May 15, 2020
Egypt amends progressive individual income tax rates and penalties applicable on tax return differences
On 7 May 2020, Law no. 26 of 2020 was issued by the Egyptian Government to introduce new progressive tax rates for individual income tax purposes that will apply as from 1 July 2020 with respect to income related to salaries. For other types of income (commercial, industrial and manufacturing (sole partnership), professional, non-commercial or real estate taxpayers), the new progressive income tax rates are applicable as from the first tax period ending after the publication of the law (7 May 2020). The law also introduced amendments to penalties applicable on tax return differences.
On 7 May 2020, the Egyptian Government issued Law no. 26 of 2020 amending certain provisions of the income tax law no. 91 of 2005 as follows:
Amendments of Article (8) and Article (13) – related to Personal income tax (PIT)
The new amendments abolished the tax discounts on the income of natural persons.
Under the new law, the applicable progressive tax rates will depend on the taxpayer’s level of annual income. The law increased the personal exempted allowance to direct the subsidies to those who are entitled to them, supporting the lower income brackets, and reducing the tax burden.
The amended income tax rates on the annual personal net incomes are:
* All amounts are in EGP
* The sum of annual net income shall be rounded- upon computation of the tax- to the nearest lower ten EGP.
Amendments of Article (87 Bis) – related to annual tax returns
1. If the tax due as per the tax return is less than the final tax due amount, the company shall be liable to the following penalties:
a. 20% of the difference between final tax due as per the Egyptian Tax Authority (ETA) and the tax due as per the tax return, this will apply if the difference is less than 50% of the final tax due.
b. 40% of the difference between final tax due as per the ETA and the tax due as per the tax return, this will apply if the difference is more than 50% of the final tax due.
2. If the taxpayer did not file their tax return, they shall be liable to a penalty calculated as 40% of the final tax due.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Egypt, Cairo
Ernst & Young LLP (United States), Middle East Tax Desk, New York