You may be subject to taxes in Egypt and you don’t know

12 Apr, 2023
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Ahmed Elnaggar

Founder, The Jurist, Managing Partner at Elnaggar & Partners, Founder and President at Emirates Legal Network

Are you an Egyptian living abroad? Read this: You may be subject to taxes in Egypt and you don't know.

If you are an Egyptian national, you have a house owned or rented in Egypt while you live, work, and earn in the UAE, you MUST regularly issue a tax residency certificate in the UAE.

These are some of the significant tax reforms implemented in Egypt in the past few years to say a few I list the below:

VAT Reforms: In 2016, Egypt introduced a value-added tax (VAT) system to replace the existing sales tax system. The VAT rate was initially set at 13%, but it increased to 14% in 2017. The VAT system was designed to widen the tax base, reduce tax evasion, and increase government revenue.

Income Tax Reforms: In 2017, Egypt implemented a new income tax law that introduced a progressive tax system with seven different tax brackets. The new system increased the personal exemption threshold and decreased the tax rate for low-income earners. It also introduced a tax amnesty program to encourage taxpayers to settle their outstanding tax debts.

Real Estate Tax Reforms: In 2018, Egypt implemented a new real estate tax law that replaced the existing property tax system. The new law increased the tax rates on vacant and undeveloped land to encourage landowners to develop their properties. It also introduced a tax exemption for primary residences and reduced the tax rate for commercial and industrial properties.

Egypt implemented an electronic invoicing system in 2021: which requires businesses or individuals providing commercial services to issue and store their invoices electronically through the government's online portal. The system aims to improve tax compliance and reduce tax evasion by providing real-time tracking of invoices and transactions.

The Central Bank of Egypt (CBE) and the Tax Authority (TA) exchange information with each other and other government entities like Social Security and the Ministry of Labor to improve tax administration and compliance.

The CBE provides the TA with financial information on businesses and individuals, such as bank account balances, loan transactions, and credit card statements, to help identify potential tax evaders and improve tax assessments. The TA also shares tax-related information with the CBE, such as tax identification numbers and tax registration data, to help monitor taxpayers' compliance with tax laws and regulations.

Similarly, the TA and other government entities like Social Security and the Ministry of Labor share information to ensure compliance with tax, social security, and labor laws. For example, the TA may obtain information on employees' salaries and benefits from Social Security and the Ministry of Labor to verify the accuracy of tax returns and assess taxes due.

These data-sharing initiatives aim to enhance tax compliance, reduce tax evasion, and improve the overall efficiency of tax administration in Egypt.

NOW TO THE CRUCIAL INFO:

In Egypt, individuals are considered tax residents if they meet any of the following criteria:

1. They reside in Egypt for a period or periods exceeding 183 days within a 12-month period that begins or ends in the tax year.

2. They maintain a permanent home in Egypt, whether owned or rented.

3. They carry on a business or are employed in Egypt, either continuously or intermittently.

If an individual meets any of the above criteria, they will be considered a tax resident of Egypt and will be subject to Egyptian income tax on their worldwide income.

The tax treaty between Egypt and the UAE was signed on May 7, 1980, and has been in force since January 1, 1981, is officially known as the "Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital."

The tax treaty between Egypt and the UAE provides rules for the taxation of income earned by a resident of one country in the other country. These rules generally aim to avoid double taxation of the same income in both countries.

Under the treaty, a natural person who is a tax resident of the UAE and earns income in both the UAE and Egypt would generally be subject to tax in each country based on the following rules:

1. UAE Tax: The person's income earned in the UAE would generally be subject to tax in the UAE, according to UAE tax laws.

2. Egyptian Tax: The person's income earned in Egypt would generally be subject to tax in Egypt, according to Egyptian tax laws.

However, to avoid double taxation of the same income, the treaty provides a mechanism for avoiding double taxation through a tax credit or exemption.

To claim the benefits of the tax treaty, you need to obtain a tax residency certificate (TRC) from your country of tax residence. The TRC will provide proof of your tax residency status and allow you to claim the benefits of the treaty, such as reduced withholding tax rates or exemptions from certain taxes.

 

Ahmed Elnaggar

Managing Partner 
Elnaggar & Partners

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