt should get temporary approval before entering Egypt from the ministry of manpower for entering Egypt. Then to be followed by the normal procedures of the work permit issuance. Overview of Egyptian Social Security 17. Social Insurance Law 79 of 1975 covers Egyptian employees as well as foreign employees whose countries have reciprocal treaties with Egypt for reciprocal social insurance treatment. 18. The social insurance contribution paid to the social insurance authority is divided into 2 portions: Employee Share & Company Share. 19. Employers are required to withhold the employees social insurance contributions from their salaries and to remit them together with the employer s contributions to the Social Insurance Organization on a monthly basis. Please refer to Appendix A below referring to the current ceiling thresholds as well as the employee and employer rates. Global Mobility Country Guide (Folio) 7

8 Step 4: Reporting and filing obligation Tax returns 20. In Egypt it is rare for an employee to file an individual separate tax return (it is in certain cases) because generally the local employer if exists is responsible for handling the withholding and remittance of tax from the employee and to the tax authority, leaving no reporting obligation on the employee with regards to his salary income. 21. However if the employer is not resident and there is no recharge to any Egyptian entity, the obligation for declaring and remitting the tax to the Egyptian tax Authority lies on the employee where the employee in this case will need to open a tax file in the Egyptian tax authority. Reporting and filing obligation overview 22. In case the remuneration package will be paid directly or recharged to the local entity, then the local entity will be obliged as per the tax law to handle the Egyptian tax matters of its employees in terms of withholding and remitting the tax due amount on monthly basis. 23. It is also required to complete quarterly salary returns and submit them to the tax authority at the end of January, April, July and October, in addition to an annual reconciliation, which should be submitted during January of the following year. Important tax compliance dates to remember 24. The tax due amount should be remitted to the Egyptian tax authority within 15 days of the end of the month in which the payment is made. Penalty upon delay: 25. Failure to comply with the dates will result in interest applied on late payments which is approximately 1% per each month delay. 8 People and Organisation

9 Appendix A: Personal income tax rates and social security rates Income Tax Rates Taxable income (EGP) Tax rate More than But not exceeding 0 6, ,501 30,000 10% 30,001 45,000 15% 45, ,000 20% More than 200, % Social Security Thresholds and Rates Income Threshold Employer's share Employer's share Basic 1, % 14% Variable 2, % 11% Global Mobility Country Guide (Folio) 9

10 Appendix B: Egypt IAS contacts Contacts Karim Emam - Partner Tel: +2 (02) karim.emam@eg.pwc.com Ahmed Asem - Manager Tel: +2 (02) (ext. 7874) ahmed.asem@eg.pwc.com Kegham Roupen Senior Consultant Tel: +2 (02) (ext:3414) kegham.roupen@eg.pwc.com Salma Abdelmaksoud Consultant Tel: +2 (02) (ext:3414) salma.abdelmaksoud@eg.pwc.com +2 (02) (ext:3414) 10 People and Organisation

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